In recent months, I’ve had several consulting clients ask me about how they might protect themselves from the ravages of inflation. The official rate of inflation is now at 9.2%, but everyone knows that the real-world rate is somewhere north of 14%. I’m offering some concrete suggestions that I will relate in this essay, but first, let me digress into some history:
According to the Wikipedia article about the WIN campaign:
“[President Gerald] Ford had taken office in August 1974 amidst one of the worst economic crises in US history, marked by high unemployment and inflation rising to 12.3% that year following the 1973 oil crisis. As a Republican, Ford favored the WIN campaign’s emphasis on addressing the problem through voluntary actions of citizens, instead of price restrictions imposed centrally by a big government bureaucracy.
The campaign began in earnest with the establishment by the 93rd Congress of the National Commission on Inflation, which Ford closed with an address to the American people, asking them to send him a list of ten inflation-reducing ideas. Ten days later, Ford declared inflation “public enemy number one” before Congress on October 8, 1974, in a speech entitled “Whip Inflation Now”, announcing a series of proposals for public and private steps intended to directly affect supply and demand to bring inflation under control. Suggested actions for citizens included carpooling, turning down thermostats, and starting their own vegetable gardens.”
Ford’s WIN campaign had lackluster success, mostly because it failed to address the real roots of inflation, which the U.S. Treasury’s monetary policy and the credit policy of the Federal Reserve banking cartel. To his credit, Ford came into office at the tail end of a five-month long Arab oil embargo, an already weak economy, and already high inflation. This was when the term “stagflation” was popularized. Ford served as President for just 895 days. In 1974, inflation peaked at just over 12%.
Granted, the consumer price index dropped from 9.1 percent in 1975 to 5.8 percent in late 1976. But that had more to do with credit tightening and the business cycle than anything accomplished by the WIN public relations campaign. Inflation surged again under President Jimmy Carter. By the summer of 1980, dollar inflation was peaking at 14.5%. It was only a tighter credit environment triggered by the Federal Reserve’s higher interest rates that finally brought inflation under control. But this of course came at a cost: Interest rates that were so high that they nearly killed the U.S. economy. According to the Freddie Mac data, 30-year mortgage interest rates averaged 16.63% in 1981. Some 15-year mortgages were written at a whopping 19.5% annual rate.
Inflation in 2022
Let’s jump forward to 2022. Interest rates are now climbing, but not nearly enough to combat inflation. The economy is slipping into recession. Government spending is out of control. Layoffs are looming, and the housing market has peaked. Stagflation is back! It now appears that the Federal Reserve will not…