Consumer prices are beginning to soar. For over a decade the US government along with the Federal Reserve has printed trillions of U.S. dollars to help stimulate the economy. Initially, investors and pundits were concern that this inflation will cause prices to rise for consumer goods.
As people worried, they began the rush for gold. However, as the years went on, prices remained steady, and thus investors started to second guess their initial assessment. Perhaps there was no need to worry about inflation after all?
Well, they were wrong; there was plenty of inflation; the resulting rise in prices occurred in other areas such as the stock market and real estate market.
However, now, we’re starting to see the actual results of inflation as consumer prices begin to rise at a fast pace. According to the Wall Street Journal, Church & Dwight the maker’s of Arm & Hammer baking soda, OxiClean, and cat litter have recently increased its prices by 30%. Even the Clorox Company raised the prices of about half their products.
CEO Benno Dorer last week voiced confidence in Clorox’s pricing strategy over the long term, and the company expects to invest in new products. Higher prices for Kingsford charcoal and Burt’s Bees products went into effect in December and February, respectively. -WSJWall Street Journal
So could we finally be seeing a rapid increase in prices among consumer goods? Alternatively, are these products an outlier to what’s going on? Well, let’s find out — first, an excellent place to start if you wish to learn more about inflation.
Consumer Prices Are Rising
There has been a multitude of recent headlines regarding the rise of production costs from many businesses. On February 22nd, Kraft Heinz experienced its most significant one day decline due to a low unexpected earnings report.
Earnings were just 51 cents a share, down from 77 cents a share from a year ago and well below the 81 cents a share that analyst expected. Talk about a huge miss in earnings!
Interestingly, what was the reason for the lower than expected results? Well according to Kraft Heinz, the lower earnings was attributed to higher commodity and shipping costs.
In the past Kraft Heinz has been known for cutting costs, however; chances are cutting costs won’t be their next move as they’re already tight on what they can cut, what’s likely next is to raise their prices.
However, Kraft Heinz is not the only company that is going to be raising prices. Last year Amazon increased their Amazon Prime subscription from $99 to $119, a whopping 20% increase.
Unfortunately, our Federal Reserve and federal government overlords, believe that inflation is at a measly 2% annual rate. Yeah, give me a break.
Inflation or should I say consumer and producer prices are running much higher than a 2% yearly rate. According to John William’s Shadowstats.com, the CPI inflation rate is around 10% per annum.
How To Combat Rising Inflation?
The answer to this question is simple, gold and silver. Physical gold and silver coins are a great hedge against inflation. When inflation rises, so do the value of gold and silver.
However; the problem with these metals is they don’t provide any interest, so they’re not a great investment tool. You can argue that in a hyperinflation environment gold and silver are indeed an investment tool.
For example, in Venezuela, there are reports that a troy ounce of silver can buy an individual three to four months’ worth of food. In another story, an ounce of gold can buy a house.
But once again these are under extreme conditions. Furthermore, whether the situation is excessive or not, if you want to have a safety net from rising consumer prices, and your safest bet is to buy some gold and silver.