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MUMBLINGS July 6, 2006
It’s inflation man! Everybody complains about the high
price of gasoline. At $2.75 a gallon for the low grade, it is
high. But so is most everything else. Many of us can remember
when gasoline was 25 cents a gallon. In model T days I have gone
up to a filling station and pumped in 25 cents worth of gasoline.
But everything else is high too. When we were paying 25 cents
a gallon for gasoline, we were buying bread for 10 cents…
now about the cheapest loaf of bread you can buy is 99 cents…
most of it is as high as $2.00. Compare the percentage of increase
of gasoline and bread and you will find that bread has gone up
as fast or faster than the petroleum.
Which is the most important, bread or gasoline? Of course, the
answer is both are very important. Without bread you would not
have the energy to produce gasoline and without gasoline you wouldn’t
have the mechanism like electricity, to produce bread.
As necessary as bread is to our normal way of life, we spend
far more for gasoline and therefore it creates more grumbling
from us poor gasoline users. We use it to get to work, we use
it for play, we use it for traveling, we use it for everything.
What is inflation? Is it simply the cheapening of the dollar
making practically all products we have to buy cost more. The
magic number in inflation is 70. If you compound interest at 10
percent for seven years and don’t spend any of the returns,
you will have double the amount that you started with. Insurance
companies learned this a long time ago and have used compound
interest for their financial growth and prosperity.
United States has comparably low inflation rates, but averages
about 31/2 percent a year. At this rate it only takes 17 years
for your dollar to amount to $2.00. After this, it takes $2.00
to buy what $1.00 would buy 17 years earlier. Put it this way,
if you made $50,000 a year in 1988, by now you would need to make
$100,000 a year to have the same purchasing power. Some of us
can remember that in the late 20’s, Henry Ford astounded
the world by agreeing to pay automobile workers $5.00 a day. Now
the same labor, even though more skilled, makes $150 a day or
more.
The last day I worked on a farm, which was in 1931, I made 50
cents a day plowing up cotton. But 50 cents bought two or three
cartons of short rifle shells. You could go to Woolworth’s
5 & 10 and purchase a book for 25 cents… You could even
order a book from Sears & Roebuck for 67 cents, postage and
all.
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