Price Inflation

What is Inflation?

"What people today call inflation is not inflation, i.e., the increase in the quantity of money and money substitutes, but the general rise in commodity prices and wage rates which is the inevitable consequence of inflation."                                                   Ludwig von Mises 

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How is Inflation Calculated?  As inflation rises, every dollar decreases in value. 

For example, if the inflation rate is 2% a year, then a $1.00 pack of gum bought at the beginning of the year will cost $1.02 by the end of that year.

The Inflation Page explains and discusses what causes inflation and how it affects the markets.

For many, the easiest way to understand "What inflation is" and how it affects each of us, is to see it, by witnessing it in our everyday lives. 

The Charts below, are a Visualization of how over the last 40 years or more, "Price Inflation" has affected all of us in one way or another.

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Inflation Patterns

There are general patterns you will recognize as you view these charts, below are a few questions you may ask yourself as you view them.

• When does Inflation in these Charts really start to materialize?(Hint: watch the lack of price movement before the 1970's, compared to after the decade)
• What is really happening in all of these charts?...Milton Friedman eluded to it in his quote.

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*Important Note: The prices displayed on all of these Charts are calculated with the average price paid in the United States and are not specific to any brand or region of the United States.

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Median Income Chart

The first inflation chart is the average increase in the Median Income over the last 85 years.

Most of the information obtained from the U.S. Census Bureau is based on the average income, a U.S. citizen, earned during the decade indicated.

This chart gives you a good idea of how inflation not only affects the items we purchase.  

But, after you view the rest of the charts below, you will be able to understand that the dollars we earn today are worth less than what they were worth 85 years ago.

Sources:

www.census.gov
www.thepeoplehistory.com

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Milk Price Chart

The next area of interest that affect us all is; what we eat.

The next two charts are based on the prices of Bread and Milk.

The Milk price below is based on the price of One Gallon of Fortified Whole Milk.

Source:
www.economagic.com

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Bread Price Chart

The Bread Price Chart below is the example of the average purchasing price of a 1lb. Loaf of Plain White Bread, in the United States.

Source: econmagic - U.S. city average; White bread

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Thanksgiving Dinner

For the American Farm Bureau Federation's "Cost of Thanksgiving" survey was first conducted in 1986.

The Survey is an informal gauge of price trends around the nation. However, to allow for consistent price comparisons, the Farm Bureau’s survey menu has remained unchanged, since 1986.

Source:  American Farm Bureau Federation Survey

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New Home Price Chart

The Prices in this chart are based on the average cost of a New Home built in the United States.

Source:
www.thepeoplehistory.com
www.census.gov

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New Car Price Chart

The averages in the New Car prices shown in the Chart below where taken from New Sports cars, Luxury Car prices, New Mid-sized and New Compact Cars sold in the US.

Sources:
www.thepeoplehistory.com

Road-Reality 2009-2010 graphic

Edmund's - Report Sheds Light on Vehicle-Shopping Trends - 2013

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Gas Price Chart

Between 1950 and 1975, the average gas prices are based on a gallon of Regular Leaded Gas.  From 1976 to the Present Day, the average gas prices based on a gallon of Regular Unleaded Gas Prices.

Sources:
www.worldbank.org
www.eia.gov

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College Tuition

Higher Education has witnessed some of the highest rates of inflation over the years in comparison to other services and commodities.  

Below are two charts concerning the rising prices of College Tuition. 

Charts are based on the average undergraduate tuition, fees, room and board rates charged for full-time students in degree-granting institutions.

Public College

Source: National Center for Education Statistics: Table 349 - column 5

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Private College

Source: National Center for Education Statistics: Table 349 - column 5

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Health Care

The ACA (Affordable Health Care Act, Obamacare) is not averaged into the charts below, however taking the free market out of any industry and handing it over to the government, is not good for lowering prices.

In the next two charts, notice how much more Medicare has increased over the Private Market.  

Private Health Insurance

Source:  PDF: Centers for Medicare & Medicaid Serives, National Health Expenditures, Table 21

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Medicare

Source: PDF: Centers for Medicare & Medicaid Serives, National Health Expenditures, Table 21

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First Class Stamp Price Chart

The Prices for the Chart below, are based on the average price of one First Class U.S. Stamp.

Source:
www.johnstonsarchive - Cost of US First Class Stamp

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Movie Price Chart

As with everything else around us, Entertainment Costs have increased in America, too.   The chart below represents the average increase in the price of a Movie Ticket over the last 100 years.

Source:
www.boxofficemojo.com

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Questions to the Patterns Answered

The patterns clearly come into focus after seeing each of the charts, the first is that after the 1970's, Price Inflation literally goes through the roof, compared to the years before the 70's.

One Key event happened in 1971, referred to as the "Nixon Shock."

The Nixon Shock happened when President Richard Nixon said he would "temporarily" take the United States off the Gold Standard.

Nixon Ends Bretton Woods International Monetary System

This action by President Nixon meant that the United States Dollar was no longer backed by gold.  Enabling the United State's Federal Reserve to print money so the government could continue to offer more and more entitlements.

Gold Price Chart

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The chart above represents the Price of Gold, over the last 45 years.

Does it look familiar?

Compared to all the charts above it, it looks very similar; Don't you think?

The other re-occurring pattern that is easily recognizable is Not that the prices of everything around us have gone up, but that the value of our the dollars has gone down.

Since the "Nixon's Shock" in 1971, the inflation monster has been creeping into our wallets, eating away at the value of our money.

The charts above reveal that Price Inflation has been shedding pennies off our dollars, year over year.

In addition, all of the charts above have one overwhelming thing in common, which is, items priced in a currency of expanding supply will constantly continue to lose its purchasing power. 

Furthermore, gold and other precious metals have retained their value against long term price inflation and that they can help you preserved the value of your money and savings.

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