The word of the day is shrinkflation, which has nothing to with a burgeoning supply of psychiatrists and everything to do with confirming your paranoia that prices are rising for many things you buy despite protestations to the contrary from those in charge of the economy.
Economist Pippa Malmgren generally is credited with coining the term shrinkflation more than a decade ago when she noticed packaging sleights of hand designed to disguise higher prices.
In general, shrinkflation is keeping costs virtually the same, but for less product. Often said product is disguised to look equivalent in packaging size to those from the recent past, but the units actually are smaller and contain less of the goods you purchased.
Half-gallons of ice cream used to be the standard in my area. Now the cartons tend to be one-third of a gallon or less.
I recall a few years back plumbing the depths of an apparently customary sized jar of peanut butter (making a sandwich for a granddaughter) only to find the bottom was domed upward, to make less room for peanut butter in what to a cursory glance would be a jar that could hold more.
This week it was reported that Costco is masking a price increase for paper towels by dropping the sheet count for a roll from 160 to 140. The price remained the same, but for less product. And, no, there were not claims of increased absorption.
The towel effectiveness is the same, there just are 20 fewer per roll.
But shrinkflation doesn’t work for everything. An eight-foot 2-by-4 or 4-by-8 sheet of plywood cannot be shrunk without throwing crimps into building plans. So lumber, unable to disguise price increases, is up 67 percent already for 2021 and 340 percent from a year ago.
That, my friends, is serious price inflation.
Food costs are up, too, as are energy expenses. Of course your federal government excludes rising prices for food and energy from inflation tabulations because they are “volatile.”
So, we are supposed to accept reports that the United States inflation rate for the 12 months ended in March 2021 is a mere 2.6 percent. That people can actually claim such figures with straight faces is astonishing.
One canary in the coal mines calling out such distortions is the traditional precious metal gold, once the basis of the world’s money systems. A more recent canary is cryptocurrency Bitcoin. The powers that be hate both of them because when their prices are skyrocketing, it implicitly means inflation is afoot and each dollar is worth that much less in terms of purchasing power, no matter what inflation numbers are reported.
You may have noticed economic bureaucrats and private citizen elites talking down Bitcoin and gold with great fervor recently.
Janet Yellen, whose name sounds like a statement (Janet yellin’) is our current Secretary of the Treasury and former Chairman of the Federal Reserve. Earlier this week, a day after gold and silver had skyrocketed and Bitcoin had interrupted its latest swoon with positive movement, Yellen acknowledged inflation in public comments.
Actually, Yellen said interest rates might need to rise to deal with an “overheat” in the economy, with is economic geekspeak for inflation pumping up prices and demand as people rush to buy now what could cost more tomorrow. The only accepted method to slow down the advance is to increase interest rates and thereby make money more expensive and demand lower.
The Federal Reserve, through many regimes, has been complicit in building the basis for rampant inflation by artificially limiting interest rates to historically low levels while also increasing the money supply geometrically.
Gold, silver and Bitcoin tanked on cue shortly after Yellen hinted at higher rates, but so, too, did the traditional stock markets. So yellin’ Yellen was quick to disavow her earlier remarks. Just kidding. No inflation. No rate hikes.
Make no mistake, success as measured by rising returns in the stock and bond markets is necessary for the government to maintain the illusion of prosperity. If either, or both, of these markets fail, this financial house of cards tumbles to the ground.
This sort of smoke and mirrors exercise works until it doesn’t. Then things can get out of hand rapidly and our current economic gurus are short on solutions other than ramping up the money supply, the one tool in their tool box and the reason we are in this tenuous position.
You can prepare any way you want, but you might want to pay heed to what the ultra rich are doing. Sam Zell, legendary billionaire real estate investor, was out with an interview May 4 revealing that he’s bought gold to protect his wealth against what he anticipates will be raging inflation at levels last seen in this nation in the late 1970s and early 1980s.
I got my first mortgage in 1979, at 10.75 percent and felt fortunate. Inflation was running at 13.5 percent in 1980. Only the willingness of then-Federal Reserve chairman Paul Volcker to allow interest rates to increase rapidly, with the federal reserve interest rate peaking at 20 percent in June 1981, put the inflation genie back in the bottle.
Our current fed funds rate is .25 percent, that’s one-quarter of a percent, or 1/80th of the peak 1981 rate.
Today’s Federal Reserve Board won’t be willing to imitate Volcker to rein in inflation, but the markets may raise interest rates for it.
Meanwhile, get used to paying more, for virtually everything. Just don’t expect the government to admit there is any price inflation.