Yo, earth to Ben, earth to Ben...
My inflation expectations have become unanchored. My bagel store just raised the price of a dozen from $7.75 to $8.95 (a 15% increase). Filling up the family minivan now costs more than $50. A routine trip to the grocery store suddenly costs $145 instead of $120. Filling up the oil tank costs $700 instead of $400.
At the same time as my expenses are shooting through the roof, my income is stagnant. I'll be lucky to get a 4% raise this year.
And my cash savings? Thanks to Helicopter Ben, I am now seeing negative real returns from my money market and CD accounts.
I am not pleased.
When it comes to money and happiness, it's not how much you have, but how much your neighbor has...
From the New York Times, a story on how income and happiness are linked.
When measuring the economic welfare of the typical family, the natural focus is on median, or 50th percentile, family earnings. Per-capita G.D.P. has grown by more than 85 percent since 1973, while median family earnings have grown by less than one-fifth that amount. Changing patterns of income growth have thus caused per-capita G.D.P. growth to vastly overstate the increase in the typical family’s standard of living during the past three decades.Some economists have advanced an even stronger claim — that there is no link, at least in developed countries, between absolute spending and well-being. Recent work suggests that this is especially true for spending categories in which the link between well-being and relative consumption is strongest. For instance, when the rich spend more on larger mansions or more elaborate coming-of-age parties for their children, the apparent effect is merely to redefine what counts as adequate.
Evidence also suggests that higher spending at the top instigates expenditure cascades that pressure middle-income families to spend in mutually offsetting ways. Thus, when all spend more on interview suits, the same jobs go to the same applicants as before.
Basically an elaboration of themes that the author raised in Luxury Fever.
2 comments:
Yes, I am also feeling the price increases. What is worse, now that I pay such close attention to my finances, like you I can see in clear numbers how much more everything is costing!
Just feeling like things are more expenses hurts less than knowing you have $X number of dollars less this month vr. last. Paycheck is the same, consumption is the same, rising prices are the culprit!
As bad as the rising gas prices and fuel prices are, it is the bagel prices that really hurt! :)
It's not that I blame him -- I know that all of his costs are up, and he hasn't raised price in several years.
It's more the realization that everything is just going to get more expensive.
What upsets me is that we're getting burned by inflation without the soothing balm of higher interest rates.
Alan Greenspan's reputation is, or soon will be, mud. And Ben Bernanke will be remembered with the same fondness that people have for William Miller.
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