In the fall of 1974, President Gerald R. Ford announced a new government initiative he called "Whip Inflation Now," or WIN for short.
I remember walking through our neighborhood grocery store in Columbia, Tennessee, and hearing the news over the radio. I was 16 years old, cleaning toilets and restocking pill vials at Derryberry's Drug Store, and the thought hit me, "Man, I need a raise."
Inflation was then running about 12% year over year, and Americans were rightly upset by the consequences of rising prices. The nation had fallen into a pattern of higher consumer prices and wages that only ended when interest rates were pushed sky high.
Many Chattanooga families - including ones headed by people who weren't even born in the 1970s - probably fear a return to 1970s- and 1980s-style inflation. According to the most recent government report, the national inflation rate is running over 8%, the highest since the early 1980s when interest rates skyrocketed. (I still don't know how anyone bought a house in 1981 when mortgage rates in the U.S. topped 16%. It makes today's headlines hyperventilating about 5% mortgages seem, well, meh.)
Anyway, enough history. On to a couple of cautions and some silver linings.
First, if it helps you psychologically to attribute inflation to politics or world events, have at it. Maybe President Biden and federal spending are your villains, or perhaps you think the fighting in Ukraine is partly to blame. If it comforts you to blame something, or somebody, go for it.
I would caution you about embracing everything you see or hear about inflation in the media. Reporters are notoriously suspect when it comes to numbers-based stories. The low-hanging fruit for most news outlets is gas prices. Scary headlines and broadcast reports about price jumps at the pump are part of the media's stock in trade. Almost never reported is the fact that most American families spend only about 3-4% of their income on fuel for their vehicles. (Although, higher gas price increases are clearly a pain point for many households today.)
Dave Flessner, business editor of the Times Free Press, reported this week: "Gas prices in Chattanooga are 14.6 cents per gallon lower than a month ago but are still up $1.23 a gallon from a year ago." Way to call it both ways, Dave.
But back to our original premise: What can the average middle-class family in Chattanooga do to whip inflation now? Here are a few modest proposals.
- Postpone buying a new-to-you car or truck. One of the self-fulfilling prophecies of a true, long-term inflation cycle is that consumers buy today for fear of paying more tomorrow.
Price spikes for new and previously owned vehicles have reached an apex and begun to crest. Almost all experts agree that this spike has been due to a supply-and-demand imbalance: Too little supply, too much demand. Most think this will persist for months if not a year or more.
So what do you do if you need a new car? First, honestly assess your "need." Many car buyers confuse "need" with "want." If your current vehicle is mechanically sound - or at least repairable - it would be smart to stay out of the market until prices reset, which they surely will.
Too, many of today's new cars are over-engineered and packed with electronics you'll never (or rarely) use. Some of today's automobiles have screens that are bigger than my first television set.
Also, love it or hate it, we are in the first years of a massive switch from gas-powered to electric-powered vehicles. My advice, if you are leaning toward a greener vehicle purchase, is to go with a hybrid, not a full EV. I'd let the EV technology evolve for a few years before taking the plunge. As with any high-tech toy, 18 to 24 months from now, EVs will be cheaper, better, faster.
- Shop for grocery bargains. For many middle-class families, 2022 may mark the first year in recent history that they've paid much attention to the price of food. Meat prices, in particular, are causing sticker shock. I remember the first time I saw a $10 pound of bacon. Yikes.
Luckily, the soaring price of red meat has coincided with my doctor's orders to avoid beef and pork for health reasons. Honestly, I've found that I don't miss it that much, although I do sneak an occasional hamburger.
My advice is to reconsider your destination if you have drifted toward pricier supermarkets. Discount groceries really are cheaper. And best of all are wholesale stores such as Costco and Sam's Club. I remember many years ago reading in a personal finance book that shopping at a warehouse store like Sam's Club is the best short-term investment you can make. For example, if you buy paper towels in bulk and they go up 10% next month, you've just made 10% on our money in 30 days. Not bad.
- Get off the housing treadmill. Networks such as HGTV have turned home-buying into a leisure-time sport. I'll admit that I'm hooked on some of the shows. I can binge-watch "Love It or List It."
But with mortgage rates on the rise, we may be in for a respite from the overheated housing market. Although "we need a bigger house" is a common lament in suburbia, often it's just a rationalization for trading up to something nicer. During the period of rising prices, we could all do with a big dose of good, old-fashioned contentment.
On the bright side, the price of our existing home appeared to gain 10% in the first quarter of 2022, nicely balancing the drop in my 401(k).
If you look hard enough, there's almost always a silver lining somewhere in the economy.
Email Mark Kennedy at mkennedy@timesfreepress.com.