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Preparing for Inflation or Possible Market Crash

 
Posts: 205
Location: Tip of the Mitt, Michigan
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Hi,  Associated Press reported:
Tuesday's report from the Labor Department showed that consumer prices in June rose 0.9% from May and 5.4% over the past year — the sharpest 12-month inflation spike since August 2008. Excluding volatile oil and gas prices, so-called core inflation rose 4.5% in the past year, the largest increase since November 1991.
Experts had been anticipating a .5% price increase only — nearly half of what actually happened,
Over the last year, many prices have spiked, not just in consumer goods but in manufacturing goods also, increasing their prices.
Here are some of the items that inflation has really driven prices up: Car rental 87.7% (y/y change) Used cars 45.2%, Gas 45.1%, Laundry machines 29.4%, Airfare 24.6%, Moving 17.3%, Hotels 16.9%, Furniture 8.6%, Bacon 8.4%, TVs 7.6%, Fruit 7.3%, Shoes 6.5%, Fresh fish 6.4%, New cars 5.3%, Milk 5.6%, Rent (OER) 2.3%.

Inflation is just going to make everything more difficult financially. Also, watching the financial sector I see trends like just before the 2008 housing crash, meltdown.

My idea is to share knowledge to help ameliorate this situation. When posting let us know what type of place you live in, (ie.., town, city, rural homestead etc...) Some things that work in the country side will not work in the concrete jungle.  
What would you do to prepare for some of the problems (and I'm not talking about zombie apocolypse)?  

It is also good to be wise and not say something like I just bought $50,000.00 dollars of gold or whatever. Someone might want what you have.

I live in a rural setting, with 1/2 acre on the shore of lake Michigan.  I propose that any big ticket purchases be made sooner than later. I was looking at at buying something I wanted and waited 2months and then thought of purchasing it. The price rose $750.00 dollars. So buy sooner than later.  

What other things might you be doing to prepare for this?
 
gardener
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I live in an urban homestead in Brazil, where we know a bit about inflation, and official numbers are saying it's 8 some percent this year. Cooking gas is up 40%, diesel/gas similar, most food prices have doubled since the start of the pandemic. Power/water fees also up. I went away for a month in June, came back and prices were visibly higher for everything. It shows no signs of stopping; if we're lucky, by year end we'll see some recovery, not improvement but maybe back to where things were before. Will prices drop back down? It's doubtful, but at least there should be some kind of growth. In the meantime we are not delaying purchases, although we honestly don't buy much, we have most of what we need. Thankfully we are employed, with no debt, and my kid is doing her college for free.

It looks like the prices of corn/soy are just about to skyrocket, which impacts meat/dairy, so I'm thinking of actually getting the meat rabbit operation going for real this year (it's been on hold, because I can only juggle so many things at once-- it's currently more cost effective for me to earn more than to save on meat).

We are keeping our heads down and plugging along. Lucky for me my work has exploded since the pandemic started; my spouse is not so lucky and his business is slow. We saved a LOT of money over the last year and a half from not going out or traveling, and I pretty much don't even use a car most of the time. Sold spare vehicles that weren't getting used (motorcycles were in demand, sold two; renting out one car we don't use on the weekend, and I'm about ready to sell the antique car I use when I do go out once a week-- more cost effective to use Uber once a week than to maintain the thing all year round).
Land prices are up as people moved out to the country during lockdown or we'd have sunk some cash into land already. Right now we are biding our time, working on the urban farm, and planning for the next step, since the kid is still in college, now living back at home, and we want to coordinate our move with her move as she goes on to her next phase post-college.
 
pioneer
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I live in a rural setting, with 1/2 acre on the shore of lake Michigan.  I propose that any big ticket purchases be made sooner than later. I was looking at at buying something I wanted and waited 2months and then thought of purchasing it. The price rose $750.00 dollars. So buy sooner than later.



