Inflation, 2023, and the Feast of the Seven Fishes
No. 26
Why Read?
Learn how to combat inflation in your life
It’s my last post of 2022
I employed the help of ChatGPT to do some writing. Can you tell where?
Read to the end for last minute gift ideas
I can’t recall when the last time the general sentiment heading into a new year was one of anxiousness. In the words of Loretta Castorini in Moonstruck, “Snap out of it.”
I have been fielding quite a few questions from friends and colleagues about inflation and whether we will be in a recession in 2023. The simple answer is, I don’t know and anyone who says they do is either delusional, lying, or both. All one can do is prepare and hope for the best. There are things that you can and should be doing to shore up your finances to deal with rising prices and a possible recession. More on this later.
In Italian homes throughout the world, this week begins preparation for the Feast of the Seven Fishes. The Feast of the Seven Fishes, also known as the "Festa dei sette pesci" in Italian, is a traditional Christmas Eve celebration in Italy. It is a time when Italian families gather to enjoy a large, seafood-based meal together. The number "seven" is thought to represent the seven sacraments of the Catholic Church, and the meal is often seen as a way to honor the celebration of the birth of Jesus.
The Feast of the Seven Fishes typically includes a variety of seafood dishes, such as calamari, baccalà (dried and salted cod), and various types of shellfish. The specific dishes served may vary from region to region and from family to family, but the meal is generally a grand and elaborate affair, with many courses and a variety of dishes.
In addition to the food, the Feast of the Seven Fishes is also a time for families to come together and spend time with one another. It is a celebration of tradition and of the close-knit bonds of family. . (If you want to watch a fun Christmas movie about this topic check out, The Feast of the Seven Fishes. We watched it as a family and my kids were, well, enlightened.)
Growing up this was the big day, not Christmas day. Preparation started with procuring seafood, cleaning shellfish, calamari, and smelt, and soaking dried and salted cod to rehydrate it before frying.
The meal itself was a huge celebration that would go into the evening before we all made the short walk to St. Anthony’s Church for midnight mass. Upon our return, we would open gifts and, fueled by adrenaline, espresso, and cannoli, remain up playing games until morning.
The Feast of the Seven Fishes is one tradition that I have maintained over the years with some adjustments. All seven fish have been replaced by Brodetto di Fruitti di Mare – an enriched tomato broth comprising mussels, clams, shrimp, and scallops.
Like my grandmother before me, the planning and preparation begin several days in advance. Earlier this week I ordered fish and was hard at work preparing Enriched Clam Juice and Enrico’s Sauce. This year I thought it would be interesting to see how inflation has affected the price of making this dish in 2022 as compared to 2000.
According to the U.S. Bureau of Labor Statistics, prices for fresh fish and seafood are 103.70% higher in 2022 versus 2000 (a $103.70 difference in value).
Between 2000 and 2022: Fresh fish and seafood experienced an average inflation rate of 3.29% per year. This rate of change indicates significant inflation. In other words, fresh fish and seafood costing $100 in the year 2000 would cost $203.70 in 2022 for an equivalent purchase. Compared to the overall inflation rate of 2.43% during this same period, inflation for fresh fish and seafood was higher.
In the year 2000: Pricing changed by 5.04%, which is above the average yearly change for fresh fish and seafood during the 2000-2022 time period. Compared to inflation for all items in 2000 (3.38%), inflation for fresh fish and seafood was higher.
Fortunately, Brodetto di Fruiti di Mare has only four types of fish so I’m doing my part to cut costs. That said, I am cooking for 12 people which means you make enough food for 15-18 just in case someone brings a friend or three. It’s the Italian way. The real reason Rome wasn’t built in a day was that the Italians had to eat and take afternoon naps.
What does 2023 hold for the Economy?
This is the time of year when prognosticators prognosticate about the future of everything from the economy to what stupid things the Kardashians might do in the coming year. I don’t put much faith in these forecasts, but I would not be telling the truth if I didn’t admit to trying to understand the probability of persistent inflation in the coming year and the effects on economic activity.
Inflation
Inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the purchasing power of money – a loss of real value in the medium of exchange and unit of account within an economy. A chief measure of price inflation is the inflation rate, the annualized percentage change in a general price index (normally the consumer price index) over time.
Inflation can be caused by a variety of factors, including an increase in the supply of money, an increase in government spending, or an increase in production costs. It can also be driven by changes in demand for goods and services, such as during times of economic growth or when the supply of certain goods and services is limited.
