I cannot help finding it amusing that anxiety about "inflation" is making a comeback. Reading this article in Bloomberg brought me back to a period for which I never thought I would be nostalgic: i.e., 2008, an era I associate with Fleet Foxes (ugh), that awful Indiana Jones reboot, Ron Paul's campaign ads, and pseudo-genteel poverty. In those days it was widely assumed in right-wing media that Barack Obama's stimulus efforts in response to the financial crisis would lead the United States to Weimar-style hyperinflation, which mysteriously never happened. Apparently we are suffering through this again. What other throwback delights could be just around the corner? A new Guns N' Roses album?
The problem with our conversations about inflation is that they are premised upon an equivocation. When economists say, rightly, that stimulus policies undertaken in the last few decades have not led to widespread inflation, what they mean is that lowering of interest rates has not increased the supply of money enough to make the prices of goods rise faster than wages. This is, trivially speaking, accurate. But this does not mean that the American people have not experienced a decline in the purchasing power of money since 2008, or, indeed, earlier.
This is because it is entirely possible for purchasing power to decline without vast increases in the supply of money. The price of housing is the best example. As my former colleague Jeff Spross has observed, during the last decade the price of housing increased at a rate much higher than that of anything else. One scarcely needs figures to see that something that as recently as 1970 was within the reach of the average American household — purchasing a home — has become a fantasy for millions of people in my generation. This is especially the case in major metropolitan areas. All of this has taken place despite the fact that in the ensuing decades the vast majority of American families have become two-income households. Americans work more outside the home and have less to show for it than they did two generations ago. This may not technically be "inflation," but it is a serious problem about which we are doing nothing.
Less visible still but equally undeniable is what has happened in the last few decades with many consumer goods that have nominally kept pace with inflation while declining in quality. In 1980 a pair of Levi's, union-made in the United States from American cotton, cost $25 in a department store. It would be ludicrous to pretend that the equivalent purchase today would be a flimsily made pair stamped with the same brand name by wage slaves in Sri Lanka and sold for $40 on Amazon. More comparable to the Levi's of four decades ago are a pair of American Giant jeans made in Los Angeles and retailing for about $150.
This phenomenon — price increases that seem to track reasonably with inflation only because consumers are paying moderately higher amounts for products of vastly inferior quality by nominal brand successors — is ubiquitous. I was astonished recently to see a child's air rifle purchased at Walmart for around $50. The sturdy wooden stock of my youth had been replaced with some kind of particle board spray-painted brown and the cocking lever, once made of metal, was plastic and non-functional. In my grandparents' basement there is a Fisher Price music box that has been played with by three successive generations of my family. Two years ago I bought what I had assumed was a revival of the same toy online, only to discover that, unlike its purely mechanical ancestors, the new version requires two batteries. It ceased working altogether six months later.
All of this is to say nothing of technological fads — "smart" features poorly integrated into toasters and coffee makers — and planned obsolescence, both of which force Americans to spend more of their disposable income than their parents and grandparents had done in order to place phone calls or make toast. I cannot be the only person whose childhood was full of living rooms in which the same television sets — indestructible boxes with easily replaceable tubes inside them — seemed as permanent as the walls. Nowadays even technology-challenged senior citizens must replace the poorly made plastic rectangles every few years if they wish to continue watching Godfather II on AMC with motion smoothing.
There are vanishingly few affordable consumer goods of quality anymore. Instead we have cheap junk (nearly always concealed under familiar brand names) and luxury goods, with nothing in between. This is as true of audio equipment and cars as it is of suits and footwear.
Inflation may be a myth. That does not mean we are not all getting less for our money.
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