Do You Have Financial Dysphoria?

Authored by Jeffrey Tucker via The Epoch Times,

Five years ago, we all had a more settled sense of how we were doing financially. Whether rich or poor or somewhere in between, the signals were relatively clear and so too our sense of place in the sociocultural pecking order. Whether we were advancing or standing in place, or falling behind, we could tell.

The cruel inflation of the last four years, alongside dramatic life disruption, has disturbed all of that in ways we are only now grasping. It’s long been said that inflation is an invisible tax. That is correct in the sense that we recognize something is happening but we are not sure entirely what.

It was all the more strange because for the previous 40 years, we had a settled feeling of what things cost, what was a good or bad deal, and whether something was expensive or not. We looked at our bank accounts and knew intuitively whether we were doing well or nearing a troubled point.

A quick example: my favorite butter (water buffalo) used to be $4 but is now $7, which I thought was outrageous until I looked online and found similar products running $30 to $50, priced as a luxury item. Immediately, my annoyance turned to gratitude and I stocked up. This is true with so many things today. Our antenna for discerning value is mostly broken.

When the inflation began, we were told it was transitory, which we gladly heard as temporary. Many people supposed that we would soon return to 2019 prices that we knew so well. This was the adjustment period. It did not help that for the better part of four years, most financial news reported that inflation was “cooling” and otherwise improving month-to-month.

In the end, however, terrible things have happened to the standard of living. Everything is far more expensive, which means that the practical power of our earnings to purchase the life we want is vastly diminished. We try to put a number on it. It could be 25 percent. It could be much higher. We can all think of particular items we once bought that have increased 100 and 200 percent.

You are likely thinking from the point of view of personal finance. Some people call it financial dysphoria, because we alternate between thinking we will be fine and waking up in the middle of the night with dark fears of bankruptcy. You just don’t know for sure what’s coming.

What you are feeling as an individual or household is precisely what businesses of all sizes face today. They look at their balance sheets and have to squint to believe what they are seeing. All costs are up, and not only for labor and materials. Insurance, rent, fees, health care, and utilities are also dramatically higher. Even if revenue seems fine, it is not entirely clear that it is.

Finally, after four years of confusion, people are starting to see the reality. Dysphoria is gradually becoming a new frugality, or really, a kind of panic reorganization of spending priorities. Cut back, eat at home, do it yourself, and get used to living less expensively. None of us are sure it will be enough to make ends meet, but it is finally occurring to people that times have changed dramatically.

The Wall Street Journal hit it out of the park with a piece on how young women are now giving up their manicures and pedicures plus exorbitant expenses on hair colorings. Having only anecdotal evidence, the journalist did a dive into Google searches for how to do all these things at home, and looked for evidence of tutorial traffic on video sites. They certainly found it.

This thesis fits very much with what I’m seeing too.

The point about cooking at home is an important one. Eating out is dangerous for personal finances, especially these days. For a very long time, many people got used to hanging out at local watering holes and ordering whatever they wanted. The way we pay these days permits the illusion that all is well to continue longer than it should.

We order, we eat, we drink, we are pampered and have a delightful time. Then the bill comes and we throw down a piece of plastic. We are a bit alarmed at the cost but swallow hard and go ahead and pay. After all, the damage is already done. You cannot uneat and undrink, so we pay. The habit goes on and on until you look back and see the percentage of your disposable income going toward this one activity.

It has taken years but Americans have finally recognized that this practice has to either end or be cut back. This is why so many restaurants are in trouble today. As if by a miracle, they survived the business closures and restrictions from 2020-2023. Barely emerging from that fiasco, they reopened ready to go. The customers came back.

Then the inflation started hitting not only the customers but the businesses too. We’ve lived through crazy times, alternating between thinking we are rich, we are poor, we are rich, we are somewhere in between, and no one knows for sure.

Accounting is a cruel taskmaster. 

It is a hard and impenetrable wall that blocks the highest dreams and the most inspired determination to overcome all obstacles. In the end, revenue must exceed expenses of all sorts else the business dies.

Accounting is the final check on the dreams of despots. It is the reality that no one can deny. Even if you deny it, it makes institutions obey it anyway. Accounting is why socialism never worked. By collectivizing capital ownership, it robbed society’s most productive resources of realistic price signals to determine profits and losses. 

The result was vast waste and economic irrationality. The result of socialist systems has always been collapse.

We ignore accounting at our peril. And yet this has always been the dream of governments, which is why they created central banks. These enable regimes and financial systems to print money without having to face the taskmaster of accounting. The cost of taking this path appears in other ways, including inflation, industrial distortions, and unsettled foreign accounts.

For anyone who has studied economics, the events of today are not a surprise. They are no less tragic, however. Aside from the very wealthy, most people in the United States today are facing extremely hard economic times as compared with just five years ago. That big bite out of purchasing power has been more devastating than we expected.

The saving grace of the current economic environment is that inflation has settled back and dramatically so. The latest data shows something remarkable: actual price declines in some industries and an overall real-time annualized rate of 1.4 percent—still too high but a very welcome relief.

Sadly, this comes at the same time as the realization that we are probably already in recession. Trump’s tariff wars are catching the blame but the truth is that the recessionary conditions long predate his moves on tariffs. Brownstone Institute commissioned an empirical study last year that documented a recession since 2022. No one has ever disputed the conclusions, and yet the financial press just went right on acting as if all is well.

All is not well, and that has become very obvious now. Taxes have gone up in light of inflation and I write even as millions of individuals and businesses are struggling to get theirs finished before the deadline. A pressing problem for many right now is wondering precisely what we are getting for what we are paying.

We’ve been through three months of hearing about unfathomable amounts of waste, fraud, and abuse in the federal budget. Aside from that there are the large problems of unsustainable debt, mandatory spending from entitlements, and a health care system that no one really likes. The whole system is crying out for reform.

And yet as we await that reform, we are still expected to cough up even as financial realities are making everyone newly aware of just how much worse off we are today than in the past. Despite all the gizmos and digital services we can consume, we have less disposable income in real terms than five years ago.

This is the reason for the financial dysphoria of our times. Despite all the ebullience about the political changes in Washington and much talk about a Golden Age, there is not too much time to make a dramatic difference in a way that matches hopes. Accounting is and always will be the hidden master of us all, one that cannot be wished away with political rhetoric or activist organizing.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times or ZeroHedge.