Drowning

If you are drowning and can no longer swim, it does not matter if the water is ten feet or a thousand feet deep.

Today the worry of the financial pundits is devaluation of products and services. In other words, the price becoming cheaper to attract buyers. The financial pundits claim there is no need at this point to fear “inflation” in the economy.

This is another misnomer. If the price of butter goes from $3.25 a pound to $2.00 dollars a pound, it sounds good for you as a consumer. But if at the same time your net spending power drops 40% you are actually experiencing a normalized 2% inflation. If all things remain equal, you are actually paying more on a percentage basis relative to your income despite the price drop.

This situation is occurring and having a dramatic effect on 80% of Americans. They know something financially is amiss. But they have failed to put their finger on the source of the problem. Why is their buying power falling? Business and industry is rushing to protect their profits. Commodity items are increasing in price (Nestle articulated this business strategy last week). The increases include food stuffs, utilities, insurance and entertainment. At the same time premium and luxury items are being reduced in price.

The premium and luxury stuff is drowning in thousand foot water. The commodities is drowning in ten foot water. In both cases you are just as dead.