Uncle says inflation is only robbing us of 2 percent of our wealth each year. (That is what inflation does – it undermines the value of the cash you have – unless the cash you have is increased by an amount equivalent to the increase in inflation – which for most of us does not happen.) More reputable sources such as John Williams’ ShadowStats claim the actual figure is closer to 6 percent.
Since I write about cars for my living, I have another measure: The year-to-year increase in the price of cars that are the same this year as last year. What are called “carryovers” in the jargon of the car industry. If a given make/model of car is carried over to 2013 without any changes relative to the 2012 version of that car, then the price ought to be about the same – or even less, given that it’s no longer the newest, latest thing.
But in fact, it is almost always more.
The 2013 Ford Transit Connect I just reviewed (see here) is a case in point. The 2012 version of this vehicle carried an MSRP – or base price – of $22,035. The identical in every respect 2013 version, however, has an MSRP of $22,265 – a difference of $230.
Now, let’s dissect this a little. On the face of it, that $230 increase is not exorbitant – it works out to about a 1 percent uptick relative to the MSRP of the 2012 Transit. But, one should also take into account that whatever funds one had available last year are – by the government’s own admission – devalued by at least 2 percent. Which means, the typical person – that is a person, whose income doesn’t uptick along with inflation – needs at least 2 percent more Fed Money Money to this year to make the same purchase he could have made last year. Which means, at minimum, we have a 3 percent uptick in the amount of Fed Money it takes to buy a 2013 Transit Connect vs. a 2012 Transit Connect.
And using the Transit Connect as an example is being over-generous to the private banking cartel that styles itself the “Federal” Reserve. Because the Transit is a model that’s not been updated significantly since its launch in 2010 as a 2011 model. Thus it is a three-year-old model, and one that’s not hugely popular, either. Such factors tend to depress prices (in real terms). Let’s look at what may be a more relevant example:
The Fiat 500 micro-car was introduced here as a brand-new model in 2012. It had an MSRP of $15,500. The identical 2013 version of the Fiat 500 is priced $500 higher – at $16,000. That’s about a 4 percent uptick, year-to-year. Which means, you’ll be paying about six percent more to buy a 2013 Fiat than you would had you bought the same car in 2012. That six percent tracks exactly with the number touted by Shadowstats.
Now, to be fair, it’s true that a number of 2013 model new cars “only” cost a couple hundred bucks more than their 2012 equivalents. But the thing to focus on is they all cost more than their 2012 equivalents. These rising-for-no-other-reason prices are tangible proof of inflation. And of our impoverishment. Each year, we have to come up with more Federal Reserve “notes” to purchase a given item. Cars are no exception. They continue to get more costly – not so much in real terms, but in terms of the amount of money – “notes,” actually – it takes to buy them.
Over time, the amount is absolutely shocking – because it is vastly more than even the 6 percent annually reported by Shadowstats. How much more? Here’s an example:
Regular readers of my column know I own a 1976 Pontiac Trans-Am. I’ve owned this car for 20 years – and am only the second owner the car has ever had. I have the original window sticker from 1976, when it was brand-new. The base price was $4,987. In current (2012) Fed Funny Money, that transmutes into $20,281 – an almost exactly four-fold increase in the quantity of Federal Reserve “notes” one would have to possess today in order to travel back to 1976 and buy a new Trans-Am.
This would all balance out, of course, if the quantity of Federal Reserve “notes” earned by the time-traveler had likewise increased four-fold. In that case, only the numbers would have upticked – but the actual value (cost) of the car relative to the buyer’s ability to purchase it would be about the same. But of course, it is not the same – because our time traveler (the average American) has not enjoyed a four-fold increase in the quantity of Federal Reserve “notes” he receives in return for his labor.
According to the government’s own data (US Census Bureau; see here for the PDF; also here for an interesting graph) median household income in 1976 was $11,308. Adjusted for inflation, this transmutes into $45,595 in 2011 (most recent available data) Fed Funny Money. Today (2011) median household income is $50,054. So, according to the government’s own stats – median income has only increased about $4,500 in real (inflation adjusted) terms. But the amount of Fed Funny Money you’d need to buy a new car equivalent in price to my ’76 Trans-Am has increased by a factor of four in actual terms.
Put another way, the quantity of Federal Reserve “notes” you’d need to buy a new Trans-Am equivalent car has inflated by about 25 percent since 1976 – but the quantity of Federal Reserve “notes” received by the average household has only increased by about 10 percent since ’76.
