Month: October 2015

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Managing the Decline

We live in an increasingly gender-neutral society as customary roles continue to change, in some ways slowly and in some ways, not.  We’re now more than two decades into the stay-at-home-dad scenario and it’s gone from a notable phenomenon to a far more widespread and mundane situation.  If you aren’t certain about that, pay attention to that faithful barometer of social change, the television commercial.  We’ve moved from the standard means-well-but-clueless-in-the-household-Dad across a broad range of products to considerably more commercials where Dad is actively engaged in managing the household and interacting with the kids.  The former still exists but it’s not as prevalent as it once was.  But as this continues to progress, men had better get used to the fact that there’s liable to be a point in their middle-aged lives when they’ll not only be responsible for managing the rise of their children but also the decline of their parents.

There are most certainly cultural influences.  China’s society is one in which the son is responsible for the ultimate care of the parents and that – coupled with their long-standing one child policy – has led to a profound imbalance in the male/female ratio as newborn girls were given up for adoption so that the parents could have another shot at having a son.  But American culture has historically been predicated upon the daughter having principal responsibility for the care of her aging parents.  The model with which we’ve been familiar through our lives has been, until relatively recently, one in which the man worked and the woman was responsible for the household responsibilities and that extended to caring for their aging parents.  It’s been stretched considerably with the rise in mobility and the nuclear family, and even further by the movement of the woman into the workplace.  This has been offset by the growth of local and state government programs to provide increased assistance for the elderly and the great majority, if not all, of American counties have some semblance of an Office of Aging to act as a portal to the panoply of programs designed for the aging American.  But we’re now at a new point in American history in which the promises made to all of the various layers and segments of our society are far outstripped by the resources available to meet them; the former Comptroller General under Presidents Bush and Clinton, David Walker, recently noted that the actual federal debt is triple what is reported due to the unfunded liabilities taken on by the government.  These unfunded liabilities would include especially the promises made to the elder generation – Social Security – and Medicare.  It is simply unsustainable.

While there are going to be increasing concerns and issues about the funding, the costs of providing care to an aging population continue to mount.  These costs are not at an outrageously disproportionate rate like college tuition, but they are increasing slowly and steadily and having an impact upon the family.  According to a report published by Genworth Financial, the median hourly rate for a homemaker service worker – who assists with non-medical and “hands-off” activities for the elderly and can help to maintain their independence – is $20 and the five year compounded rate of 1.61%.  Note that this is for the most basic assistance available to an elderly person and has the lowest rate of cost growth.  When you reach the higher levels of care, such as a semi-private nursing home room, the cost has risen over the past five years by a compounded rate of 3.57%.  And that cost is not being borne solely by the elder and the governmental programs.  A survey of more than 1400 households involved in caregiving for an elder found that fully 46% of those households were spending more than $5000 annually in their funds to assist their elders.  So once again, costs are increasing and the sandwiched generation is being pulled from yet another direction.  Paul Krugman can wax eloquently about existential American despair in the op-ed pages of the Times, but this type of issue goes to the heart of the matter.  The American middle class is beset not only by decreasing incomes on one side, but increasing costs and responsiblities on the other as more costs are offloaded back to them.  This middle class generation was raised in a particular environment – employers with a set of benefits, a belief in the value of education, and an activist government – and they’re watching it vanish as costs are shifted back to them and most importantly, their children.  Healthcare benefits?  Higher tuition?  Jobs that enable their children to take their own place as productive adults?  Nope to all of that.  And when you consider that the writing is on the wall for future government spending, then there’s really nothing existential about it.

So what does this mean going forward?  An understanding that the old model of following the job and then monitoring the elders from a distance and managing via a cobbled-together network won’t be as operative as it once was.  State and local programs will be constrained and there’s a greater likelihood that the facilities available to help care for invalided parents will be less than optimal and perhaps, households will shift to more of an integrated and intergenerational model with the elders close by to assist with the children and in turn be assisted by their children and growing grandchildren as they become increasingly infirm.  My own perspective is also framed by an understanding that even if we don’t realize it, our children are watching us and taking their lessons from our actions and inactions alike.  That means that I try to model a more hands-on and involved approach with my own parent, even if the roles are increasingly reversed and frustrating in their own way.  If we can’t – and honestly shouldn’t – look to government and the private sector to handle everything, then we have to be prepared to step in and manage ourselves as best as we are able.  And if the parents are ultimately living longer, then the simple truth is that the men are going to have to move beyond their comfort zone and take on the additional burdens because their own mates are going to be similarly pressed; but if men can take on the kids – and we are most certainly able – then we can likewise take on the elders.

