What Is Happening to Prices?

A MAN and his wife stopped at a grocery store to buy just a few small items. The clerk took the $10 bill (U.S.) that the couple gave her in payment, but returned only 40 cents. The wife, expecting much more change, exclaimed: “Oh, Miss, you’ve given us the wrong change! We gave you a 10-dollar bill!” The clerk answered: “But that IS the right change! Those items now cost $9.60.”

The husband held the small bag of items in the palm of one hand, shook his head in disbelief and muttered: “What’s happening to prices anyway?”

If you shop on any regular basis, you well know what has happened to most prices: they have been on a relentless surge upward. True, prices have been rising for many years, especially since World War II. But never has the increase been so persistent and so much as it has recently.

Nor is the situation confined to just a few nations. The entire world, practically without exception, is plagued by this phenomenon, including even the tightly controlled economies of Communist lands. And this is unique, because never before have all nations undergone such inflation at the same time.

Of course, wealthier persons are not bothered much by most price increases. They can afford to pay more. But the overwhelming majority of people in the world are not wealthy, and many of them are suffering because of what is happening.

In country after country, polls show that people consider their greatest problem to be inflation. They feel as though they are in a trap that is closing in, with no way out. Many husbands work overtime, or on a second job. Many wives also work now; in some lands more than half of them do. Family life is affected, because one of the major reasons for family breakdowns is the fighting over money.

An American housewife lamented: “I wonder whether we’ll ever get ahead.” But while she was wondering about ‘getting ahead,’ others were wondering about survival. A truck driver in Brazil commented: “I’m getting panicky these days with the absurd cost of living. It seems as though there is no way out.” In that same land, not unusual is the situation of one husband who has two jobs, works 12 hours a day, six days a week. His wife teaches sewing and also works as a seamstress at home. They stated: “Caring for a family becomes increasingly difficult.” Indeed, one janitor in Brazil said: “We are not sure whether we are living or just existing.”

It should not be thought that this situation exists only in poorer countries. In the United States, an Atlanta woman works 40 hours a week as a hair stylist and then as a waitress on weekends. She says: “I’d starve to death if I didn’t hold down two jobs; there’s no way I could pay my rent.” Her situation, too, is not all that unusual.

In an African country, a report states that the following is happening due largely to runaway inflation: “More and more people turn to stealing, embezzlement, bribery and any other way they can get money to meet their daily needs.”

In highly industrialized Japan, in one period of about seven months nearly 100 people killed themselves because of troubles caused by sarakin (loan sharks). These people had gone deeply into debt, borrowed at high-interest rates, and could not pay the money back. Unable to face life, they committed suicide.

Historian Arthur M. Schlesinger, Jr., asserted regarding the economic situation: “The party’s over.” He said that the days of unparalleled prosperity in some places must now be changed for discipline, sacrifice and a lower standard of living.

In France, a commentator declared: “The dream of a ‘new society’ of abundance promised toward the end of the 1960’s and extolled during the early 1970’s has died out as inflation has made a lethal attack on the purchasing power in France.” Similarly, in the United States the Encyclopedia Americana Annual for 1979 observed: “The American dream, people said, had become a nightmare.”

Citicorp, a large bank in the United States, concluded: “The unpleasant fact is that the persistent inflation afflicting most countries will, if allowed to continue, ultimately have consequences that go far beyond what is narrowly defined as economic.”

Yes, unchecked inflation can mean much more than just a matter of some people having less. It can threaten the entire way of life of a nation. In fact, in the past it has destroyed the economies of nations. This time, inflation threatens the whole world, and not just economically, but with staggering political and social consequences as well.

Inflation Tightens Its Grip

“WE HAVE to recognize that we are at war . . . with inflation,” declared Business Week magazine. It added: “We are, moreover, losing that war.”

The “war” against inflation was being lost in the sense that, regardless of the measures taken so far, inflation has tightened its grip on the world’s economy.

As a result, there is a loss of confidence in money​—that is, paper money. This can be seen from the price of gold. Historically, gold has been the “money” of last resort, most valued in times of trouble. So it is a kind of “barometer” of economic conditions. Less than 10 years ago the price of gold was $35 (U.S.) an ounce. But in 1979 it went over $444 an ounce! This represents a large measure of lost confidence in paper money, and is an indication of how savage inflation has been.

