Inflation

We hear monthly in the statistics associated with the jobs report that inflation is low, that the FED has a target of 2% that they evaluate in the mission to keep the economy moving forward. The FED states that it’s mission is to promote the effective operation of the US economy, generally by conducting monetary policy to promote maximum employment, stable prices, and moderate long-term interest rates in the US economy.

I am not an economist. But as a consumer, I see inflation all around me. It is not just in the increases we see in the costs of the products we purchase. We see it in reduced services that we pay for. A few years ago, Consumer Reports wrote about price inflation was hiding around shrinking packaging:

https://www.consumerreports.org/cro/news/2014/05/can-shrinking-packages-trick-inflation/index.htm

The Consumer Reports article talked about reducing the size, quantity, and packaging of a product without an increase in price. I have witnessed this firsthand over the past few years. The package of Oreo’s that I buy my kids. The package is the same, the weight appears to be the same, but when I open it up, it is a few cookies short. The Pop Tarts appear thinner than they were several years ago. Measure the size of a Ritz cracker? The diameter is less than it was a few years ago. A family box of cereal. The size of my Captain Crunch cereal is less than it was several years ago. Same size box and weight. More of it fits on my spoon. Same taste. The list goes on and on.

I can often tell when something is going to change in that I will pay more for less. The company puts the products for sale in the stores. Then they create a new package for the product, or they introduce a new flavor (pumpkin pie Pop Tarts), then put the new packages on the shelf. You are paying the same price, but now you have less. It is later that the reduce the quantity even more in the new process. It becomes a new cycle. Sometimes there are subsequent price increases as inflation picks up in other areas.

My recent experience with some Ritz crackers got me thinking about this issue of packaging. I had two different sources of the crackers, and there it was, two different sizes. Both were Ritz, both were made from the same company. The taste was the same, but the size was different. The impetus for my post was my recent visit to my banks ATM. I typically withdraw money every week for purchases. Up until last week, my $80 withdraw was 4 twenty dollar bills. Now, unless otherwise programmed beforehand, is a $50, a $20, and a $10. It may be that my bank is trying to offer more. It may be that by makinging withdrawals in $50’s instead of $20’s, they are trying to be more convenient. It think it is inflation. When people buy things, they think less about total costs if they get more change back. Stores typically frown when you pay with a $20. My sausage burrito from Chili Works is typically $7.95. If everybody pays with a $20, change can be difficult. Paying with a $50 is impossible. Filling up the car with regular was usually 1 to 2 twenty dollar bills. Now it is $50. I guess costs are just continuing to go up, often at a rate faster than my salary.

Some inflation is understandable if it is tied to the basic laws of supply and demand. Some it is out of control. Medical costs and the costs of higher education are two that have received much press of late. Not clear why these are increasing. My theory is that since Government is involved, there is an unlimited supply of money and so there is no need to control costs. Costs go up, they never go down. All I can say is buyer beware.

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