Thursday, November 26, 2009

Inflation in the US: The Candy Bar

So, I thought I'd lead off the story of the declining dollar buy illustrating how inflation has slowly but surely eroding our purchasing value. I'm choosing to illustrate this by borrowing from my own life and talking about the price of candy bars.

When I was a little kid, say six years old, I was able to buy a candy bar at the local grocery store for ten cents. I can be sure of this, because my dad used to give me a quarter and I would ride my bike up to the local Lucky's and I would buy two candy bars and pocket the nickel in change.

Last week when I was a my local super, candy bars we're priced at $.99 a piece.

What this means of course is that in 35 years, the price of a candy bar has risen ten times! Or looked at another way, on average, the price of my candy bar has gone up about 6.7% every year. In Econ 101, Professor McKibben told us that inflation between 2.5% and 3% was normal. So what gives?

From what I can recall, I believe that I was paying about $.50 for a candy bar just three years ago. That means that nearly half of the price increase in candy bars has come in just three years, for about a 24% increase in price per year.

This is an example of what I (and others call) insipid inflation. Prices rise, and dramatically so, but because the government say inflation is low and contained, we believe them and go about our business.

It is precisely this kind of inflation that shows just how weak the dollar has become, but as we'll see in the coming months, this is the tip of the iceberg.

1 comment:

Richard Stabile Bergen County New Homes said...

I think that commodities that go into the candy bar has gone up in the past few years with gold, oil, corn, wheat, soy beans and the like. Also, merchandising has raised the margins for these companies.

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