All during the 19th century prices were relatively stable. But after World War I they became more erratic. Then, after World War II inflation became a part of everyday life. In recent years it has become more pronounced than ever, so that even during recessions inflation persists.

During one month in 1979 inflation in the United States registered 12 percent above the previous year, 15 percent in Japan, 18 percent in Britain and over 10 percent in France. The Federal Republic of Germany, with one of the more stable economies, experienced a 10-percent jump that month.

The Philippines reports that since 1966 the price of food, clothing and fuel has more than quadrupled. The price of Japan’s staple food, rice, increased over 500 percent in two decades. Brazil admitted that inflation in 1979 would be about 40 percent, as in 1978. There, the magazine Administracão e Servicos observed, “68 million Brazilians are not able even to think about buying a simple electric iron” because of having to spend their money for necessities.

Some African countries have inflation rates of over 100 percent for just one year. Israel’s rate was near that last year, and since its founding over 30 years ago the consumer price index there has risen over 5,000 percent!

The situation in the United States demonstrates what can happen over the years because of inflation. The dollar that was worth 100 cents in 1898 is now worth only 12 cents.

Workers whose wages just keep pace with inflation are being hurt two ways

However, have not wages also increased? Yes, they have. And for many workers wage increases have been greater than the inflation rate, so their standard of living has improved.

That is not the case with many other workers, though. In the United States, for example, about half of all workers find that inflation grows faster than their incomes, meaning a decline in their living standards.

Further, many poor people and persons on fixed incomes have fallen far behind. Note just one sample of this, a retired schoolteacher in New York city, who said:

“My present annual City pension is $4,439 [below the poverty level in the United States]. That we find it difficult to get along despite our heroic efforts at economy will, we are sure, not surprise you.

“We have no car. We do not own our own home. We rent the same small apartment we have lived in for more than 35 years. We take no vacations. We do not travel. We do not eat out. We consistently shop only [at] sales, and only for the most important necessities.

“We use no tobacco. We never indulge in liquor​—not even in an occasional beer. We have not been to the theater or even to a neighborhood motion picture since my retirement more than 21 years ago.

“We do not entertain. We spend no money on gifts to friends or relatives. We content ourselves with the occasional good will postcard for important occasions. We do not regularly buy a daily newspaper anymore.

“My wife and I are both in our mid-seventies. Neither of us is well or able to work.”

Workers whose wages just keep pace with inflation are also being hurt. Why? Because inflation’s bite cuts two ways. Not only do increasing prices reduce the value of hard-earned money, but corresponding wage increases put workers into higher tax brackets, exposing them to heavier tax burdens. The result is a net loss of purchasing power.

Also, inflation often penalizes thrifty persons who put money in savings banks. In one country, the interest paid by the banks was only about half the inflation rate. So at year’s end, the bank account, including interest, was worth less than at the start of the year. What made this worse was that the interest was taxable.

People carry heavier and heavier debt

The money squeeze has resulted in an enormous increase in personal debts of all kinds. One reason is that people do not want to try to save money before buying things they desire. So they go into debt to get them.

But another growing cause for this debt is that, due to inflation’s relentless surge, more people now borrow money just to maintain what they have. And the American Annual for 1979 also noted: “Those who once borrowed rarely, and only for big ticket items, sometimes found their borrowings paying for necessities instead.”

Then there are those who see no future ahead and so adopt the ‘eat, drink and be merry’ attitude, trying to enjoy all they can before it is too late. As one such person said: “I have a sort of doomsday-type attitude.” Some others even borrow heavily with no intention of paying back, which amounts to stealing.

U.S. News & World Report called the trend in debt “a tidal wave” that is “throwing a new scare into economists.” It also said: “Never before have people relied so much on borrowed money.” Any severe economic setback would bankrupt millions of these people.

Why is there so much inflation today?

What is causing the type of inflation that is so rampant throughout the world today? Authorities do not agree on every aspect of the problem. But most of them do agree that one of the main culprits is the spending of more money than what is being made and going into debt to finance this spending. As the Times of London reported: “What is inflation, after all? . . . It’s an economist’s word for overconsumption; for living beyond your income; for taking more out of the kitty than you put in.”

When governments spend more money than they take in from taxes, they must “create” money to make up the deficit. Harper’s magazine put it this way: “The debt arising from the government expenditures that taxes won’t pay for is covered by creating fresh new dollars.” The Wall Street Journal also noted:

“By far the largest part of the upward pressure on prices, . . . has been inflation in the literal sense. That is, it’s caused by a huge expansion of the money supply from years of excessive government deficits financed by the creation of money and credit, the modern equivalent of . . . running the printing presses.”

An example of this source of inflation is the domestic debt of the United States. The government has had 17 years of deficits in the last 18. Whereas it took 167 years for the debt to reach the first $100 billion, it now increases by that amount every year! The total is expected to pass one trillion dollars soon. And the interest on this debt is about $60 billion a year now, the third largest government expense. All of this means more money chasing goods and services, pulling their prices up, as at an auction.

Making the situation worse is the oil problem. Only a handful of nations produce more oil than they use. These nations have banded together in OPEC, the Organization of Petroleum Exporting Countries. They have increased the price of oil to more than 10 times what it was a decade ago. Since so many things​—gasoline, heating oil, plastics, chemicals and others—​are petroleum-based, their prices rise accordingly.

Because of these factors, some nations now are so heavily in debt that they are being kept economically alive only by further massive infusions of credit. Some of these countries cannot even pay the interest on their debt from their own resources, much less the debt itself.

Some economists wonder if inflation has gone beyond curing

How can inflation be cured? A number of economists wonder if the situation has not gone beyond curing. They compare it to a heroin addict who is too far gone, demanding more and more heroin to produce diminishing effects. If he continues, the drug will kill him. If he withdraws, the consequences of his drug-taking may still shorten his life.

To stop inflation, the overspending by governments, businesses and individuals must be severely cut. But this would mean people buying less, and so businesses would produce less. This would throw many people out of work, hence a severe recession or depression. The world economic system is now geared to such a high state of production from overspending that some observers claim it already is too late to be cut back drastically without causing about as much harm as is caused by the inflation itself.

[Diagram on page 7]

(For fully formatted text, see publication)

1898 1979

$1 = $.12

The U.S. Dollar Shrinks

What Can You Do About Inflation?

THERE is little that you, personally, can do to stop worldwide inflation. You cannot control government budgets, mounting debts of others or economic policies of nations. But there are things that you can do to help cope with the money squeeze.

For one thing, if you live in a more developed country, it may mean settling for a lower standard of living. That is, it may mean doing without certain things that you have come to take for granted, but which most people in poorer lands never had in the first place. While this prospect may seem very undesirable, it needs to be faced to prevent increasing frustration.

Too, as money becomes tighter, marriage mates need to talk openly and calmly about how their income will be used. Where the wife also works at a secular job, the need for communication over how family income is to be spent becomes greater. If the husband, or wife, spends without consulting the other mate, problems can mount.

Family food bills can be pared 20 percent if children are not allowed to go grocery shopping

The trend in food costs is up, up and up. How have some families saved money here, aside from the obvious way of cutting back on the more expensive foods? An Awake! correspondent in Japan says:

“Food is the biggest single expense on the budget of Japanese families. So the advertising sections in newspapers are carefully looked over so that all the bargains on shopping days can be taken advantage of.

“Also, at many supermarkets, just before closing, certain items are reduced in price in an effort to sell them before the day is over. Or, these same items, the first thing the next morning, are set out at the reduced prices to make them move before spoiling. Some housewives make an effort to shop at these times, and keep the family reasonably fed at moderate prices.”

Joseph Coyle, a food editor in the United States, claims that people can save from 20 to 40 percent on purchases by making up a shopping list after studying advertisements on the best food-sales’ days. In some places, ‘no frill’ stores sell at discounts because of having lower expenses.

In a recent year, grocery manufacturers in the United States issued 62 billion (thousand million) coupons offering price reductions, with an average value of 15 cents (U.S.) per coupon. These coupons are found in magazines, newspapers and sales brochures. The key here is not buying a product merely because it is advertised at a reduced price, but buying the product you need at such prices.

Newsweek magazine observed: “Family food bills . . . can be pared by 20 per cent if children are not allowed to go grocery shopping​—and aren’t able to wheedle extra purchases from their parents.” Too, a shopping list of genuine needs (not just wants) is important to avoid ‘impulse buying’ in stores. And when shopping, look for unbranded products that have the same nutritional value as advertised brands, but that cost less.

A Brazilian husband whose family is being hurt by inflation comments: “We had to cut down on luxuries, and my wife cooperates in every possible way. She never throws away any leftovers from meals.” Others save by having the husband take his lunch to work instead of eating out.

It makes sense to save by cutting nonessentials

When money is tight, it makes sense to save by cutting back on, or cutting out, nonessentials. One such is the tobacco habit. It is not only costly, but deadly, since about 90 percent of all lung cancers, and many other health disorders, come from smoking, truly a habit that is a “defilement of flesh.” (2 Cor. 7:1) Those who have given it up by exercising self-control find that they save hundreds of dollars a year.

Similarly, alcoholic beverages are costly, and their excessive use can damage health, and even family life. While the moderate use of alcoholic beverages is not condemned in the Bible, overuse is. (Prov. 23:29-35; 1 Cor. 6:9, 10) Here, too, hundreds of dollars a year can be saved.

Another source of savings has to do with recreation. It is not really necessary to spend hundreds, or thousands, of dollars to enjoy a change of pace from work. Commercial advertisers may make it appear that traveling to faraway places and staying at luxurious hotels are musts, but that is not the case. Traveling to places of interest near home, going on family outings, visiting with friends and other inexpensive forms of recreation can be very enjoyable. Appropriate television programs can help fill the gap left by cutting down on expensive movies and theaters.

In the old days families did not have radios, stereo sets, television, movies or other modern forms of entertainment. And the average family back there rarely, if ever, ‘ate out’ at restaurants. Yet they had wholesome forms of recreation and a measure of enjoyment in life​—perhaps even more than we do in today’s complex world. True, times are different, but humans are not that much different. They can still enjoy simpler, less expensive forms of recreation.

Many women now save much money by making their own clothes. Initiative and practice really pay off here. As an example, a housewife saw a relatively simple dress that she liked in a department store, but it was priced at over $50 (U.S.). Instead of buying the dress, she purchased similar material and made the dress for less than $5.

Certain stores sell secondhand clothing in very good condition, so a considerable saving can be made. Some people cut costs by washing their own clothes instead of having them laundered. They wash items such as sweaters in lukewarm water by hand rather than having them dry-cleaned, sending out only those things they cannot do themselves.

An important factor in saving on clothes is not being too concerned about fashion. Many people throw away good clothing just because of style changes. But one man, noting that even men’s styles were more swiftly changed now, declared: “Not this time! I’ll never again be a slave to fashion designers trying to get me to part with my money. I wear what I have as long as it is neat, clean and respectable, regardless of what the fashion people say.”

Another area that has resulted in much saving for some is learning how to make simple repairs at home. This not only saves repair costs, but gets much longer use out of appliances, furniture and other items.

One husband states that he has saved about $200 a year on haircuts. His wife agreed to learn how to cut his hair, and is getting better with experience. With such varied hairstyles these days, the haircut does not have to be perfect anyhow.

Medical costs can be reduced by comparing prices of doctors, treatments and medicines. A television news team, visiting a number of different drugstores within a few blocks of one another, found that the cost of the identical prescription drug varied from two to five times as much from one store to another.

Of course, the list of things that can be done to save money is much longer. But these samples show that a little thought and planning can help in this time of money pressure.

Too large an appetite for material things has wrecked many a family

One of the greatest sources of trouble these days is having too large an appetite for material things. It has been the financial ruination, and home wrecker, for all too many families.

Some want more material things to ‘keep up with the Joneses.’ But such false pride can be very costly. Appropriately, one wit already has noted that it simply does not make sense ‘to spend money you do not have, to buy things you do not need, just to impress someone you may not even like.’

Regarding the need to control material desires, a family wrote the following to U.S. News & World Report:

“Our family lives happily on the amount many two-income parents pay day-care centers. We fight inflation by guarding against double-digit desire for material goods.

