Kid Milestones:  The Shotgun Seat

There are milestones in a family’s life and one of them in our family has been the shotgun seat – aka the front passenger seat for the uninformed.  With the presence of airbags, kids have had to wait until they were sufficiently old and large enough to withstand the impact of deployment and it was a rite of passage amongst the older ones when they could graduate from the backseat to the shotgun seat.  But what do we do when there’s a gray area?

Different states have differing guidelines on when a child is legally allowed to ride shotgun with a front airbag.  While the consensus of many is that the child has to be twelve years of age, it does vary.  In my instance, our state laws mandate that a child must be at least eight years of age with a minimum height of 4’9" and a weight of 80 lbs.  We had previously based our decision with the other two kids on the recommendation of the American Academy of Pediatrics, which suggested that it’s simply wiser to wait until the child is twelve years of age so that any question of size and weight is moot by that point.  That was fine when the two older kids were well within the size guidelines, but Youngest is the Bell Curve outlier in terms of size and weight.  He wears clothing sizes that are typically worn by kids in middle school and is far past the front seat parameters set by state law. 

When Youngest and I were doing some Christmas shopping on Saturday morning, he asked if he could sit shotgun.  Given his size – and the fact that having a kid sit shotgun happily changes the occupant dynamics – I agreed and he jumped into the front at the next stop, with the understanding that I’d check on the requirements when we got home.  While he’s well past the state requirements, he doesn’t meet the AAP guidelines of being twelve years of age.  But the opposition came from his older siblings who protested based upon the premise that they had to wait and it was only fair that he should as well.  The logic that he’s far bigger at his age than they were doesn’t wash with the siblings and I suppose that I can understand why.  But as I pointed out to them, it’s not a matter that they weren’t as mature at that age or that I might love him more – it’s the simple reality that he’s simply much, much bigger than they were.

For the record, we’ve decided to follow the AAP guidelines and have him wait until he’s older for the shotgun seat.  We’ve made it clear to all three kids that it’s not due to their protest or their apparent – to Youngest, at least – status as most favored children.  It’s simply the sense that the pediatricians have more thoroughly studied the issue and find it to be more than simply a matter of size.  But I’ve also warned that the next milestone will soon be upon them – when Youngest physically dominates his elder siblings.

What’s Going On With Ireland And the IMF?

Those who have been reading me awhile know that I’m a closet economics geek.  The Chinese aphorism is may you live in interesting times and if they didn’t get so damned scary, it would be utterly fascinating.  But the periodic conversation over the past several months has been the game of economic dominoes played first in Greece and most recently in Ireland.  Just what is going on in Ireland?  What does it mean to my family?

One of the better layman’s explanations of the Irish predicament comes from Gonzalo Lira.  I recommend the article in it’s relatively brief entirety as it lays out the core of the problems that now face the Irish. 

But what does it mean for my family?  The gist is that the Irish backed their failing major banks in their entirety without knowing that the banks had blown such gaping holes in their hulls that they saddled the Irish taxpayer with a ghastly debt burden.  What it means for my family is the concept of austerity, in which the national economy goes into literal lifesupport as desperately needed capital is transferred from the taxpayer to support the banks.  As the Irish did with their Anglo-Irish Bank, we’ve thrown life support to the TBTF entities so that the typical American family will carry huge tax burdens to cover the cost of that debt.  The result will be higher taxation of the general public and greatly constrained public spending as the debt assumed from the financial system crowds out the debt that would be used for real public expenditures, and that was already too high to begin with.

What is frightening is that it truly is a game of economic dominoes.  If the poorer European Union nations – the infamous PIIGS – are permitted to flounder and collapse the Euro, then the stronger core European banks holding the PIIGS sovereign debt will fold.  If these banks fold or collapse in any way, the interconnectedness with the US TBTF institutions will create stunning pressure on the US financial system with the growing prospect of collapse.

I’m actually sorry that the Irish government caved in and took the IMF/European Central Bank rescue proposal since it ostensibly saves the bank bondholders at the expense of the Irish taxpayers for the next generation (that isn’t an exaggeration, either).  It’s once again the bondholder and corporations – one group relatively few in number and the other legally fictitious – that will prosper at the expense of the mass of the taxpayers.  That’s a continuing thread that poses a true threat to my children’s future.

