I compared food prices 3 months ago and now. To put it mildly, it’s terrifying.
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Recently, the FED released the inflation data for the United States. According to their numbers, US inflation during the last 12 months was 8.5%. This number is enough to put us in the worst inflationary cycle of the last 40 years.
I am only 33 years old, meaning that during my lifetime, the most powerful country in the world has NEVER had such an unnerving general price hike.
But things are worse, because:
- The price increases are accelerating. Fast.
- Geopolitical problems (for example, the Ukraine War) exacerbate the already strained supply chains and economic chaos caused by consecutive lockdowns.
- The problem is not localized like in the 70s. It is global. Countries everywhere are announcing record-breaking inflation numbers. The UK, for example, reached annual inflation of 7%.
And the most sinister of all:
- We can not even really trust this number of 8.5%. In this article, I will tell you why.
We are in an inflationary cycle. The worst of the last…
The current inflation numbers are the worst since the 80s.
But there is a problem: in the 80s, inflation was calculated differently, and this is one of the reasons that during those times it had much higher values.
As explained by the WSJ, the consumer-price inflation index that was used in the 1970s and early ’80s included house prices. The modern version of the index uses a nonmarket rent for owners’ housing costs, which doesn’t include the price of a home.
If calculations were made in the same way as in the 70s and 80s, it is likely we would already have 2-digit inflation.
So, if you are American or European, there is a fair chance that neither you, your parents, nor even your grandparents lived during an inflation explosion as strong as the one starting now.
Yes, it is just starting.
And it will get worse, and global.
Food will consume most of your income if there is hyperinflation in 2022
The most famous inflationary wave in Europe occurred in Weimar Germany. The German mark had depreciated so much at the time that people took carts full of cash to the grocery store just to buy bread.
It took 11 years for the inflation wave to reach its apex. Initially, Germans spent an average of 30.3% of their earnings on food. A decade later, food accounted for 92% of their total income.
Because food is inelastic. You can reduce your entertainment expenses, postpone your rent (to the extent that laws protect you from eviction), and even drastically cut your electricity costs. However, you cannot live without food.
As a result, their prices tend to skyrocket while demand remains constant.
That is what makes them an inelastic good.
This rise has already begun, and it is far worse than you think.
To check that, I used the Wayback Machine to compare the prices of some commonly used food items between January and April of 2022.
What is Wayback Machine
The non-profit Internet Archive established Wayback Machine, a digital database that has saved over 613 billion pages on the World Wide Web since 1996.
It allows you to view archived versions (as they were previously) of pages on a website for free.
I used Wayback Machine to see what pricing Supermarkets were showing on their websites between January and April of 2022.
Supermarkets and Products Compared (US and UK)
I compared the prices of the same products in the same supermarkets in January and April.
This means that all the time, I am comparing apples with apples.
Therefore, details like measurement (gallons vs. liters, or kgs vs. pounds) are irrelevant for this purpose because they did not change between January and April. For example, the price of milk in January is calculated per gallon in the United States, but so are the prices in April. The same is true for milk prices in the United Kingdom calculated in liters in both January and May.
One might wonder why I chose Walmart over Costco for the United States. Others may wonder why I chose Cravendale Milk over Tesco Milk for the UK comparisons. The reason is simple: not every product and supermarket chain is archived on Wayback Machine, so I made do with what I had. If anyone has a larger pool of data, please feel free to make a different calculation.
The supermarkets analyzed are:
- For the US: Walmart Online Store
- For the UK: Tesco Online Store
- Eggs: Great Value, Extra Large Grade AA Eggs, 12 Count in the US, and Tesco Large Free Range Eggs 12 Pack in the UK.
- Chicken breast: Foster Farms Boneless Skinless Chicken Breast in the US, and Tesco British Chicken Breast Portions 650G in the UK
- Milk: Great Value Whole Vitamin D Milk, Gallon in the US, and Cravendale Filtered Whole Milk 2 Litre
- Tomato Sauce: Great Value Tomato Sauce, 15 oz in the US, and Tesco Finest Tomato & Chilli Pasta Sauce 340G in the UK.
- Bread: Great Value White Bread Loaf, 20 oz, 24 Count in the US, and Tesco White Bread 800G in the UK.
Food Price Results in the US
Eggs (Great Value, Extra Large Grade AA Eggs):
- January: $2.65
- April: $3.23
- Inflation during the period: 22%
- Annualized item inflation: 121%
Chicken breast (Foster Farms Boneless Skinless Chicken Breast)
- January: $8.78
- April: $9.60
- Inflation during the period: 9%
- Annualized item inflation: 43%
Milk (Great Value Whole Vitamin D Milk, Gallon)
- January: $ 3.24
- April: $ 3.62
- Inflation during the period: 12%
- Annualized item inflation: 56%
Tomato Sauce (Great Value Tomato Sauce, 15 oz)
- January: $0.64
- April: $0.72
- Inflation during the period: 13%
- Annualized item inflation: 60%
Bread (Great Value White Bread Loaf, 20 oz, 24 Count)
- January: $0.84
- April: $0.93
- Inflation during the period: 11%
- Annualized item inflation: 50%
Hyperinflation in 2022: how bad things really are in the US.
The table below has a compilation of all the results for the US.
Every price increased by more (multiple times more!) than the official annualized inflation rate. The price of eggs increased by 22% in just three months. When compared to the so-called annual inflation rate of 8.5 percent…
Food Price Results in the UK
Eggs (Tesco Large Free Range Eggs 12 Pack):
- January: £2.05
- April: £2.1
- Inflation during the period: 2%
- Annualized item inflation: 10%
Chicken breast (Tesco British Chicken Breast Portions 650G)
- January: £3.75
- April: £3.85
- Inflation during the period: 3%
- Annualized item inflation: 11%
Milk (Cravendale Filtered Whole Milk 2 Litre)
- January: £1.9
- April: £2
- Inflation during the period: 5%
- Annualized item inflation: 23%
Tomato Sauce (Tesco Finest Tomato & Chilli Pasta Sauce 340G)
- January: £1.4
- April: £1.4
- Inflation during the period: 0%
- Annualized item inflation: 0%
Bread (Tesco White Bread 800G)
- January: £0.59
- April: £0.6
- Inflation during the period: 2%
- Annualized item inflation: 7%
In comparison to the United States, prices in the United Kingdom increased much less dramatically. Bread increased by the same percentage that would be expected based on the official figures, while tomato sauce saw no price increase at all. Meanwhile, item inflation for eggs and chicken breast was slightly higher than official inflation. Only milk experienced a significant price increase.
Conclusion: Is the US going into hyperinflation?
No, the US is not going anywhere. It is already there. The United States is already experiencing hyperinflation.
The question now is when the contagion will spread to the rest of the world.
Printing trillions of dollars during the last few years is not an act that comes without a cost.
Good luck to all of you.
To help you with the possible wave of hyperinflation in 2022, I also recommend: