A Primer on Inflation:

Just so you know: this blog entry was inspired by This iTulip page.

For those who don’t remember what inflation was like in the late seventies, I can give you something of a clue, as I was a child during much of that time.

Basically, prices shot up in double-digit levels during two points during the seventies. In the early seventies, crude oil prices quadrupled, leading to a an immediate doubling of gasoline prices. What was 37 cents/gallon went up to 75 cents a gallon. After a period of adjustment and slow swings (between 60 cents and 50 cents per gallon), Prices shot up again to $1.20/gallon area

Both times they were followed by prices all over the board. I most remember car prices jumping up, but I also saw it referred to in food prices and in utilities. Since there was an active Union presence in the economy back then, wages generally followed suit, as did the minimum wage laws.

But it wasn’t just rising prices. Sometimes it was shrinking portions. Before, it was the candy bar companies who were known for shrinking their product to satisfy their bottom line. Indeed, their “King Size” servings that came out in the early eighties were referred to by those who knew as “the original servings in the sixties.” Nowadays it’s shrinking servings in Pringles’ Cans (here’s the joke: the cans that said “1/3 more” were but 1/10th larger than the original size cans with the original sized servings) and coffee servings.

Sometimes it’s quality of stuff. I don’t remember anything going on during the seventies, but the population of the cut-rate supermarket chain Aldis can translate to a dropoff in quality today. Also, a shift in business from Bakers Square to McDonald’s (who recently sold off their Boston Market stores) signifies a shift from better quality to lesser quality.

It’s also level of service. Not just in who answers your phone (English vs Indi-ish), not just in service (since when does Wal-Mart need only one person checking out 100,000 customers?) but also in hours open. I’ve seen quite a few “24 hour stores” suddenly close down between 12 midnight and 5 am, and some other places now close down an hour earlier (or open up an hour later).

It can also show up in fees. Suddenly you’re being charged to sit by the aisle, or the window of an airplane. Or you’re charged an extra 25 cents for an extra condiment.

– – – – – – – – – – – – – – – –

There’s two ways to react to the increase in prices. Both ways depend on whether you can (or are allowed to) make an effort to keep up with increasing prices.

If you are able to keep up with increasing prices, you end up spending what you get your hands on. When a whole nation is able to do this, you usually end up with hyperinflation, during which time savings becomes a curse and dissipative spending a virtue.

If you can’t keep up with inflation (which it appears most people in America presently can’t do), you spend less on other things and keep up on the most important bills. Right now, it seems to be food, fuel (that’s been rigid for the past few years, I believe that if we had had better public transit fuel prices would have caused a much greater drop in travel) and credit cards.

Now what’s interesting is that the government is trying to engineer inflation without any accompanying wage inflation. You can see it in the false “Core Price Index,” in which a 4% inflation rate hides exploding fuel and food prices. You see it in an unemployment rate that only tells people who tell the government they’re working (whitewashing discouraged workers plus those who don’t turn to the State-run employment agencies). You see GDP levels where the increase shown hides the actual DECREASE that’s happened since 2000 (Clinton’s era, plus the stagnation during his time).

The point? If you can inflate the money without inflating the wages, you make the people poorer. Make the people poorer, they work harder and harder to make ends meet and/or get the toys you love. Make them work harder, the less likely they are to fight for their rights to health care and a good living. The less they are likely to fight, the more thankful they will be for the hand-outs. The more thankful we are for the hand-outs, the easier we are to control.

Which is a reason why I worry about these “economic stimulus checks” we’ve gotten again. Is it really a help, or is it training us to bow down before Big Government and their Corporate Owners ™? “Take your gift, drink that booze, and wake up tomorrow when the bells ring.”

Other topics later.


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