‘Affordability’ is the New Buzz Word to Scare You | Eastern NC Now

‘Affordability’ is the New Buzz Word to Scare You

By:  Beaufort Observer Editorial Team

Affordability. This is the new buzz word we hear every day when discussions of the US economy are raised. But what does this word really mean? It depends upon who you ask.

af·ford·a·bil·i·ty

noun

     1. ability to be afforded; inexpensiveness.

What is expensive or inexpensive? The answer depends upon the person you ask. Some may determine that $110.00 for a 12-pound prime rib roast is acceptable. The next person may say it is too expensive. Yet, the same person may tell you that two one-pound prime rib steaks priced at $9.99 per pound is reasonable. It all depends upon many variables and how one feels. (Politicians are more concerned about how you feel about things than what you know about those same things.)

I see commercials for beef that is grown in Wyoming on TV. The prices for ribeye steaks grown in open pastures without growth hormones and antibiotics are over $30.00 per pound. Obviously, there is a market for this product at this price point. Those that purchase this beef obviously feel good about this price.

I must get a little deep in the weeds here. The prices we pay for goods and services in the United States is based on the US dollar. Is the cost of beef based upon the value of the dollar or the real value of the beef?

I have been told by a good friend that in 1942 a well-made suit could be purchased for the government decreed value of one ounce of gold: $35.00 US dollars. Today, a well-made suit tailored of the finest cloth is still valued at the price of one ounce of gold: $3900.00. So, what changed? Not the value of the suit, but rather the value of the US dollar.

In 1971 President Richard Nixon convinced Congress the value of gold should be allowed to float to its real value. This allowed the Federal Reserve to print US currency without the backing of gold held by the Federal Reserve. The flood gates opened and eight years later the US was consumed by inflation. The interest rates to buy a home exploded to over 18%. I entered a home loan in 1981 at 21%. A year later the interest rate came down to 17%. Under President Reagan the interest rate settled at less than 7%.

Back to affordability. The unlimited printing of fiat dollars during the Covid Pandemic set the stage again for inflation and higher interest rates. Inflation does not drive up the real value of commodities; it drives down the value of the fiat dollars used to purchase those commodities. This occurred under the Biden administration, not under the second Trump administration. Yes, the prices you see at the grocery store are higher than they were in 2019. The rate of inflation is down from 9.1% in 2023 to 3.0% now, but the cost in dollars for those commodities and groceries for most items is still higher. Will they come down any time soon? For some items, yes. For others, probably not.

Energy is a big part of the cost of everyday products. Everything we purchase and consume today is delivered by ships, trains, and trucks. Very few citizens raise hogs and cattle and process them at home. All these delivery vehicles consume energy. Energy is a global commodity. The price of energy has many variables; where it is manufactured, how it is delivered worldwide, the exchange rate of the various value of currencies involved, regulations of vehicle emissions, and the politics of countries shipping and receiving the various energy products.

The US Federal Reserve also has their finger in the pie. They set interest rates in the US which also influences the interest rates in other countries. The Federal Reserve was established in 1913 in response to financial calamities in the late 1800s. During the Great Depression of the 1930s, the Federal Reserve Bank was granted more authority to stabilize the economy and ensure stable employment. The lever they use to achieve this is interest rates on borrowed money between major banks.

Every town, no matter how small, had a local bank and a banker that everyone knew. Today, this is no longer the case. Big banks may have a local branch, but they operate from great distances from the small towns. In the 1950s, a loan could be finalized with a signature and one or two pages of documents. Today, this requires 20+ pages of documents, attorneys, and notaries. The statements each month come from cities you have never visited and probably never will.

If you see your definition of affordability anywhere above, you may be content or really disturbed. Many factors beyond your control determine whether you can afford something or not. If you have a job that pays wages commensurate to counter government induced inflation, have savings for future expenses, or social security payments that fulfill most of your immediate needs, then affordability may not be of concern to you. However, if you have none of these, affordability is of great concern.

The above does not cover all the variables that influence affordability of goods and services. The qualifications for other government services such as SNAP, EBT, Social Security, disability benefits, and retirement investments also play a role in whether one considers items affordable or unaffordable. Local, state, and federal government taxes and fees play a role in the affordability equation.

Are you scared yet? The progressive left-wing democrats sure hope so. AOC, Bernie Sanders, Chuck Schumer, and Zohran Mamdani are depending on it. Affordability, or the lack thereof, is the cudgel you will be beaten with until you feel that everything you desire to pursue happiness is unaffordable.