PracticalDad:  Are Small Children a Mother’s Job?

I recently had a series of conversations and the gist was the question of whether fathers had a serious role in raising smaller children or whether small kids are the mother’s purview.  The sense of one person was that the father should let the mother be primarily responsible for the younger kids until they’re older, at which point the father steps in.  Others disagreed and to be honest, I was surprised.  Why shouldn’t the father be involved from the earliest days?

Mothers historically are viewed as the nurturing parent and that’s partially the result of the physical act of having to nurse the child.  Both nurture and nurse are from the latin nutrire, of which one definition is to nourish.  Prior to formula, and followed later by the breast pump, women had to stay home since they were the only ones capable of actually feeding an infant that wasn’t yet able to take in solid food.  And historically, the fathers were out working in order to put the bread on the table and the roof over the head.  With these clear job delineations, men looked askance at women as they entered the workplace.  I can attest from firsthand experience that when men started to take up the household and childcare duties, more than a few women likewise looked askance as well.

But is that parental job division still valid?  Are kids better off with mothers when they’re younger or are men equally as capable?

I’ll have to be honest and acknowledge that at some level, there will be some gender generalizations made.  In my experience, women seem naturally more capable of multi-tasking than men and I can’t determine if that’s hard-wired into their brains or just a skill acquired from watching their own mothers as they grew up.  Multiple men have commented that their wives are better at handling several things simultaneously but I can attest that there are some learned skills that make the juggling of various tasks at the same time.  The more that you handle housework, the more you learn about how to accomplish various tasks while the dishwasher or dryer is running.  Most women have also had the opportunity to watch their mothers work with the children and combined with the plethora of additional resources available and are less surprised by the various ways that a child can throw a monkey wrench into the workings of the average day.  Men haven’t had the benefit of seeing their fathers in this role before and couple this with the lack of resources and many men are far more unprepared than their mates for the task.  Likewise, women tend to be far more detail oriented than men and one of the female’s standard complaints is that the male just isn’t paying attention.

Point taken.  But the flip side is that it’s hard to keep track of details when you’ve got no clue what the details even are.  Birthday parties, vaccinations and clothing shopping are generally off of the father’s radar but once he’s aware, he can also learn to make sure that they’re covered.

But apart from the inexperience and unfamiliarity factors, fathers are also capable of taking over the childcare and household responsibilities.  It’s liable to be a bumpy ride at first, but men can learn the tips, tricks and routines that go into the daily life of the child.  What are the child’s sleep and nutritional requirements?  Why are they acting as they are and if it’s a problem, what can I do about it?  These are issues that don’t lend themselves to any particular gender and with some experience and attention, fathers should be able to handle them as well. 

There are some areas of childrearing in which fathers do have an advantage over the women.  The communication skills of children with active fathers is significantly higher than those without an active father.  Likewise, kids with active fathers are more self-confident in their dealings with new situations and are more willing to explore than if the father isn’t involved or present.  It’s the men who interact in the world and take the time to model that behavior for their children that really are watching what they do. 

There’s another aspect to fathers in the home that deals less with the child’s well-being than the father’s.  Perhaps because so many now grow up in fatherless homes that those men who had no active fathers want to take a strong role in the household and childrearing so that their children don’t experience what they did.  I’ve had multiple conversations with men over the years and the common thread of these fatherless guys is that they want the kids to not experience their own difficulties.  They also want to enjoy their time with the kids, far more than their predecessors did.  Solid parent-child relationships are built on more than just weekend trips to the zoo or other activities and it’s in the day-to-day life that many lessons are passed along.

But for all intents and purposes, it’s become a more academic question than it was one or two decades ago.  The old gender lines are blurring and as they continue, because of economics and choice, it will be less of a concern to the simple question of who’s making sure that the kids are cared for and raised.




PracticalDad:  Just What Is A Gold Standard?

Listen to AM talk radio nowadays and you’ll hear hosts rave on about the value of gold in your portfolio.  I buy it and you should too.  Protection in the face of a declining dollar.  Buy now and don’t be priced out.  Most people can see the value to purchasing precious metals in today’s financial environment but now pundits are tossing around "gold standard" like a football and you have to question, what is a gold standard and what does it mean?

