How do you deal with the ghost of inflation ?

Is inflation just a number ?

To the common man on the street it can mean a lot more.

Going by the book inflation represents rise in prices or better still rate at which prices are rising.
So for most of the people it means loss of buying power as the money they hold can buy less of the stuff it used to.

Effect of inflation on daily lives

Suddenly you find you need more money to buy stuff.

It is represented as a percentage
Taking the example of food the typical inflation numbers would be released as 8.08% in September, 2022
What this depicts as the rate at which food prices are increasing.
Even the whole sale price index is in lower double digits.
However the reality is far from these number

Do organised & well developed markets have more direct price inflation correlation ?

If you are in the part of the world where supply chains are well managed and organised and almost all retail happens in online stores or brick and mortar stores where every thing sold is as per a label on the product then perhaps we are talking of a more correlated price - inflation relationship.

Inflation in developing economies where Prices run much faster than inflation in a lot of places

If you speak of countries where the supply chains are not always computerized, stream lined and well organised there are multiple middle men coming to the picture.
where products move from the manufacturer to the consumer via so many intermediaries there is always a hidden element that modifies the price in a way which is in no way related to inflation.
Nor is it reflected in the monthly inflation number released by the authorities.
I would like to explain this with a few examples.
Due to the Covid 19 pandemic markets, malls and stores were closed. Business suffered and there were no sales.

Post the opening of the lock downs business has been slow or sluggish for a lot of sectors.
As a DIY (do it yourself ) enthusiast Joe the common man on the street has to buy stuff he needs to fix things around the house or use in creating new projects.
In need of some metal washers he visits the local hardware store.

He is surprised or rather shocked that the prices have changed by a factor of 10X for a humble washer over a span of a couple of days.

This humble device that you see in the picture below

is a starter and used to light up the tube light on the wall.
Even this has gone up 3X in price over a span of about 15 days.

The day of realization

That is the day he realizes that metal washers and tube light starters are clearly outperforming the top blue chip equity stocks, BTC, ETH and so many blockchain based projects by a huge margin.

If you ask the seller why such a sudden price rise then he would quote inflation.
These kind of things are needed for installations and repairs so by jacking up the price the sellers are making things difficult for the end user.
The example is used to show how prices of even the smallest of things are getting jacked up in the name of inflation.

Are they possessed by the ghost of inflation ?

It is a very precarious situation because be it in the name of inflation or in the name of fuel cost rise prices only go up.

However salaries are never able to catch up with these price rises.
Mostly one is not aware of there being a governing authority which is looking at such price hikes.
Surely we need someone to keep a tab on such malpractices.

Without such corrective processes in place no one can complain that why prices are going up so steeply and no one gets prosecuted or goes to jail for manipulating the prices in the economy.
The irony is that the Banana prices which doubled over a span of a month or so in never make news headlines.
The same goes for the price of staples which are increasing at multiple X times the rates of inflation.

The Domino effect of price rise

The price rise of one thing triggers a price rise of so many other things and one is left fending for onesef on so many fronts.

The effect of such price rises can be felt at every stage. House hold items are getting expensive at a rate much faster than the inflation numbers suggest.
If you goes out to a restaurant you could easily end up paying 2X or 3X what you used to pay earlier.

Are price inflation anomalies only happening in the developing economies ?

Well there are instances of toilet roles going in short supply in UK and being sold on e-bay at multiple X prices.

These anomalies can be dangerous !

Back in 2018 there were riots in Paris due to Nutella chocolate price slashing.

source

Referred to as "Nutella Riots" It was a case where the brand slashed the prices of its products by 70%
This resulted in people of Paris going on a rampage trying to get hold of what ever Nutella chocolate jars they could find in the stores.
However these instances are less frequent.

So what can happen in a world where the prices are going up multiple X times and despite that there are food shortages.

Jacking up the prices on a periodic basis in the name of inflation is a evil which remains to be tackled in a large parts of the world.

In our world inflation is not just a number it also is the manifestation of the belief that prices are going up. This notion is being used by some people to suit their needs.

From the release of numbers by the authorities to the product landing in the hands of the consumer there is a lot more happening in terms of price jacking that is simply not reflected by the inflation numbers.

A lot many factors play a part.
Had Joe been some where in the UK he could have visited one of the many Sam 99 stores and got the DIY supplies for cheap.
However there are other things to contend with high gas prices in a fast approaching winter. Multi decade high inflation only add to the woes of the general population.

Final Thoughts

It hardly matters in which part of the world you live inflation is like a ghost which haunts us all and being an invisible enemy there is little common folks can do about it.
Though traditionally governments and central banks do try to come up with their own set of solutions however till the time such measures control this ghost it is financially a back breaking experience for most of us.

• Since disposable income is losing its buying power some people look out for sales and buy and store in bulk
• Using coupons discount vouchers and offers on your credit/ debit cards can also help reduce the monthly bill.
• Spend within your means and never let the credit card payments default as it can lead to heavy penalties.

These are some of the things that people incorporate. What are your ways of dealing with inflation ?

Disclaimer : No investment advice is offered in this post. Please DYOR do your own research before making an investment.