“We have a peace about raising our own children and find security in being a ‘traditional family.’ Full-time homemaking will never be obsolete because it is God’s way for a woman to be perfectly fulfilled. ‘Expectations about what marriage should be’ have nothing to do with income. People, not combined incomes, make a marriage. People, not material goods, make a family.”

The curbing of material desires is particularly helpful in avoiding a prime cause of unhappiness: an overload of debt. Borrowing too much money, and living with the frustration of trying to pay it back, is a sure path to trouble. Accurately the Bible states: “Borrow money and you are the lender’s slave.”​—Prov. 22:7, Good News Bible.

According to interviews with families in serious credit trouble, many of their purchases were not needed. A young couple married only two years had already accumulated huge debts. Rather than pay those off first, they continued to borrow and spend. Their lack of self-control regarding material things soon took them into bankruptcy. Yet they told a credit counselor that they had spent money only “on necessities.” When questioned, it was found that these “necessities” included very expensive vacations and costly clothes that they really did not need at all.

Debt advisers suggest analyzing your take-home pay to see what percent of it you use for debt repayments. If, aside from a home mortgage, it is much over 10 percent, you are heading for danger. Some of these credit managers relate that when their clients cannot control their use of credit cards, they ask for these cards and tear them up in their presence. They note, interestingly, that this often causes “emotional hurt” to those who viewed credit cards as friends instead of the potential destroyers that they are to those who cannot use them wisely.

“The love of money is a root of all sorts of injurious things,” the Bible states. “And by reaching out for this love,” it adds, many people “have stabbed themselves all over with many pains.” (1 Tim. 6:10) Those truths are becoming more evident with each passing day.

What happens to those who make the materialistic view the main force in their lives? Our correspondent in Japan notes:

“In Japan, the average family simply takes on more work. The husband and wife work full time, plus overtime. Although they may feel that they are coping with inflation, it is the family that suffers because there is no mutual, upbuilding association.

“The whole effort is very shortsighted. It only concentrates on NOW, TODAY. The future is not brought into the picture and hope is not part of the daily life.”

The End of Today’s Economic Systems

IF YOU designed a machine and it did not work well, what would you do? You would likely try one modification after another to see if it would work better. But what if you found that after each repair it got worse? Would it not be time to consider that the machine itself was unsatisfactory, and that a different kind was needed?

Today’s economic systems are not working for the good of all mankind. There are enormous injustices in them. Hardworking people see their money eaten away by inflation. Hundreds of millions live in poverty. Other hundreds of millions do not even have the necessities of life. The New York Times reported of some lands: “For many poor people the price of a single meal now exceeds a day’s income,” which is a striking fulfillment of the Bible prophecy, “A whole day’s wage for a loaf of bread.”​—Rev. 6:6, Weymouth, Fifth edition.

Really, today’s economic and money systems cannot bring the peace, security and prosperity mankind so desires. Selfishness, greed, pride and a heartless lack of concern for others are built into them.

What does all of this mean? Why the worldwide inflation, as well as food shortages, wars and other unprecedented troubles since 1914?

All these things are a sign of the times. They are conditions that were foretold to be a part of the “last days” of the present system of things. And included in the foretold conditions is that people would be “lovers of themselves, lovers of money, . . . without self-control, . . . lovers of pleasures rather than lovers of God.” All these things are part of today’s political, economic, social and religious systems.​—2 Tim. 3:1-5.

Hence, today’s money instability and hard economic times for so many are part of the evidence that this system of things is rushing toward its finish, as Jesus himself foretold. (Matt. 24:3-14) Any patchwork improvements to try to keep today’s economic systems going will be very short-lived. No repair can undo the selfishness, greed and injustice that are built into them.

So what all these things really mean is that this present unsatisfactory system is moving toward its greatest crash ever, but by divine action, not human failure. As Jesus put it: “For then there will be great tribulation such as has not occurred since the world’s beginning until now, no, nor will occur again.”​—Matt. 24:21.

Comfortingly, though, God’s prophetic Word promises that this time of coming trouble will be followed by “a new earth” in which “righteousness is to dwell.” (2 Pet. 3:13) That “new earth” means a new human society, which will include a new economic system, one that will work for the good of every person. The promise is: “The LORD Almighty will prepare a banquet for all the nations of the world​—a banquet of the richest food and the finest wine. Here he will suddenly remove the cloud of sorrow that has been hanging over all the nations.”​—Isa. 25:6-8, Good News Bible.

