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It’s easy to think of “inflation” as an abstract economic principle and forget that it has real impacts on real people.Federal Reserve Chairman Jerome Powell acknowledged the pain of price inflation during his press conference at the close of the December FOMC meeting.
“We understand very well that prices went up by a great deal, and people really feel that, and it’s prices of food and transportation and heating your home and things like that. So there’s tremendous pain in that burst of inflation that was very global.”
Powell did not admit that he and his fellow central bankers were largely responsible for that pain, although he took credit for bringing inflation down, saying, “Now we have inflation itself is way down — but people are still feeling high prices — and that is really what people are feeling.”Yes, Jay. We are feeling those high prices — because they haven’t come down! In fact, they continue to rise, just not as quickly as they were last year.I might note here that inflation is on purpose. Making prices rise and go up is a stated policy. They just don’t want prices to rise so fast that you notice.Unfortunately for the powers that be, you’ve noticed.Just how much have prices gone up?According to the most recent Consumer Price Index (CPI) data, prices are up 2.7 percent in the last year. But those of us living in the real world know prices have gone up much more than that.Joaquin Henault and Laura Williams recently highlighted the dollar’s loss of purchasing power using the “Big Mac” index. In 1974, a Big Mac cost around 65 cents. Today, it will run you around $5.69.
“The purchasing power of your dollar, according to burgernomics, has fallen 90 percent in the past 50 years (the Federal Reserve Bank of St. Louis puts that number at 85.3 percent.”
My friend Alan Mosley, host of the late-night show It’s Too Late With Alan Mosley, came up with another example showing just how much the dollar has depreciated. We were discussing my recently diagnosed knee problems, and he quipped, “You need to become a cyborg.” That dredged up memories of the Six Million Dollar Man.Those of you of a certain age will remember the show starring Lee Majors. The Six Million Dollar Man aired from 1974 to 1978 and was based on Martin Caidin’s novel Cyborg. The story followed Steve Austin, a former astronaut turned secret agent, who suffered severe injuries in a test flight crash. He underwent groundbreaking surgery to replace damaged body parts with bionic implants, giving him superhuman abilities.So, could we turn me into a $6 million man?Probably so, but it would cost a lot more than $6 million.The show came out in 1974. If we adjust $6 million for inflation, it would cost $38,396,714 today.This reveals just how much price inflation compounds over time. A 3 percent annual rate might not sound like a lot, but over time, your purchasing power is being stolen at a staggering rate.More By This Author:Is Selling Gold Right Now A Mistake?
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