Don't forget that small regular purchases can add up. Buy in bulk, especially for items you know you'll need which wont expire. Toilet paper, diapers, etc.
 
pollinator
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I am working toward buying 2 years worth of meat and canning it now.          

Inflation is slated to go thru the roof, and with the rise of gas prices, and food shortages on the horizon   I figured I am going to need to buy it anyway, why not buy it and have it on the shelf.      Canned meat lasts like 5 years so buying it now while it is at a good price and putting it into a form that last thru a power outage just made good sense for me.


I also just went off grid,    I bought extra solar panels and finally pulled to plug on the power company.     Now I get $30.00   a month back since I am no longer connected.

I am now looking at a bean sheller,     I want to be able to process food as the price of food should skyrocket,  expanding my garden and working at better ways to process food seems like the way to go to me.

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gardener
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We live in a semi-urban area, but in a hidden pocket of "rural" inside the town. (The house up the street has horses.) We have the smallest lot in our neighborhood, at just under .5 acre.

Our tips to hedge ourselves against inflation and a bad economy:

1. Rethink our ideas of money being akin to wealth. By that we mean define our family's wealth in non-currency types of ways. Our tangible, holding-in-our-hands assets are worth more than digits in a bank computer somewhere. I don't mean we have gold or anything like that; I mean we are trying to make sure we have what we need on hand for our family now, before we must make a hasty financial decision later. Things we can't manufacture here, ie: rice, sugar, dairy, mammal meat, etc. are what we are focusing our stockpile on.

2. We are trying to put our own systems in place here on our property so that we are not slaves to the market/economy. Our systems include food, water, shelter, tools, etc. We are actively trying to make ourselves as self-sufficient as possible so that we are not washed about with the tides of inflation.
a. We are trying to grow as much food as we can.
b. We are saving as much seed as we can.
c. We are raising as much poultry as we can.
d. We are collecting as much water as we can.
e. We are learning as much DIY for repairs/construction as we can. We may not be able to afford large purchases later, so we'll need to fix up and make do with what we've got now.
f. We are paying as much extra to our mortgage (our only debt) as much as we can.

3. We are engaging in side hustles--reselling, mowing lawns, etc.

4. Be content. Remember how God has taken care of us in the past, and trust He will continue to provide for us. We've yet to go to bed hungry. We've never been without clothing or shoes. We've never been homeless. We've never been without medical care. In the grand scheme of things, we are filthy stinkin' rich compared to 90% of the world.
 
master steward
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I live in a very rural area which was very hard hit last year due to some very unfortunate circumstances.

Several restaurants closed their doors due to a lack of customers.

The community stood behind their friends and neighbors.  There were special drive-through dinners to help pay taxes, etc.

I am gladly paying higher prices to help our community.

I also understand that there have been several cyber attacks on businesses so the prices are going up.  I blame the cybercriminals, not the businesses.

My best strategy against inflation or a possible market crash is to live as frugal as possible and forget about trying to make money in the stock market.  I have never invested in the stock market as it is a gamble.
 
Posts: 80
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I propose that any big ticket purchases be made sooner than later.



This is exactly the sort of thinking that drives inflation. If people assume that prices are going to go up, then buying now, at any price, seems logical. If everyone buys goods at an elevated price, then supply will not be able to outrun demand and ... prices will stay the same, or go up.

While I am not an economist, my understanding of the current situation (from reading articles on reputable news outlets, by reputable experts) is pretty classic supply and demand. We have just experienced a massive supply disruption, we have pumped a lot of easy money into the system, and now there are a bunch of mis-matches in supply and demand. Evidence for this can be seem in the price of lumber. As all the cooped up homeowners ran to Home Depot to buy boards for their new fence, the prices went crazy. As soon as the price climbed too high, they stopped buying so much, mills started working triple shifts, and so supply and demand are balancing out. Here is an intersting graph:

https://tradingeconomics.com/commodity/lumber

This graph is of "lumber" in a commodity sense, but given time, that price will drive down cost we pay for the finished products at the store (I.E. plywood and 2x4s or whatever).

