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As we remodel and redecorate a family vacation home, getting it ready for new generations to enjoy, I came across a stack of old magazines from the 70’s. Quite a variety of reading materials that reflect the interests of my parents and my brother and I at that time period.
I glanced through a few old Dirt Bike magazines and had a good laugh at the state of the art motocross bikes being reviewed. Then I looked at what one of these modern machines of the day would have cost me.
I put down the motorcycle magazine and thumbed through a couple issues of my mother’s old Better Homes and Gardens. Notwithstanding the horrid design ideas and color schemes from the period that I had to endure while browsing, I was struck with the same impression left on me after viewing my old magazines; things sure were cheap back then.
Here is one quick price check for you: the newsstand prices of the magazines from 1976 were $1.25. Go pick up any similar magazine now and the price on the cover will be in the $4.50 range.
If you have access to any old publications, spend a little time looking at the advertised prices and see what your reaction is.
My reaction was ‘things were cheap back then’, even though I knew that the difference in prices was almost completely due to inflation.  The prices were not necessarily cheaper back in 1976, the value of our dollar is just cheaper now. The compound effect of inflation over the past 35 years means that it takes more dollars to buy the same product.
There is nothing new about what I am writing; most people understand the basics of inflation. The problem with inflation is the incremental way that it destroys wealth. No one seems to notice, or care, when the inflation rate is only 2-3%.
Only when you stand back and look at the effect over several decades do you gain the proper perspective on inflation. Year by year, almost unnoticed, our money buys less. That dollar you earned last year is only worth about 97 cents today, and maybe 94 cents by next year. Don’t worry though, you were smart and put it in a high yield CD at the bank that paid you a penny on that dollar for the year.
You guessed it, you are going backwards.
Why is any of this important? Over the past few of years, your government has purposely caused your dollar to be worth less in order to stimulate the economy. Fancy words like Quantitative Easing were used to mask what they were doing. As the Feds added more dollars to the money supply of our country, each of those dollars were worth less and more of the dollars will be required to buy the same product in the future.
The big difference is that we will not have to wait 35 years this time to be shocked at how expensive things have become. Within ten years, people will be looking back at magazines from 2012 and saying to themselves, ‘things sure were cheap back then’.
Gaining this proper perspective on inflation is important before voting this November. There will be candidates willing to fool you with incremental measures that steal from you slowly, and there will be candidates that tell you about painful measures to be taken now that will halt the future theft of your wealth.
Which will you choose.
