It’s the small, slow changes of life, the ones that occur a little each day, that are the hardest to see but, in the end, pack the hardest punch. Whether it’s the extra 50 calories a day we eat or the extra $50 a month we invest, the change is nearly invisible at first, but life-changing in the end. And so it is with inflation.
My grandmother was an avid reader of all things political. I have several of her books, and the other day I began reading Before the Fall: An Inside View of the Pre-Watergate White House, by William Safire. The interesting part of the book for our purposes wasn’t what Mr. Safire, one of President Nixon’s speech writers, had to say, but a 1978 news clipping I found inside the book that my grandmother evidently used as a book mark. The title of the article was “Inflation’s Bleak Prospect: Cars for $89,000 in 2023.” Here are some of the article’s bleak predictions:
If you have a wheelbarrow, keep it. You may need it to haul cash to the supermarket or clothing store to pay for the necessities of life in the not too distant future.
In 1978, most folks didn’t carry four or five credit cards (my parents didn’t have any, except for a Sears card). How about the price of an education:
The price of knowledge will climb to unprecedented heights. A four-year college education, now costing $16,000, will cost $51,000 in 1998 and $88,000 in 2008.
While Georgetown University is not the least expensive education, tuition for one year currently costs $41,393 plus various fees, books, room and board. Here is what the article said about buying a home:
The middle class dream of owning a home, already jolted by record high interest rates and housing costs, may be further dashed. A home now selling for $48,000 will cost $64,224 in five years, $85,968 in 1988 and $660,720 in 2023.
Ahh, the good old days. Here is the real kicker:
These projections were made by economists at Columbus-based Midland Mutual Life Insurance Co. And they are conservative. They are based on a 6 percent level of inflation, not the more than 10 percent annual rate in the U.S. in recent months.
Inflation of 10 percent! This article reminded me that the U.S. has not always enjoyed low inflation and low interest rates. More importantly, we shouldn’t assume that modest inflation and 4 percent mortgage rates are here to stay.