To understand the gold standard, you first have to understand that we live with a fiat currency monetary system.  Excepting those countries who tie their currency to the value of another’s currency – think China and the United States – currencies "float" in value versus one another and it’s the collective global concensus that evaluates which countries have stronger currencies.  There is nothing backing any currency except for the economic policies and tax revenues of that nation.  The Norwegian Kroner – remember that Norway is not a part of the Euro – represents a nation that’s the #3 oil producer in the world, started the world’s first Sovereign Wealth Fund to cushion against the day that the North Sea oil runs out, and keeps it’s public debt under control.  Now consider the Mexican Peso.  The country is in year three of a vicious fight against drug lords, has a depleting oil supply and never fully recovered from the currency crisis of the 1990s.  When the global currency market considers these factors, it values the Kroner higher against the peso so that it takes far more pesos to purchase one kroner.  If the Mexicans could magically deport the drug lords to Norway, find another huge oil field and the Norwegians shot through five years of oil revenues on a month-long binge of hookers and blow, then the world will re-evaluate the peso as worth far more than the kroner.  Not that the typical Norwegian male would be in any condition to care.

Cut through the mustard and that’s about where it comes down.

Countries compete against each other in multiple ways but one of the long-term keys is via national interest rates, as set by both the particular central bank and the assessment of the global investment community.  In the ideal world, interest rates supposedly act as a crude governor to the economic engine so when things start to heat up, the national rates are raised, credit demand declines and things slow down.  When things are slow, rates are dropped and credit is more available so that things pick up.  The market also has an impact on rates however via a risk premium on top of the set national rate.  When things are copacetic and the investment assessment actually matches reality, the risk premium is small and other factors are allowed to help set a country’s course.  When things aren’t copacetic however, then the risk premium rises so that a country has to pay far more for capital than others. 

In today’s world, we’re awash with debt at all levels – personal, municipal, state, national (sovereign).  Because we’re a fiat currency, the only way to handle governmental debt is to either raise taxes on a strapped citizenry or else cut spending.  The reality is that our political leaders haven’t been willing or able to cut spending and raising taxes isn’t seen as an option.  Our monetary authorities – the Federal Reserve System – have opted to address the debt by devaluing the currency.  This has been done by keeping interest rates at historic lows for long periods of time and also by purchasing lousy assets from the banks at rates that are far better than the underlying asset is worth. The end result is that huge amounts of liquidity have been injected into the system and at this moment, there’s no evidence that that’s going to be brought under control.  The long and short is that the political and financial classes appear to have lost the will to do what’s in the best interest of the country, assuming that we could all agree on the definition of "best interest". 

It’s this sense that certain members of the financial and political community – both in and out of the US – can’t be counted on to control themselves that’s led to the rising talk of a return to the gold standard.  When countries agreed to operate on a gold standard – whose best days were from about 1880 to 1914 – the operation was almost mechanical.  In a sense, each country’s bank vault was akin to a giant bucket and international trade was the liquid that flowed between the various buckets.  When a bucket became too full, the country took the currencies filling it to the various currency owners and turned them in for gold to fill the national bullion vault.  Because the amount of a country’s money circulating was a function of the amount of gold in the vaults, more gold led to easier credit and more money circulating.  Those with less gold had tighter credit and higher interest rates until such a time as they adjusted their policies enough to balance the system so that increased trade brought gold back to their own vaults. 

In a way, the system was self-regulating amongst the countries and eliminated the vagaries that arose from the decisions of individuals regarding their particular currencies.  It was consequently a mechanism that imposed discipline among the member nations so that no one country could run chronic trade and budget deficits or debase their currency. 

That’s the theory behind the argument on behalf of a gold standard and the reason that more voices, domestically and internationally, are being raised.  Just bear in mind that there’s no such thing as a hands-off mechanism that’s flawless when it comes to the interactions and foibles of people.



Is Inflation Happening Now?  Walmart Says…


The hope and aim of the Fed Chairman, Ben Bernanke, is that all of the liquidity that’s being injected into the system will cause prices to rise as inflation takes hold.  The fear of many is that he’ll succeed and the general public is now catching up with the econophiles as they try to determine if this is going to happen.  After hearing friends comment about how this or that went up in price, I went ahead and started the PracticalDad Price Index to publicly follow the course of prices amongst a market basket of 47 items.

