Invisible Inflation continues

[unclemick]

Hmmm - no spreadsheet but with a few memory cells left

Age 10, 1953, $3-5 per DAY picking strawberries in Oregon was big money.

Age 11-15, $2-3 per lawn was big money - furnished my own lawnmower.

1966 - first engineer job $8k/year and 1992 - last year of work before ER - $61k/yr.

People on this forum - save more than I made in my best earnings years. Inflation has been with me as long as I can remember. Why I can remember when you could buy a decent running (not too much smoke)  $50 old car from the junkyard - maybe nurse a whole year out of it and sell it back for the original $50.

In the modern world - it seems to be a constant presence - requiring - er ah 'creative hedonic' adjustment.

Pssst - didn't the Terhorsts' note this in their first Argentina stay?

No escape - although 'agile, mobile and hostile' ala the Bear may mitigate the effects.

heh heh heh heh - haven't seen a decent $50 car in decades.

 

[Andre1969]

I bought a car from the junkyard once, in 1997. 1979 Newport. Seemed to run fine, and made it home with no troubles at all. Very little smoke, nice responsive engine, everything seemed to work (although it was winter so I really couldn't tell with the a/c). Unfortunately by this time, the $50 junkyard car was up to around $250. Plus about $900 to get it through inspection. : Then the transmission went out...another $650.

All told, I had that car for about 2 years and put around 20,000 miles on it. Really only drove it for about a year though. Didn't get it on the road till April of 1997, and my Mom gave me an '86 Monte Carlo the following March that got better fuel economy. In the end, that junkyard car probably cost me about $2600. Oh, and $250-300 is about what I got for it when I finally ditched it.

When I was a kid and our family needed a second car, I vaguely remember my Granddad finding us a '64 Galaxie 500 that needed a new starter, for something like 50 bucks. And my Mom's first car, in 1965, was a '57 Plymouth that she paid $75 for. I guess those days are gone forever!

 

[cute fuzzy bunny]

Hmm...the cheese I get has a date on it about 3-4 weeks out usually. Lots of mexican food, quesadillas especially. Grilled cheese sandwiches (the grated cheese melts faster). Sprinkled on salads, incorporated in soups (Legal's fish chowder recipe calls for shredded jack cheese), macaroni and cheese (its for the baby! then why are you making 5 metric tons?).

The possibilities are endless.

Lets not talk about the size of my head.

Its 54 kleenex because thats how many will fit in the box!

 

[danm]

From fruit to IT, deflation is the issue

By James Altucher
Financial Times
Published: February 14 2006 02:00 | Last updated: February 14 2006 02:00
http://news.ft.com/cms/s/2d7a6408-9cff-11da-8762-0000779e2340.html

Every media pundit, economist and investment analyst has been whining about inflation and it's starting to bother me. People refer to government fictions such as the PPI (producer price index) and CPI (consumer price index). And if they don't support their theories they begin conflating the trade deficit into future inflation worries. The implication is that consumers are somehow getting "choked" by inflation when the reality is quite the opposite.

...

Wheat futures, currently trading at $360, are significantly lower than their 10-year high of $750, reached in 1996. Wheat is significantly lower than even its five-year high, reached in 2002, at about $425.

Soybeans were as high as $1,050 as recent as early 2004. Now they are at $584.

There's more. Oats are at $191, down from a high of $280. Hogs are at $58.40, down from a high of $85. Got milk? In 1995 it was at $12.40. Now, it is $12.40. And so on. (Yes, Live Cattle is up, from $83 to $93 over the past year, but then, frankly, steak is improving.)

What about lumber? Hasn't there been a huge increase in demand for lumber thanks to the "bubble" in housing? One year ago lumber was at $460. Now it is $344. Its 10-year high was around $480, reached in 1996.

...

Increases in productivity, the rise of just-in-time inventory management and the role of the internet in driving down transaction costs, have created a long-term deflationary spiral that will ultimately affect all resources. It is deflation that the pundits (and investors) should worry about, not inflation.

-----

Well, but I expect this posting to get ignored, as people would rather whine about inflation. Which, ironically, just reinforces deflation that much more.

 

[ladelfina]

Due to 'invisible' inflation, they still use the box size that used to hold sixty-three Kleenexes! I'm losing nine Kleenexes...! 



no matter. Now that I'm not working I often as not use my shirt.. 

 

[ladelfina]

DanM, sure there are elements of deflation. I don't think anyone is denying that.

