As a small follow up to our last post about experienced inflation, I wanted to touch on some minor points.  As we have defined experienced inflation as the rise in the cost of goods actually purchased, experienced inflation will vary from person to person.  However, with that said, people from similar income brackets will spend a similar percentage of their income on a similar basket of goods.  A homeless person will end up spending 100% of his income on food and other necessary basics, meaning that he will suffer the most from increases in the price of food.  People in low income brackets will spend 100% of their income on food, rent, and energy costs (i.e. gasoline, utilities).  The massive monetary stimulus by the central bank drives up the real estate market, and the ensuing rise in rents creates tremendous hardship for those in the low-income brackets — all the while, the central banker proclaims that inflation is “too low”.  Similarly, the same monetary stimulus drives up the price of energy and should the politicians also boost the cost of energy in the name of climate-change policy, then again, it is the lower income bracket who will suffer an incredibly high rate of experienced inflation, given the large weight energy costs are in his basket of purchased goods/services.  With the incredulous high cost of health care/medicine in America, the low income bracket population is effectively priced out and cannot afford the cost hospitalization should he fall seriously ill or have an accident — one could argue that the experienced inflation rate approaches infinity if the price of a necessity rises to the extent that it is no longer affordable (i.e. the cost of the good is so high that a person dies from not being able to afford it).

One word game the central bankers play is their definition of inflation — it is the rate of change in price levels, on a yearly basis.  For example, let’s say the inflation rate of college tuition is 10% per year.  For the economist, this means that cost of tuition goes up 10% every year, on an ongoing basis.  However, should there be a one time price rise of 50%, and after that the price goes up 2% every year, the inflation rate of tuition will drop from 10% to 2% — though the absolute cost will have risen dramatically.  The central banker will proclaim that college tuition will have experienced “dis-inflation” and talk of economic calamity.

The central banker also does not look at the distribution of income in a society — he just takes into consideration averages.  For example, because of their extreme monetary stimulus, the price of financial assets goes up 20% (i.e. stocks, real estate, etc.).  The economist will say that “average household wealth” has increased by 20% and proclaim that central bank policy has benefited society.  However, the central banker ignores the fact wages have decreased by 10% per year, when adjusted for experienced inflation — i.e. experienced inflation has increased by 15% per year and wages have only gone up 5% per year.  The lower and middle income group of people own little to no financial assets, so the 20% increase in the “average household wealth” accrued to only the top 20% of the population, with the top 1% of the population receiving 90% of the increase in wealth.  In effect, central bank policy, when combined with stagnant wages, has resulted in the ongoing impoverishment of 60% of the population, and a tremendous wealth boon for the top 10%.

As the illegitimate Biden administration is opening up the borders once again, the labor supply in America will once again swell in numbers, which will once again put a lid on the price of labor.  At the same time, the Federal Reserve has exponentially increased the supply of money, which looks to push experienced inflation back to levels not seen since the 1960’s.  This means that the majority of Americans, who now make up the lower income bracket, will continue to face further impoverishment as the cost of necessities increase at an increasingly faster rate and the availability of jobs decrease further due to the unrestricted tide of illegal immigrants.  It would appear the the 3rd rider of the Apocalypse, the rider on the black horse, has indeed been unleashed upon the world.

With economic suffering looking to increase, it becomes all the more important for Believers with the means, to help those Believers who are suffering hardships.  Be God’s agent on this world, and be a shepherd to His flock.


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