This gives us a better idea of the true costs of transmutable by fiat “notes” – as opposed to sound money. And of how viciously our financial security is being undermined by the private banking cartel that issues those “notes.” The more of them it issues, the poorer we become. Things cost more – in terms of the quantity of “notes” we have to have in order to pay for them. And each year, the average person earns an ever-diminishing quantity of those notes relative to the amount of them being put into circulation – which relentlessy eats away at the purchasing power he retains.
It’s hard to get an exact handle on just how much we’re being screwed, but the above gives us a pretty decent idea. It’s not necessary to know every detail about a rapist to know you’ve been raped.
The question is: How much longer will we continue to put up with being raped?
Throw it in the Woods?
Great “what” article; to find out “why” read Henry Ford’s book.
Don’t forget the effects of government regulations in driving up the cost of new vehicles.
Henry Ford II once warned that the $2,000 Pinto would become the $4,000 Pinto because of safety and emissions mandates. That hapless car did. And it was replaced by the $6,000 Escort in 1981, which continued to go up over the years, ending at about $14,000 in 2002.
In 1970 it was possible to buy a full-sized, rear-drive, body-on-frame American car for $4,000. The last such car, the Ford Crown Victoria, last sold to the public in 2007 (police, export, and fleets only after that until the last 2012 models were built in September 2011), typically went for $30,000—and this same basic car had been in production with the same body for 10 years then. That is above the official rate of inflation. You can thank the feds for that.
Capitalism natually seeks productivity improvements to reduce costs in hopes of securing greater market shares.
Deflation is normal in a competative Free Market. Innovation and competition drive prices down and motivate creative improvements and advances that would otherwise not surface in a static market.
Government INFLATES our currency, our means of exchange, to “skim the cream” of normal productivity gains by masking the normal market forces to produce at ever dropping prices.
Engineering and Technology simply play into the Inflationary schemes that Government cooks up.
We the people become more efficient, like honey bees, and Government collects the honey from the hive.
Nicely put!
These last few comments about the correction of inflation calculations are, BY FAR, the most civil I’ve seen in ages. Thanks to all for not being obtuse about things like that. On a slightly different tack, if the 76 TA was in pristine, showroom condition today, what would it be worth? Realistically, not best-case, since the higher-end specialty, classic car market is thinner than it has been..
Almost everyone I talk to about cars and their associated costs rarely considers even the price of insurance (racketeering) or maintenance costs over the period they intend to keep the vehicle. It’s a stretch to find anyone in modern Amerika that factors depreciation, inflation, racketeering support expenses, fuel, maintenance, and everything else that goes into a vehicle. They have no ability to think beyond the “Monthly Payment”. None whatsoever. I know, because I used to be the same way. Luckily, that idiotic mindset came to a screeching halt late in 2003, when I got screwed on a car purchase because I only looked at the payment, not the sum of payments. Since then, thankfully, I’ve managed not to get screwed again and have probably pissed off a few (well, more than a few) car dealers by knowing EXACTLY what I’m looking at and EXACTLY what a reasonable total cost is. Funny enough, I’ve also ended up with far better cars/trucks since then, and paid a LOT less to do it. Never buy new, always buy the factory maintenance and wiring manuals, learn to do the basic stuff yourself, don’t skimp on regular maintenance items. It ain’t that damn hard to do.
Based on what I know about second gen. Firebirds and current values:
A fair price for a solid #2 car (looks very nice, could do well in a local show – but has some flaws/signs of wear; in very good to excellent overall mechanical/functional shape, etc.) would probably be in the neighborhood of $15,000 for a 400 car. A 455 car (last year) would be worth around $25k in similar condition.
Rare colors – like Carousel Red and Goldenrod Yellow – would add to the bottom line.
Prices for the mid-late ’70s cars are still fairly modest (though rising).
In contrast, I’ve seen SD-455s and 455 HOs go $60,000 – and more…. concours level SDs are now six figure cars.
Such is the nature of speculation, eh? 1 in 100 cars might hold comparable value over 30+ years, but when they’re 5 or 6 years old, they all just look like used cars.
Yup – it depends on the car.
My ’76 TA is increasing in value for two reasons:
* The more desirable early cars are becoming unaffordable.
* The numbers have been attrited; though cars like mine were made in much larger numbers, they were made going on 40 years ago – and over the past four decades, many – probably most of them – have either rusted away or been scrapped. There is a finite (and diminishing) number of “good ones” left.