“In order to clear up the present economic problems everything must be set back to zero”

What will soon happen, then, is similar to what a Japanese businessman answered when asked about a solution to today’s economic turmoil. He remarked: “In order to clear up the present economic problems everything must be set back to zero.” He rightly saw the hopelessness of ever repairing the system. And God’s Word agrees: it is too far gone. Hence, it will not be repaired, but will be demolished.

The possibility of today’s economic systems crashing has been a more frequent topic of discussion among economists lately. For instance, American financial commentator Sylvia Porter spoke of the real possibility of an “inflationary blowoff in this nation and the world, destroying the confidence in any investment in ‘paper’ [money], and so undermining the functioning of our international monetary system that trade among nations would grind to a near standstill.” The columnist added:

“The blowout would then ripple out to cause a rash of bankruptcies among businesses, a collapse of the dangerously swollen credit bubble, an upsurge in unemployment, foreclosures of vastly overextended mortgage credit, and repossessions of goods bought on installment loans the debtors could not repay.

“The scenario becomes more scary even as I write it.”

“Nations cannot go on borrowing to improve living standards”

Political commentator Jack Anderson similarly commented on the shaky money situation, stating:

“Nations cannot go on borrowing to improve living standards. The money can never be paid back unless it is invested in production instead of consumption. For many countries, the debt is already greater than they can absorb without a financial breakdown. . . .

“Skyrocketing prices keep adding to the bad debts until the whole banking system is threatened with collapse.”

The American Institute for Economic Research makes the following observations:

“During the next several years, the following economic developments seem highly probable:

“A severe and prolonged worldwide depression. . . .

“During a prolonged depression, social disorder might well become extreme. . . .

“Any person or family who appears to be substantially better off than those who are most adversely affected may become the target for mob violence.”

When people rob, rape, mug and murder in such increasing numbers now, in a time of relative peace and prosperity, they would do much worse if a breakdown occurred. An evidence of this is what happened during the blackout in New York city in 1977. In certain areas anarchy prevailed. Looting, vandalism and robberies were epidemic. The police admitted that they were helpless.

Similarly, in an African country, a one third increase in the price of rice sparked rioting and looting in the capital city. The streets looked as if a war had just been fought. Martial law was declared and a strict curfew imposed.

“Into the streets they will throw their very silver, and an abhorrent thing their own gold will become”

Concerning what lies ahead for the entire world, the Bible speaks of a “great tribulation such as has not occurred since the world’s beginning until now, no, nor will occur again.” During that time, paper money will be worthless. Why, Bible prophecy even says: “Into the streets they will throw their very silver, and an abhorrent thing their own gold will become. Neither their silver nor their gold will be able to deliver them in the day of Jehovah’s fury.”​—Ezek. 7:19.

No human leader, nor any form of human government, will be able to forestall the coming “great tribulation,” since it is God’s judgment against this present wicked system. That is why his Word warns: “Do not put your trust in nobles, nor in the son of earthling man, to whom no salvation belongs.” (Ps. 146:3) What, then, is the right course to take? The Bible answers: “Trust in Jehovah with all your heart and do not lean upon your own understanding.”​—Prov. 3:5.

Those who trust in Jehovah now he promises to help even in an economic way. No, God will not provide his servants with luxuries, but he has promised them the necessities of life. (Matt. 6:24-34; Ps. 37:25) Nor does this mean that those who trust God will have an easy time in life, since they too are affected by bad conditions in the world. But they will certainly have more success than others do in coping with today’s troublesome times.

In addition, such ones will have the assurance of God’s protection during the coming crash, and of surviving into a righteous new system. (1 John 2:15-17; Ps. 37:27, 34, 37) That is why a family in Brazil who learned to trust Jehovah states: “Although beset by economic problems, we are a happy family because we know Jehovah, the happy God, and we know his purposes.”

“Raise yourselves erect and lift your heads up, because your deliverance is getting near”

So, regardless of how severe the money squeeze becomes, there is the sure hope of the best of times directly ahead in God’s new order.