This post is part of a set of posts by a group of preparedness bloggers on the topic “What’s Your Threat?”  You can see the other articles at the bottom of this post.

In 2014 America, if you’re not concerned with the direction the nation is headed, then you’re not paying attention. Many who are paying attention are noticing the increasing tyranny of the federal government and even many state and local government agencies, increasing surveillance and controls on our lives, and the difficultly in affording even the basic necessities of life.

The threat of natural disasters and crime–both of which government usually proves to be inept at assisting the average American with–have prompted many to prepare to be more self-reliant should a major disaster occur in their area or if violent crime comes to their home and they need to defend themselves.

These are worthy and wise preparations, but there is another threat that faces most Americans that they may miss until it’s too late:

What do you do when everything gets too expensive to afford? Especially the essentials of life?

Let’s briefly review the factors contributing to the trend of inflation, especially in non-discretionary items like food, and then I’ll provide some action items, so you can get started on combating this most insidious and difficult enemy to defend against.

Prices are Rising Because of Dollar Devaluation

Since the Federal Reserve was created by act of Congress in 1913 and given the authority to regulate the money supply of the US Dollar, this private banking cartel has devalued the dollar by over 95%.

Purchasing power of the us dollar 1913 to 2013
This means that a dollar in 1913 is only worth about $0.05 today. It’s no wonder things even a generation ago used to be priced in cents and now are tens and hundreds of dollars!

Since the financial crisis of 2008, the Fed has undertaken a massive money printing operation to shore up the horrific balance sheets of the banking sector–which it has cryptically titled “Quantitative Easing”.

Much of the Trillions of dollars of money the Fed created out of thin air has gone to monetize the Federal debt–that is, to buy government securities to allow the Federal Government to continue to spend without limit.

Federal Reserve Balance Sheet
The rest of the money has gone to the banking sector, but much of it has not been released into the economy, thanks to the Fed offering modest interest to the banks for putting it on deposit with the Fed. This is the primary reason that major inflation is not rampant right now–because the funds are tied up in bank deposits instead of being loaned out into the economy.

To learn more about how the Federal Reserve has devalued the dollar and confiscated the wealth of the American people through inflation (and what you can do about it), browse our archive of blog posts with financial expert Franklin Sanders.
Even though inflation is not as bad as it could be, it’s far worse than the government is reporting. Most Federal government statistics are, for the most part, between half truths and outright lies.

 

The US inflation rate, for example, has been recently reported as somewhere between 2-3% for the past couple of years. Using the older methodology before the government started tweaking the statistics to provide better economic news, we see from the honest statistics provided by economist John Williams at Shadow Government Statistics that the real inflation rate is somewhere closer to 9-10% over the past decade.

Inflation 1980 to 2014

This is largely the result of cumulative dollar devaluation working its way through the economy into higher prices for everything.

Bottom Line: Inflation is far worse than you are led to believe, and if you don’t take measures to protect yourself from it, you are going to get pinched between a rock and a hard place sooner or later.

We’re in a New Great Depression

Despite being labeled as the “Great Recession” that supposedly ended in 2009, the truth is that we continue to be in a prolonged downturn that is actually a Great Depression that could very well turn out to be worse that the one in the 1930s. As an article in the prominent journal Foreign Affairs succinctly pointed out, “Compare the ongoing crisis to the Great Depression, and there is hardly anything ‘lesser’ about it.”

Since recessions are defined by a negative growth rate in Gross Domestic Product (GDP), he who defines and measures GDP determines what is called recession or not.

If we look at an accurate measurement of GDP, we see that in fact the US economy has been in negative growth for much longer than one year.  We’ve actually been in negative growth since about 2004, and that was only after a very brief period in positive territory.  That’s right–we’ve been in a recession for about a full decade!

US GDP growth through April 2014
Globalization has caused millions of US manufacturing jobs to move overseas, and the growth in the service sector of the economy has not kept up with the loss in productive output that once characterized the American economy when we produced real, physical products.

The rise of the crony corporatist economy–where huge corporations pay for special favors and rules that benefit them at the expense of their smaller competitors–has likewise contributed to a weakening of the economy and a huge increase in the reach and power of the Federal government in economic affairs.

The costs of Obamacare are preventing small businesses from hiring even if they wanted to. Instead, they are having to reduce hours in order to avoid the costs of the “Affordable Care Act”, which many Americans are coming to realize at this point is a sick twisted joke.

Despite recent pronouncements of a reduction in the unemployment rate, we see that the government is again tweaking the numbers and lying through its teeth.  The average real unemployment rate in America is almost 25%–about the same as during the Great Depression in the 1930s.

