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Put it this way, when I was growing up we had neighbors on both sides that owned their own homes, supported their families on one income. One was raising 10 kids and the other one 4. They lived in a nice suburb of San Diego.
One was an auto parts counterman, and the other worked in a grocery store. Try that today.
Just multiply all of those by 10, and it seems not much has changed (well, to be fair, the Harvard tuition would resemble something today at a cheaper public 4-year, but everything else seems 'normal'):
New House: $125,500
Average Income: $55,560 per year
New Car: $29,240
Average Rent: $1100 per month
Tuition at Harvard: $15,200 per year
Movie Ticket: $10.00 each
Gasoline: $2.70 per gallon
Stamp: 40 cents
This is a great place to start a common sense course in Economics, which is a deep mystery to the any too well.economists and the general public,... or, is well understood by a few "economists" who do not want the rest of the people to understand
The BIG SECRET is that EVRYTHING double every ten years.
Wages double along with Prices and the amount of money collected in Taxes, and the Stock Market, etc.
What I say in this first post will be attacked, of course, out of ignorance, or worse, out of the people who sat through a few courses in Economics while they were taught how use big names for Key ideas that hardly matter.
Compare the list above with the lists below in order to get an intuitive idea of what I am saying:
A double check on this is to compare the increased price of products and services every ten year over a span of many years.
Prices double @ every ten years.
For instance, in...
1963, a gallon of gas cost .18 cents
1973 = $.36
1983 = $.72
1993 = $1.44
2003 = $2.88
2013 = $5.76?
Houses
1970 = $25,000
1980 = $50,000
1990 = $100,000
2000 = headed for $200,000 when Clinton's Stock Market Bubble crashed followed by the 911 disruption of the economy
2006 = the recovery saw housing return to the rule, doubling the price of housing in every decade, jumping to prices that had been depressed and too low in 2000.
2010 = headed for $400,000 but the 2008 Bankruptcy of the Banks/mortgage companies set the curve back down again.
Try the Stock Market which is a measure of the Net Worth of all business enterprises.
This post wins for totally misunderstanding and missing the entire thread!
I think he is on to something in comparing actual Value against the inflated dollars we say things are worth.
A house is brick and stone, and takes the same labor to build.
It REAL value should not change in spite that the value of the paper money does change.
When see that paper money inflates 7% a year, almost like clockwork, we can understand why the cost of everything doubles every Ten years.
This RULE becomes our Gold Standard, because we can recon a fair price for things and demand a fair salary, too.
Just multiply all of those by 10, and it seems not much has changed (well, to be fair, the Harvard tuition would resemble something today at a cheaper public 4-year, but everything else seems 'normal'):
New House: $125,500
Average Income: $55,560 per year
New Car: $29,240
Average Rent: $1100 per month
Tuition at Harvard: $15,200 per year
Movie Ticket: $10.00 each
Gasoline: $2.70 per gallon
Stamp: 40 cents
etc.
Multiplying by 10 is close, but doubling every 10 years is based on the economic "Rule of 72."
If we divide the inflation rate, 7%, into the number 72, we get the length in years when the principles will have doubled.
This is usually applied to figure how long it takes to double your savings at a fix rate of % interest.
But now you can see that in you are getting 3.5%, you are losing money every ten years.
The point they missed was that the relative cost then is no different than now!
It more important to know the Real Value of things so they cost you the right price or you sell them at the right price or you invest when the price is lower than it ought be.
It more important to know the Real Value of things so they cost you the right price or you sell them at the right price or you invest when the price is lower than it ought be.
Good post!
Hopefully not off topic, but by looking at every purchase/commitment in terms of what it cost me in labor versus dollars has helped me become very frugal!
I'm amazed at the crap I pass on that in the past I would have bought without thinking about it. Suddenly I have a LOT of money let over each week to put into savings!
Good post!
Hopefully not off topic, but by looking at every purchase/commitment in terms of what it cost me in labor versus dollars has helped me become very frugal!
I'm amazed at the crap I pass on that in the past I would have bought without thinking about it. Suddenly I have a LOT of money let over each week to put into savings!
When you say, "put into savings," do you examine the cost to you if the interest is below 7%????
If you save at a lower interest on your money than 7%, based on the rise in prices as we have examined here, it is clear you are losing your saved money at 7% minus the interest you are getting on it.
Think of it this way, if you Save under you bed and get zero interest, in 10 years your money will be worth only half.
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