This isn’t a word that I’ve heard for thirty years, but it’s as frightening today as it was then. Stagflation is the combination of a stagnant economy coupled with high inflation rates.
Back in the late 1970’s, our economy did exactly what’s happening today. It eroded the average worker’s buying power. Currently inflation is sitting at 6.2% while our Gross Domestic Product this year will probably only increase about 2%.
Back then it led to
1 – More employers with open jobs than people seeking work
2 – Bare shelves at the grocery store
3 – Heating bills in winter that many couldn’t afford
4 – A soaring national debt
Does any of this seem familiar? Deja Vu stinks. What can any of us do about it? Not very much other than getting ahead of it.
There are conclusions that are unmistakable.
Periods like this in American history lead to higher prices. Companies are forced to raise their prices to cover their increasing costs.
If you offer a product or a service where pricing increases are possible, then it’s much easier to ride out the storm. You watch your numbers and make adjustments as are necessary.
If there’s any fat that needs to be trimmed, you get to it as quickly as possible. Sooner or later, things turn around.
But what happens if you’re in a tight marketplace where price hikes are either extremely difficult or impossible? The simple and ugly fact is that many will go out of business.
Many others will limit their exposure to losses by reducing staff and other expenses. They take their time and ride out the storm, replacing as many customers as possible, until the economy turns around.
Taking this approach requires financing. An entity needs to get small quickly, divest itself of unnecessary expenses, and control it’s losses.
However you look at it, your numbers become extremely important.
Let me leave you with this.
During the ’78 – ’81 depression, I was a kid working at my Mom’s performing arts school. She had a company named Amundson Arts Academy that taught dance, drama, voice, and music, over on Montrose near Austin in Chicago.
Most schools don’t make that much money. Anyone who owns one will be happy to verify that fact, but try operating one in the middle of a depression.
If a couple has the choice between paying their mortgage or sending their daughter to ballet class, which option do you think will win?
Times were hard. There wasn’t any extra money for anything. We worked hard for little. Years went by until one day my Mom rounded up a couple of her teachers and took the four of us to a Sizzler Steakhouse.
I don’t remember exactly when this was, but it had to be near the end of the recession. Back then, the big money in the dance business came from teaching private ballroom lessons. Someone had come in that day, and bought a bunch of lessons with cash.
After we sat down to eat our $8.95 steak and all-you-can-eat salad bar, my Mom reached into her purse, pulled out a one hundred dollar bill, and put it on the table for all of us to see.
Mama said, “We’re finally coming out of this lousy economy. I haven’t seen one of these for three years.”
Think about it. Think about where we were and where we seem to be headed. We can all only pray that our current administration and congress does something about this before it gets totally out of hand.
We’re all going to get through this. Let’s get through it together.
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Chris Amundson
President
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