It seems that Walmart has been keeping its own internal survey of about 86 items and the Walmart purchasers are expecting prices to rise in the coming months.  Apart from the intellectual exercise of trying to stretch the family dollar even further, people should be concerned because these prices will be concentrated amongst the major producers of items that are composed of commodities such as wheat and sugar.  These are precisely the commodity items that have been the recipients of a significant portion of the funds that the Fed has injected into the economy via the financial system.  As quantitative easing kicks in over the coming months, more funds will be funneled by the financial sector to commodities that in turn sends the price up further. 

If I read the article correctly, the prices haven’t actually hit the shelves yet so shoppers are safe.  But they’re coming and we’ll be following them publicly on a monthly basis.

Stay tuned.

Veterans Day, 2010

Each Veterans Day, I think of my deceased father and the stories that I later learned of his service in the Korean War.  But this Veterans Day, I’ve been thinking more about my grandfather, the man who watched his son march off to Korea.  How must it have felt knowing that your son was enlisting with the prospect of combat and then knowing that he was engaged in combat?

Children grow up and we expect them to talk about the future and what they plan to do.  But as I walked the dog with my eldest son the other evening, the discussion turned to life after high school.  He’s not yet in high school but watches Eldest with the typical high school decisions – where do I want to attend and what do I wish to study?  My son – whom I refer to as Middle – struck me with a serious comment about serving his country and his thought of enlisting after graduation.  This wasn’t the tone of the kid saying that he wanted to be a soldier when he grew up, but the tone of someone who’s actually giving it consideration.  My question was simple:  Why do you want to serve?  His response was equally simple:  Because I want to make a difference and know that what I did meant something besides just a job.   

I honestly felt as though one half of my heart was being torn from the other.  This is what I want from my children, the willingness and ability to lead productive and fulfilling lives.  I can’t give them happiness since that’s something that they must find for themselves, from within.  But the other half was the fear that I suddenly realized, in an intense fashion, is felt by millions of other fathers as they worry about their sons and daughters.  Before this moment, it had occurred to me as an intellectual awareness that maybe my child would become a soldier but now it struck me viscerally.  We talked and he then asked me what I thought of that prospect.  Both of our families – maternal and paternal – are shot through with veterans, although my wife’s tends to the Navy while mine tends to the Army – and the kids know at least some of the stories that have been handed down.  God knows that awareness shot through me as we walked.

I struggled with my thoughts and responded simply.  I told him that it was an honorable wish and certainly an honorable way to gain that wish, and God knows we need solid, dependable people in the Army.  But the reality of what truly bothered me quickly became clear.  It’s not that the Army or Air Force isn’t worthwhile, because it is.  What’s bothering me is that you might have to risk your life and I want – need – to be sure that the people making the decisions about going to war are truly able to make a good decision that’s worth the sacrifice.  And I’m no longer certain that they’re either competent or honest enough to make a solid decision.

That’s why I’ve been thinking of my grandfather the past two days.  None of us wish to see our children in danger but the large majority understand that there’s a real need for those able and willing to serve.  My grandfather however, had Truman as a president and a Congress that believed that division ended at the water’s edge.  I’m honestly not the least bit confident in the political leaders, either in their decisions or their loyalties.  Who do they serve?  The people that elected them, or a corporation that’s purchased their vote for an issue that’s unfriendly to the common man?  If my son and his friends are someday in Harm’s Way, I need to know that they’re there for the reasons that idealistic young join – serve, protect and make a difference.

I hope that I haven’t offended anyone reading this and I mean no disrespect to those who served.  Now that it’s off of my chest, I’m going to have a drink and have a few thoughts of my own father, the veteran.

Good night and thank you for your service.





Whose Room Is It?

Dad, it’s my room.  Why did you open the door?

This came from one the kids who arrived home from school to find the bedroom door open.  And it begs the question, just whose room is it, really?

Teens are acutely aware of their privacy, especially as their bodies change and they become more aware of their privacy.  I get that and recall the days of walking in my bedroom, shutting the door, turning on the music and turning off the world.  While it appears to be lazy – especially as I wander through carrying laundry or stuff – it does serve a purpose.  That however, is a different article for a different day.

