Inflation

Sensitivity to inflation is largely an affliction of older Americans.

The cost of living just went up another dollar a quart. —W.C. Fields

Sensitivity to inflation is largely an affliction of older Americans. When you are twenty-something and stop at an airport concession stand to buy a Hershey bar, you are not surprised when the price turns out to be 90¢. You assume this has always been the price. But when you are seventy-something and find yourself purchasing a 90¢ Hershey bar, you think: “My God! A Hershey bar is supposed to cost a nickel. This must be some sort of madness.”

Inflation is insidious. In the United States prices slither their way upward when you are not paying attention. You think you know what something costs and then suddenly discover that the actual price is twice or three times what you thought it was. Insidious.

My wife and I bought our first new car in 1951. It was a six-cylinder Studebaker Champion sedan. Although it was not air conditioned it was a splendid automobile, which we drove for several years. It cost $1,725, tax included. Our next car was a Chevrolet sedan. Price: $3,135. After that, we began to lose track. My employer started leasing the car I drove, and you don’t pay as much attention to the price when someone else is picking up the tab. We were aware, I suppose, when the average price of a new car had slithered to $10,000; then to $12,000, then to $15,000. Still, if the figure $1,725 sticks in your mind as the cost of a new four-door sedan, discovery that the sticker price of a vehicle you have been thinking about exceeds $30,000—well, that can be traumatic.

I not only remember $1,725 automobiles. I remember when a six-pack of bottled Coca Cola cost 25¢ and a pack of chewing gum or a double-dip ice cream cone cost a nickel. I remember, in 1948, buying a new pair of Florsheim dress shoes for $7.50 and Arrow dress shirts for $3.50 each. The jacket of the hardbound copy of the Devil’s Dictionary, by Ambrose Bierce, which rests on the book shelf behind my desk, displays a price of $1.49. In 1939, during my first year in college, my tuition—as an in-state student—was $7.50 a semester. I remember that the first house we owned cost $10,900, and the monthly mortgage payments were $65.50. My recollection is clear on Holiday Inn rooms which were $14 on week days, $10 on weekends. I can recall staying in a first class room at the Washington Mayflower for $28 a night.

In 1948 I was working in downtown Tulsa as a member of the staff of the Western Petroleum Refiners Association. Each day at noon, along with other staff members, I strolled over to Michael’s Cafeteria for lunch. We all always made a point of never spending more than 50¢ for our meal, including iced tea or coffee.

With memories of this sort, I find $300 hotel rooms, $300,000 bungalows, $35 books, and $50 shirts somewhat difficult to adjust to. I become subject to inflation shock.

The Federal Reserve Board, under the chairmanship of Alan Greenspan, is supposed to protect us from the ravages of inflation. Theoretically, when inflation appears to be getting out of hand the board need only raise interest rates and—voilá!—inflation will go away. In practice, however, such a move merely impedes inflation; it does not cure it. On a number of occasions over the past half century the board has elevated interest rates, but the action has not brought back $1.49 books, $1,725 automobiles, or nickel Hershey bars.

As an alternative to raising interest rates, Mr. Greenspan occasionally unburdens himself of an utterance which suggests rates might be raised. He says things like “the economy shows signs of irrational exuberance,” and the Dow promptly falls 70 points. It would probably work just as well if Mr. Greenspan merely said “Boo!”

Startling Change
We remember the day, in a simpler time
When a cup of coffee cost only a dime—
Which is why we’re shocked when
compelled to pay
Three dollars or more for a café latté.

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