So, if you want one of these cars, better to buy sooner rather than later…
Eric,
Love your site and your insights into the auto industry. However, something caught my eye in this article relating to the Trans Am analogy. You say that the car’s price increased about four fold in FRN’s due to inflation, and then you used the same math to deduce the 2011 income based on 1976 income figures. Looking at it another way, here are the percentages of yearly income required to buy the TA then and now (with the median income figure you cited for 2011):
1976:
$4,987 / 11,308
= 0.441
or 44% of income
2011:
$20,281 / 50,054
= 0.405
or 40.5% of income
So, the car’s price relative to income has actually decreased. Now if you want to compare it to the price of a modern car as bitchin as the TA (as if there is one!), that’s a whole ‘nuther kettle of fish…
I’m only stating this in the interest of clarity, but keep up the great work, I love it! I’ve sent a lot of people to this site.
Vince
But the $21,000 (today’s dollars) Trans Am was the top of the line model back in ’76, while the 2013 base model Camaro is $23,000. That being said, in spite of increased govt. mandates and regulations, cars are substantially cheaper now when you factor in quality.
Imagine using a time machine to drop a base 2013 Camaro onto a Pontiac car lot back in ’76 and say we rebadge it as a Trans Am BTF (Back to the Future) edition , then imagine being the car salesman and walking the lot with a potential buyer and explaining “For an extra $500(’76 dollars) over our standard Trans Am we have this unique Trans Am BTF, it has a 323 HP V-6 allowing to utterly crush the std. model in a race while getting twice the mileage, the tires are far superior, has a 6 speaker Audio system, goes 9K miles between oil changes, won’t rust out in 3 years, tuneup after 100K miles, stability control, etc, etc” Would the buyer back in ’76 find this car an amazing bargain? I would think so
In spite of everything the Govt. has done, we are still better off today than in the 70’s. Just think what we could have had without these mandates and regulations?
Not me!
I’ll take the carbureted V-8 I can easily (and cheaply) bring up to 400-plus hp… and skip the air bags, traction control DRLs and six-speaker stereo, too.
But I’m a kook, I realize!
Serious reply now:
I’ve driven the New and the Old. For everyday transpo, it is hard to beat new. It can’t be argued. But for personality, soul – and just fun – the Old wins hands down.
Yes, but you have to admit the appeal of the old stuff is because it is vintage. I’m fascinated by vintage automobiles, antique phonographs, steam trains, sailing ships and such…but gov regs aside, if GM decided to reintroduce the ’76 Trans Am identical in every respect to the original, it would be considered crap now, with modern production techniqes, they could probably sell it for 10 Grand or so and still make a profit.
And that’s the rub. That type of car should be available on the market today. When you count average incomes, that only includes people working. There are huge swaths of unemployed or underemployed people today that are not counted in the statistics. When that is taken into account (if it can be), inflation is far worse. Household income in 1976 was earned by man and a woman maybe working part time. Today, that same household income is earned by husband, wife and maybe a kid or two working. We are arguably a lot worse off than we were back then. The only solution is to allow cars to be built as they were 38 years ago. If that would force prices down, then the average family would have a shot. Today, they don’t. They are a lot worse than today. It has nothing to do with fiat money or the lack of a gold standard. It has everything to do with our trading position and lack of employment opportunities.
Henshaw is correct… you’re double-counting, and car’s aren’t inflating quite as much as the claimed baseline. This is hardly surprising since product categories often follow very different inflation schemes.
Eric, in this article you don’t seem to understand how inflation works. If price inflation is up 2% on average (which it isn’t, it is up a lot more than that because government is lying to us about the real rate), that means that the value of fiat money relative to anything you can buy is on average 2% less than it was a year ago, because the marketplace has expectations that the government has basically created counterfeited money to the tune of 2% of the money supply.
So, in that situation, you would expect that on average the prices of everything would rise 2% to reflect that dollars in 2012 are worth less than dollars in 2011.
Thus, a Ford Transit Connect that has risen only 1% in price in the last year would mean that the actual purchase in 2011 dollars is 1% LESS, not the 3% more that you cited. You added: 1% plus 2% — instead of correctly subtracting: 1% minus 2%.