The question arises because of what occurs behind the doors, at least in terms of unacceptable behavior.  Yes, I also know about self-stimulation and unless it appears to take center stage in life, my view is that it’s normal sexual development for teens.  But unacceptable behavior in this instance pertains to actions which damage the property.  I know one family whose son had an Air-Soft gun, a high-pressure air gun that can shoot plastic pellets at a high rate of speed, and he’d periodically load up the gun and shoot the walls of the room.  Did it knock holes in the walls?  No, but it did leave the walls with an interesting dimpled effect from the high-pressure impact.  It’s a conversation that I’ve had on multiple occasions with one of the kids as I’ve had to (re)explain my stance.

  • I reserve the right to open up the room when the child’s not around to permit air to flow and stuffiness to dissipate.  Teenagers’ rooms can get rank in a New York minute if permitted.  When the kid gets home and chooses to shut the door, I’ll honor that.
  • If damage occurs within the room – and I mean the damage that arise from brain-dead anarchy – then the door will stay open as the child has shown himself incapable of behaving in such a way as to deserve privacy.  Sorry, but the Justices don’t live under my roof.  It might be your room, but it exists inside of my house and will revert back to me when you’ve grown and moved on.
  • Privacy is also a privilege that can be removed in the event of outside misbehavior so egregious that it warrants it.  And there have been instances in our household when the bedroom doors have been removed because of major-league issues.  While we sometimes permit the kids to earn back removed privileges – note that I didn’t say rights – the loss of privacy is something that we’ve let run the full course.
  • I periodically make the statement that I reserve the right to search a room if I deem necessary.  I don’t know that that will occur but I don’t want the kids to claim that they were ever unaware that it could occur.
  • To the extent that it’s possible, any damage within the room will be fixed or cleaned up by the offending child.  That includes scrubbing the floor and spackling and painting damaged walls.  I can talk until I’m blue in the face but having to sand a recently spackled wall will send a memorable message – and teach the kid another life skill.

The last point that I’ve occasionally had to make, especially as the kid ages and matures, is whether they’d like someone to treat their property as they might have treated mine.  Some kids will never quite understand the point, but others will and amend their ways accordingly.

And to finally prove the point, not only do I open the door to the bedroom but I even open the window.

PracticalDad Price Index:  November 2010

Because there are questions as to whether inflation is going to accelerate, I began a simple price index – the PracticalDad Index –  with the market basket priced at three local and unrelated grocery stores.  The basket consisted of 47 items covering basic food categories such as dairy, meat, produce, staples, baby items and health/beauty products.  The pricing will occur during the first several days of each month and the results posted during the second week.

Listed below are the items, with store and average prices, that compose the market basket.  The average cost of the basket is $178.39 with a basket range from $174.37 to $181.42 and whenever possible, the items sampled were store brand.