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…and a child shall lead them

Part of me believes that I should sit down with my son and watch the first half hour of the Democratic debate tonight.  And then the other part of me remembers that the media (hint, CNN) is actively trying to get Biden to run and I realize that it’s a complete circus freak show.  Seriously, a week in advance and CNN is holding a debate podium for a guy who hadn’t declared?

I think that I’ll just wait for the Bad Lip Reading version and take bets on whether they give Hilary a man’s voice.

          –comment on personal Facebook page on day of first Democratic debate

I posted the above comment on my Facebook page late this afternoon as an expression of the intense frustration with our present political gridlock.  It’s ingrained that my principal job as a parent is to prepare my kids to take their place as productive and moral adults in the great wide world and part and parcel of that preparation is exposure to Civics and the political process.  Yet the frustration lies in the understanding that the political process is presently captive to the monied interests, much as it was during the days of the late 19th century Gilded Age.  Top it off with the knowledge that the corporate media isn’t just reporting the news but actively trying to massage it on both sides of the political spectrum – thank you, CNN and Fox – and I was sincere in my desire to blow off the entire thing in order to share a good action flick with Youngest, now in middle school.

With Mom out of town on business and his elder siblings off at college, he and I are doing the bachelor thing.  We opted to watch a recently released action film but as we paused periodically for one thing or another – typically involving snacks and fridge raids – I commented on the debate, which was scheduled to air in another half hour.  Understand that Youngest is living proof that the kids are capable of playing up, provided that you make it a habit of taking the time and effort to discuss the world and events with them.  He’s listened to conversation with his older siblings through the years and there have been instances when he’s returned to me for clarification on whatever he’s been privy to hear.  Youngest has known for years who Bernie Sanders is because I made it a point to have him and one of his siblings listen to a short clip of Sanders’ 2010 filibuster, made immortal by the common refrain …and they can’t afford diapers; it wasn’t a lengthy clip, but it did accompany an explanation of what a filibuster was and how rare it was anymore to actually hear one.  After a short break, I thought that even if I was frustrated, I should at least give him the choice of what he wanted to watch and my frank expectation was that he’d opt for the film.  It was a real surprise when he looked over at me from the sofa, took the lead and said no offense, Dad, but I’d kind of like to see a bit of it.  We can finish the film tomorrow.  It was an internally jarring moment as I realized that I was ditching my responsibility, one that I’d pursued regularly with his siblings, and that I was doing him a disservice.

At 8:29, we flipped off the movie and turned on the debate for the opening introduction through the question on gun control, at which time we turned off the television to start the bedtime routines.  During that interval, he and I would take turns making comments – surprisingly serious and not the usual snark – and there were multiple instances in which I commented that I’d be coming back to a particular point.  There are now multiple issues and comments written on a notepad in the kitchen for referral over the next several days and I’ll make it a point to periodically visit those points in short conversations.  And yes, the two predominant issues will be wealth/income inequality as well as gun control, those items covered in the first part that we watched.  As time passes and more is discussed, we’ll go into some of that as well.

So what’s the takeaway as I sit here on the sofa, writing?  The first, and probably most important, is that parenthood is a marathon instead of a sprint.  As your family grows and then begins to move out into the world, it’s easy to slack off a bit either because you think that you’ve got it all down pat or more importantly, just because you’re tired.  Trust me, teenagers can take it out of you and when you’re onto teen #3, the wear on the tire can be a bit much.  Tonight was a gentle smack in the figurative face that I was willing to forego what I absolutely wouldn’t have ten years ago and that it was a disservice to a child who deserves as much as his older siblings.  The second was the misconception that Youngest would be willing to skip the whole thing and stick to the movie instead of checking out the debate.  It’s a knock on his generation that they’re tuned out and while I do subscribe to that in the main, tonight makes me wonder whether it’s because they truly don’t care or whether we simply don’t give them the opportunity of playing up to adult issues.  It certainly was almost the latter in Youngest’s case tonight.  My role as a father and parent is changing in terms of the two older kids, now off to college, but it hasn’t changed with Youngest and it’s something about which I’m going to have to remind myself.  I will, however, have to also remind myself to not just rule out the current event conversations just because I don’t think that they’ll be interested.