Jim, glad you pointed this out. Eric I love your website and almost completely agree with your perspective on things but you did sort of double count the effect of inflation in this article. The aggregate inflation rate is the weighted average of the % increase in price of each item in the economy which results from more $ in circulation. So some cars increased 1% some 4% while other items increased more or less but together weighted by some stupid ‘basket of goods’ assembled by economists they weight the inflation and report an official inflation rate.
One other variable: 0% or lower-than-inflation interest on a loan. When I bought my new car I got an offer of 1.5% APR, which I considered high, but not terrible. Doing the math (get yourself an HP12C calculator and learn how to use it… especially while negotiating the deal) I found a combination of down payment and financing that will hopefully let the bank eat some of the inflation loss (especially since it’s with the same bank I keep my deposits in, which are enough to pay off the loan anyway should my situation change for the worse).
My last car came with 0% interest financing, and put almost nothing down. I finally got tired of writing a check every month and paid it off, but every year that loan became less of a drain on my paycheck. I guess GMAC took the loss on that one, because when GM starting moaning about bankruptcy they said they lose something like $400 on every vehicle sold. My guess is that they thought GMAC would become the profit center, but at 0% interest even that goes away.
MSRP is squishy though, dealers in Atlanta regularly advertise TEN Thousand off MSRP, so the MSRP is meaningless nowdays.
True –
Still, the trend is always up. Shouldn’t cars, which are a very mature technology, cost less each year?
Both Eric and those who have commented so far have hit the nail on the head. It’s not very difficult to understand, but I can just see the eye-glazing, wincing, and distraction of the average Amoricon consumer when one try’s to explain this to them.
Perhaps the most infuriating aspect of inflation is that even using the official 2% rate, savers are screwed even more.
If you manage to find any investment that pays a return of say, 5%, then the 5% is treated as a “profit” and subject to a “capital gains” tax. So although the money that you invested a year ago and achieved a 5% return on is 5% higher in terms of federal reserve notes, you can buy less things with the notes than you could last year with 5% less of them (assuming John Williams is correct).
For this loss in purchasing power, you are kicked again with a tax on the “gains.”
The war on savers gets worse with higher rates of inflation, since it is completely ignored by the IRS when computing capital gains rates. They don’t even have the decency to adjust for the “official” BLS numbers.
“… consider what Max Planck said:
“A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather its opponents eventually die, and a new generation grows up that is familiar with it.”…”
http://www.safehaven.com/article/27527/remember-remember-the-sixth-of-november
…So I’m thinking, write and talk to youth, skip the old People.
What do you suppose will happen to price levels if there are food shortages? Sudden hyper-acceleration? Just thinking about the big picture here.
A news item here or there just does not seem to have the same impact as seeing a list, imho:
“…the US government is making it more difficult for people to be prepared and to be self-sufficient. Here’s a bullet-point list:
Using recent corporate “food safety” laws as the weapon to curtail people’s producing or sharing or selling food themselves, laws have been put into place and police actions have been occurring that expose a pattern of …
* Cities are passing “food safety” ordinances making it a crime for people to give food to the homeless.
* Cities and states are using armed agencies to attack local food producers, having turned misdemeanors around such minor infractions as certification, into felonies and even conspiracies to sell fresh food. Worse, people are being accused of breaking laws that are not even in existence.
* The FDA is attacking organic farms and food producers, especially around access to raw milk, even as the CDC puts out false information on it that is at odds with the CDC’s own data which show it to be as much as 35,000 times safer than other foods. It is the only real milk in the country.
* The USDA has shut down most small local meat processors across the country – despite no history of contamination – and left the biggest corporate processors in place, despite an on-going history of illnesses and deaths from contamination. In shutting down local processors, the government has cut local communities off from control over local food, and left them at the whim of the big processors to deliver meat at all.
* Having gotten rid of the small operations, the multinationals have just demonstrated why they put “food safety” laws into place. The food safety agency in Canada (with USDA’s help) just brought a major slaughtering operation to destruction in only a few days and with no means provided for the company to correct any alleged problem – setting it up for easy picking by the multinationals.
* The food safety division of the FDA has been directly asserting in court that people have no right to choose their own food, or to contract with each other, and even no right to their own health.
* Corporate lawyers have gotten food redefined as “stuff” knowing that GMOs do not fulfill the definition of food. The basic of nutritional aspect of food is entirely missing as is its capacity to heal, and support fertility.
