https://www.mauldineconomics.com/frontlinethoughts/inflation-sinks-deeper
When we talk about inflation, the conversation usually centers on
periods (like now) when inflation is especially high. Those are
certainly problematic. But we can overlook a possibly bigger problem:
other than a few short breaks, you and I have never seen a time when >inflation wasnAt rising. Inflation isnAt some problem that pops up >occasionally. Inflation has become normal u so normal we let it
accumulate for years without complaint.
Think about that for a moment. The Consumer Price Index has risen 28.5% >since January 2020 alone. That $100 bill you carried into the grocery--
store in January 2020 has the purchasing power of $77.82 today. Nobody
voted for that.
And it is not just the years since COVID. Go back to 1913, when the
Federal Reserve was created with a mandate to amaintain price
stability.A A dollar then is worth roughly three cents today. That is a
97% loss of purchasing power in a little over a century. If your bank
gave you a savings account that lost 97% of its value over its lifetime,
you would call it fraud. When the Federal Reserve does it, we call it >monetary policy.
We donAt complain in part because inflation can be convenient for some
of us. If we have a mortgage on a home, inflation generally means the
home price goes up while the mortgage value stays the same. We like it
when the price of assets that we own go up, forgetting that much of that >price increase is inflation. It works for assets of all types.
Federal Reserve officials, for example, have long considered 2%
inflation kind of handy. It gives them wiggle room to manage the economy
the way they want. And since most of the academic economics profession
is beholden to the Fed, that belief doesnAt get much pushback.
Compound Inflation
LetAs begin with a little math. Albert Einstein, who knew more than a
little math, famously called compound interest othe most powerful force
in the universeo (or words to that effect). This force unfortunately
applies to inflation, too.
A 2% inflation target may sound small. Over time, it is not small. Ten
years of 2% inflation adds up to 21.9% higher prices. Twenty years means
the cost of living is 48.6% more expensive than it would have been
without inflation.
Or, looking at it from the other direction, at 2% inflation the $100 you >started with shrinks to $82.03 in 10 years and $67.30 in 20 years. That
is not small, particularly since a 2% aofficialA inflation rate probably >understates actual inflation for most people.
Except we havenAt been living at 2% inflation. We have been living at
3%, 4%, and in some categories far higher. At the FedAs preferred PCE >measure, inflation ran at 4.1% year-over-year as of this week. Since
January 2020, U.S. prices have risen approximately 25%, reflecting an >average annual inflation rate of around 6% over this period.
Run 4% inflation for 20 years and your $100 becomes $46 in real
purchasing power. Half. Gone. And since January 2020 alone, cumulative
CPI inflation has already reached 28.5%. If your household income hasnAt >kept up with that, you are poorer than you were five years ago. The math
is not ambiguous.
The Grocery Store Never Lies
There is no better place to feel inflation than a grocery store.
Abstract economic statistics can be argued, revised, and seasonally
adjusted into relative harmlessness. The checkout line cannot. According
to FRED data from the Bureau of Labor Statistics, the CPI for food at
home u groceries u rose 37.9% between January 2020 and March 2026. That
is more than one-third more expensive for the same cart of food in six >years.
The specific numbers are striking. Eggs have become a cultural
flashpoint, with prices periodically tripling from pre-pandemic norms
due to a combination of avian flu outbreaks, feed cost inflation, and
supply chain disruptions. Ground beef is up roughly 30% from 2020
levels. Bread, butter, and cooking oils have all seen sustained
double-digit increases. And while some individual item prices have
pulled back from peak levels, the overall level of grocery prices has
not. It has simply stopped going up as fast. That is not the same thing
as relief.
Then there is shrinkflation, which is inflationAs sneakier cousin. Your
bag of chips that used to weigh 16 ounces now weighs 13.5 ounces, same
shelf price, less product. Your can of tuna that held 6 ounces now holds
5. The Brewers Association has documented the phenomenon in packaged
goods across dozens of categories. The Bureau of Labor Statistics tries
to adjust for this, but consumers feel it directly even when the
statistics donAt fully capture it. Shrinkflation is inflation with a >disguise.
Food inflation is also deeply regressive. A family spending $400 a month
on groceries and a family spending $1,200 a month both face the same >percentage increase. But for the lower-income family, that $150 in extra >monthly grocery costs represents a much larger share of their budget.
The USDAAs food security surveys show that the share of Americans who
are food insecure, meaning they sometimes donAt have enough to eat, >increased meaningfully during the inflation surge of 2021u2023. Those
are real people, not data points.
On Sat, 27 Jun 2026 14:50:16 -0400, Wilson <Wilson@nowhere.invalid>
wrote:
https://www.mauldineconomics.com/frontlinethoughts/inflation-sinks-deeper
When we talk about inflation, the conversation usually centers on
periods (like now) when inflation is especially high. Those are
certainly problematic. But we can overlook a possibly bigger problem:
other than a few short breaks, you and I have never seen a time when
inflation wasnrCOt rising. Inflation isnrCOt some problem that pops up
occasionally. Inflation has become normal rCo so normal we let it
accumulate for years without complaint.
