From 10,000 Feet

Wed May 14, 2008 3:28pm EDT

(Reuters) Washington, D.C. …………The 0.2 percent rise in the Consumer Price Index (for April) was less than the gain that Wall Street analysts polled by Reuters were expecting, a Labor Department report showed on Wednesday. ………….”One of the many risks the market sees is runaway inflation leading to a very quick re-rise in interest rates. This puts that off, at least in the near term,” said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey.

The Comment:

Run away inflation is a very realistic outcome of the policies of the Fed. The quote above indicated not if but when it happens. Inflation is like a tax that takes away a percentage of everything you have, including the value of your house, savings, retirement fund – everything. It also reduces your income by increasing prices. Inflation goes where no tax collector could.

The increase in the price fuel and food is inflation on a limited scale, but it affects everyone, except those who don’t use fuel and don’t buy food. As we have discussed the price increases in these areas are not related to the increase in deamand or the reduction in supply. It is the speculation of huge investors use the commodity as a hedge against inflation (they know you have to eat). The first reaction of most people would be to join the “hedgers” but that would be contributing to the problem because it would drive prices up even further. There aren’t a lot of choices, but reducing your consumption is about the best ethical and moral response. By reducing your fuel consumption you avoid purchasing the inflated priced fuel. By reconfiguring your lifestyle and food consumption you reduce demand and avoid paying inflated prices for food.

Consider growing some food this summer. Consider hyper-miling (check out our previous post for details). It really works! I didn’t think I could reduce my consumption that much just by changing my drive style, but you can. It amazing how much money you can save. Other alternative are: move to the outskirts of the community you live in where you can have a garden. The food is fresh, pure and rich in nutrition when you grow it yourself. If that is not possible form a food coop where a group of people have a farmer grow certain food for them. This is one of the best ways for urban dwellers to get good food. Grocery stores often import food even when local food is in season, in order to keep the supply chain open.

The less you consume the less it matters what the price of such and such is. Most people spend the better part of their working career paying for a house. But there is a better way! Building an alternative house not only is cool, environment friendly but a great way to live well and debt free. Some people have built a really awesome house for under $20,000 plus the land. These aren’t far out ideas. They are survive techniques if and when the economy continues wobble. Those who see the danger and take action early will do much better. If the system crumbles, you have done wise thing. If it doesn’t, you have done a smart thing.

Paul Weigel

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