By: Bill and Cindi Porter, AILERON INVESTMENT ADVISORS
Q: Is inflation something we still need to worry about?
Consider this – during the past 20 years, the government has reported that we have experienced only a negligible amount of inflation. Really?
• The U.S Census Bureau reports that in 1998 the median price for a house was $153,000, but in 2018 it is now up to $325,200.*
• The College Board tells us that in 1998, public college cost$5,020, but in 2018 it has more than doubled to $10,230.*
• The National Conference of State Legislatures tells us that in 1998 the annual premium for a family health insurance plan was $5,532, but now it has nearly quadrupled to $19,616.
If you do not need a house, health insurance, or care about college, perhaps these statistics are meaningless. However, these examples are just a small sampling of the major price increases that have skyrocketed during a period of “low inflation.”
In the 1970s, 18% mortgage rates, the price of gas doubling overnight, and the price of nearly all products increasing weekly shook our nation. “Stagflation” suddenly became the new normal — skyrocketing prices coupled with stagnant wages. Everything was more expensive, but paychecks remained the same. Could it happen again?
Think about this: The Federal Reserve artificially kept interest rates at nearly zero during the entire Obama administration while the national debt was doubled. In 2007, rising interest rates exposed the folly of individual sub-prime mortgages. In 2019 it may be the federal government’s turn.
The U.S. Treasury tells us that the national debt in 1998 was $5.4 trillion and in 2018, it has now quadrupled to $21.7 trillion.* The government must now pay the interest on that debt at increasing rates of interest — perhaps another sub-prime fiasco in the making and a recipe for inflation.
A conversation with your trusted advisor about inflation may be time well spent.
*Sourced from InvestmentNews, November 12, 2018
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