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A Not So Merry Christmas Ahead, Be Prepared.

dustin wells

Dustin Wells, Tax Specialist

The U.S. economy is tittering within the first nine months of the newly elected President Biden. Let’s run it down as we’ve done here before and analyze further what’s ahead so that you can better plan and protect your money and families. 

Inflation. Record high inflation is occurring but more importantly currently is what’s called shrink-flation. Shrink-flation is occurring within the products you buy at the grocery store by suppliers – Kellogg’s, etc. – are actually giving you less in your box of cereal and charging you the same price. Don’t believe me? Check the ounces on the next cereal box you buy and notate the price and compare the prior boxes you’ve purchased. This is beginning to occur across the proverbial economic board for multiple corporate reasons we have addressed here before but will not delve into today as to not repeat ourselves. 

Moreover, have you seen an increase in your wages lately? Anyone’s wages increased greater than 6.2%? Doubtful. Think you got a raise when you got a 5% increase this year in pay? I disagree. With record high inflation, if your wages did not increase by 6.2% or more similarly to the rate of inflation, then you actually got a pay decrease because your wages and take home pay are 1% less, on average, than the increase you are paid in the form of… inflation! No increase in your wages greater than 6.2% will ever overcome the amount of the current inflation at record high levels due to the continual, never-ending printing of US dollars out of the Treasury to the tune of a likely $2 Trillion of new, federal government spending passed by the Democrat-led Congress expected soon.

Per the BLS, Bureau of Labor Statistics, the annual inflation rate in the US surged to 6.2% in October of 2021, the highest since November of 1990 and above forecasts of 5.8%. Upward pressure was broad-based, with energy costs recording the biggest gain (30% vs 24.8% in September), namely gasoline (49.6%). Inflation also increased for shelter (3.5% vs 3.2%); food (5.3% vs 4.6%, the highest since January of 2009), namely food at home (5.4% vs 4.5%); new vehicles (9.8% vs 8.7%); used cars and trucks (26.4% percent vs 24.4%); transportation services (4.5% vs 4.4%); apparel (4.3% vs 3.4%); and medical care services (1.7% vs 0.9%). The monthly rate increased to 0.9% from 0.4% in September, also higher than forecasts of 0.6%, boosted by higher cost of energy, shelter, food, used cars and trucks, and new vehicles.

With no intentional words or actions outlined by Congress or the Treasury, inflation will continue to increase to record high levels higher than we see currently with your dollar’s purchasing power similarly decreasing while more and more US (paper) dollar bills are printed by the Treasury and budgeted spent by Congress.

Supply Chain. Supply chain problems are occurring and will continue. You may not be seeing, feeling or recognizing the supply chain problem yet, but soon all American consumers will most definitely recognize it in person and at stores everywhere. Currently, American suppliers, stores are struggling to get inventory regularly. In California, ships cannot be unloaded because union workers are limited and the union workers actually working aren’t enough to unload the boats sitting on the shores of California. Secondly, there are not enough American truck drivers to get the heavily delayed products off the boats to suppliers and stores for US buyers.

So what? How does that effect me? So… buy your Thanksgiving and Christmas gifts now because the products you need and may want to buy – toys, presents, gifts, etc. – will not be on the store shelves when you go to buy them or order them online in November or December. Additionally, as we have strategically and repeatedly outlined here – when you go to the grocery currently you need to buy double of whatever you use or eat regularly because you are going to need a larger supply of food, meat, condiments, water, drinks, etc. to last for the months ahead, because you’re not going to see those same groceries, products on the shelves at year end.   

On top of these problems, you will see additional problems ahead including but not limited to: 1) higher energy costs. It will cost more to heat your home this winter and fill up your car with gas due to increasingly, higher energy costs across the board; 2) record high taxes for corporations and middle-class Americans if and when Congress passes the $2 trillion spending (aka reconciliation) bill; 3) corporate business profits will be materially decreased by year-end leading to a static stock market as Wall Street turns bearish on President Biden and American corporation’s for the multitude of economic reasons we’ve outlined here and prior, and that’s only the beginning. 

In conclusion, lets summarize. Any and all clear-minded Americans can no longer refute the substantial consequences of secular-progressive policies being implemented just nine-months into President Biden’s administration which are affecting all Americans including the more vulnerable lower-middle class. Moreover, a more immediate concern for you is what you don’t see and what you don’t feel yet and that is economic hardship and pain coming through Christmas of 2021 and through the 2022 year ahead.

Decisions by President Biden and his administration are directly responsible for the higher U.S. domestic gas, energy prices which has directly led to higher grocery and food costs because the cost of fuel and gas to get grocery’s and other consumer products to Wal-Mart’s store shelves costs substantially more across the board. With all that – Be prepared and plan ahead. Update your family budget for expected higher gas, energy and food costs.  Save as much of your money you can.  Store up on the most important goods and products you and your family use regularly, as well as other useful and regularly used commodities.  Economically, the end of 2021 and through 2022 will be rough.  But hopefully, if we plan ahead, budget, save, store up food and other goods, the economic pain likely to be incurred will not be as bad. As always, I pray to God that we all have more time before the proverbial dam breaks and if you’re reading this now, I sincerely hope you will as well.

Author: Dustin Wells

Dustin is an Enrolled Agent with the Strothman and Company Tax team and has been with the Firm since 2019. He has nine years of experience working for the Internal Revenue Service before transitioning his career into public accounting. Utilizing his IRS experience he specializes in assisting clients with tax representation at the federal, state, and local levels in addition to his tax preparation and planning work.
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