Dear John: Inflation is rapidly getting out of control.
Real estate prices and rents have exploded. Health care costs are going through the roof. Food is rising. Education and services of all kinds are rising rapidly.
We are solidly in the 6 percent to 8 percent inflation range right now. Something’s gonna give. J.B.
Dear J.B. Sorry, but I don’t see it.
Sure, some parts of the country are seeing faster inflation than others. And if you are in New York City, real estate prices and rents had been rising rapidly.
But there’s been strong anecdotal evidence recently that rents are retreating, especially on commercial property. And there’s so much building going on that I’d be shocked if another bubble isn’t forming in NYC that’ll pop soon.
Nationally, the Bureau of Labor Statistics says the consumer price index was up 0.2 percent in August. If you take out the price of food and energy (which, of course, is so easy to do in everyday life) the increase is 0.3 percent.
As you probably already know, I don’t believe any government statistics. And the Consumer Price Index, which calculates housing and medical costs in an extremely bizarre way, isn’t any better than the other government gauges I pick on.
My gut tells me this: Energy prices have been declining and will continue to do so because the world economy isn’t improving anytime soon. Food costs have moderated, which is leading to the closure of many supermarkets.
But big-ticket items — education and health care costs — are going up. And some of the health care costs could be the result of ObamaCare, which is bringing a lot of nonpayers into the health system. (Something I praise on a humanitarian level but understand is a problem on a financial one.)
So the Federal Reserve doesn’t have inflation nipping at its heels — not yet, at least.
But it does have other problems that should make rates rise. One is that it is choking savers, who are getting laughable interest income and therefore can’t spend. And without this large group spending money, the economy is never going to improve.
Second, the Fed needs to raise rates because the country could easily go into a recession. Without a rate hike, the Fed won’t be able to reverse course in the event of a recession and show that it still has some power.
Others will disagree with me on inflation. You are welcome to be one of them.
Dear John: Regarding the Federal Reserve, why don’t they just come out and say what everyone knows: “We don’t know if we will ever raise rates, since it will have an adverse affect on the stock market. End of story, so stop asking.” A.M.
Dear A.M. Boy, you want to spoil all the fun!
But I get your point. The Fed, of course, won’t even acknowledge that it pays attention to the stock market. But we all know it does. In fact, the stock market is about the only way people were able to generate wealth for the last eight years.
And that’s good — except that the market could crash in an hour, and all those riches will disappear.
So it’s not surprising that the Fed is concerned about the market. Some might even say it is rigging the market and in more ways than by just keeping interest rates at unattractive levels.
But this is poker, my friend, and the Fed isn’t going to tip its hand by making the statement you suggest.
Be wise, scams are on the rise
Dear John: It would be a public kindness if you were to warn your readers:
- Never put your Social Security number in an e-mail for any reason; never call and give the information over the phone.
- Never use your true birthday online; nobody really needs it. And if some entity really needs it, call and give your information over the phone.
- Yahoo (for one) has been hacked continually for a long time; the company has finally admitted it has a problem with vulnerability. Well, this is years too late.
Because of the power of the Internet, and its reach, we are sitting ducks for every thief and scammer out there. I see no reason to be too helpful to them. Do you? J.R.
Dear J.R. Thanks. No, there is no reason to help the scammer.
As you may know, I’ve been trying to make their lives difficult for years. But the scammers prey on one human vulnerability: People want to get things for free. And that leaves themselves open to fraud.