But anyone can write an article to further either claim by picking and choosing what they want to highlight.. What struck me about the FT article was the emphasis on food. Ok, I'll accept that some commodities have lower prices than before, but you need to be able to show that that's 'trickling down' into lower prices in the shopping cart. I'm not sure the shoppers here are experiencing the benefits of lower wheat or soybean prices, which I assume are a tiny fractional part of their consumption dollar.

Lumber is down, great. Palladium, check.. wonder how much palladium I'll be using next year??

GM has bigger "employee discounts" on its cars!?!?!  Maybe A.) no one else is buying them, and/or B.) they can afford to enlarge their employee discount program by 10% after they cut their workforce by 20% (Just fake numbers, but you get my point.. this is not valid data on deflation).

The next thing is generic drugs.. great. But explain what percentage that is of consumption patterns.. contrast with overall rising drug and health care costs.

So we're left with toys and computers.. okaaaay.

So, from this small handful of items, we're supposed to not worry about double-digit increases in gasoline, heating oil and gas, health care, insurance, housing prices and so on?

The serious effects of wage deflation are not even intelligently dealt with, since they would more than wipe out any of the author's "savings" on soybeans and palladium, and thus render moot his entire article.

 

[danm]

ladelfina,
Yes, and your argument applies just as well to the anecdotal comments posted here about inflation. That's my point. You have to look in aggregate. The question then is CPI related measures, are they correct, high or low?

I think most people would claim they are low (due to false hedonic measures, or whatnot). I have references to studies which show they are high.

Regardless, looking at the larger trends, for the last 200 years in the U.S. we experience inflation during wartime, and deflation reigns in peacetime. Benchmarked against GDP we are clearly in peacetime, including the 'War' on terror spending. Certainly since 1970 we've experienced disinflation, or decreasing deflation. So it's funny (to me) to read people complaining about inflation. Stuff should be free I suppose.

 

[ladelfina]

the reality is quite the opposite.

The question then is CPI related measures, are they correct, high or low? ... I have references to studies which show they are high.

Um.. would it be rude to ask why you didn't link to those studies instead of that lame FT article?

I expect this posting to get ignored

I think people would be interested if you have some real numbers we can talk about.

 

[cute fuzzy bunny]

Ok lets see the study references that show CPI calculates high.

As far as the '200 year' reference, that was true for wars like the civil war and WWI. Not true in aggregate in modern times.

Ladelfina is right. Your argument cherry picks items that are lower. Housing, food, energy, cars, clothes and education are all more expensive year on year. Electronics, toys and other items that can be manufactured outside the US in low income countries are cheaper and "do more" but they arent necessities.

But maybe you're right and for some reason retirees in their 70's and up that are living off of "inflation adjusted" social security arent really buying 20-30% less with their money than they were 10 years ago. Maybe they just cant do math.

 

[cute fuzzy bunny]

And by the way, we're serving palladium with cheese on top for dinner tonight

 

[ladelfina]

Yeah, back when palladium was so expensive, we'd just use a little palladium on top as a garnish for the cheese. Good thing about palladium is, it doesn't get moldy.

But seriously, the cost of wheat sounds important, but completely disregards 99% of the other costs involved in getting a loaf of bread or a frozen pizza.

-shipping
-milling
-packaging
-more shipping
-other ingredients
-processing
-more packaging
-even more shipping
-advertising
-shelf space
-personnel costs, energy costs and storage costs at every level

Your $2 loaf of bread might have $.03 of raw wheat in it.. might.  So we're to be relieved it's $.03 and not $.037?? Whew!! Thank heaven for deflation!

 

[cute fuzzy bunny]

Not to mention

-Shrink
- Disposal of expired bread

By the way, my bread has 5c of wheat in it. Mac users buy bread that only has 3c of wheat in it.

Maybe its the reduced fiber that causes that whole defensive Mac thing...

 

[ladelfina]

my bread has 5c of wheat in it. Mac users buy bread that only has 3c of wheat

I thought it was the other way 'round, O King of Bargain Hunters.

 

[cute fuzzy bunny]

Well, I only pay 98c for a loaf of bread at Winco, so there!

 

[ladelfina]

Visible inflation

nel 1950 un chilo di pane era pari all'1,1 per cento dello stipendio giornaliero di un operaio di un mese standard composto da 30 giorni, mentre nel 2004 un chilo di pane era pari al 10,6 per cento. In altri termini, il costo del pane è decuplicato nel giro di 50 anni". Facciamo un conto più vicino ai nostri tempi: nel 2001 un chilo di pane costava in Italia l'equivalente di 1,25 euro contro l'euro della Francia e lo 0,9 della Spagna. Alla vigilia del quarto compleanno di moneta unica, siamo passati a 3,5 euro, i francesi a 1,5 e gli spagnoli a 1,4.