* The EPA is one step closer to approving Dow’s Agent Orange pesticide , and thus opens up the possibility of the FDA declaring an infestation or contamination on organic farms and ordering aerial spraying with this new Agent Orange “pesticide,” thus wiping out normal agriculture in the US and truly killing the soil, animals, insects and ultimately, people.
* This scenario is folded into the food safety law, designed by Monsanto’s VP Michael Taylor who is now running the FDA’s food safety division using that law, putting Monsanto in charge of all farms in the US. Given that the DHS has declared organic crops bio-threats, and the USDA has listed earthworms – the indication of a healthy ecosystem – as an invasive species, the door is open to the FDA ordering the spraying of Agent Orange pesticide on private local organic farms and even gardens.
* The food safety law allows for the shut down of food into cities if contamination is declared, without it having to be proven, and as though absolute starvation were preferable to contaminated food. These provisions codify how the government behaved in New Orleans after Katrina, shutting off delivery of food and water (even donated by citizens), and preventing people from leaving the area, and gunning down unarmed people who broke into stores to obtain food.
* The government is moving ahead rapidly with GMO approvals despite emergency warnings from agricultural experts that farm animals are going sterile and agriculture itself could collapse here.
* In Michigan, the Department of Natural Resources, leaving all logic – except the profit of industrial agriculture – behind, has declared small farmers’ heritage pigs, which are raised behind fences, and raised on pasture, “feral” and “invasive” and has ordered they all be destroyed and farmers raising them, declared felons.
* This is bringing home to the US a similar US agribusiness attack on pigs that occurred in Haiti to force US hogs that require huge expensive inputs of USDA commodities on the country. The US used the threat of swine flu to destroy the special breed of Haitian pigs, leaving Haitians without the food and income the non-demanding little pigs provided.
* In the UK and Korea and across, US agribusiness has profited from fear of foot and mouth disease (harmless to people) arranging for military to slaughter millions of farmers’ animals. In Asia, the hoax of avian flu was used. In both cases, the slaughters left countries dependent on imports by the giant multinationals, and much less food secure. Local sources were wiped out and then laws put in place putting in place a financial bar to raising animals. Biodiversity is wiped out and it is biodiversity that provides a food system its resilience and security.
* Recent Presidential orders include the seizure of all farms, all livestock, all farm equipment and all food. How such removal of food production from the American people is protective of them or the country is unclear.” …
http://thedailybell.com/28233/Fake-Meme-of-Food-Scarcity-Is-Deadly-Serious
Yeah, there is a concerted effort on the part of the Feds to demonize anyone producing food on their own. I don’t know how effective it will eventually be come the day it all collapses.
This one worries me. I can readily imagine them crooning that “safety” precludes the private ownership/raising of small-scale livestock – since it’s “dangerous” for people to eat, for example, uninspected eggs from unapproved/unregulated chickens. They’ll make the argument – you can see it coming, can’t you – that “society” cannot afford to allow “irresponsible” individuals to “take risks” that can impose costs on the Great Collective.
This, for me, will be another Rubicon – like gun confiscation.
I hope fervently that millions of others will agree and take a similar stand, if it becomes unavoidable.
I have followed agriculture politics for years and everything quoted by Clark is accurate. I have for years considered retiring to the country to expand my hobby farming into a nice retirement occupation, but after seeing the direction that regulation is taking organic products, I have decided to seek my retirement in a country with more liberty. In the process of researching S. America I have realized that the cost of living is substantially cheaper in real terms than in the USSA. And the ability to open a business substantially easier (much less red tape and taxes and fees).
One way to beat inflation of $$$ is to not use them. Another way is to reduce your expenses by relocating to a less expensive venue. South and Central America offers both. These are not banana republics anymore and in truth, the USSA is more of a banana republic these days – only without the ability to bribe the local officials.
Mal
Say clark, I don’t know where you’re coming from but “agent orange” has been around for decades. I can’t and won’t condone its use but it’s nothing new. I am a farmer and rancher and have had licenses to apply this stuff. While I was almost forced to use it in spot treatments(fencelines, killing weeds in the grass patch, etc.), I eventually came to accept there were other things I could use though not on a cost per basis with these chemicals. I finally used nothing but mechanical means to control invaders but that’s not without its own pollution.
