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Author: galt67 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 746080  
Subject: Is inflation that bad??? Date: 3/13/2000 8:12 PM
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I know I'm going to come across horribly naive and ignorant with this question but, 'what is the practical effects' of 3% inflation (the average annual rate for last 50 years).

Let's say, for example, I own my house-debt free. Same with my car. Now let's say inflation is running at a 'high' of 6%-gas prices are rising, housing costs are increasing, etc. All pushing up the CPI.

So what is the 'real' effect on my day to day purchases?? As someone mentioned on this board, if the price of rice increases significantly, I'll buy beans-or someother substitute. Let's say a winter freeze hits FL wiping out the orange crop thereby pushing up orange juice prices-which will be factored as 'inflationary'-Couldn't I buy grape juice, instead?

Or how about clothes? Ten years ago I bought a nice dress shirt for $40 at a department store. I know I could buy a similar or better shirt for equal to or less than that today. Of course you see the same thing with computers, airline fares, so on.

I'm not looking for someone to the explain 'causes of inflation' (read Mises, Hayek, Friedman for that) but, during the early 80's, with inflation in the double digits, how did it DIRECTLY affect your life-besides waiting in line for gas.

My theory-If 'high' inflation returns, we as rational persons can make choices and find subsitutes that will dramatically offset its effects-so maybe an early retiree's fear of inflation is overblown(?)-Or am I wrong???
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