My heart breaks for all Sarasotans who were or continued to be affected by Hurricane Debby. If you are one of them, you are in my prayers. Our beautiful Manatee County will recover better and stronger than ever and deservedly so. We’re a strong community. We take care of our neighbors when Mother Nature goes rogue.
It doesn’t help matters that inflation has been munching away at our purchasing power when we Sarasotans need all the purchasing power we can get right now. It’s discouraging to find your savings isn’t what it used to be and, with this being peak election season, politicians have been oh-so-eager to lay the blame for rising prices at their opponents’ feet and escape any responsibility for how they contributed to the predicament we’re facing.
The truth is we don’t have enough fingers on our hands to point at the people who allowed or caused prices to rise. Hindsight being 20/20, it’s easy to believe the executive branch, Congress, and the Fed overdid the pandemic relief and unleashing the money floodgates with a zero-interest rate policy. Lower taxes are a great thing, certainly, but it also freed up consumer and business spending, which led to increased hiring, higher wages and, yes, more spending.
It’s not just politicians and Federal Reserve technocrats driving inflation. We’ve done our fair share by accepting almost any price put in front of us. We moan and groan at what we’re paying, sure, but, for one reason or another we keep buying.
So, what will slow prices? The government has plenty of tools. The Fed can drive interest rates higher, which makes big ticket items more expensive. That reduces demand and the need to hire more workers. Eventually, the economy slows and, hopefully, inflation along with it. The government can also increase taxes, cut spending, and, hopefully, pay down the deficit. We can be more financially discerning consumers.
The tools are there, but the will to use them is weak. Politicians don’t like to talk about cutting voters’ favorite programs and benefits during an election year. They’d rather be remembered for what they delivered, not for what they took away. The Fed is–theoretically–independent from political pressures, but it has to balance the often paradoxical goals of full employment, low inflation, and reacting to financial crises. That’d be tough for anyone.
If we can’t count on the government to slow inflation (at least until the elections are behind us) we can control how inflation affects us. Not completely, but we do have some choice.
Some purchases are necessary or very difficult to switch away from, and we can’t do much about those. But if there’s an opportunity to economize, let’s take it. We may not fix the country’s economy on our own, but we can always work on our personal economies. Let’s focus on managing our own inflation rates.
Evan R. Guido is the Founder of Aksala Wealth Advisors LLC, a 2018 Forbes Next-Gen Advisors List Member, and Financial Professional at Avantax Investment ServicesSM. Evan heads a team of retirement transition strategists for clients who consider themselves the “Millionaire Next Door.” He can be reached at 941-500-5122 or eguido@aksalawealth.com. Read more of his insights at https://finance.heraldtribune.com/category/ask-guido/. Securities offered through Avantax Investment ServicesSM, Member FINRA, SIPC. Investment advisory services offered through Avantax Advisory ServicesSM, Insurance services offered through an Avantax affiliated insurance agency. 6260 Lake Osprey Dr. Lakewood Ranch, FL 34240. The views and opinions presented in this article are those of Evan R. Guido and not of Avantax Wealth Management® or its subsidiaries. These opinions are based on Evan R. Guido observations and research and are not intended to predict or depict performance of any investment. These views are as of the close of business on 08/08/2024 and are subject to change based on subsequent developments. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. These views should not be construed as a recommendation to buy or sell any securities. Past performance does not guarantee future results. The S&P 500 is an index of 500 major, large-cap U.S. corporations. Standard & Poor's is a corporation that rates stocks and corporate and municipal bonds according to risk profiles. You cannot invest directly in an index. An investment in a money market fund is not insured or guaranteed by the FDIC or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. CDs are FDIC insured and offer a fixed rate of return. They do not necessarily protect against a rising cost of living. The FDIC insurance on CDs applies in case of insolvency of the bank, but does not protect market value. Other investments are not insured, and their principal and yield may fluctuate with market conditions. Investments are subject to market risks including the potential loss of principal invested.