Submitted by Revolutionary_Elk345 t3_ztlkt9 in wallstreetbets
In 1964 a gallon of gas cost about a quarter. So how did we get to today’s price? Through inflation. The fed targets 2% inflation per year to spur people to invest their money and not keep it in the mattress. Essentially, if you save that money in a safe it’s losing a compounded 2% annually. Several times since 1971, inflation has run away including in the 70’s and each time we had to raise interest rates above the rate of inflation to swiftly stop it. We’re not raising fast enough in this case and that’s a huge problem for the rest of our lives.
Why is it important to swiftly stop inflation? Because they never fully deflate, prices don’t go back to pre-inflationary prices. That is how gas becomes 3-5$ instead of 0.25c over 58 years. Which means that if this inflation only wanes down 0.1% for months on end then your prices, for the rest of the of your life, are rising higher and higher and these prices will be the new normal. They will stop their measures at 2% inflation and where we land is the now normal for pricing.
For every 1% in inflation we gain that is 1% you have lost for the rest of your life. Because they don’t reverse it. They only get to 2% and stop. We have now gained somewhere close to 10% in 2 years. That means for the rest of your life now 10% of your earnings, that you don’t make up in raises, is gone and it will be compounded by an extra 2% annually and other high inflationary periods.
You should be screaming for them to raise faster as they did in the late 70’s because you now have to make 10% per year in the market to even stay above the new prices you will pay. That is impossible for most. Don’t believe me? Look up consumer prices from the late 60’s, 70’s and 80’s. We don’t ever roll them back to where they were.
Sure you will get some back in the form of raises, but you won’t get it all back and this is called erosion of your purchase power. Ever hear how people in the 1950’s and 60’s could buy a house and 2 cars and pay them off in 4-7 years? Their houses cost 10k and cars 2k and they had salaries of 10k or more per year. The same house and cars you pay 100k+ and 50k+ for. The wage increases never match inflation and slowly the poor and middle class are bled to death.
Hopefully this spurs some of you to understand monetary policy in this country better, it’s the single biggest destroyer of our livelihoods.