Inflation

Ryan at TSLRF mentioned inflation.  I went and pulled some old info to see how bad it has been for certain categories of goods.

OFFICIAL CPI

The official CPI figures are available online.  From the last ten years the average CPI has been about 2.5% each year.  According to the rule of 72, that means prices should double every 30 years or so.

GASOLINE

I drove over to GasBuddy.com and pulled ten years of data for retail gas prices in Anchorage and the USA average.

In 2003, gas prices peaked at around $2/gallon and bottomed at $1.43, with an average around $1.75.  Prices in Anchorage averaged a bit higher but were within those ranges.

In 2012, gas peaked at $4.44 (Anchorage)/$3.84 (US), bottomed at $3.24 and averaged around $4 (Anchorage)/$3.75 (US).  Those averages are just WAGs from looking at the charts.

An increase from $1.75 to $3.75 over ten years is about a doubling.   That works out to an annual increase of more like 8% per year.

GROCERIES

I dug out my old college budget.  I used to budget $100 per month for groceries.  I did not eat a ton of ramen and easy cheese in college.  We did a pasta meal once or twice a week, and I was pretty religious about finishing leftovers, but I cooked and ate normal homestyle meals, shopped at a super walmart, and didn't clip coupons.  Heather had a similar budget.

Today, we go through about $300/month in groceries for the two of us.  While we do buy a few things at Whole Foods, most of our shopping is done economically and in bulk.  That is an increase of 50% in less than a decade.  It works out to an average of ~5% every year, or double the reported CPI numbers.

CONCLUSIONS

Compounding the above, my credit card used to offer 5% cash back on Gas & Groceries.  Now it offers 1% back. So my bill for these items has actually gone up even more then the above estimates reflect.

I don't think I really believe the CPI numbers are reflecting the reality of costs for many consumers.

Ryan asks what we're doing.  That's a tough question.  I am staying the course on my long term & retirement savings.  In a moderately inflationary environment, stocks will do better than cash in the mattress (or savings account).  I have a fair stack of precious metals.  I'm paying a lot of attention to tax planning, in particular to avoid capital gains taxes on illusory paper gains that don't mean squat due to inflation.

We have a decent amount of collectibles & tangibles which will hold their value well.  We are squared away pretty well for ammo, food, and other consumables.  We have no debt and a healthy emergency fund.

There's really not much else one can do, I think.  I guess now might be a good time to take out a mortgage at a low interest rate to pay back with inflated dollars, but I don't want to buy a home that I'm not prepared to live in forever; given the market, I could get stuck underwater in the future.