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# CPI 30 years from now?

Discussion in 'Economics' started by Covertibility, Dec 23, 2003.

1. ### Covertibility

Over at Yahoo! Finance there's a little quiz:

How much greater was the U.S. cost of living in 1914 than it was in 1865?

a) 3%
b) 30%
c) 300%
d) 3000%

"Americans born in the 20th century, and especially after World War II, have generally only seen prices go up. But significant, sustained inflation in the U.S. is largely a late 20th-century phenomenon. An American born at the end of the Civil War, would, in the course of their lifetime, have seen prices go mostly down from year to year:"

In 1865 the CPI was 9.763
In 1875 the CPI was 8.036
In 1885 the CPI was 7.154
In 1895 the CPI was 6.958
In 1905 the CPI was 8.134
In 1914 the CPI was 10.100
In 1920 the CPI was 19.400

With that in mind, anyone ever see the forecasts some investment advisors are putting out in terms of what one has to save to retire comfortably? Check this out:

http://money.cnn.com/2003/12/01/retirement/costs_2030/index.htm
The article says Reality Check (so take it seriously!?!?!??!?!?)
In 2030:

"\$130, for two tickets and a modest dinner.

And a box of prescription pills that runs \$170 today is more likely to cost close to \$1,000 in 27 years, given a 6.7 percent annual growth rate, according to the BLS.

If you're still into artery clogging, a dozen Krispy Kreme doughnuts could cost you nearly \$13, double the \$6.50 you'll pay today.

\$200,000 house today will cost \$1,040,946 in 2030...."

SO

Is inflation a 20th century anomally and we'll enjoy low inflation from here to say 2030 or are going to pay \$100 for a movie, \$7 for a Big Mac, etc.. in the years to come?

2. ### tmb

Almost all countries went off the gold standard by 1914, so 1914 is a key year. After WW I, many countries went back to a gold standard temporarily, only to go off it again in the 1930s. A summary by country is shown here:

http://eh.net/encyclopedia/officer.gold.standard.php

Other inflation data shows that 1933 was a pivotal year. Up until 1933, average prices in Britain fluctuated up and down from year to year. From 1933 through 1998, averages prices in Britain went up EVERY YEAR. See "Inflation: the Value of the Pound 1750-1998":

http://www.parliament.uk/commons/lib/research/rp99/rp99-020.pdf

So I don't consider consumer price data from 1865 to 1914 very relevant to the current world situation.

3. ### vulture

Interestingly enough, I believe the Federal Income Tax was enacted in 1913 and the creation OR formation of the Federal Reserve began in 1913 as well

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