High-Altitude Costs of Living
Does Cost-of-Living Have a Mind of Its Own?
Inflation--Data going back hundreds of years on the cost of living can be amazing to look at. It stimulates the imagination to see what cars cost when your parents were young, what houses were selling for in the elite sections of famous cities, and how finances and stores operated in centuries past.
For example, if an employer paid a worker $40 in 1964 to do an all-day job, that same worker might get $300 in 2015 for the same task. But the $300 would have the buying power in 2015 about equal to the $40 in 1964, a half-century earlier.
The so-called value of the dollar is what's making the difference. Economists try to pinpoint the value from year to year, decade to decade. However, it's a sloppy job that doesn't really result in a very neat and satisfactory figure. The Internet even has an automatic calculator that supposedly can show you the difference in the value of the dollar between one year and another. You just enter any two years into the fields you want compared. (http://www.bls.gov/data/inflation_calculator.htm)
Regardless of the precision of the calculations of the dollar's value at any given time, it's pretty well settled that the dollar today isn't what it used to be in former times in terms of what it can buy.
The Causes--What causes the shrinking value of the dollars people handle, physically or electronically, on a daily basis? It's something worth finding out because it has an effect on everyone.
When people save for the future, they are convinced that they are doing the right thing for themselves and their family. But they also realize somewhere in the backs of their minds that they can buy more with the money they have today than they will be able to buy in the future with that same amount of money.
Interest on savings is practically nil due to the recession. Saving money, therefore, isn't being done with a view to having more money in the future. The amount will be about the same as what was put into savings in the first place. When a rainy day comes and people withdraw some savings, they will be withdrawing weaker dollars than the ones they put it, thanks to inflation.
Are business people and consumers to blame for inflation? The value of the dollar keeps eroding. When buyers want more than what's available, or when the cost of producing and supplying things gets too high, money won't be worth as much as it used to be. But workers want raises; consumers want to elevate their standard of living by buying more; businesses want to grow and make a profit. Therefore, is inflation inevitable because it's natural?
If you embark upon such a slippery topic with an economist, you will get a cheerful debate because the economist is essentially a philosopher.
In business there's a temptation to overcharge for products and services. Theoretically, competition in a free, capitalist economy keeps overcharging in check.
Gasoline prices are notorious for indicating the current cost of living, but they are only one commodity among many that comprise the necessities of life. They are affected by how much people want, the cost of supplying it, and government taxes on such a necessary item.
Conclusion--Inflation has been going on for centuries, long before gasoline was invented. The cost of living and the value of the dollar or any other currency used in modern or ancient history are connected with financial security, and always have been.
In desperation, many people consult advisers to help them plan financially, not trusting their instincts anymore because the economy has them too confused. It's a joke. The finest minds in the country, Ivy League graduates, experts in finance, still can't explain how to bring the nation or the world out of the cycle of recurring recessions and bubbles bursting again and again.
If it's a joke, then take heart. Inflation allows people to live in the more expensive home they've always wanted without even moving away.