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Inflation Invading My Dreams - Friday, February 18, 2022
In the last few months, inflation has been the talk of the economic world. It was only a matter of time before the insane amount of money the Fed created over the last two years caught up with us. Inflation is now up 7.5% annually, food is up 7%, gas is up 40%, and energy 27%. We've been feeling the pain at the pump, at the grocery store, and at the hardware store. Just yesterday I was at Home Depot to buy some PVC pipe, and a 10' length of 3/4" schedule 40 pipe now runs for $6.46, up from $3.56 ten months ago. That's an 81% increase in less than a year. Sheesh. And don't get me started on lumber prices.

While inflation for me and Priscilla is a minor annoyance, there are undoubtedly people who are greatly impacted by higher prices. The federal stimulus packages only allowed people to get by, not suddenly become well-off, and now that those have ramped down, people are starting to feel the squeeze. I think a recession in the next two years is inevitable.

Last month the S&P 500 took a 10% tumble, then started inching back up, but is now headed back into correction territory. Priscilla and I continue to dollar-cost average into index funds, but to have some more diversification, we bought I bonds, which have a variable interest rate adjusted for inflation. The current interest rate on those is a respectable 7.12%, maybe the only silver lining to high inflation. There's a $10k limit on I bond purchases per calendar year, so it's too bad that we only learned about them this year. I wish I'd bought some last year instead of putting so much money into the stock market, but oh well. I trust that the market will keep going up over the long-term, and if it doesn't, then we'll probably have bigger problems to worry about.

So related to inflation are its ugly siblings shrinkflation and skimpflation. We've seen all of those firsthand. There's also a labor shortage, which in reality is probably just a shortage of good paying jobs. In December, we ate with Priscilla's parents at an Asian buffet and the restaurant had replaced its ceramic plates and silverware with styrofoam plates and plasticware. Probably so that they don't have to wash dishes. My subconscious must've used that memory when I had a dream last night about eating at an Asian buffet where they provided us with paper plates, and each plate came with a layer of rice on it. As in, the restaurant was nudging customers towards filling up on rice so that they eat less of everything else. In the dream, I saw an adjacent table where the guests had left without eating a lot of the rice. But even though this generates waste, if a lot of people eat more rice than they otherwise would have, the restaurant probably still comes out ahead. In the real world, we've seen how people behaving rationally can lead to outcomes that are good for them but bad for society as a whole. It's sad.

Anyway, it looks like inflation won't be letting up anytime soon. To think that the Fed had at first predicted that inflation would be transitory!
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