PracticalDad Price Index – November 2010

Item Size Category Store A Store B Store C Average
hot dog rolls, store brand (count) 8 bread 1.09 .99 1.19 1.09
loaf, white bread, store brand (oz) 20 bread 1.19 1.19 .99 1.12
spaghetti, store brand (oz) 16 bread .99 1.09 1.25 1.11
children cereal, sugar flakes, store brand (oz) 17 cereal 2.99 2.10 2.50 2.53
cereal, rice chex, store brand (oz) 12.8 cereal 2.59 2.59 2.89 2.69
oatmeal, one-minute, store brand (oz) 42 cereal 3.19 2.99 3.19 3.12
milk, 2% (gal) 1 dairy 3.54 3.54 3.54 3.54
butter, unsalted (lb) 1 dairy 3.79 3.29 3.59 3.56
vanilla ice cream, store brand (qt) 1 dairy 1.71 1.71 2.13 1.85
grated parmesan cheese, store brand (oz) 8 dairy 2.99 2.99 2.99 2.99
American cheese (lb) 1 dairy 5.99 6.99 4.58 5.85
peanut butter, store brand (oz) 28 grocery 2.99 2.89 2.99 2.96
grape jelly, store brand (oz) 32 grocery 1.99 1.69 1.79 1.82
kidney beans, dark, store brand (oz) 15.5 grocery .85 .83 .89 .86
can green peas, store brand (oz) 15 grocery .89 .89 .89 .89
can diced tomatoes, store brand (oz) 14.5 grocery .99 .95 .89 .94
can cut green beans, store brand (oz) 14.5 grocery .89 .89 .89 .89
can corn, store brand (oz) 15.25 grocery .89 .89 .89 .89
spaghetti sauce, store brand (oz) 26 grocery 1.07 .89 1.42 1.13
cola, store brand (L) 2 grocery .88 .89 .89 .89
caffeinated coffee, store brand (oz) 13 grocery 3.19 2.99 2.69 2.96
diapers, size 3 (count) 100 baby 16.82 18.41 16.82 17.35
formula, Enfamil (premium Lipil) (oz) 23.4 baby 23.19 22.59 23.02 22.93
child ibuprofen, OS, store brand (fl oz) 4 hlth/bty 4.49 4.69 4.89 4.69
adult ibuprofen,caplet, store brand (ct) 100 hlth/bty 7.69 7.69 4.99 6.79
shampoo, Suave brand (oz) 22.5 hlth/bty 1.69 1.65 1.89 1.74
pads, long, Poise brand (ct) 42 hlth/bty 15.99 15.99 16.29 16.09
bath soap, Dial brand (ct) 8 hlth/bty 5.39 5.39 5.39 5.39
aluminum foil, store brand (sq ft) 75 hshold 2.99 2.92 2.79 2.90
kitchen trash bags, store brand (ct) 26 hshold 4.24 4.46 3.63 4.11
paper towel, 2-ply, store brand (rolls) 8 hshold 8.19 4.99 8.59 7.26
hot dogs, meat franks, store brand (oz) 16 meat 3.0 2.69 1.69 2.46
ground beef, 80% lean, per lb (in bulk) 5 meat 2.99 2.99 3.09 3.02
eggs, large (doz) 1 meat 1.49 1.79 1.59 1.62
lunchmeat, ham (lb) 1 meat 5.29 6.79 4.59 5.56
chicken, roaster (lb) 1 meat 1.69 1.39 1.49 1.52
fish sticks, Gortons (ct) 44 meat 7.99 7.59 7.49 7.69
tuna, water packed, store brand (oz) 5 meat .79 1.29 .79 .96
banana (lb) 1 produce .59 .59 .55 .58
apples, Red Delicious, bag (lb) 3 produce 3.49 3.99 3.49 3.66
carrots (lb) 2 produce 2.19 1.89 1.99 2.02
orange juice, original, store brand (oz) 64 produce 2.89 2.59 2.49 2.66
potatoes, Russet (lb) 5 produce 3.99 3.49 3.99 3.82
sugar, store brand (lb) 5 staple 3.19 2.99 3.19 3.12
flour, all purpose, store brand (lb) 5 staple 1.89 1.89 2.09 1.96
canola oil, store brand (oz) 48 staple 2.99 3.39 2.99 3.12
rice, white, long-grain (lb) 2 staple 1.59 1.99 1.49 1.69
total 181.42 179.39 174.37 178.39

As time progresses, the November 2010 average will serve as the basis index level of 100.

We’ll see.

Is Inflation Happening Now?

Now that we’re all cruising aboard the QE2, I wonder  whether we’ll reach the promised destination of a return to economic normality.  The cost of this return however, is the value of the dollar and whether we’ll be able to afford anything at all after we’re done.  There’s been growing concern about the validity of the economic data coming from the Federal Government, especially in terms of consumer prices.  The Federal Reserve has kept interest rates at all-time lows under the mantra that the Consumer Price Index is .1%, exclusive of food and energy.  Apparently the Fed believes that the rest of us don’t eat and don’t have to buy gas, so we can stay home on our extreme diets.  I’ve heard people say that food prices are rising, and I believe that they will if they aren’t already, but nobody can seem to say how much.

So we’re going to put it to the test and track the prices of commonly used household items in the PracticalDad BOG (Boots on the Ground) Index.  The BOG Index will measure, monthly, the prices of selected grocery items in a  simple, straightforward format.  What do we actually buy and what’s happening to the price?  It’s actually not difficult to do provided that you have some rules in place at the outset and then follow them scrupulously; the key is to keep it simple and consistent.

