Inflation Chart

055: Making Sense of Rising Inflation

Oct 21, 2021

We’re all living with inflation. We’re watching prices climb out of control, whether we’re at the grocery store or doing our holiday shopping. It’s everywhere. It’s hard not to notice that gas is up over $1.25 a gallon when you’re filling up the gas tank.

So, as you watch your costs balloon, what can you do to protect your finances and best take care of yourself and your family? Today, we’re talking about all the factors at play: what’s causing rampant inflation, how inflation has affected us in the past, and the things you can do to best survive this economically trying time.

Here are just a handful of the things that we'll discuss:

  • The root causes of the inflation we’re experiencing every day.
  • The safest ways to keep up with inflation as you approach retirement or build your retirement portfolio. 
  • Why the sky isn’t falling–and how a good financial planner can help you navigate this and other economic challenges.

Inspiring Quote

  • “The good news is you’ve got a lot of options. There’s a lot of opportunities right now but you need to make sure that you’re protected, especially if you’re within 10 years of retirement or in retirement.” – Ed Siddell

Interview Resources

LeAnne Siddell: It's The Retirement Trainer with Ed Siddell, a podcast about finding ways to help you become financially fit for your future no matter what financial shape you're in now. Inflation. 

Ed Siddell: Scary. 

LeAnne Siddell: Yes, that's exactly it.

Ed Siddell: It is, right?

LeAnne Siddell: I kind of feel like I want to punch a table when you say the word because those of us that go to the grocery store or buying our Christmas gifts, we're seeing the prices climb, I'm just going to use something very tangible, Xbox Series X. Yes, it's selling retail for $450 but if you want to get your hands on one, you're not going to find it under $995, and that's on eBay or some other place because they can afford to charge that much. You cannot get your hand on a Series X. 

Ed Siddell: Gas is up over $1, $1.25 a gallon?

LeAnne Siddell: Yep. This is LeAnne Siddell and here to help us with all our questions and to give us some guidance to help us stay in the best financial shape possible, The Retirement Trainer, Ed Siddell. 


LeAnne Siddell: Hi, Ed. 

Ed Siddell: We're already into it, right?

LeAnne Siddell: We already got into it because we just couldn’t avoid talking about it. I think normally my response to this is just to say, “Oh, this is so boring,” but I think this is critical for a lot of people right now. 

Ed Siddell: It's an impact. I mean, you see it when you go grocery shopping, when your food bill goes up… 

LeAnne Siddell: 20%. 

Ed Siddell: 20%, 30%, 40%, and you've got a large family, you know, three kids, two kids or more, I mean, that's a huge hit, not including gas. And the list goes on and on and on. 

LeAnne Siddell: Well, people start talking to you about Christmas gifts in August because they're not going to be able to get your hands on the things that are popular. and that's where people really take advantage. They go in and they buy up all the inventory. 

Ed Siddell: Yeah. I mean, and that's part of that whole supply chain, supply and demand. And inflation really, it's a supply and demand. It's a decrease in the purchasing power of money and it's reflected by the increase of prices of goods and services. And we see that like you were talking about with the Xbox, with grocery stores, and the list just goes on and on and on and everyone always asks me, “So, is inflation bad or is it good?” And it's actually both. 

LeAnne Siddell: I don't know that the majority of us would look at inflation and say, “How is it positive?” And we're going to get to that. 

Ed Siddell: Yeah. I mean because it's a paradox, right? I mean, it’s when you can have one thing with two meanings, and they're both correct. Like I said before, so when you look at inflation, it really is a function of supply and demand of money. And the more you produce or print money, the more money makes each dollar, the more you print, the value of the dollar goes down which causes prices to rise, and we're seeing that right now. But it also has benefits, too. So, when the economy isn't firing on all cylinders and we saw that after the housing bubble, we saw that after 9-11, most recently COVID. Right? And it's basically because the economy, it's running below capacity. People aren't working so you have unused labor, you have unused resources, they're not producing. And the more dollars that you have, it translates into more spending, which in turn creates more demand and stimulates the economy. But it's just like anything else, too much of a good thing. When you go back to, I'm going to use Bernanke, the old Fed Chair, and his monetary policy when it comes to quantitative easing. Do you remember when I taught the class and we were talking about the economic section and we had the whole section on inflation? And I use the fire example?

LeAnne Siddell: Yes.

