The Gov’s Fix for “Temporary” Inflation Will Only Make Things Worse

Andy Snyder|March 25, 2021

We don’t like it when our doorbell rings.

Way out here, there are no vacuum salesmen… no political hucksters… and the lost have already been found.

When the chimes go off, there’s trouble.

They rang twice yesterday.

The first time it was a concerned lady who got out of an SUV. One of our sheep was grazing on the road.

We pushed her on the rump, and she went where she belonged – the sheep, not the lady at the door.

The second time the doorbell rang, we saw a tall gentleman pacing on our brick walkway.

“You don’t have a big dog, do you?” he asked.

Hmmm… we thought. Folks normally don’t let a dog loose on somebody with good news.

We lied and said our pooch was off herding some sheep.

Rising Prices… Broken Promises

“I’m a realtor,” he said. “I’m listing the property down the road.”

Ugh.

If you’re a frequent reader, you know we had a contract on that property. We had a deal.

But the seller talked with a few folks, read a few headlines and decided she could get more – more than enough to walk away from our deal.

“I don’t like this market. People are paying too much,” the nervous realtor told us. “But folks have the money and they’re spending it.”

“Call me if you want to up your offer,” he said.

We wished we had a dog… but have you seen their prices lately?

A “Temporary” Death

We promised more on inflation and its fallout this week. It’s a mess.

The folks in charge say it’s temporary. In their words, they like to say it’s “transitory,” as if it’s going to catch the next public bus out of town.

But what if the bus has a flat tire… or it’s too old and overloaded to make it up the hill?

They say this latest surge in rising prices is the result of pent-up demand and the one-time effect of the war on COVID.

They could be right. But then again, their predecessors argued the same thing when inflation soared after the Civil War… World War I… and World War II.

In equivalent dollars, we’ve already outspent all three big fights.

We’re seeing collateral damage across the economy.

Prices of semiconductors are soaring… Several firms have already boosted prices by 30% or more. Others have flat-out stopped shipping to some customers.

None of it is great news for consumers. Car buyers, though, may be hit the hardest. Today, 40% of a vehicle’s value is related to its electronics.

General Motors (GM) has tossed its hands in the air and is now selling trucks without an important fuel economy module. The trucks will burn an extra 50 gallons or so of fuel each year… for the rest of their useful lives.

Their unfortunate new owners don’t buy the “temporary” price hike story.

It’s the same in the building materials industry.

The folks who track such things recently said the average price for a new home is up $16,000 thanks to rising lumber prices.

Spread across a 30-year loan and compounded by today’s mortgage rates, the increased price lingers for a generation.

Again… these things are just temporary, though.

Just Starting

According to our mailbag… prices are about to rise even further. There’s another major shortage.

Plastic.

That means everything from plumbing pipes to windows to refrigerators is about to see a price spike.

From a man on the inside…

Andy, I love your column and investment services. I have information from the field on inflation. I sell plastics mainly used in food packaging. Our raw material is resin, which has become in tight supply due to low output from refineries. Resin prices have skyrocketed recently, so we are increasing our prices by 60% in April. Packaging is the No. 2 cost for prepackaged foods. I hear we will see inflation in a few years. We will see it in a few months. – Reader D.D.

Thanks, D.D.

He’s right. Plastic prices have soared to record highs.

Polyvinyl chloride – better known as PVC – is used in roofing, flooring, siding, car interiors, pipes and even car windshields. It just hit a highest-ever price of $1,625 per ton.

But for many factories, price doesn’t matter.

There’s just not enough of the stuff to go around. America isn’t producing enough plastic to cover domestic demand.

This problem, though, is only loosely related to the pandemic. Demand is soaring as the economy pops its head out of its quarantine bolt-hole, but the real issue is the recent freeze in Texas.

It shut the industry down.

Good, the freethinking will say, that means the price spikes are temporary.

We’d like to think they’re right.

But digging deeper, we see trouble coming up the sidewalk.

Somebody else is ringing doorbells in Texas and throughout the nation. He’s from the government and is here to help.

Release the Hounds!

With the semiconductor mess on his mind, the president just signed an executive order that forces a 100-day review of supply chains.

Even more, he’s called for $37 billion in funding to help “solve” the problem.

It’s not good news…

Just ask dairy farmers. As milk prices rose during World War II, the government stepped in to fix things. But the folks in D.C. missed a few critical details and sparked the beginning of the end of the industry.

The government is in a meddling mood these days.

It will print more money to add a permanent fix to a temporary problem.

That’s never good.

The government will grow… and so will our cost of living.

More from the mailbag and what your fellow readers are thinking and doing about inflation tomorrow. And share your thoughts and what you’re seeing at mailbag@manwardpress.com.

Editor’s Note: As Andy has said often… you must increase your income as inflation takes its bite. Otherwise, your lifestyle could take a big hit. That’s why you need to check out his unique and effective once-per-month trading strategy. It could potentially DOUBLE your money every month… and protect you from the trouble inflation could bring. Get all the details here.