B(oots) O(n the) G(round) Index Rules

  1. The Index will be calculated by following prices on a monthly basis at three different grocery stores in my vicinity.  These stores comprise a mix:  a locally owned grocery; an American owned Grocery chain store; an internationally owned grocery chain store.  I don’t pretend that there aren’t regional differences but we’re looking at the price changes in totality, not pricing by region.
  2. The items are those that would be purchased by a family with children.  The item list will not change and the items will be consistent from store to store in package size and comparability.  A five pound package of ground round (80% lean) will be the same item priced at each of the three stores.  If an item is no longer available at one of the stores, then the best-fit alternative will be used.
  3. Because one of the concerns about pricing is “stealth inflation”, in which prices remain the same but package size changes, the package size of each item will be consistent.  In the event that the package size of an item changes, I will adjust the price recorded to reflect the change by recalculating the item on a per ounce basis.  This will then be carried forward as we move along.
  4. If the stores do not have identically sized packaging for the item in question, the price for the item will be calculated at the base unit price (per ounce, per count, etc.) and equalized amongst the three in a common size.
  5. Pricing will not allow for BOGO or other such specials so that price movements aren’t distorted.  Likewise, there will be no allowance for coupons.
  6. As much as practicable, the BOG Index will concentrate on generic items.  If generic items aren’t available, such as diapers, then a brand name will be used.
  7. Pricing will always occur during the first week of each month and the prices as of November 2010 will constitute the base level of 100.

It’s going to be a work in progress but with a little time, the question of whether there’s price inflation – and the extent to which it exists – will become apparent.

The results of this month will be posted next week.

A Family Cruise on the QE2

Several decades ago, a family cruise on the QE2 was an event to be remembered and cherished.  Passage was booked well in advance in order to secure a cabin and it was sufficiently expensive that only the wealthier families could afford the trip.  But now, millions of American families – most of whom wouldn’t go because of the expense – will most likely be peremptorily booked on a new QE2 adventure courtesy of the Federal Reserve System.  The excursion’s cost will be ruinously expensive and for most families, savings will be wiped out long before the cruise is finished.  The only question is whether the soon-to-be-destitute will be jettisoned before the cruise ends.

Most older Americans identify QE2 as the famous Queen Elizabeth 2, symbol of a slower, more gracious age.  But the liner is now long out of service and the QE2 being referenced is what economists and business pundits call Quantitative Easing.  Because it’s a repeat of what the Federal Reserve System did two years ago with massive infusions of cash to the financial sector, it’s referred to as QE2.  With an economy loaded past the gunwales with debt, more than can be adequately serviced, the value of various asset classes have been dropping steadily for more than two years with a resultant wipe-out of trillions of dollars in wealth – paper though it may be.  The intent of the experts at the Fed is to actually purchase huge amounts of various kinds of assets from holding banks and institutions, with the institutions and banks subsequently creating additional credit as the funds ripple from the financial sector throughout the economy.  These assets will go beyond just the debt to be issued by our Federal government – the government actually only needs a fraction of what’s expected to come – and leech into other areas as well; this would possibly include corporate and municipal bonds and if they emulate Japan’s central bank, could even include ETFs and Real Estate Investment Trusts.

That’s the intent and as the maxim goes, the road to hell is paved with good intentions.  The reality is different.  Since that time and despite all of the money pushed to the banks, credit available to the average consumer and small business has dropped, while the reserves held by the banking system has risen multi-fold.  Since short-term consumer debt rates – think credit cards – have never been decreased to Joe Six-Pack and credit limits for many have actually been slashed, the response has been to steadily pay off debt as much as possible so that the family debt load is lessened.  What has surprised financial authorities is that people in general have made greater efforts to stay current on the credit cards while letting the house payments fall behind; given that many now depend upon the credit card for essentials, this isn’t surprising.  And this is where Joe Six-Pack’s actions contribute to the Fed decision to launch the QE2 since many of the deteriorating financial assets are bonds backed by the mortgages that Joe’s letting slip away.

That’s hopefully a nice explanation, but what does it mean for me and my family?  How will it impact my kids?

