Inflation 101

The title is a freshman college type course description. That is the approach this post uses.

The question is usual about what does inflation even mean since the subject is in the news so much. It is a good question. The experience level in America with inflation depends on one’s age, and so many younger citizens have simply never had the experience. And the question I hear often enough is “what does it mean to me?”

Of course what it means depends on you are, and your particular circumstances. But in the same vein, the common denominators apply to all of us.

The cost of living index is a good way to read the present calculated inflation rate. While the two numbers are different, to most the two impact our lives about the same. Anyone drawing monthly social security dollars knows all this, by the way.

Back to inflation and what it means to us, the common citizen. If inflation any given year is 5%, and our take home pay goes up 5%, then all is well. But if inflation goes up 5% and our pay is capped, as in no increase, then our quality of life decreases by 5%. To normal humans raising a family this means what their $100 dollars of pay for groceries now only buys $95 dollars worth of food that year. Bummer. And apply this idea any way you want to your quality of life and how you live.

Now one can talk about inflation another way. Let us say you have saved money for any reason, to include a “rainy day”. For example if you had $10,000 saved in a bank, and annual inflation was 10%, then in 4 and ½ years you could only buy $5,000 worth of stuff. Bummer. So many try to increase that $10,000 savings to $20,000 dollars just so in 4 and ½ years they are even. Bummer again.

Now there are also pros to this. For example, if you are paying a fixed mortgage you got when rates were lower, then inflation may help you in the short run. And ivory tower types apply this also to many other levels. But in the end, what do the voters in America think? Mostly, how does it affect them?

What seems shameful is for those in elected leadership seeming to apply their ideas of a commune to the whole USA country, using the federal legislature and federal executive to get it going again. Let me add in their hired staffers. Now many in our past have tried this with the best intentions, and all have failed in the end. Bummer again.

If what is going on today should bring back USA like inflation in our recent decades old past, then things will sort out in the end, and as always. It is the human suffering in the meantime that is so disturbing. It did not have to happen as will probably unfold.