Real Unemployment statistics

The Federal government recently reported that the “unemployment rate” had declined to the lowest level since the financial crisis began in October 2008.  But when you look at the details, the recent jobs report was a disaster–it becomes apparent that the reason for this decline is that 806,000 people left the labor force.

When the only thing that causes a reduction in the “unemployment rate” is that close to a million people get tired of searching for a job and leave the workforce entirely, you know we have a serious and worsening problem on our hands.

In fact, the more accurate measure of the labor force participation rate, which adjusts for population growth, has steadily declined since about 2000, and is at a 27-year low. And they call this a recovery?

Labor force participation rate at 27 year low

Furthermore, recent news on the housing market shows it is in worse shape than in 2008. The CEO of private investment group Blackrock recently said that the US housing market is “structurally more unsound” today that before the last financial crisis and is “more dependent on Fannie and Freddie than we were before the crisis,”

Despite the government propaganda sent through the corporate mass media, the real news of every major accurate indicator of economic health is negative.

And it won’t get better until the factors causing it–banker wealth extraction through market manipulation and big bailouts, crony corporatism and government regulation and spending–are reversed to allow for a true recovery in the economy.

Bottom Line: The economy is bad and getting worse.  No one is going to make things better for you.  You need to take action to reduce your exposure to the risks in the system and be ready for both a systemic collapse and a slow continued path down the economic drain.

Food Prices are Skyrocketing Due to Drought

Even if you’re fully employed, there are a few costs that you can’t avoid. The ultimate non-discretionary expense in your budget is food (and probably fuel to drive to work) – which is conveniently left out of the government inflation statistics.

If you haven’t noticed the significant rise in food prices over the last year or so, you are going to notice it soon.

Just take a look at this sampling of food price increases since the beginning of 2013:

Top Food Price Hikes

Several factors are going to make food prices climb quickly, including dollar devaluation, increased global demand, and most importantly, weather events like drought.

California recently experienced its worst drought in at least a century. The entire state of California was in severe to exceptional drought.

US drought May 2014
The impact of this drought is that state water resources were being severely limited and many farmers were not receiving access to any surface water, so they had to use well water exclusively, resulting in a reduction in production in many areas of 30% to 50% or more.

Since so much fresh produce is produced in California’s central valley, the decrease in production is going to have a major impact on many fresh produce items in the grocery store.

Here’s just a sampling of the huge impact that California’s farming output has on the national supply of fresh fruits and vegetables:

  • 99% of almonds
  • 99% of grapes
  • 99% of walnuts
  • 97% of apricots
  • 97% of plums
  • 95% of celery
  • 95% of garlic
  • 95% of processed tomatoes
  • 94% of broccoli
  • 89% of strawberries
  • 85% of leaf lettuce
  • 76% of avocados
  • 74% of peaches
  • 73% of spinach
  • 69% of carrots
  • And the list goes on and on…

Since our modern food system is centralized and intricately linked to petroleum for production and distribution, we’re in a situation where a huge amount of the food in the US comes from a very small area, which makes negative conditions like this drought have huge and widespread consequences.

In fact, the Weather Channel produced a report entitled “California Drought Threatens Food Supply of All Americans; Collapsing Aquifer Sinking the Land”, which seems rather sensational for that news source. It actually reveals just how bad things really are.

Bottom Line: Food prices are going up, and you need to take steps now to counter the significant rise in food prices that are coming to your local grocery store that WILL impact your family’s food budget.

What To Do? Take Action Now to Combat the Effects of Inflation.

There are a number of important areas that you should focus on to counteract these trends of inflation which will directly impact your cost of living.

Step 1 – Build Up Your Food Storage Supply

Building up an adequate food storage supply not only provides you with the resources to withstand a long term crisis, whether natural disaster or prolonged unemployment, but buying now before prices increase will help you save money on the cost of your food.

You have a number of options on how to approach this task:

Purchase and build your food storage supply from reputable vendors like Emergency Essentials or ThriveLife.
Emergency Essentials/BePrepared

Utilize good planning and organization methods like those from Food Storage Made Easy or Real Food Storage. (If you want to eat healthy, I highly recommend getting the Real Food Storage ebook and calculator tool, which is the best way to learn how to save a lot of money by buying nutrient-dense real food.)

Buy food in bulk – things like wheat, beans, and other dry goods can be obtained at significant discounts from companies like Azure Standard or Frontier.

Having an adequate supply of food storage will help you weather natural and manmade disasters, and provide a buffer of food security in tough times like with the loss of a job.

