Posted by John Reese on 16/12/2018 02:10:32:
Remembering prices from 20 or more years ago and comparing with current prices does bad things to one's blood pressure.
I remember single scoop ice cream cones and 7 oz draft beer for $.05.
But don't forget that wages were also low in the same proportion! In 1956 the average UK weekly wage was £9.25 per week, and a pint of beer cost 1s (£0.05). A man who drank 3 pints of beer a day was spending 10% of his income on booze. The average UK house cost £2300 and only 8% of the population could afford one. 65% could not afford a car.
Things were considerably easier in the US at that time. The weekly wage in 1956 averaged about $70. With the exchange rate at £2.5 pounds per dollar, the typical 1950s American about 3 times better off than the average Brit.
Don't worry too much about inflation John. Your blood pressure need not go sky high. Although prices rising out of control is very bad, a state of mild inflation is ideal because it encourages spending and stimulates the economy. (People rush out to buy before prices go up again.) Even a mild deflation (prices falling) causes severe difficulties. Because people delay spending money because goods will be cheaper tomorrow, money drops out out of circulation, businesses fail, and people lose their jobs.
Interesting that best tactics for dealing with inflation and deflation are not what 'common sense' would suggest is financial good management. However, national economies do not follow exactly the same rules as a household budget. Another example: President Trump has successfully boosted the US economy by selling the idea that he will 'make America great again'. His words inspire confidence at home causing like minded folk to risk spending in 'this economy' again, causing a recovery. (Hurrah!) So far it's working, but my view is he is blowing a bubble – there is no substance behind his rhetoric. It's a collision between hot emotion and cold facts. Not only might the recovery go pop, but it's being done at the cost of annoying America's friends, and it risks crashing the West's economic system. Of course, we wise Brits would never vote for a major change of direction without thinking it through very carefully first…
Dave