This disruption will likely last for a long time, but I think the prudent thing to do at the moment is to sit tight. The longer you put off a major purchase, too, the more likely you are to realize that you didnt actually need it in the first place. As for rising food prices, what better incentive could you need to plant another bed in the garden?

 
gardener
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I was going to say it's a supply/demand shift, with more areas opening up as vaccination counts rise, while certain industries haven't ramped up production to match. We have very slim supply chain margins that can't handle big shifts in supply or demand.

When a story talks about overall inflation of 1% being "far higher then expected", that's not an issue to me. Historically inflation has been closer to 3% hasn't it? With so much shut down in the last year, seeing a 4.5% annual rise feels a little low even. At one point last year oil option prices hit negative dollars because there was so much oversupply. We've been in this weird state for the last 10-15 years of near zero interest rates, and nothing stirs up ratings better than making everything a crisis. Mortgage rates are still way under 5%, and now house prices are shooting way up due to pent up demand and few houses for sale. Prices are up 10-15% in just the last year here, wasn't surprising seeing gas prices go up with summer and reopenings happening at the same time. But a few months of corrections should be expected later this year. Lumber for example, you had a drop in supply as mills slowed down, followed by a ton of people stuck at home and deciding to build things, and prices are crazy. I expect they will stay crazy so long as enough people keep buying.

Growing more of your own food is always a good option, you know what is or isn't sprayed on it, it's fresher, and you can store the surplus. But I think there will always be people warning about the imminent collapse, using it to sell us stuff. For the last couple decades of my adult life, I've been warned about the upcoming "whatever" that will end life as we know it. It's about to happen every couple years, usually tied to a political/tech/social change of some sort.
 
Anne Miller
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Carl said, "I think the prudent thing to do at the moment is to sit tight. The longer you put off a major purchase, too, the more likely you are to realize that you didnt actually need it in the first place. As for rising food prices, what better incentive could you need to plant another bed in the garden?



Both of these ideas are great and so true!
 
pollinator
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We have been looking at ways to monetize our property especially ones that the tax write-offs balance the increase in income, like Hipcamp. We always bulk buy so that isn't new or different. Mostly we are trying to deal with the lack of products, services etc. It's very difficult to get water deliveries unless you know someone, or tradesmen to come out, that seems very much a lack of supply issue. So finding work arounds is important, whether it's DIY or bartering. Thankfully we are not involved in the market and are good at non-monetary solutions.
 
pollinator
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Carl Nystrom wrote:

I propose that any big ticket purchases be made sooner than later.



This is exactly the sort of thinking that drives inflation. If people assume that prices are going to go up, then buying now, at any price, seems logical. If everyone buys goods at an elevated price, then supply will not be able to outrun demand and ... prices will stay the same, or go up.

While I am not an economist, my understanding of the current situation (from reading articles on reputable news outlets, by reputable experts) is pretty classic supply and demand. We have just experienced a massive supply disruption, we have pumped a lot of easy money into the system, and now there are a bunch of mis-matches in supply and demand. Evidence for this can be seem in the price of lumber. As all the cooped up homeowners ran to Home Depot to buy boards for their new fence, the prices went crazy. As soon as the price climbed too high, they stopped buying so much, mills started working triple shifts, and so supply and demand are balancing out. Here is an intersting graph:

https://tradingeconomics.com/commodity/lumber

This graph is of "lumber" in a commodity sense, but given time, that price will drive down cost we pay for the finished products at the store (I.E. plywood and 2x4s or whatever).

This disruption will likely last for a long time, but I think the prudent thing to do at the moment is to sit tight. The longer you put off a major purchase, too, the more likely you are to realize that you didnt actually need it in the first place. As for rising food prices, what better incentive could you need to plant another bed in the garden?



Your lumber economics is a bit simplistic.  

