Self fulfilling inflation

We all know inflation is high, we are told every day, we see it every day, we accept it everyday – we expect it so it happens even in small ways.

Packages get smaller, suddenly we are charged an extra percent to use a credit card. Gee, lettuce was $0.99 a few months ago now it $3.99.

As long as we expect inflation, its easier to raise prices.

Much of the current inflation is beyond our control because it is a global situation, but we can help lower it in some ways.

  • Avoid buying anything that you don’t absolutely need
  • Shop for sales
  • Consider generic brands
  • Substitute the expensive for the less expensive alternative when possible

The Federal Reserve is making spending more expensive in an effort to limit demand and thus lower prices – higher mortgage rates for example lower the price of a house because the affordable monthly payment includes more interest. The same is true for other large purchases like a car.

There is a lesson here for those nearing retirement. Plan your retirement income so there is a cushion for times like this. You should be able to generate an income in excess of your expected living expenses, including discretionary spending. This is especially true if you are living off investments.

One way to do that is to have some of your portfolio in interest and dividend paying investments which you plan to reinvest. When times are tough, you can turn off the reinvestment and use the interest and dividends. Turn reinvestment on again when possible.

Isn’t it fascinating that politicians deny responsibility for inflation, but take credit when it declines even a small amount?


  1. Avoid buying anything that you don’t absolutely need
    Shop for sales
    Consider generic brands
    Substitute the expensive for the less expensive alternative when possible

    Funny – I have been doing these things my entire life. Also, pay credit card statement balance before any interest is charged, but if you cannot only go 90 days, very short time pay off cycle. From 1986 to 2020 I purchased used cars for cash and performed all maintenance and repairs, saving me thousands of dollars.
    Remember money is just a tool to make your life better. The more money you keep every month the better your life will become.


  2. We all expect to see reasonable increases but the current situation was created by our government (this administration). We do not have to accept inflation that is unacceptable. Those on fixed incomes and those in lower paying jobs are being brutalized by this administration. It is not Russia, China, Ukraine or the cost of prescriptions. It is power over the people. The push of an undeveloped green energy fantasy while cutting access to our abundant energy supply chain. This rise in the high cost of goods and services is man made. We did this to ourselves.

    You can not continue to print money which devalues our buying power while giving billions away to countries that struggle to eat in the guise of helping them prepare for their green energy projects. Tractors on large farms do not work on battery power. If they need to travel 20 miles to sit idle while getting charged. We have someone in the administration who flies his plane around the world pushing useless programs and gadgets that measure the amount of CO2 generated by people and farm animals in an effort to push renewable power systems in areas where there are concentrations of CO2.

    We are nuts – plain and simple. If the current agenda is repeated enough times, people begin to believe it as true. Meanwhile, we let millions of people (illegals) flock unchecked into our country living off the proceeds we worked for. I feel for those people but we can not continue to accept this unchecked flow into our country. Immigration in countries around the world all have controls. We now have no immigration controls not to mention the drugs that flow into our country which are killing our citizens by the thousands.

    We need to change the direction this country is headed. I know I am but one vote but Thank you for listening.


    1. Bill Sr.

      You come across as a very frustrated and angry guy! I ask what does that anger serve you?
      First accept that life is unfair. Just try to adapt.
      Just do your best to insulate yourself from adverse happenings that you, and I, have absolutely no control over.
      Live in a secure gated development where there’s older white people such as you. Hopefully there’s nice shopping nearby to meet your needs. Never ever use the airlines to fly. Most importantly avoid the news on TV and cable at all costs! Rise blissfully above all the hubhub and dream sweet thoughts!


  3. For a long time, The Federal Reserve (FOMC) had a target inflation rate of 2% for about a decade. They were a slept when it finally happened. But the Fed chairmen even before 2012 knew that inflation was better than deflation or stagnation.

    Graduating high in 1980, I lived through some very high double digit inflation. Employers were giving raises only to find that they did not cover expenses the following month.

    History should have taught us to plan for inflation. Expect inflation. It is foolish to believe that costs will never go up over time. It is a question of how fast will costs go up and will incomes be able to follow? Even in retirement if you think that food and energy prices will be the same as the day you died as the day that you retired, you are kidding yourself.


    1. We just downsized, escrow closing next week. Our mortgage payments were $2,000/mo. including taxes and insurance. The new owners will be paying $3,600/mo.

      I asked myself, ‘who can afford that much house payment?’

      The answer… Me? That’s who.

      I looked up the salary for the last position I held, and guesstimated for my wife.

      Prices have gone up considerably since I retired in 2009. So have wages. Dwayne is right, you have to plan for inflation. I could still, with retirement income, afford $3,600/mo, but just barely. I would have to stop adding to investments each month, and maybe start withdrawing.


  4. I can’t agree with the premise that if we expect inflation, it will happen. I, for one, was caught totally off guard with the run up in housing around our area as well as rents. The things blamed on supply chain breakdown, yes, but not things that didn’t appear to be supply chain related.
    Your other advice is good since a lot of pricing is sticky and will be high from here on. The people who thought they were going to retire on a “simple, low spend” lifestyle are out of luck. They need to readjust their income estimates upward.


    1. What I should have clarified is that once inflation starts, we expect it. For example, right now don’t we expect to see higher prices when we go to the supermarket? We become resolved we are going to pay more and so we do.


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