Agent Orange is mostly 2-4D and 2-4DT. It is some rank stuff but I won’t go on record as saying it’s the rankest. I’d be glad to return to the days of chaining pastures with a couple of big dozers but that’s not what the 2-4D thing is all about although that’s part of it. I don’t know what the answer is since the diesel used to chain pastures and grub fencelines is not without it’s own risks. I can tell you one thing for sure, the new GM Roundup Ready crops are so replete with glyphosates that we’re killing the earth off with an every increasing badass chemicals that causes many negative things to our environment. Not withholding the fact that RuReady crops consume 20& more water than non GM crops and that translates into our aquaculture being highly hazardous now with almost all of water borne aquatic species, esp. fish, now having a problem with reproduction since it turns a huge percentage of offspring into females and hermaphrodites. Of course the average person knows nothing about this and wonders why their child is (horrifyingly) displaying both sexes. Wake up people, it’s not only here but it’s been here a long time and now we have proof positive of all aquatic creatures in the waters of Texas alone testing positive for glyphosate and the mind altering drugs of the masses, drugs typical to prosaic and the rest. LGBT is not a matter of choice now if it ever was(and I don’t believe it was)but a matter of circumstance. Go back 60-70 years and find out how many people had asthma or autism. It was totally unknown a 100 years ago. And they have a war on drugs, what a bad joke. There is a great documentary called FLOW, For Love of Water that can educate you rapidly. I urge everyone to watch it. It’s not hype. I have been there and done that. I am my own victim of being poisoned by the very chemicals I used to make a living. The chemical companies lied out the wazoo to me back 40 years ago. Hey, it’s safe and efficient……Not!!! Now we have the govt. going after those who choose not to use chemicals. I once truck farmed and billed myself as “organic” since I had quit using any chemicals that were not of a natural origin, something found in nature. These farmers like me now are being attacked by the govt. for Not using chemicals. I know where it leads and can’t help but think there’s got to be a way to stop this. Cotton in the U.S. is a non-productive crop, since it’s not a long staple and it can’t compete on the market without your and my money to support it. It’s also the cause of terrible pollution that has stayed in the ground and is now affecting edible crops such as rice with the arsenic based chemicals that were applied to vapidly without need to control the amount because they were so cheap.
Once this became known, the EPA forced many states to comply with the least amount of pesticide that could do the job. In some respects, things are better but overall, it continues to get much worse. God help us all from the govt. and big ag. A once dyed in the wool rancher(and still am and don’t use anything on my livestock I wouldn’t use on myself)and farmer who has seen the light(many years ago)and has tried to stop the insane practices that are killing us all. Unfortunately, the govt. would silence me in a heartbeat if my knowledge became too well known. In the words of Gale Sayers as he was in his twilight years when asked about Astroturf, “This stuff is going to shorten a lot of careers” only he didn’t know that careers weren’t going to be the only thing shortened by Monsanto when he became their spokesperson 2 years later.
Government forces conformity and regulates everything to mediocrity. “Competition is a Sin”. “Get big or Get out”.
I think that about sums it up.
The Vietnam Agent Orange was 2,4,5 T (trioxone), 2,4 D (hedonal trinoxol), and deadly 1,4 Dioxin. (Not on the label, but there nonetheless). The synthetic hormones accelerate growth until death of both edible dicots (broadleafs) plants and human sperm. Grasses are not affected as much. War is hell they think, so why not build a Frankenfood Fed FSA, with a new Agent Orange Light, I’m sure you’re right.
If we all learn step by step, learning about compounds is no worse than the science needed to follow a recipe to make an elaborate dinner. I am sure we can overdose on spice or get yeast infections, but we must not fear. Fear is the mind killer.
I have no love of big gov or crony corporate murder enablers.
What I wonder, is how do normal folks synthesize annd use these compounds for good and also test our food and property on our own. Gun control or chemical control doesn’t help, If we chimp out and burn down Monsanto, then what?
My system for keeping track of how things are going is rather simplistic. I call it the “paperback index”. Others use the price of a McDonalds hamburger in other quarters of the world but this works for me. For the longest time the price of your average paperback book in the US was an hour of minimum wage labor. Give or take it was usually pretty close. When the price of these books began to rise above the hourly “wage” is when I began to notice how things were getting worse. It’s slow and subtle.
I have a ragged 305 PAGE copy of GENERATION OF VIPERS in my hand right now. In sold for fifty cents in 1954. I can remember buying new paperbacks in the early 1950s for less than a dollar.
tgsam
Tinsley, I can only go by what I “saw” from the early to mid seventies until recently. I’m not even certain there was a minimum wage back in the fifties so you’ll have to forgive me for not knowing. Question is what did people in entry level work usually get paid if there wasn’t a mandated floor to start from? I’d like to know.
