Your New Life of Sticker Shock
Your New Life of Sticker Shock

By Jeffrey A. Tucker

Do you remember just a few years ago when you could buy a nice burger from a local shop for $4–5? That might have come with chips. Now, it is hard to find the same for less than $10, and more likely $13, and that is without fries and with a notably smaller sandwich or burger than was normal just a few years ago.

What we once called sliders are now called hamburgers.

And a beer? That’s where they really get you. This is most likely because, in technical language, the price elasticity of demand for beer, wine, and liquor is more vertical than for other products. That means that people will continue to buy even with large upward swings in price.

Restaurants and cafes figured this out several years ago and started shifting a larger burden for the revenue stream toward the wine and cocktail menu. Essentially, this is a bet that people are willing to keep shelling out for alcohol regardless.

Astonishingly, it is not unusual now for a glass of house wine to run $25. The wait staff is instructed to pour it in front of the customer like streaming gold is going from bottle to goblet, all in the interest of creating the illusion of something spectacular happening. After all, it had better be amazing at that price.

You sit down at a bar or restaurant expecting a $20 tab, with memories of only a few years ago, and end up throwing down, with inflated tip expectations, as much as $60, $80, or more. This is not uncommon. It’s not a one-off event. This is the new normal.

The truth is that sticker shock is everywhere now in the retail market. It’s a new world and hard to process mentally. When all this began in 2021, we were told that the inflation was transitional, a word that sounds like temporary. Most people believed that it would be. After all, people reasoned, there were lots of strange things happening in the previous year, including huge breakages. We can put up with some odd pricing behavior in the short run. So people were chill about it.

Surely prices will revert to the golden days of 2019 soon.

Three years later, it should be obvious that it was not temporary but marked a dramatic change in our lives. Venturing outside the house and seeking out a bit of fun on the town is now dangerous business. You get hammered at every turn. It’s not the fault of the enterprises. The problem traces to the astounding explosion of Fed bond purchases with newly printed cash that happened in 2020–21.

Even now, the money supply is 38 percent higher than it was in January 2020, with $5.8 trillion in new dollars floating around, thus watering down the value of all previously existing money. It’s not complicated. If you take a can of concentrated lemonade and mix it in a pitcher, it will taste like lemonade. If you pour it into a swimming pool, not so much. If you understand that, you get the essence of what went wrong.

There was no way to know in January 2021 for sure how this would end up. The entire time, the Fed and Treasury acted like they had it all under control. They did not. They had no idea how long it would last and how much value the dollar would lose over the coming years. That’s because nothing like this had ever happened in the United States.

There was, of course, the precedent of the German hyperinflation. Deposits in German banks in 1918 stood at 20 billion marks and rose to 39 billion marks the following year, before rising by another 50 percent the next year, all the way to 116 billion marks in 1921. This was done to pay war debts, but the result was the complete destruction of the German mark. We were nowhere close to this, but it did begin similarly, so there was no question of the trajectory.

But didn’t the Fed try to fix this before it got this bad? Maybe, but it’s not so easy to clean up an oil spill on this level without also risking hurling the entire economy into a deep depression. So the Fed pulled back on the increases but had very little success in actually reversing the damage.

(Data: Federal Reserve Economic Data (FRED), St. Louis Fed; Chart: Jeffrey A. Tucker)

The problem was how to get the American public accustomed to the price drama that followed. The Biden administration has variously attempted to blame the private sector for being greedy or shrinking packages and so on. But it appears that this little propaganda campaign did not work as well this time as compared with the 1970s simply because people today are more sophisticated in their understanding.

Some leeway against public outrage has been made possible simply by the way people pay today, not by tacking bills out of their wallets but by touching their magic cards on machines. This makes it possible to ignore just slightly the bills as they stack up.

As a result, credit card debt has soared at a time of rising interest rates. At the very time when people should have been saving money—because savings is paying a return for the first time in 15–20 years—they had funds flowing in the other direction, away from individuals toward financial institutions.