Ed Siddell: Because it really is for people to understand it, the difference between good and bad if you think of it like a wildfire. I'm going to use California because they have all the crazy wildfires out there. You know, if a wildfire out of control is like hyperinflation, you can't control it. Do you remember I think it was four or five years ago, the wildfire was so out of control it actually went over the interstate and burned all those cars on the interstate just kept on going? And I forget how many tens of thousands of acres that it burned. So, it’s the difference between a wildfire and a controlled burn. So, a controlled burn is when you have firefighters, the fire department, they're out in a certain area and they're monitoring the weather and the wind direction and everything else, and they're planning ahead and digging ditches. And they light a specific area of the forest on fire to get rid of all the undergrowth, everything that's dead and decaying. And why do they do it? Well, they do it for two reasons. Number one, to make sure that you don't have a wildfire that burns out of control. So, think of that as kind of like a monetary policy. Now, that monetary policy, once you have that controlled burn, the second purpose of it is it's a rebirth, right? So, once you get rid of all that dead wood and underbrush and leaves and everything else, now what happens? Well, you have the ability for new plants to grow in wildlife and everything else. 

So, think of that as stimulating the economy. And you know the whole purpose of the Federal Reserve is really to control that monetary policy. You know, when we look at the 70s, you have hyperinflation, which is when the wildfire’s out of control and it can also mean the opposite, which is stagflation, which is super slow, sluggish economy, super high unemployment. And we saw both of those under Jimmy Carter going all the way into the 80s when we saw interest rates of 14%, 15%, 16%, 17%.  We had a family in here that we were helping a couple of weeks ago, and they were talking about a CD that they got that was like 17 point something percent. We would kill for that right now, not the other interest rates, but a 17% CD rate, right? The Federal Reserve is supposed to control that. Bernanke, when the housing bubble popped and it was boring stuff, but it's really important to kind of get the gist of it, he was such a student of the Great Depression and the stock market crash, he wanted to make sure that that didn't happen. I'm not saying I agree or disagree. This is just his thought process. And so, the way that they stimulated the economy was through quantitative easing and, everyone, the vernacular is QE, QE 1, 2, 3, and 3.5, and it hasn't really stopped today. And it was supposed to be a temporary thing but it has since become permanent. 

LeAnne Siddell: Yeah. It's become a new policy. 

Ed Siddell: It has. And you know, the more dollars you print, the more they're devalued, interest rates are lower. And because interest rates are lower, what happens? Well, that stimulates the economy. Money's cheaper. The money supply is greater.

LeAnne Siddell: People loan and get more debt. 

Ed Siddell: Exactly and the debt becomes cheaper so businesses can grow. They can afford some more capital expenditures and expand but then you also have the negative side of that, which is government spending, which we've seen a lot of. And we talked about this before with the national debt. When Clinton left office and Bush took over, it was about 5.8 trillion for the first 220 some years of America since the beginning of the country. When Obama took over, it was about 8.5, almost 9 trillion. By the time he left, it was about 20 trillion. So, it just kept doubling and doubling. And now we're pushing 30 trillion. You know, we're trying to pass another 3.5 trillion. Well, how can we keep doing that? Well, the reason we can keep doing it is because interest rates are low as part of this fiscal, this monetary policy and so the cost of the debt service is really low. Now, as rates start to go up, once we hit that inflationary period, which is where we're at right now, even though the feds have been trying to keep interest rates low, we just saw this, the CPI, which measures the inflation, consumer price index, and that's really important because that has a huge effect on those people receiving Social Security on fixed income because that goes directly to their COLA, cost of living adjustment. 

So, everyone who is on Social Security or about to get it next year, they're going to get I think it's 5.4% increase. 

LeAnne Siddell: Yeah. It’s the largest one that we've had really in history.

Ed Siddell: Yeah. It might be. I think it might be. We'll have to look that up. I think you might be right. I don't ever remember it being that high. You know, I mean, cumulative, I think if we add up the last 20 years, I think it's 5.4%. 

LeAnne Siddell: Well, I can definitely tell you when we plan, in our plans, certainly we never come close to 5%. 

Ed Siddell: I think we use 1%, right? It’s to err on the side of caution. 

LeAnne Siddell: Yeah. To be conservative for sure. 

Ed Siddell: For Social Security cost of living. 

LeAnne Siddell: Yes. 

Ed Siddell: Yeah, not for inflation, that's for sure. And right now, we know rates are super low. You could see it when you go to the bank. In our savings accounts, I mean, it's so low that we're almost paying them. They're almost negative so we’re almost paying the banks to keep our money. By the time you add in back in the fees and everything else and even the CD rates are horrible. So, as rates start to go up, it's going to have an impact on the market. And the reason is when rates are really low and you're approaching retirement or in retirement and you're not making any money in the bank, what are you going to do? You’re going to search for growth. And where's the best place for growth? 

LeAnne Siddell: The market.

