Pondering Price vs. Value

 "Observe always that everything is the result of change, and get used to thinking that there is nothing Nature loves so well as to change existing forms and make new ones like them." - Marcus Aurelius

 Recently, price inflation has been in the headlines.  Not wage inflation, of course - nobody can demand or get a wage increase these days.  So we have price inflation.  The Fed says this inflation is "transitory" - meaning temporary.  That's probably just PR because they don't want to harm the fragile economy (and hedge funds) by raising interest rates to stabilize inflation.  Their PR won't solve a very real and harmful problem that may or may not turn out to be "transitory".  Like those fools have a clue - they got blind-sided by the housing bust and banking crisis. 

 Below:  The most recent Consumer Price Index (CPI) chart.  I believe this chart is nonsense.  Prices are rising, rapidly.  There is a website that tracks the CPI using methodology from the 1980's, to stay consistent.  That website is called Shadowstats.  Shadowstats shows consistently higher inflation than the government does, using the government's own earlier method of measuring inflation.

Below is a chart of the Producer Price Index (PPI).  This is the cost that business pays for raw materials and energy to make the stuff that we buy.  That price will eventually show up in the CPI.  This chart (from the government, not Shadowstats) is alarming.

Anyhow, due to price inflation, I've been on a bit of a buyer's strike.  A "buyer's strike" refers to a large number of consumers refusing to buy something due to high prices, and using their numbers to bring the price back down.  I don't care if *other people* are refusing to buy stuff after the price has climbed.  I personally don't want to pay a higher price than the actual value of an item.  And now, regarding pissing away money on stuff I don't really need - I'm on strike.  

Of course there are some things you can't avoid buying.  But the optional things?  Well, I'm done because the price now exceeds the value.  There are things I am happy to pay top dollar for: Quality professional labor, excellent dining service, and high-quality (US, European, or Japanese made) stuff.  But generic shit from low-cost labor countries now costs twice what it did a year ago?  No. If something has a certain value, I will not pay more than I believe that value is, especially if I don't *need* that item right now.

This is one reason that I'm 60 years old, but I've never purchased a brand-new car for myself.  Yeah it would be nice to know it's never been abused, and to have a perfect-condition vehicle off the showroom floor.  But are those things worth a 25-35% instant loss of money the moment you sign the paper?  To me it's not a good deal, at all.

So what products am I talking about, specifically that have gone up in price?  lumber, used vehicles, sporting goods, and paper products, to name a few things I've noticed.  Also pretty much anything interesting that I see listed on Craigslist, Facebook Marketplace, and eBay.  The asking prices are jaw-dropping and stupid.  If you see a bargain on eBay, it's because the Seller isn't willing to ship it.

Eventually the prices will come crashing back down again, and then  people will begin to yard-sale their stuff for some spending cash.  Seen it before in 2008, and we will see it again very soon.  It always ends the same.

Here's what I wrote in this very blog in April 2006, well before the 2008 Global Financial Crisis (that no professional economist in the government could have foreseen!!!)

"The economy:
Can't help the feeling that things are going to crash and burn soon. There's too much going wrong right now, under the surface. The country is in debt, the consumer is in debt, and interest rates are going up, making those debts difficult to service. The US savings rate is negative, and the only reason people have been able to prop up the economy by buying stuff is because they've been refinancing their homes and taking out cash - rather than earning the money before spending it. If (when) the housing bubble bursts, a lot of people will be upside-down on their houses and those with ARMS may get foreclosed on when their loans adjust up."

That's how we got the house we live in now - it's a repo that we purchased from the bank at 2/3 market price after the original owner defaulted on the loan he could not make payments on. 

While inflation starts to hit harder and harder, I'll just put money away and putter around in the shop.   I'll finish up some long-delayed projects that won't cost much, and will provide a lot of entertainment and satisfaction.