You can look at the consumer price index (CPI) today, and it doesn’t look utterly terrible. It seems like the dollar has lost about 20 cents of value overall since 2020. But this figure is wildly wrong. It is compromised by fancy data-mashing techniques that disguise increases in rent and health insurance plus interest. Once you pile all that in and reweight the numbers, you can come up with 30 to 50 cents on the dollar since 2020. That fits more with our experience on the streets today.

There is deep tragedy here based on an old principle. You can tell the quality of a country and regime based on the quality of the money. If you have visited relatively poorer countries in Latin America, for example, and seen their money, with all the zeros to the point that it is hard to keep up, you have the evidence before you of what corruption and mismanagement have gone on in the past. Here in the United States now, you have something similar, a fundamental attack on the quality of money as a proxy for the attack on the people.

This is direct harm to everyone by the Federal Reserve, from which the middle class and poor suffer the most.

Chipotle has gone up in prices by some 10 percent each year since 2020. Chick-fil-A has the same issue, and McDonald’s is sneaking in price changes every which way. You used to get in and out of these places for less than $10, but now, it will cost $30. Restaurants are dangerous places for the price-conscious but so are grocery stores. Aldi used to be a store for the poor and cheap, but now, these stores are more packed than ever.

Theater tickets are through the roof, on which the strange surcharges make no sense. All the actors and musicians complain of being underpaid, and no one can doubt it. All these institutions had become puffed up in administrative bureaucracy. These were precisely the people who gamed the system to their own benefit while leaving the actual workers in the dust. This was a metaphor for how virtually everything operated, a system designed to protect the hanger-on apparatus and punish the productive.

The problem hits the luxury items as well as the everyday. Get used to one-ply toilet paper unless you want to pay the big bucks.

As for cars, pity the buyer of anything new or used, and new homes are priced beyond belief. Once you get to the point of borrowing because of depleted cash, you are going to pay through the nose to the bankers for years. It rather drains the joy out of the Sunday drive and the fancy home. As for vacations, people are still doing them but mostly on credit, which is going to catch up to people eventually.

As for real income, the data from the Bureau of Labor Statistics show a three-year flatlining with a dip, but it’s still up overall from 2020. Much more accurate data from the Census Bureau are reported only once per year and show absolute devastation since 2020, and the news is going to hit very hard once this figure is updated. We have been systematically impoverished over four years in ways you intuit but are not fully visible in real-time government data because of aggressive manipulation.

(Data: Federal Reserve Economic Data (FRED), St. Louis Fed; Chart: Jeffrey A. Tucker)

We are already at the point in which families are unable to afford food. Maybe you would say that’s good because Americans eat too much and are too fat. But hold on a minute. The least healthy food is the cheapest in today’s market, thanks to massive grain subsidies and the war on meat, while healthy food is extremely expensive. So under these conditions, it’s not at all clear that cutting back is going to result in better health.

There are other areas of price increases that are less reported. All forms of insurance are going up, and those aren’t even calculated well, much less weighted properly in the CPI. We are living lives of daily, constant sticker shock. The sound dollar that we’ve mostly experienced for the previous 40 years is no more. We might be lucky with 3 percent to 6 percent inflation for the foreseeable future.

Meanwhile, we found out this weekend that the chairman of the Council of Economic Advisers has no idea how the bond market works or what causes inflation. Depressing doesn’t quite describe it.

Consumers may have reached their limit.

“U.S. fast-food traffic declined 3.5 percent in the first three months of this year compared with the same period in 2023,” The Wall Street Journal reported. “U.S. grocery sales of food and beverages fell 2 percent by volume for the 52 weeks ended April 20 compared with the year-ago period.”

No more Starbucks, Wendy’s, and name brands. These are giving way to home cooking, Mr. Coffee, and store brands.

An inflated world is much more bland, crabby, and deprived. That is the present and the future unless there is a dramatic course correction. These could be the last days of the appearance of prosperity.

Views expressed in this article are opinions of the author and do not necessarily reflect our views.

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