According to an opinion piece by Rex Nutting from Market Watch (click here) many people are fooling themselves in to thinking they are rich. Everyone knows, Nutting explains, that a nickel is no longer worth what a nickel used to be. We need to rethink what money actually is. Instead of being a nominal figure, money is what we use to buy actual things. Money is purchasing power. Inflation takes away that power. So, we’re left with an illusion of wealth rather than its reality.
We see the money illusion everywhere, and it’s going to be a problem as long as inflation remains high. For instance, we often hear of people bragging that their home’s value has doubled in 10 years. We hear politicians griping that gas prices are the highest they’ve been since 2014. Those people are suffering from the money illusion, because they are ignoring the effects of inflation on the purchasing power of a dollar over time. In real terms, their home’s value is up 55%, not 100%. In real terms, gas prices are down 24% versus the 2014 peak. It’s like your smug granddad lecturing you about how a candy bar “ought” to cost a nickel, just as it did back in the day. Everyone knows a nickel isn’t worth what it used to be and we should start acting like we know it.
What matters most is what your money can buy.
It’s up to us, the consumer, to make sure we get the best product at the least price. Maybe you can negotiate. Maybe you can’t. But you can usually buy almost anything on sale. As long as there is competition, someone, somewhere, will be lowering their price in search of a sale. Despite the rising cost of food, I’ve still managed to keep my budgeted amount at the same monthly price. I’ve learned to make adjustments, manage substitutions and still keep food on the table. Gas today is still $1.00 cheaper than what it was in 2014. My savings was still adequate enough to pay cash and buy a new-to-me vehicle. I haven’t been priced out of anything. Yet.
I’ve come to realize that money now has turned out to be meaningless. It has no value. It’s only purpose is to be accumulated and used as a worthless tool to buy worthless material possessions utilized during a worthless lifetime. You can’t take it with you when you die. And you certainly weren’t born with a pile of it sitting in your crib. That was reserved for a pile of another equally meaningless item.
It’s called: The Great Reset.
A friend of mine was complaining the other day about some vacation plans he and his wife were trying to arrange. They sold their RV last year and were now scouring hotels to book in some local exotic location. They were being met with hotel rooms no less than $450 to $700 a night. What ever happened to the $99 special the Hilton Hotel chain used to famously advertise on TV a few scant years ago? Another friend of mine booked 10 days in an AirBnB for $911 a night. That bill came to over $10,000 with tax. Where do these people get money like that to spend so lavishly? I don’t have it. My husband and I were trying to book an RV site near Ocean City and were met with prices averaging $225 a day! We’ve never once booked an RV site higher than $50 a night. See what I mean? Worthless. Meaningless. Having no value. Money has now crossed over in to the Twilight Zone.
Lobster rolls used to cost $12 last year. This year you’re lucky if you can buy one between $30-$40 dollars. A steak dinner used to be had for $9.99. Now? You’re looking at $40 beef meal prices at “normal” restaurants. (if there is such a thing as “normal” anymore). My only hope to escape the perils of inflation is to situate myself to live entirely off the grid. Sure, I’d still have to pay property taxes in money form and those costs are rising steadily but it’d be the only thing I would need cash again for. I could be self-sufficient in almost everything else. I think. I hope. Many of my neighbors have now started raising chickens to sell their eggs (@$4 a dozen). Others have put up self-serving vegetable stands. Some locals are selling rabbits and chickens for consumption. As more and more people find out their money buys them less and less and less, I’m anticipating the return to good old-fashioned bartering.
Inflation has taken away our purchasing power. Landlords are losing their homes because the rent moratoriums have depleted their wealth and sometimes a landlords’ only means of a livelihood. It used to be that the only way the middle class could accumulate wealth was through real estate ownership. That ship has sailed for many people. Big corporations are buying up many of the available homes for sale, paying exorbitant prices for said homes with the expectation of turning said homes into rental properties. We’ve become a land of renters. The government hopes that eventually the people will turn to it for affordable housing.
Everything is an illusion. We don’t know what our reality is anymore. At least I don’t. Frugalistas, such as myself, have no place in an inflationary world such as what is developing right now. Bargains will soon be hard to come by. Even garage sale hosts or flea market vendors are raising their prices. They have higher bills to pay. In turn, they will raise their prices to meet their own demands.
We have to judge our financial lives by a new standard. Our money holdings are only as valuable as to what it can buy.
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