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PracticalDad Price Index – October 2015:  Statistical Noise on the Fifth Anniversary

The data has been collected and calculated for the PracticalDad Price Index in October 2015 and the result of this 60th monthly edition is a resounding example of minimal change and statistical noise.  The Total Index for the 47 item marketbasket is 106.17 (November 2010 = 100) while the Food-Only Subindex of 37 foodstuff items declined from September’s 107.17 to 107.07 (November 2010 = 100).  The most notable change in the monthly occurred in the lunchmeat and deli cheese items (one pound prices for cooked deli ham and store brand American cheese, respectively).  The price for each item rose by $1/pound at one of the three separate grocers to $4.99/pound apiece and was aided and abetted again by one of the other grocers not having the cheese on the shelves; this meant that the price increase for the one store had a larger impact on the average price of deli cheese due to the absence of the third.  This type of occurrence in which one or another of the stores has an intermittent hiccup in the supply of one item has been noticeable, especially within the past year.  In different months, I’ll go in to price and find that one store of another simply doesn’t have one of the sampled store-brand items on the shelf and in fact, doesn’t even have a shelf tag to indicate that it’s even in stock.  If it’s in one of the chain grocers, I’ll swing by different locations to ascertain if it’s purely a location issue and if not, I’ll simply leave that item blank for that store with the result that the average price for the item is predicated upon two grocers instead of the standard three grocers.

So this is the fifth anniversary of a kitchen table project to ascertain what’s really going on with food prices.  I began the project in the late summer of 2010 because the Federal Reserve had engaged in a series of unprecedented policy manuevers – Quantitative Easing – that had the blogosphere humming with debate of whether this would radically impact prices or whether it wouldn’t be able to offset the feared deflation arising from a near economic collapse in 2008.  Many didn’t trust the CPI issued by the government’s Bureau of Labor Statistics and I figured that I could spew essentially meaningless bytes across the screen calling bullshit or I could put previous experience to use and provide a hopefully meaningful data point.  You see, in the dark and distant past, I had an internship at the research department of a local chamber of commerce and was tasked in that summer to set up the local city for inclusion in the national chamber’s cost-of-living index, measured periodically and compiled for cities across the country.  It was grunt work contacting dozens of businesses to gain their input on an ongoing basis but it was at least educational as I also got to see how the mechanism worked.  When the chamber hired me for further economic research after college (what is the impact of an avian influenza epidemic upon the county’s poultry industry, you ask?), one of my corollary tasks was to continue with the collection of pricing and it was during this period that I was able to meet and work with the researchers who devised the survey for the national chamber.  It’s actually easy once you get it set up, provided that you go to the effort of being thoughtful in the creation of the instrument and follow up with consistency amongst the items priced and it was in the several month creation phase that various things were tried and eliminated.

So what have I learned in the past five years? 

The first thing that I’ve learned is that inflation is not an event with a single cause, but instead a process affected by a variety of often competing factors.  The bloggers and pundits in 2008 were looking at the various QE programs with the idea that the vast amounts of money about to be pumped by the Federal Reserve and other central banks into the system would have a fully systemic effect – a rising tide lifts all boats impact.  There was an opinion, which I shared, that we would go the way of the German Weimar Republic and end up with a hyperinflation that destroyed the currency.  But prices were actually affected by a wide variety of factors.  The Food-Only Subindex – consisting of 37 separate foodstuff items in bread/meat/dairy/produce/staples groups – rose from the baseline of 100 in November 2010 to a peak of 115.13 in December 2014.  While this increase was neither linear nor constant, it did rise as items were affected by different factors.

These factors included such things as simple supply and demand, as exogenous events such as drought or disease affected the price of one or more of the particular items in the basket.  One of the earliest factors captured in the index in the first year was the impact of hot money flows into commodities.  As money from the first QE program began to flow into the financial sector, the wizards of Wall Street promptly began to divert some of that into commodities with the thought that these raw materials had greater value than money itself because it was actually physical so hey, it’s gotta be good because there’s something actually there.  Among the commodities were aluminum, sugar and coffee.  The run-up in oil prices around 2012 and 2013 led to a corresponding significant rise in the grocery store as various forms of cooking oil – which had sources that also served as biofuel sources – rose significantly, albeit lagging the rise in oil prices.  The oil rise was a function of both hot money commodity flows and foreign political factors.

I’ve also learned that while prices can go down again, as it did for items such as canola oil and coffee (although not as low as it was beforehand), stealth inflation packaging is a great way for producers and grocers to gain a little bit more profit margin on their goods.  From what I’ve seen, it’s a great way to ensure a little extra profit margin as nominal prices go down on the newly repackaged item but not enough on a per ounce basis to make it truly cheaper.  It also resets the scale as it were, so that there’s a new baseline price upon which they can act in the future and over time, people will lose sight of how much the original price actually was.

