Posted in On the Homestead
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December 22, 2007 Yes, it's true that there will be (if there isn't already) global inflation—in food, building materials, fuel, and a host of other things. Let's look at the sources. 1.The value of the dollar has dropped by about 1/3, and this means it will take more dollars to buy what we normally buy, on a local level as well as an international trade level. This is being allowed to happen by our Treasury and Federal Reserve to stimulate purchases from outside the country, propping up our sagging and wilting economy. Without this, we would already be in a recession…perhaps a depression right now. Corporate spending needs to occur, because that's where the biggest dollars are coming into our economy—not in the grocery stores or electronics stores. We're talking large earth-moving machines being ordered from China, and oil rig parts ordered from around the world compared to bread loaves and ground meat—see the monetary difference? Personal spending on your part doesn't do much for the broader economy, nor the global economy. Think of this as our country's products being on sale at 30% off to everyone but us. 2.Remember the law of supply and demand—when things are in short supply, or when demand spikes beyond supply's capacity, the prices go up. This covers everything from oil to corn to cement to finding a decent roofer or mechanic. It also doesn't just happen here in the U.S., but worldwide. At this particular moment, we here are feeling the effects of ethanol on our economy in many ways: corn is being diverted from animal feed to fuel, because there isn't enough domestic corn to handle both types of demand, and the price skyrocketed (causing corn growers to go where the money's best, and that is fuel). Animal feed producers have tried to switch to other grains, but animals won't eat just any old thing, and the prices of those grains have shot up as well—soy, rice, wheat, and others. This means the diversion of corn to fuel has affected your protein prices (turkey, chicken, beef, and pork feeds) and the end products of these animals (meat, eggs, milk products, lard, etc—and probably pork rinds and leather coats too). Since this also dragged the price of wheat up, your bread products are now being affected as well. I wouldn't be surprised if tofu products are also higher in price, as soy prices have skyrocketed too. Mexicans are up in arms over corn tortilla prices, and Third World countries that receive food aid from us are probably dealing with short supplies and cut rations--both are net importers of our corn, and now that supply of corn for food is reduced by ethanol and the higher price per bushel it brings. Let's not forget the increased price of shipping foods around—higher fuel prices for trucks, trains, planes, and cargo ships have increased the shipping costs, which are added into the retail price of those foods shipped. The further the item is shipped, the higher the added cost—this is why it pays to shop from local producers. 3.Politics and trade restrictions or tariffs will always get in the way—this is how we control whom we trade with and what we're willing to trade. The corn/ethanol situation could've easily been solved if only Brazil were allowed to import its excess sugar ethanol to us, but no—the tariffs in place are so high as to squash that notion in the bud (yes, Virginia, we do have cane sugar industry protectionism going on in the Gulf Coast states, mainly Louisiana). For once, commodity farmers are getting their day in the sun Wall Street-wise, but it won't last—a new Farm Bill is being hammered out in the Senate that will do away with much of the subsidies these farmers get now that the markets have taken off for their crops. As of right now, the only crops slated to lose their subsidies are cotton and rice, due to strong-arm lobbying by certain companies that comprise Big Farm—and this same protectionism and lobbying is largely what prevents us from importing cheaper food crops from other countries. So what is a common ordinary citizen supposed to do about the things he/she cannot control in the food realm? Well, it boils down to the basic tenets of frugality: •Use your price book to keep track of prices, so you aren't caught unaware. Always have a calculator handy to find true bargains. •Buy other products that satisfy your price and needs just as well. •Learn to stretch the life of the products you do buy. •Learn to live without products that you otherwise cannot find affordable and acceptable substitutes for. •Make your own products using affordable raw ingredients. We cannot control the value of our dollar, the tariff system, trade policies of our country, or what's happening in the rest of the world, but we can control what we do here at home—see the effects? We're spending less, and our heavily consumer-dependent economy is swiftly shrinking as a result. Big business is working globally at breakneck speed to keep itself and the economy afloat. China seems to be our biggest buyer right now, and once they stop buying (which could happen after the Beijing Olympics), we're likely going to see the deepest economic water we've ever seen—probably worse than the depression of the 30's. We'll also have the first wave of boomers retiring in 2010, driving up Social Security taxes for the rest of us. These are also things we cannot control, so all we can do is what we can do (see list above). But what else can we do to prepare for this possibility? 1.Get out of debt and stay out of debt—have patience and learn to accept the word NO if you can't afford something with cash. Learn to prioritize. 2.Relocate to a cheaper cost-of-living location NOW to preserve what money you still have coming in—so far, this would be Gulf Coast states and those bordering on the Mississippi River, but this may change later. If things get too bad, we may end up going back to riverboat commerce to cut shipping costs to either coast. 3.Haggle like crazy, knowing the value of something is only what the buyer attaches to it. You make the market value, not some arbitrary agent or invisible investor. 4.Avoid costly marketing and advertising pitfalls, including the ones on TV and on the side of the road. 5.Learn to reduce, reuse, recycle, swap, and scavenge—people throw away or walk past things with plenty of life left in them for lack of imagination. 6.Never buy anything new except food (items not home-grown) and supplements. I haven't figured out how to buy used food yet in anything but compost form--if I do, I'll let you know. So far, scratch-and-dent produce is as close as I can get. Don't worry about organics—if we do go into a depression, nearly everything will become grass-fed/natural/free range, because commercial feed, pesticides, hormones, and additives will be too expensive for food growers and processors to regularly use as a matter of course. Just think—we may all end up eating better as a result. How ironic is that? Basically, you'll have to be a black-belt frugalite. If you aren't one already, you will be soon. You'll have to be if you want to make it in this world, and you'll have to teach your children so they can make it in the future, and they will have to teach their children, and so on down the family line. Let the politicians figure out the rest—after all, they're the ones who got us INTO this mess! http://www.stretcher.com/blogs/toh.cfm- This is where I read this info. (It is not mine.) I thought that it explained a lot of things concerning the economy. I read another blog this morning about the government bailing us out of our problems/debt. We should be following the Bible when it concerns debt and trusting Him to supply ALL of our needs. Amanda <>< II Corinthians 5:7 |
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