One recent morning, I stopped at the bank to grab some cash as I headed out to run some errands. I needed to pick up my new prescription sunglasses and grab some brake parts for a truck that I’m restoring, as well as a few other miscellaneous things. When the bank teller asked how I'd like the money, I found myself saying — to my own surprise — “Fifties please.”
What I could have done with $20s a few short years ago was now so much more expensive that $50s were more convenient. In short, $50 is the new $20.
Our government would like for us to think that prices are relatively stable. But that’s because it's in their interest to do so.
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The U.S. Department of Labor’s (DOL) Bureau of Labor Statistics provides us with an index of costs in the form of the Consumer Price Index (CPI). This index is used to calculate cost-of-living increases for social security, food stamps, and a variety of other programs.
Keeping the CPI low helps the government keep from having to increase payouts to seniors on social security, as well as many recipients of various other programs.
If the CPI were to increase dramatically, our government would need to increase social spending dramatically. As such, the “index” drives spending, rather than the real pain experienced by consumers.
As consumers, we see the effect of increasing prices on a daily basis. The costs of housing (including rent), auto repairs, food, entertainment…
The visible increases are astonishing. But the DOL tells us that the CPI is only nudging up a little. According to them, there’s no real inflation, as far as consumers are concerned.
Yet we saw the pound of packaged coffee become the 13-ounce can at the same price. Then that price went up, and the can got even smaller. Now an 11-ounce “pound” of coffee is the norm — at a higher cost than we used to pay for a real pound in the not-too-distant past.
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The “shrinking size, same price” phenomenon isn’t restricted to coffee, either. Ice cream, candy bars, spices, and various other foodstuffs have shrunk in quantity while prices have held or increased. Even the standard 6.5-ounce can of tuna has fallen to five ounces. And they think we won’t notice!
The use of cashless transactions for the majority of purchases has mentally isolated many people from seeing stealth inflation as it occurs. But as consumers, it's readily apparent that we need a lot more money today to do the same things that we did just a few years ago.
The government may believe that consumers are happy eating hot dogs today with last year’s steak money, but we know better.
Stealth inflation is real. It costs a lot more to live now than it used to — far more than the tiny CPI increases indicate. As financially literate individuals, we need to make sure that our investments are outpacing real cost increases, not fake ones. As citizens, we need to be proactive in influencing positive change so that we aren't duped by politicians with an agenda.
Today, $50 is the new $20. We’d better brace ourselves — with this stealth inflation, $100 may become the new $20 in the not-so-distant future.
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