This is true. Prices must always rise. There is no more evil
hobgoblin for business than deflation.
For one thing among many, it allows paying yesterday's debts with
today's less valuable dollar. Oh glory, imagine paying 40 thou for a
decent home 40 years ago and being able to repay that 40 thou mortgage
with today's much less valuable dollar. Of course this really only
matters when you are dealing with many millions of dollars worth of
long term debt, as corps do.
Think about that for a moment. The Consumer Price Index has risen 28.5%
since January 2020 alone. That $100 bill you carried into the grocery
store in January 2020 has the purchasing power of $77.82 today. Nobody
voted for that.
And it is not just the years since COVID. Go back to 1913, when the
Federal Reserve was created with a mandate to rCymaintain price
stability.rCO A dollar then is worth roughly three cents today. That is a
97% loss of purchasing power in a little over a century. If your bank
gave you a savings account that lost 97% of its value over its lifetime,
you would call it fraud. When the Federal Reserve does it, we call it
monetary policy.
We donrCOt complain in part because inflation can be convenient for some
of us. If we have a mortgage on a home, inflation generally means the
home price goes up while the mortgage value stays the same. We like it
when the price of assets that we own go up, forgetting that much of that
price increase is inflation. It works for assets of all types.
Federal Reserve officials, for example, have long considered 2%
inflation kind of handy. It gives them wiggle room to manage the economy
the way they want. And since most of the academic economics profession
is beholden to the Fed, that belief doesnrCOt get much pushback.
Compound Inflation
LetrCOs begin with a little math. Albert Einstein, who knew more than a
little math, famously called compound interest rCLthe most powerful force
in the universerCY (or words to that effect). This force unfortunately
applies to inflation, too.
A 2% inflation target may sound small. Over time, it is not small. Ten
years of 2% inflation adds up to 21.9% higher prices. Twenty years means
the cost of living is 48.6% more expensive than it would have been
without inflation.
Or, looking at it from the other direction, at 2% inflation the $100 you
started with shrinks to $82.03 in 10 years and $67.30 in 20 years. That
is not small, particularly since a 2% rCyofficialrCO inflation rate probably >> understates actual inflation for most people.
Except we havenrCOt been living at 2% inflation. We have been living at
3%, 4%, and in some categories far higher. At the FedrCOs preferred PCE
measure, inflation ran at 4.1% year-over-year as of this week. Since
January 2020, U.S. prices have risen approximately 25%, reflecting an
average annual inflation rate of around 6% over this period.
Run 4% inflation for 20 years and your $100 becomes $46 in real
purchasing power. Half. Gone. And since January 2020 alone, cumulative
CPI inflation has already reached 28.5%. If your household income hasnrCOt >> kept up with that, you are poorer than you were five years ago. The math
is not ambiguous.
The Grocery Store Never Lies
There is no better place to feel inflation than a grocery store.
Abstract economic statistics can be argued, revised, and seasonally
adjusted into relative harmlessness. The checkout line cannot. According
to FRED data from the Bureau of Labor Statistics, the CPI for food at
home rCo groceries rCo rose 37.9% between January 2020 and March 2026. That >> is more than one-third more expensive for the same cart of food in six
years.
The specific numbers are striking. Eggs have become a cultural
flashpoint, with prices periodically tripling from pre-pandemic norms
due to a combination of avian flu outbreaks, feed cost inflation, and
supply chain disruptions. Ground beef is up roughly 30% from 2020
levels. Bread, butter, and cooking oils have all seen sustained
double-digit increases. And while some individual item prices have
pulled back from peak levels, the overall level of grocery prices has
not. It has simply stopped going up as fast. That is not the same thing
as relief.
Then there is shrinkflation, which is inflationrCOs sneakier cousin. Your
bag of chips that used to weigh 16 ounces now weighs 13.5 ounces, same
shelf price, less product. Your can of tuna that held 6 ounces now holds
5. The Brewers Association has documented the phenomenon in packaged
goods across dozens of categories. The Bureau of Labor Statistics tries
to adjust for this, but consumers feel it directly even when the
statistics donrCOt fully capture it. Shrinkflation is inflation with a
disguise.
Food inflation is also deeply regressive. A family spending $400 a month
on groceries and a family spending $1,200 a month both face the same
percentage increase. But for the lower-income family, that $150 in extra
monthly grocery costs represents a much larger share of their budget.
The USDArCOs food security surveys show that the share of Americans who
are food insecure, meaning they sometimes donrCOt have enough to eat,
increased meaningfully during the inflation surge of 2021rCo2023. Those
are real people, not data points.
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