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To investors,

Inflation was officially reported at 7.9% this morning, which is the highest inflation that the United States has experienced in more than 40 years. Core inflation, which excludes food and energy, is up 6.4% over the last 12 months.

If we look at the breakdown of specific components in the Consumer Price Index, it becomes obvious that the average American is in a dire financial position.

Charlie Bilello @charliebilello

Price increases over last year (CPI report) Used Cars: +41.2% Gasoline: +38.0% Gas Utilities: +23.8% Meats/Fish/Eggs: +13.0% New Cars: +12.4% Electricity: +9.0% Food at home: +8.6% Overall CPI: +7.9% Food away from home: +6.8% Apparel: +6.6% Transportation: +6.6% Shelter: +4.7%

March 10th 2022

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According to the government, it now costs 8.6% more to eat food in your home than it did a year ago. It costs 38% more to fill up your car with a tank of gasoline. Your electricity bill is 9% more expensive. These numbers are mind-boggling.

High inflation is not just happening in the United States though. The ECB increased their 2022 inflation forecast from 3.2% to 5.1% this morning. That is a 50%+ increase in their inflation expectations.

Squawk Box @SquawkCNBC

BREAKING: ECB raises its 2022 #inflation forecast to 5.1% from 3.2%. @steveliesman reports:

March 10th 2022

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The important thing to call out is that these numbers are the official calculations according to the government and/or central banks, which are incentivized to report the lowest numbers possible. There is widespread belief that the real inflation, especially what is experienced by the lowest income brackets, is well into the double-digits at the moment.

Almost half (45%) of Americans own no investable assets. This means they live paycheck-to-paycheck and have their entire savings in cash. These ~150 million people are being punished because of the undisciplined monetary and fiscal policy that has been pursued over the last 24 months.

You can’t print trillions of dollars, manipulate interest rates to 0%, and conduct an enormous amount of asset purchases, while simultaneously expecting no negative ramifications. The establishment, both economists and the media, have been presenting the idea that inflation wasn’t going to happen, then it was transitory, and now it is supposedly somehow good for you.

Obviously, this is all wrong. It always has been. Inflation was the natural outcome of these activities. Combine the current economic situation with the new Russia-Ukraine conflict and you have a recipe for disaster.

The Federal Reserve can’t raise interest rates aggressively, because we now risk spiraling into a recession. Inflation or recession. Pick your poison. Maybe we get both. The whole situation is unfortunate and there is no clear off-ramp.

While the economists, central bankers, and people in positions of power and influence try to address the current crisis, the average citizen is suffering. This highlights a severe lack of financial education in the United States and abroad. Inflation has been punishing those with no investable assets, but the wealthy, who store majority of their net worth in investable assets, have been getting wealthier and wealthier at the same time.

The United States is currently engaged in an economic war with an invisible enemy. Inflation silently erodes the wealth of those savings in dollars. Wealthy individuals know that you can’t save your way to financial security. You have to learn to invest. You have to gain the knowledge needed to protect yourself from the invisible enemy.

One of the most important things we could do right now is to immediately educate as many people as possible in personal finance topics. The faster we teach them about money, inflation, and personal finance, the quicker they will be armed with the information necessary to make sound decisions that benefit them and their families.

I won’t hold my breath for a national personal finance education campaign though.

There is no good answer on how we get out of the current economic crisis. Inflation is raging and a recession is peaking out around the corner. The central bankers and politicians who oversee monetary and fiscal policy have an impossible job. No matter what they do, they’ll be wrong.

Complaining about these issues is no longer a productive exercise. We simply have to educate as many people as we can and help to position them to become immune to these issues. It is difficult work. It will take a long time. But rather than complain, we have to educate. That is the only hope that the average citizen has at this point.

If not, inflation will continue to eat away at their wealth and the vicious cycle of falling behind will persist. Hope each of you has a great day. I’ll talk to you tomorrow.

-Pomp

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