A cautionary tale: The difference between food and rent in high inflation

Dec 15, 2022
CPI November Food Inflation

As of Dec 15, 2022, CPI for November 2022 was just reported. In the above picture, you'll see that for October, food's "relative importance" was 13.74% of the total. 

In Weimar Germany in the early 1920's, food accounted for, at the peak, well over 90% of family income. In contrast - rent/heating was almost all of the last 6-10% of income!

Do you want to be selling food or renting to tenants if any situation remotely close were to happen?

Slightly different measures, so this is apples and oranges - but to mix some metaphors, at least these are both round sweet fruits. Just going off of the ballpark figures - consumer spending habits will shift drastically under escalating inflation - as it must, when a reserve currency fails. This is not all bad news - it means 2 things:

1) You can look to get ahead of the curve by changing where/what you sell; and
2) You do not want to be in the businesses that are most impacted by high inflation - ie, businesses (like real estate) where payment terms are usually monthly / annually, unless you prepare for that - because your "share of wallet" could decline up to 80% as people eventually get redirected into the most basic of needs - food!

The major exception is if you can survive years of tax payments and no income on otherwise income-generating properties - if you can hold through the bad times, you can likely come out well ahead. But historically, not so many people have navigated the transition well. YMMV.

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