Inflation may be abating, but the long-term damage has already been done

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As the Biden administration continues its effort to paint a picture that inflation is under control, the truth is that while things may seem to be finally winding down for a while, the irreversible damage done to American families will continue to be felt financially for years to come. will continue to harm. .

A recent piece from TBEN points out that while inflation appears to be cooling, the impact on the price of basics like fuel and groceries will linger:

In recent months, many of the key factors driving inflation over four decades have begun to fade. Shipping costs have dropped. Cotton, beef and other raw materials have become cheaper. And shoppers found greater discounts online and in malls during the holiday season as retailers attempted to clear excess inventory. Consumer prices fell 0.1% in December from the previous month, according to the Labor Department. It was the biggest monthly drop in nearly three years.

But cheaper freight and raw material costs won’t immediately trickle down to consumers, in part because of supplier contracts that set prices months in advance.

If we combine the problems faced by suppliers with the increased labor costs since the 2020 pandemic, consumers will have to bear the burden going forward.

The question that remains is, now that Americans can take a breather (just before they face the tax man this season), what will their financial landscape look like in the future? Are better days coming or is the future just a permanent disaster?

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Millennials will likely continue to struggle to get ahead

Today’s young people still face the burdens of pursuing the dream of a middle-class lifestyle while facing severe economic challenges that the previous two generations did not face.

A Fidelity article published in July 2022 noted the stark differences in spending habits between millennials and their parents, as well as the unique challenges they face.

“For the first time in their lives, millennials are feeling the rapid effects of inflation — and in some cases are being forced to reassess their plans for the future,” the author writes.

The author points out that younger consumers “are more likely to buy used cars because they are cheaper than new ones.” While that may seem like a blanket, cost-effective decision, they note that “used car prices are up more than 37% in 2021” and have continued to rise ever since.

Millennials are generally more likely to rent rather than buy, especially since many of them are priced in today’s ultra-competitive housing market. That said, it’s also not very helpful that rents have risen by an average of 18% across the country in recent years since the pandemic.

Critics might point out that on a superficial level, Millennials, which consist of those born between 1981-1996, now boast an average net worth of $76,000 since reaching their peak working years. However, millennials are relatively only outperforming those born in 1997 or after.

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A Yahoo! December’s report points out that “Millennials are making more money than any other generation at their age, but have much less wealth because the cost of living has outpaced wage increases,” said Equitable Advisors certified financial planner Molly Ward.

“In addition, because boomers married young, there were often two wage earners in a household, so net worth increased,” Ward said. “Millennials often live on one paycheck because they may not get married young or at all.”

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Central banks support distrust in the dollar with gold signal

How have the world’s central banks fared in this tumultuous time? Well, while they were printing money at a rapid pace, devaluing our purchasing power and killing our savings, they were also buying gold at alarmingly high rates.

In an article published this week by Daniel Lacalle of the Mises Institute, Lacalle sounds the alarm about the gold-purchasing activity of central banks around the world.

“By 2022, central banks will have purchased the largest amount of gold in recent history,” says Lacalle. “According to the World Gold Council, central bank purchases of gold have reached a level not seen since 1967. The world’s central banks bought 673 tons in one month and in the third quarter the figure reached 400 tons.”

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“This is interesting because the flow from central banks since 2020 has been net sales par excellence.”

Lacalle adds that there are many factors to this rush when buying gold. Factors include, of course, the drastic inflation of the US dollar, which is after all the world’s reserve currency, but also China’s attempts to move away from their economy’s dependence on the dollar, the impact of the conflict in Ukraine on the rest of Europe and the falling value of our own bond market.

“So, why are they buying gold?” He asks. “Because a new paradigm in policy will inevitably emerge as a result of the disastrous economic and monetary effects of years of excessive easing, and neither our real earnings nor our deposits benefit from it. Given the choice between ‘good money’ and ‘financial repression’, governments force central banks to choose ‘financial repression’.”

Lacalle concludes that “the only reason central banks buy gold is to protect their balance sheets from their own monetary destruction programs; they have no choice but to do so.”

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