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Inflation

Today Tam points us to an article about inflation.

Now while I’m always yelling at people to understand basic economics, I’ll admit that when the subject reaches higher levels of abstraction I default into nod-and-agree mode. Like inflation, fer instance. It seems more than a little tautological to me (“Compared to the rate prices have been going up, prices haven’t gone up much!”) and kind of glosses over some important points.

For a person whose hobbies are pretty much fueled by prices in the commodities market, the effects of a less-valuable currency are immediately obvious. But across the board, is it really that bad?

I’m typing this on a computer that I bought used from geeks.com for under $200 shipped two years ago. Its predecessor was bartered from my brother for about $600, and he paid around $1200 to put it together eighteen months prior. The computer previous to that was cobbled together from a staggering variety of sources and did not remain in one configuration for more than a few months. In the end, the only components that remained the same through it’s life were the case and the floppy drive. I paid $1700 Canadian for it in 1995, and probably spent about half that upgrading it through its lifetime. The thing is, I’ve had to spend practically no time troubleshooting or tinkering with this one to keep it running, compared to the hours of time I wasted on its predecessors. Needless to say, the P4 that sits on my desk now has more storage and processing power than pretty much all the supercomputers in the world when my father was my age.

In the mid-80s, my father purchased a 1978 Chevrolet Malibu. It set us back about $3000 Canadian and lasted approximately 60000 miles before a catastrophic gasket issue sidelined it permanently. It was probably the best family bus we had. Contrast: three years ago, I bought a 2002 Daewoo Leganza for $2000, and it has needed nothing but tires, a timing belt, brakes, oil and gas for the past 40000 miles, and The Mrs and I fully expect another 40000 out of it without major issues. With 33mpg, air conditioning, a CD player, power locks and windows and comfy seats! None of which the Malibu could claim. Well, maybe the comfy seats. And it was rear wheel drive with a 283, so it could do a bitchin’ peel-out.

Did I mention that my computer is hooked up to a broadband internet connection that sets me back $40 a month, and would have been the envy of most megadollar corporate datacenters a mere 15-20 years ago? We also have two mobile phones that were “free” with a 2 year agreement, set us back $54 a month total and go for days between charges.

I could go on and on: DVD players and $5 DVD movies, reliable and accurate pistols that need no work out of the box for under a week’s pay, the Gillette six-bladed razor which manages to rid my face of hair without removing skin — a first!, $300 leather recliners, etc etc.

So are prices going up, or are we seeing localized offsets in some areas to pay for the staggering boons we’re reaping in other areas? I’m not smart enough to know.

I guess what I’m trying to say, is that in an era where even the poor have air-conditioned homes, cell phones, cable TV, video games, $5 fast food and drive around in used cars that would have caused the Big Three to run screaming to their congresscritters for protectionistic tariffs a mere two decades ago, vendors of economic gloom ‘n doom need to work a little harder to close the intellectual sale.

FWIW, while I do think a small correction in the housing market is overdue, I wouldn’t call it a crash, and I don’t think it will last long. Those avaricious materialistic Americans are always looking to trade up! So a few sub-prime lenders get shafted? They represent a minuscule fraction of national debt load and GDP, and the bankrupt hulks will be replaced shortly with new irrational exuberant greedmongers. It is the way of things.

{ 3 } Comments

  1. Rick C | December 31, 2007 at 6:12 pm | Permalink

    OH, man, now you’re gonna have Crazy Uncle Ron’s supporters coming thru here.

  2. The Old Man | January 1, 2008 at 9:18 pm | Permalink

    Read somewhere that the mortgage default rate was less than 1 in 600 mortgages. That works out to ~ .17% or less overall. Doesn’t look like a crisis where I sit. Of course, Congress forcing the lenders to “invest in the cities” and “stop redlining” during the Bubba Administration had nothing to do with this “mess”….

  3. Tennessee Budd | January 2, 2008 at 12:51 pm | Permalink

    A 283 in a ’78? Cool, but if I were going to replace the factory 305, I’d go 350, not back to the Sixties.