Some thoughts. Sorry for the ramble. I’m not good at explaining this in writing. Skip to the end for the one line version.
My dad has had this strong fear of inflation ever since the 70s. He has warned me year after year that we are going to have a big bout of inflation and it’ll wipe me out since I am not employed in a job that will raise the salary. This kind of happened to him in 1976. He didn’t get raises for a few years and it made life tough.
It’s all clouded up in his mind. He said buying his home stabilized his monthly housing costs and that I am doomed because I’ve rented up to now. He has warned me that renting will be my undoing for twenty years. But his interest rate was 12% and housing prices were depressed because of that - like a bond price/yield. So he never compares apples to apples when he recalls “when I was a kid we could get a burger for $0.10 and see a movie for $0.12.” He doesn’t mention he was caddying at the local country club for $2 a day in 1943. However he does remember his house only cost $50,000 in 1975 and now it’s $2,000,000. Sounds bad but it takes about the same fraction of monthly income for a young version of his 1970s self to pay the monthly payment at today’s single digit interest rate. The costs seem to be more set by what clears the market.
I posted up my Costco tire buying experience over three sets of tires for the same car. From 2010 to 2023 it appears my set of Michelin tires has gone up by 6% a year. Same tire. Same car. It sounds horrible to pay $700 for four tires that cost $300 thirteen years ago but I managed.
My wife has always had a rebuttal to my dad’s gloom and doom inflation warnings. She’s no economist but it seems to make sense. She has shopkeeper’s daughter sense. She says somebody has to drive prices. There has to be a customer willing and able to pay higher prices for prices to stay high. Or prices will have to fall. What you don’t want to be is the only one in the room without rising income if the price increases are sustainable. Like there is money falling from the sky but you don’t get any for some reason. Then you’re screwed. Maybe that is what’s happening to the average American.
This seems to be a problem when the goods are in short supply. A few rich earners can snap up all the juicy goods and leave everyone else in the cold. The sellers are happy to deliver at the higher prices. My favorite example was single family home prices going through the roof during the dot com in Silicon Valley. You see this with rich people snatching up beachfront property in SoCal, paintings, rare cars and truffles.
The fact you see burgers at $30 must be telling us something. Perhaps employers are passing on the high cost of service labor on to us? I had a really good burger at home. Bun made by my boutique baker, chopped sirloin processed in my cuisinart, Mexican conflict avocado, overpriced farmers market tomato, Jarlsburg Swiss cheese, etc.. I’d estimate it cost me $7. That’s pretty steep for a home burger but it’s nowhere near $30. No beer. Beef at my grocery is still awfully cheap. Conflict avocados are sinfully cheap.
TopHatFox wrote: ↑Tue May 02, 2023 10:34 pm
I doubt multi-millionaires are agonizing over restaurant outings. So then I wonder if frugality is just a cope for limited resources. The real solution is to see cooking/
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I don’t eat out as much since the pandemic. I don’t agonize over restaurant prices but yeah, I’d say what I paid $20/person in 2019 costs roughly $35 now. I chalked it up to labor costs. I pay. I don’t really think about it 1) because I only eat out once a week and 2) it’s chump change compared to say my housing, insurance or even financial management fees (1.25% of millions). So there’s a millionaire’s perspective. I see a lot of mundane stuff for sale and I can buy it. Stuff rich people want is overpriced because money is easily acquired given their enhanced access to money.
Reminds me I spoke to my dear Godmother in Palo Alto last night. 86 years old. She says her son cannot afford her $3,000,000 home that she only paid $400,000 for in 1994. Sounds bad but that’s only 7.5% annualized before taxes, insurance and upkeep. Apple was a better investment. She should know, she was an art dealer to Steve Jobs among others in the 1990s. But it’s all about her expensive house, the price of which was driven up my Steve Job’s minions.
I still think a $30 burger and beer is a ripoff. I refuse to pay that. Suns up. Time to make my own latte and reheat a slice of vegetarian quiche. I can reflect on how little money I’d have if I followed my dad’s inflation phobic financial advice.
Long Sclass style ramble. Short version, make money faster than inflationary surges.