I’m not sure where you got the idea mills “ started working triple shifts” to meet demand.  Most mills work 24-7 and during covid were considered an essential industry. Most production  mills are incredibly efficient. That being said mills can only produce as much lumber as the speed of their machinery. They can’t make more lumber than the machinery will allow.

A production lumber mill works at capacity ( or should) every day.

That’s why you see acres and acres of logs in log yards waiting to be milled.  Even though there is demand mills can only put out what the machinery allows.  

There isn’t a scramble to all of the sudden start working at full capacity.  










 
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Reading over the posts, I get that there's a difference between the official inflation rate and temporary shortage driven inflation.  But I don't see a downside in reducing dependence on our "just in time" systems by bulk purchasing, buying ahead or finding ways to produce more of your own.  

Unfortunately for us, we've been hit with so much rain that our hillside garden is a swamp, has been for a while, and no end in sight.  I'm not sure we're going to have a good harvest this year.  We're starting a bunch of transplants now in the hopes of salvaging a fall garden.  But for sure we won't have the bumper crop of potatoes and sweet potatoes like we had last year.  Those calorie crops were real budget stretchers.

We did make one very large purchase this past week.  Our old Prius has over 150K miles on the original battery.  We found a new one for sale that was exactly what we wanted.  Instead of waiting for the old car to fully die like we usually do, we bought the replacement.  We'll keep the old one and hope it lasts to give to our son who will be old enough to drive in 10 months!  As others have pointed out, there are some supply and demand problems happening.  Particularly with anything that has computer chips in it.  So it does seem prudent to buy things a bit ahead if you know you'll be needing them in the near future.  Desperately needing something is a good way to be stuck paying more that you're comfortable with.
 
Mart Hale
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Looking at real data the harvest this year does not look good.        Not only is the flow of goods have problems but also the  production is down.

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gardener
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Lumber prices are going down:
https://www.npr.org/2021/06/21/1008843212/lumber-prices-are-finally-dropping-after-they-soared-during-the-pandemic

https://www.npr.org/2021/07/08/1013819703/what-the-rise-and-fall-of-lumber-prices-tell-us-about-the-pandemic-economy

Supply and demand
 
Arthur Angaran
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Hi, When the govt. here in the US talks about inflation of 1 percent, they are talking about the new way they view inflation. Today's inflation of (I think 2.5 %) is equal to 11 or 12% back in the 1980's to make it not look as bad as it is in real world numbers.(Can we say they are lying to you?) So for us non economists should we just think it is a lot higher?

Transitory inflation is supply and demand. Unfortunately with all the money printed out of thin air prices must go up as the value of the dollar goes down.

The story today from Kroger. Grocery prices are headed higher this year. Inflation is running much hotter than management anticipated. Prices are expected to rise another 2-3% by the end of the year. Beef prices are up 14%, pork prices 12%, poultry is up 6%, Inflation hits the poor the hardest.

The NY Fed stopped publishing the GDP number. This is one of the oldest and most important numbers published. The Atlanta Fed district, (there are 12 districts), the Friday before Labor Day at 4:00 published the projected GDP to go downward by 41%. This is very very bad. There is something wrong here, you can't spend yourself out of financial problems. No one really talked about the downward projection, since we had 9/11, Biden's proclamation, Afghan stories. . .

I am preparing for a bit of a bumpy ride.
 
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I look at it like this
if your going to need or want to buy seeds for next spring, get them sooner rather than later.
if a little or big greenhouse will help you boost production, procure the needed supplies now rather than waiting.
stuff like that might turn out to be a big help if things go bad.

but a whole bunch of stuff hasn't been normal for well over a year now. for example a friend sent me a package 2nd day delivery fedex-- its now been ten days still no package and tracking is useless it just says

No scheduled delivery date available at this time.

and in the detailed tracking info the last entry was 5 days ago and says


on delivery truck

in transit

yup a bunch of stuff already is not how it used to be
 
pollinator
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Good time to borrow money.  Refinancing your house/property at a long term low fixed rate is an excellent way to hedge against inflation.  
 
pollinator
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Stacie Kim wrote:We live in a semi-urban area, but in a hidden pocket of "rural" inside the town. (The house up the street has horses.) We have the smallest lot in our neighborhood, at just under .5 acre.