Bread prices in Italy...
The quote says:  "In 1950 a kilo of bread was equal to 1.1% of the daily worker's salary for a standard month composed of 30 days, while in 2004 a kilo of bread was equal to 10.6%. In other terms, the cost of bread* has gone up tenfold in 50 years. Let's make a calculation closer to our own times: in 2001 a kilo of bread in Italy cost the equivalent of €1.25, as against €1 in France and €.90 in Spain. At the eve of the fourth anniversary of the common currency, we have gone to €3.50, the French to €1.50 and the Spanish to €1.40."

*by which he means real, inflation-adjusted cost

This is from L'Espresso, the Italian equivalent to Time/Newsweek. The link is here:
http://tinyurl.com/9d4tx
A kilo is 2.2 pounds.


Even if you look at the French and Spanish numbers, they are talking about a 50% increase in the price of bread over four years. You do the rest of the math, danm, and tell me there's deflation.

You can't eat toys and DVD players.


(although CFB can tell us how his palladium supper turned out..)

 

[cute fuzzy bunny]

You can't eat toys and DVD players.

Gabe begs to differ. He's munching on a toy right now.

 

[ladelfina]

Good God, man!

Toys are cheaper than bread, so you feed the kid plastic??. That is bargain hunting! Hats off!

 

[Mountain_Mike]

Check out chili....the 16 oz. cans are quietly being replaced by 14.3 oz. boxes...

 

[Andre1969]

I remember when I used to deliver pizzas for Little Caesar's back in 1996-1997. For awhile, the most expensive single component of each pizza was...get this...the box that it came in! Then, for awhile, insurance rates shot up, so averaged out, the cost of the insurance for me to deliver the pizzas was the single biggest component.

At least when I worked at Papa John's, the most expensive single ingredient was the cheese!

BTW, there used to be a local Metro (Basics before that, and I think it's a Shoppers Food Warehouse now) near my old condo where we could get the cheap bread for 39 cents per loaf. That was back around 1995-1996.

 

[Marshac]

Palladium, check.. wonder how much palladium I'll be using next year??

More than you think? Platinum group metals are used in a lot of industrial processes and products. If you think Palladium had a nice run up, check out Rhodium.

 

[justin]

Re: Visible inflation

Bread prices in Italy...
The quote says: "In 1950 a kilo of bread was equal to 1.1% of the daily worker's salary for a standard month composed of 30 days, while in 2004 a kilo of bread was equal to 10.6%. In other terms, the cost of bread* has gone up tenfold in 50 years. Let's make a calculation closer to our own times: in 2001 a kilo of bread in Italy cost the equivalent of €1.25, as against €1 in France and €.90 in Spain. At the eve of the fourth anniversary of the common currency, we have gone to €3.50, the French to €1.50 and the Spanish to €1.40."

Dang.. I can buy a 450 gram loaf of Italian bread at SuperWalmart for USD$0.60 usually (not sure how much that is in yur euro Monopoly money). Why is Italian bread so much more expensive in Italy? Maybe I should start a business exporting Italian bread from USA to Italy?

Seriously, does the average worker in Italy spend €3.50 (or 10.6%) of his €33 daily salary on a kilo of bread? Is this boutique pricing? Has walmart not come to Italy yet? Maybe I should scrap the bread exporting business idea and start a little bakery right in Italy.

 

[Chris24]

I posted on this last year, however that post was hijacked into feeding extra rib eye steaks to your dogs.

Where did the extra rib eye steaks come from ? .. just curious.

 

[cute fuzzy bunny]

Well, someone went off on how their wife buys stuff when its on sale and puts it in the freezer, where it sits for years until its fed to the dogs or thrown out. I'm presuming dogs will eat rib eyes that have been in the freezer for any length of time.

Forget who it was. Someone who posts primarily off topic stuff that isnt that interesting.

 

[VoyT]

I'm seeing this sneaky stuff in other areas, too.
The supermarkets here would double coupons up to 50 cents; for the 55-cent and up coupons, they'd round up to $1. Now they still double the 50 cent coupons, but anything above that goes for face value.

At the theaters, 6 p.m. has been the cutoff time to get the matinee price. AMC has recently shifted the cutoff to 4 p.m. ... after that, you pay full price

 

[Nords]

At the theaters, 6 p.m. has been the cutoff time to get the matinee price. AMC has recently shifted the cutoff to 4 p.m. ... after that, you pay full price

Another reason to ER!