Step 2 – Relocalize your Food Supply – Plant a Garden and Know your Farmer

If you’re already gardening, plan to make this your biggest year ever. If you haven’t started, there’s been no better time to start than right now.

Purchase heirloom seeds from vendors like Seeds for Generations, and learn how to save your seeds to use in future years. Only heirloom seeds can be saved and replanted with reliable results.

SFG 468 60 Affiliates

Use simple, but proven organic gardening methods like Square Foot Gardening.  Also consider methods that incorporate permaculture techniques for food production, like those discussed by Rick Austin in the session on his Secret Garden of Survival method.  You can also get more info on our Gardening Resources page.

The more of your food that you can grow at home, the less you’ll have to buy.  Plus, it’s far more nutritious when it’s harvested ripe and fresh.

For food that you are not able to grow yourself, find a local, organic, sustainable farmer to buy direct from.  You’ll get the best quality and prices buying direct from the farmer, especially for pastured animal meats and dairy.  At a minimum, visit your local farmers market to obtain fresh produce and support your local farmers that way.

If you can, join a Community Supported Agriculture program to obtain fresh produce.  This type of share program allows members to contribute to reducing the risk the farmer undertakes in growing your food, and ensures that you have a steady supply of fresh produce and other food on a weekly basis.

To find local farmers, use resources like Local Harvest or Local Dirt.

Step 3 – Diversify your Income to Reduce your Risk

Having all your eggs in one basket for income these days is as risky as doing the same with your investments. Even if you’re employed full time, work to build a secondary source of income for your family.

Consider ways that you can build a family business that utilizes the resources, passions, and skills of your family members.

Do freelance work for small businesses, build your skills and always keep learning, and look for ways to provide value to your local community and businesses.  There are always needs that people are willing to pay to have met.

Learn more about how you can do this in our blog post entitled “What It Takes to Start as an Entrepreneur”

Step 4 – Protect your Assets from Inflation

Since all paper financial instruments are being eroded by inflation, what can you do to protect yourself?

You need to invest your assets in things that will keep pace with inflation, if not thrive in an inflationary environment.

Income-producing assets like productive farmland, rental properties, or a small business are the best things to focus on.

But an important and very wise allocation of at least 10-30% of your assets would be into precious metals like physical silver and gold. By physical I mean that it is not a stock or paper certificate of a precious metals fund or index that is traded on the market.

I highly recommend that you consider The Moneychanger, founded by expert Franklin Sanders, who is featured in our Beyond Off Grid documentary film. He is a man of the utmost integrity, and his family business has been building a loyal customer base for over 30 years.

You can sign up for Franklin’s daily (and humorous) email commentary on the markets and precious metals on The Moneychanger website.

It’s Up to You to Take Action

These are a few critical first steps you can take to protect yourself from the threat of inflation eating out your purchasing power and making your cost of living rise unsustainably.

Learn more about how you can reduce your dependence on the modern economy by joining our email list or watching our Summit Online Course and/or Summit Event Video Course.  The Beyond Off Grid documentary film is now available also, so make sure you don’t miss it!  Here’s a sneak peak at our teaser trailer:

What other factors are you considering on this topic, or what other steps are you taking? Please let us know in the comments.
What's Your Threat? What's the biggest threat to you and your family? Check out some amazing blogs and how they attack their biggest threats to being more prepared and more self-reliant!

Read the rest of the “What’s Your Threat” posts in this series below:

Push Past the Fear and Just Do It!! – Mom with a PREP

Living in Tornado Alley – The Busy B Homemaker

Why You Need Food Storage – Food Storage Moms

Break in the Supply Chain – Homestead Dreamer

Economic Downturn – Apartment Prepper

Drought! – Ever Growing Farm

Medical Emergencies at Home – Preparedness Mama

Surviving a Tornado – Survival at Home

Wildfire – Cooke’s Frontier

Rising Food Prices – Common Sense Homesteading

Economic Collapse – Timber Creek Farms

A Personal Job Loss Situation – Food Storage Made Easy

7 Tips for Keeping Your Family Together in an Emergency – Food Storage & Survival

Massive Blackout– Trailerpark Homestead

The Unexpected – Self Reliant School

Our Threats Are Many, But Our Worries Are None – Trayer Wilderness

Food Storage Without a Plan – My Food Storage Cookbook

Hurricanes and Nor’Easters – Backyard Pioneer

Hurricanes (What I Wish I Knew Before it Hit!) – Prepared-Housewives

A Financial Disaster – The Survival Mom

Staying Off the Radar – Geek Prepper

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