Inflation can have both positive and negative effects on an economy. Moderate inflation may be beneficial in that it can stimulate economic growth and encourage spending, but high or persistent inflation can be harmful, as it can lead to uncertainty and instability in financial markets and erode the value of savings and investments.
Synopsis – Inflation is a silent thief that robs you of purchasing power. Each dollar you spend buys less.
The method of beating inflation that has worked in the past has been to raise the Federal Funds Rate above the rate of inflation. This is what Fed Chair Paul Volcker did in the 80s. Today, everyone seems concerned that the Fed Funds Rate is at 4.5% although Core CPI remains around 6.2% and Headline Inflation is at 7.1%. (No kids inflation is not negative as one very prominent elected official recently declared.)
The current Fed Chair, Jay Powell, is attempting to orchestrate a “soft landing” where we have a short recession and then the economy rebounds. To be honest, I am not terribly sanguine about the probability of this happening. The rate of inflation would have to continue to fall, while the Fed Funds Rate increased slightly or is held steady long enough for it to go above the rate of inflation to declare victory over inflation. At the same time, businesses and the economy would continue to grow, lifting the country out of a mild recession. Birds will sing, markets will rise, and America will experience the Lake Wobegon Effect – “where all the women are strong, all the men are good-looking, and all the children are above average.”
My concern for 2023 is an inflationary recession since that would hit people who lose their jobs the hardest and cause real pain across the board but especially low-wage earners. Most recessions have been deflationary, meaning that prices fell during the recession.
Inflationary Recession
An inflationary recession is a situation in which an economy experiences both rising prices (inflation) and a decline in economic activity (recession) at the same time. This can occur when an economy is experiencing strong demand for goods and services, which drives up prices, but at the same time, there are constraints on the supply of those goods and services, which can lead to a slowdown in economic activity.
Inflationary recessions can be caused by a variety of factors, including external shocks such as a sudden increase in the price of oil or other raw materials, or internal factors such as rapid credit expansion or an overheated economy.
Inflationary recessions can be difficult to address because the usual remedies for a recession – such as lowering interest rates or increasing government spending – may exacerbate the inflationary pressures. Similarly, measures to reduce inflation, such as tightening monetary policy or raising taxes, can further slow economic activity. As a result, policymakers may have to find a balance between addressing both the inflationary and recessionary elements of the economy.
The operative phrase about is, “policymakers may have to find balance.” Much of the reason we are where we are today is that policymakers can’t agree on much of anything. Winston Churchill famously said, “You can always depend upon America to do the right thing. After they’ve tried everything else.” The challenge with inflation and recession is that the timing of policy changes matters. For instance, the Federal Reserve was late in raising rates to address inflation believing that it was “transitory.” Ever since that time the Fed has been aggressively raising rates to combat inflation. Perhaps the Fed’s biggest challenge in combating inflation has been the U.S. Government which keeps printing money and giving it away to various constituencies. Will they cooperate in 2023?
What can you do?
Longer term we all need to stop electing morons to important policy making positions at all levels of government – local, state, and federal.
In the near term there are several steps that individuals can take to address inflation:
Monitor your spending: Keep track of your expenses and try to reduce your overall spending where possible. This can help to offset the impact of rising prices on your budget.
Save and invest wisely: Try to save and invest your money in a way that preserves its value over time. This may include investing in assets that tend to do well during periods of inflation, such as stocks or real estate, or in vehicles that offer a higher rate of return than the rate of inflation, such as certificates of deposit or high-yield savings accounts.
Consider adjusting your budget: If you are on a fixed income, you may need to adjust your budget to account for rising prices. This may involve cutting back on certain expenses or finding ways to increase your income, such as by working a part-time job or taking on freelance work.
Shop around for the best prices: Take the time to compare prices at different retailers or online, and look for sales and discounts to help stretch your budget further.
Trade out more expensive products and services for less expensive products and services.
Be mindful of debt: Inflation can make it more expensive to pay off debt, so try to pay off high-interest debts as soon as possible and avoid taking on new debt if possible.
It's also important to keep in mind that there are limits to what individuals can do to address inflation. Ultimately, the direction and level of inflation are influenced by broader economic factors that are beyond an individual's control. So, hope for the best, plan for the worst, and otherwise, be smart with your money and make your presence be your present this holiday season.
Happy Holidays to all and may 2023 hold only positive surprises, good health, and peace to all.
Have a topic you’d like for me to cover? Leave a comment or email me with your thoughts.