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1981: Back to the Future

1981: Back to the Future

| July 13, 2022

Earlier today, the inflation numbers came out. 9.1% for the trailing twelve months ending in June of 2022. I’d like to share a few observations with you. The 9.1% number combines a lot of different prices of things you aren’t going to buy. You need gas and groceries. This CPI of 9.1 excludes food and energy.

That means your personal inflation rate is much higher depending on your lifestyle and family needs at this time in your life.

In response to inflation, the Federal Reserve is raising interest rates. This will put downward pressure on bond prices and real estate prices as mortgage interest rates rise.

The question you should ask yourself is what were interest rates in 1981 when we had inflation this high? Would the answer to that question give you a clue as to interest rates in the future? I’m not sure.

The next question is how much worse will inflation get. Consider this: As of March 2021, COVID costs totaled $5.2 trillion. World War II cost $4.7 trillion (in today’s dollars).

All-in money printing totaled $13 trillion: $5.2 for COVID + $4.5 for quantitative easing + $3 for infrastructure. Mountains of money cause inflation. This is a direct quote from our friends at Source:

 We should brace ourselves for higher inflation as measured by CPI, but also as measured by your day to day spending habits. Brace yourselves for higher interest rates and a painful recession. Wish I had better news. If you’d like to talk about it, click here.