By Robert F. Sanchez, JMI Policy Director
Most folks track inflation informally by noticing the ups (and occasional downs) of items whose prices we know – a gallon of gas, a loaf a bread. We worry only when a change seems out of whack with the rest of the economy … or our salary. Hearing the outcry as gas soars toward $4 a gallon? Still feeling the pain of your last trip to the grocery store?Over the long haul, though, inflation is a sneak thief that penalizes savers and does insidious things to the economy and to families’ financial security. To illustrate, ponder this tidbit of show-biz trivia: Q: What movie grossed the most money in the U.S.?
A: If you said “Avatar,” you’re technically correct. It’s nearing $750 million in U.S. ticket sales. If you adjust for inflation, however, “Avatar” ranks fourteenth. In thirteenth: “Ben-Hur,” which grossed only $74 million.Yet that was in 1959 and, when adjusted for ticket-price inflation, $74 million then is the equivalent of $779 million today! Put another way, someone who earned $14,800 in 1959 would need to earn approximately $155,800 in 2010 to keep up with general inflation, which pretty much tracks ticket-price inflation.True, 50 years is a long time. Yet it’s not as long as the average person’s adult lifespan, nor is it much longer than the typical professional’s career.Granted, some things are worse than inflation – a depression or the kind of hyperinflation experienced in today’s Zimbabwe and, after World War I, in Germany’s Weimar Republic, where the currency’s swift nosedive in value set the stage for Hitler’s rise to power.Currently, inflation in the U.S. isn’t dead; it’s merely napping. When the bill comes due for reckless government borrowing and spending – and when re-empowered labor unions start pressing for wage gains unrelated to productivity – watch out. Inflation will be back – with a vengeance.