But these factors are truly only temporary factors that can be remedied – and largely have been – with a change in situation.  As the QE programs ended, the hot money flows have diminished significantly and the supply issues will ameliorate over time as either supplies again increase or demand is shifted away and to other items so that there’s a new equilibrium reached.  In each of the commodities already listed – sugar, aluminum foil, coffee and cooking oil – the prices have either stabilized or again dropped, although not to the original level because prices never drop as readily as they increase (thank you, grocers and producers).

So the Food-Only Subindex rose over four years from a baseline of 100 in November 2010 to a high point of 115.13 in December, 2014 and it was this period that demonstrated the effect of the various factors as they overtook the effects of the deflation so feared by the Federal Reserve and other assorted central banks.  But it was in the ten month period from January to October 2015 that deflation took the reins from the other factors as the Food-Only Subindex literally collapsed from December’s 115.13 to this month’s level of 106.17 – a drop of 53% in a period of time only a fifth of that through which the index rose.  Despite the best efforts of the Federal Reserve to move prices upwards, it was in this ten month period that the deflation that it so feared came through as the effects of lower incomes and increased food stamp usage finally surged through the mass economy.  Grocers aren’t stupid.  They live with a thin profit margin and as a result are sensitive to their customers’ needs, wants and especially circumstances.  It’s been in these past ten months that another process, more violent, as surged through as the grocers have found new suppliers willing and able to provide lower-priced alternatives to their clientele.  The Great Depression taught that in a deflationary environment, few businesses survive and the three grocers have each gone to lengths to fight one another – and Walmart – for market share, rolling out new pricing strategies as well as simply finding new suppliers to provide the lowest cost alternatives for the customers.  Yes, other prices are increasing such as rent, health care and tuition.  But when looked at on a market basket basis, it’s the grocery where prices have crashed.

People often learn best when presented with an illustrative point or analogy and it’s here that I’ve struggled for some while to find the right one to drive the point home.  Until this past weekend when I went camping with Youngest’s scout troop and came down to the kitchen area early one morning for a coffee to kickstart the day.  As I sipped the scalding black coffee, I looked at the scoutmaster’s camp stove and noted a pot with a lid to heat up hot water.  But what was different about this pot was that there was a built-in spigot that extended from the bottom and allowed a person to dispense hot water without having to remove the lid or worry about ladles and it was this pot that struck me as the best example of the interplay amongst inflationary and deflationary factors.  Think of the economy and prices in the most general terms as a pot on a stove and prices as the level of the heated water within the pot.  Economic activity is moved by transactions much as water is heated by a source and as the economic activity increases, it heats the economy and prices will generally rise much as the water level in a heated pot will rise when the lid is on.  That’s the view that’s been taken by the economists and it’s to this end that all actions have been taken.  Prices have risen due to some of the factors that we’ve discussed before, the level bubbling due to supply shortages and hot money flows and for all of the effort, the pot really does appear to be active and hot.  But if you keep the heat on the pot yet use the spigot to remove water from the pot for a cup of instant coffee or oatmeal, the water within will continue to boil and bubble and yet the water level will drop despite the heat and this is the deflationary effect.  It doesn’t matter what occurs with the other factors.  Prices for individual items can rise like a bubble, but on a cumulative basis, the price level will drop as the incomes – the water – drain away.  Customers can and will alter their buying habits, replacing steak with inferior goods or simply doing without and the grocers and producers will have to do whatever they can in order to continue to make sales.  And when they can do no more, they’ll simply go out of business like their predecessors in the Great Depression.

So what will be the outcome of this thus-far eight year trip down the monetary rabbit hole?  Will there be hyperinflation that destroys the currency or will deflation win out?  The sad reality is that nobody really knows now since the central banks took actions that literally destroyed the metrics that were used to understand what was happening around us.  This isn’t a national pricing project as several respected financial/economics bloggers have correctly pointed out and I’m not about to pretend that it is; but I do believe that it can and does serve as a reliable datapoint for those who are interested.  And if you’re interested in doing this to satisfy your own curiosity, just be sure to be consistent in the marketbasket over time.  But even if you don’t go this far, make it a point to pay greater attention to what you’re seeing in the stores and on the streets, because it’s our own inattention that has helped this monetary nonsense flourish.