Ed Siddell: It's in the market. And there's a lot of risk there. So, there's a lot of seniors, a lot of people that are pre-retired, in retirement that are taking way more risks than what they want and even need just to make sure that their money lasts.

LeAnne Siddell: To keep up with inflation. 

Ed Siddell: To keep up with inflation. Exactly. And as those rates start to go up, what's going to happen?

LeAnne Siddell: They're going to take their money out of the market and they're going to put it someplace safe.

Ed Siddell: Safe haven. Yes, absolutely. And so, again, supply and demand. So, right now, there's a huge demand for stocks and bonds. Why? Because there is no other place to put your money for growth. But now, all of a sudden, if there's competition, supply and demand, in that competition is guaranteed income or a fixed interest rate for a certain period of time without any risk of your principal. People are going to take some of their money out and put it in there. And so, as they do that, the demand for stocks are going to go down and it's going to have a bigger effect overall. Does that make sense? 

LeAnne Siddell: That totally makes sense. 

Ed Siddell: All right. 

LeAnne Siddell: So, the good news is?

Ed Siddell: Well, so you know, I kind of had to explain everything and there is a lot of good news. The sky is not falling. As a country, we've been through this before, not a situation exactly like this, but we've been through situations where our leaders have been not good stewards of our money or theirs, a lot of overspending, bad policy, at fiscal policy. And so, that has an impact on everything that we see going around. And Jesse Itzler.

LeAnne Siddell: I know. You're a big fan. I'm a big fan. 

Ed Siddell: So, those of you who don't know who he is, he's an author. He's an entrepreneur. He’s the owner of the Hawks. His wife is…

LeAnne Siddell: Married to the inventor of Spanx. So, yes, he's an interesting guy. 

Ed Siddell: Yes. Living with the seal. I mean, he's written some really good books, too. But you know, we always say I'm a glass is half full kind of guy and I was listening to an interview over the weekend and his whole take was, you know, people always say, "Are you glass half empty or half full?” He's like, “Man, I'm just happy I got a glass.” And when you think about it, I actually started laughing when I heard him say it because we're in America. We get to have a glass. Right? 

LeAnne Siddell: Yeah. 

Ed Siddell: And even if it's half full, we have water in a glass. Well, and that's what's so exciting. And so, the good news is you've got a lot of options. There's a lot of opportunities right now but you need to make sure that you're protected, especially if you're within that 10 years of retirement or you're at or in retirement. That's kind of a big deal right now. 

LeAnne Siddell: Yeah. So, it is something where people need to understand everything that affects them in retirement to know how they plan for what that looks like on the other side when there is no longer paycheck when all those scenarios come into play. So, how do we make sure that we have a glass? 

Ed Siddell: Yeah. Well, safety, income, and growth. I mean, we talk about it all the time. You've got to have your money that you need for safety. You know, it has nothing to do with the rate of return. That’s your emergency money, six to 12 months cash. You need to have it set aside just to make sure that when bad things happen as they sometimes do, your money's there, right? It's got to be liquid and accessible so you need to have it there. And then you have your money for growth. Well, that's the money that you're going to need in the stock market. You have to have money for growth to hedge against things like inflation, taxes, health care costs, long-term care, spousal replacement, God forbid, when that time comes. And then you also need your money for income, which is also kind of like the conservative bucket. And the sources for income for most people, the Social Security. Some people have pensions, which are really just annuities. You've got rental income, dividend income, interest income, and the list goes on and on and on. And the problem is, I would say, probably and I'm being conservative 90% or more of the families that come in that we help when they first come in have 90% to 100% of their money over on the growth side. Over the last 10 or 12 years, it's been a good thing and a bad thing. I mean, if it was managed correctly, it should have done really, really well over the last 12 years. 

The bad thing is, is that we're all 12 years older now. People that weren't in retirement, they're in retirement or much closer to it or at retirement. So, it's time to start taking chips off the table to make sure that no matter what happens in the market, that you can maintain your lifestyle and do whatever it is that you want to do. And it's our job as financial planners and everyone out there listening, to use all the tools that we talked about and even those that we didn't to make sure that even if the market goes down and we have a recession or it's a bear market that you're not having to sell those holdings, those stocks, those bonds, those mutual funds, exchange-traded funds, whatever it is, at a loss just to pay the bills. And that's why that safety, income, and growth, that methodology, our philosophy is so very important. 


LeAnne Siddell: Well, great information. If you want Ed's help where you have additional questions, please reach out to us at Give us a call at the office at 614-526-4118. You can check us out and see what we're all about on our website at Thanks, Ed. 

Ed Siddell: Thanks, LeAnne.



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