Most inflation is hidden. Engineers spend a lot of time both on the design and manufacturing ends fighting inflation. Engineers increase the productivity the bankers steal the gain.
Inflation also isn’t even across the board and a machine like an automobile has such a variety of parts from such a variety of places it becomes difficult to pin down a federal reserve inflation number from the MSRP. Different vehicles will increase at different rates as well because of the same factors.
However, without the fed’s inflation, without the inflation of central banks around the world, the MSRP’s natural tendency would be for prices to go down and equipment, performance, etc to go up. With stable money the customer would share in the cost reduction with the company. Only on high demand vehicles would the manufacturer be able to pocket the entire cost reduction. Otherwise it would be used to undercut competition and drive prices down. Instead, thanks to inflation, who gets the value? Not the customer. Not the manufacturer. Not employees at the manufacturer. The bankers do. And the government.
BrentP,
Thanks for stating this more clearly.
Not the small commercial fisherman who has invested thousands in his rig. Run a toxic gaff top catfish fin into your hand while culling your catch (If you have one.)and you will experience lingering pain that will cause you to writhe in agony for an hour or more. More serious injuries can cost you dearly.
Years ago I was acquainted with a man who worked his double rigged 65 ft. trawler ALONE. Cancer took him out while he was still fairly young. He died poor.
tgsam
The number of parasites continues to grow.
tgsam
It will be as a game of Ta-Ka-Radi. Eventually the tower will collapse. It does not matter how high it gets.
There will come the point when this system is unsupportable.
Inflation is cruel and insidious on many levels. Those closest to the creation of new money are able to spend the money before its purchasing power is reduced. Usually government is closest to the “new” money.
The wage earners are the among the last to receive the new money. By this point their new dollars’ purchasing power has been reduced.
Savers are hurt because their money loses value with each new dollar created. Savers are effectively compelled to use riskier investments in an attempt to retain their purchasing power.
Deflation is a normal part of life. Unfortunately the government through the FED has done everything in its power to prevent deflation. I have a difficult time remembering any periods of deflation during the last 30 years.
Good comment. I would add to this and say that savers are not only hurt in real time, but the incentive to save is reduced, lo, nearly eliminated when combined with other forms of foolishness.
Your comment on the timing of inflation is spot on. The body that issues the currency doesn’t have to experience the inflation that issuance causes.
Deflation is a natural state of affairs in a world with postive increasing technology. Sad that we don’t get that benefit for many things. Interestingly, deflation DOES occur in some segments of the economy. If all you ever purchased was electronics or apparel, you would experience deflation. Of course, we must eat and learn and drive and get medical help occasionally.
I am going to go out on a limb and say that any given segment of the consumer economy inflates in direct proportion to the amount of government regulation and subsidy in that same segment. The markets with the least regulation, recreation, computers, apparel, etc., are boons for the consumer still, wheras energy, education, food, and healthcare are all climbing.
Exactly. The incentive is smothered so you’re forced to find alternative means to keep or increase this vanishing wealth.
Lower prices in apparel?
Maybe if you think a lower quality of good is the same as a higher quality of good.
Some of the national clothing chains have lowered their prices, sure, but the quality dropped even lower. JCP anyone?
Looking at boots, same thing, cheaply made ones are cheaper today than yesterday, but that ain’t happening with the good quality boots such as Redwing.
Clothing is an area I take note of. For the women folk in my family I’ve always noted how clothing is an outright ripoff. Maybe that’s why my girls prefer boys t-shirts. Notice how such thin and altogether flimsy “clothing” costs more than your typical menswear? Ounce for ounce it’s a scam.
Shoes are no different. What may appear “cheaper” doesn’t last as long. So while you may pay less today you will pay the same or more over the life of your higher priced shoe. Now that doesn’t hold true across all shoes just some of them. Same for a lot of things.
“Deflation is a normal part of life.”
If you mean the lowering of prices due to technological advances in production, that’s valid, but that definition of deflation is part of the Fed-jargon matrix which provides talking points for pinheads like Bernanke.
Deflation has an entirely different meaning in a discussion of the endless inflation foisted upon us by central banks. Deflation, in real terms, is a reduction in the amount of money in an economy. Deflation makes it harder for politicians to spend what they don’t have. It makes their theft much more noticeable.