Let’s start by considering the banks.  If the banking system is getting all of these funds – and stands to get hundreds of billions more commencing shortly – but isn’t passing them through to everyone else, where is the money going?  Banks exist first and foremost as for-profit enterprises with the intent of making money.  If they can gain money by selling dodgy assets to or borrowing from the Fed at almost 0% rates, then they can take the almost free money and literally throw it at various investments; if everyone is throwing money at the same assets, the result is that the price is bid up and the asset becomes more expensive.  In this instance, the assets at which they’re throwing the money are commodities and natural resources, assets that have a hard, tangible output and value.  Remember that ours is a fiat currency backed solely by the tax receipts of our country.  Bankers fully understand the concept of debt service and asset valuation and sense that our country has entered a phase in which the ability to cover our debt is seriously questionable.  In a grotesquely perverse act of selfishness, they’re taking the money that flows from the increased debt and using it to profit by pushing up the prices of the resources of families and children need to survive – wheat for flour, sugar, corn for food and animal feed, cotton, oil.  The prices of these items will continue to rise out of proportion as the money released by QE2 flows further into commodities.

The result will be what the Federal Reserve wishes, inflation.  Inflation which not only profits the financial institutions via commodity investment, but also inflation which supposedly makes the country more competitive internationally  as the dollar is devalued and the cost of American labor decreases.  Joe Six-Pack will be making less, when he’s employed, but will have to stretch the dollars to cover the cost of everyday items needed for his family’s survival.  So what might we expect to see for the American family?

  • First, the birth rate will drop as fewer couples feel secure enough to take on the cost of raising a child.  Already, the US marriage rate is dropping as couples forego marriage until employment prospects improve and while marriage is no longer an automatic precursor to parenthood, many will avoid purposefully having children.
  • Second, there will be a continuing swell of the food support programs such as SNAP and WIC.
  • Third, school attendance rates will continue strong and lunch program participation will rise.  Children who haven’t enough to eat at home will be sent by parents in order to take advantage of subsidized and free meals and more of the three squares a day will come from the school districts.  God knows where that money will come from when the Federal Government is eventually forced to pare down spending.
  • Fourth, more men will take to the road for employment opportunities a la the Great Depression, further removing fathers from a frayed family structure and placing more stress on the family.
  • Fifth, the American retailing model will take a hit as a devalued dollar leads to higher finished goods prices.  Even the made-in-China clothing of Wal-mart will become more expensive and out of the reach of stretched families.  Clothing will increasingly be purchased or obtained via alternative sources as parents scramble to clothe growing children at church thrift shops, second-hand/consignment shops or even clothing distribution events.  In my small town, a reasonably prosperous school district sponsored a free clothing give-away for all ages on a recent Saturday morning.  In the longer term, expect handy skills such as sewing to make a comeback.
  • Sixth, expect families to take a greater hand in their own food growing, storage and preparation.  If food prices rise, more will return to gardening and the subsequent canning/drying.  In my own case, I’ve begun the process of turning a manicured hillside ornamental garden into a terraced vegetable garden.  I was also surprised to find that a daily chore performed by one of the third-graders in my cub scout den is to feed the chickens.  This child leaves in a classic suburban housing development built in the 1970s and the parents, both employed, built a chicken coop in the backyard to cut down on food costs.
  • Seventh, anticipate an uptick in juvenile crime and violence.  We’ve raised our children permissively and tended to spoil them and the resulting cut-off of the various goodies will probably lead to some level of increased thefts and violence as they steal from one another as well as others.
  • Eighth, expect that the standard housing arrangements will change as families move in with one another to keep costs down and still provide housing for the chlldren.  Children might also be more likely to share bedrooms as well as electronic devices within the household.
  • Ninth, expect that in the longer-term, today’s children become far more practical and hardnosed than we – their parents –  ever had to be.  I glimpsed this one day while talking with one of my son’s friends, who was then in sixth grade.  His parents were delighted to be going on a trip to the Bahamas and when I asked about it, he responded The Bahamas?  I want them to get a new driveway.  Ours is a wreck.  Likewise, I spoke with a teenager who was being raised by his older sister.  We were discussing money with a group of teens and the question was what would each do with a windfall of $100,000.  While others talked of cars or trips, this boy simply said that he wanted to purchase health insurance and set aside the rest for a place of his own.

There’s no guarantee that any of these will come true, but I wouldn’t be surprised if some of them didn’t.  Some of them are already happening and doing so before my eyes.

We parents are going to be stretched in ways that we never considered before.  Our priorities will change and we’ll be forced to make choices and decisions that are new and painful to our generation.  The key will be to absorb the blows in such a way that even while our children have to adapt to a new reality, they don’t find it as painful as we will.