inflation , inflation , inflation!
Why You can’t Afford Anything Anymore.
Trying to demonstrate just what inflation has done to us isn’t as easy as it seems. Simple, we thought. We’ll just pick out some items and find out what they cost in Dallas in 1958, 1968 and 1978. Not so simple.
Take hair, for instance. In 1958 we greased it down with Wildroot Cream Oil. In 1968 we held it in place with hair spray. By 1978 we fluffed up hair with the dry look. How can we compare hair care products? In 1958 we squeezed our shaving cream out of a tube and watched black and white TV. In 1968 aerosol shaving cream came in a can and we watched color television. And then there’s 1978, with electronic calculators, digital watches and all sorts of wizardry which wasn’t even contemplated in 1958.
We finally settled by trying to find items which are basically comparable to themselves over 20 years. The technology of the potato, for instance, doesn’t change much. But that of a tonsillectomy does, so we scratched plans to include a tonsillectomy. The items we came up with have stayed pretty much the same over 20 years. We checked prices locally and in nearly all cases our sources swore us to secrecy. No one wants to admit that he has raised his prices. In one case, a funeral home director refused to talk over the phone, so we visited him personally to gather the data.
It is astounding to look back a few years and see what has happened. During the last ten years alone prices have practically doubled, cutting the buying power of a single dollar nearly in half. However, look back another ten years and runaway prices disappear. Fonzie’s decade with its cheap gasoline, high finned cars and low utility bills truly was the golden age.
So much for good times. The middle of our survey, 1968, started off with the Tet offensive, followed by the Pueblo’s seizure, the assassinations of Robert Kennedy and Martin Luther King, President Johnson’s decision not to run again and the Soviet invasion of Czechoslovakia. These happenings were merely a prelude to a decade of war, Richard Nixon, Watergate, runaway inflation and the Arab oil embargo. It hasn’t been the same since.
Now that things have settled down a bit we can look back to 1958 and see where we stand. Prices in general have risen 116 percent with nearly all of that occurring in the last ten years. If you had a dollar in 1958 and stuffed it under the floor boards for 20 years, today its buying power would be 46 cents.
Now for the good news. As inflation has diminished the buying power of our individual dollars, wage increases have replenished our real buying power. During the golden age of 1958-1967 the average American’s after-tax income (in constant dollars) rose nearly 38 percent. Since 1968, however, it has remained almost unchanged, so our standard of living has flattened out. Among all of the items we checked we found one set of bargains, electronic goods, which cost about the same now as in 1958. The rest have gone up, up, up. Happy shopping.
What You Should Have Done
A key indicator of how successful one has been in battling inflation is the appreciation of his investments. We considered two simple types, investing money in a savings and loan passbook account and investing in six well known common stocks. Here is what we found.
One hundred dollars invested in a savings and loan account in 1958 would be worth approximately $250 today. The stocks we chose did much better, although all stocks haven’t fared as well as these favorites. We imagined in 1958 an investor bought 100 shares of three widely held stocks. Here is his return, combining dividends and appreciation.
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