Our tips to hedge ourselves against inflation and a bad economy:

1. Rethink our ideas of money being akin to wealth. By that we mean define our family's wealth in non-currency types of ways. Our tangible, holding-in-our-hands assets are worth more than digits in a bank computer somewhere. I don't mean we have gold or anything like that; I mean we are trying to make sure we have what we need on hand for our family now, before we must make a hasty financial decision later. Things we can't manufacture here, ie: rice, sugar, dairy, mammal meat, etc. are what we are focusing our stockpile on.

2. We are trying to put our own systems in place here on our property so that we are not slaves to the market/economy. Our systems include food, water, shelter, tools, etc. We are actively trying to make ourselves as self-sufficient as possible so that we are not washed about with the tides of inflation.
a. We are trying to grow as much food as we can.
b. We are saving as much seed as we can.
c. We are raising as much poultry as we can.
d. We are collecting as much water as we can.
e. We are learning as much DIY for repairs/construction as we can. We may not be able to afford large purchases later, so we'll need to fix up and make do with what we've got now.
f. We are paying as much extra to our mortgage (our only debt) as much as we can.

3. We are engaging in side hustles--reselling, mowing lawns, etc.

4. Be content. Remember how God has taken care of us in the past, and trust He will continue to provide for us. We've yet to go to bed hungry. We've never been without clothing or shoes. We've never been homeless. We've never been without medical care. In the grand scheme of things, we are filthy stinkin' rich compared to 90% of the world.




This is along the lines on what we are doing.  Of course most of what we are doing it are things we have been planning and working toward for the last 7 years and not necessarily a reaction to the latest economic news.   I am sure most permies here are of a similar mindset even if they are on a different point on the path.    

My husband built us a greenhouse.  He is currently finishing it up and building raised beds to go inside of it.  

We keep expanding the garden every year and now I am buying more food preservation tools to deal with all the production.   Why I didn't think to 30 quart  mixing bowls and a giant colander to go with my 5 and 6 gallon stock pots sooner.  I am also slowly picking up more canning jars, lids, and heavy duty freezer bags that I can wash and reuse.

I started buying in bulk and having stuff we use regularly shipped to my house when I stopped driving a few years ago.  With the current supply chain issues I tend to buy stuff in lots of what we would use in 4 to 6 months.  This allows me to catch the rare sale and not stress over shipping delays.   4 to 6 months supply is based on our storage space and my ability to not get overwhelmed with too much stuff.  

Other things that I need once a year or so I try and buy a season ahead.  I order my spring seeds, trees, soil amendments, and garden expansion materials  in the fall and early winter.  We do this in part so we need to know what to build/ prep in the fall so we can just plant in the spring.   With our cold, wet, late, spring that has biting black flies it pays huge dividends to build infrastructure and garden prep in the fall.  Fall project include the green house project, adding more fencing, updating the chicken run, adding a second coop, redesigning the dry hang out shelter in the coop, rescuing the raspberry patch  from other overgrown vines, and adding more raised garden beds.  

I am working on lining up reliable friends to work with me in the garden next year to reduce my work load and share the production.  We are finally getting to the point where we are starting to grow more than we can consume.  Scheduling will the hard part but I have 3 friends that I think I can make it work and hopefully we will all benefit.

Christmas presents are being handmade this year or purchased now to avoid the hassle of supply chain and price increase issues.  With my art and design background and our family's love of food it is easy to make gifts our loved ones actually want is easy for us.    

I am hoping that our financial and lifestyle choices will get us through whatever economic shifts come our way.   I am just grateful we starting incorporating permaculture into our thought processes and lifestyle years ago.  

 

 
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