Inflation affects more than your money!Written by Kurt Larsson
My parents bought their first house on Long Island in 1955. A two story Cape Cod, its purchase price was $17,000.00. According to its latest valuation it is now worth north of $400,000.00. Very little has been done to it. What has happened in 48 years since its construction is commonly referred to as inflation. But what does that really mean and more importantly what else is inflated?According to Webster’s New World Dictionary®, Inflation means "an increase in amount of money and credit in relation to supply of goods and services". To complicate matters, did you know that according to Federal Reserve (ironically/comically charged with maintaining a stable dollar) and its own records, there is now twice number of dollars in circulation as there were in 1995? I bring this up to ask question: are things we purchase worth more as time goes by or is money we buy them with worth less? Good as Gold? Ask people following gold or supporting a return to a gold backed currency (which by way was written into United States of America’s Constitution). The dollar is worth less and less each day. Yet, in a now famous speech delivered last year, newest Federal Reserve Governor stated that “Fed” had a printing press and was not afraid to use it. Whether this concerns you yet or not, is not purpose of this article. What should be of interest to us all is to dare look for signs of this inflationary phenomenon in other places in our lives. Then and now It’s fairly obvious when comparing everyday items such as glass bottles, cans and cars built 50 years ago to those built today. Technologies have certainly helped streamlined waste in this process, but important question here is can we buy more or less product now with same amount of money? For example, deposit for recycling a bottle of cola is now more that price of whole drink with bottle not many years ago. But let’s look deeper. For instance: • How many TV channels are available now? Do you get same value from watching? • What is cost of using foul language now compared to a number of years ago? • What is price of hours you work compared to value of your salary, health, stress, etc? • What is price of accessibility (with mobile phones, e-mail, etc.) compared to value of your (health, stress, free time)? Which is increasing / decreasing? • How much value do you receive from your taxes and all its paperwork? • What is current level of trust you have for authority figures? • What about family values? (Some Swedish children were recently asked what home was and their answer was “a place that you always cleaned”.) • Finally how much time do you have nowadays to just reflect? In each of these cases, which way is cost trending compared to its value? Can we agree that while value of each either remains same or is being diluted, cost continues to increase? The consmer society Let’s now return to subject of money and our seemingly endless need as a society to purchase more stuff. It is interesting to note that as our need for more stuff keeps increasing, values mentioned above (and many others) seem to be weakening. These values and other so called "human" and "societal" factors seem to be slowly breaking down, but in such a benign way that process does not seem to cause much concern. Just like proverbial frog who will eventually boil to death in a slowly boiling pot of water, we seem to be numbed to inflation’s effect. Yet, more we lose these precious properties and qualities that make us human, more we seem to becoming machines "stressed" to perform better. How much of your life has become about performance and effectivness? “The lights on, but nobody’s home” Some brilliant person recently coined term “human doings” to describe how many of us run around from task to task like chickens with their heads cut off. Have you ever dared to count inflation in “have to-s”, “musts” and other obligations you have in your life? Think about about paperwork inflation, alone.
| | Trust in a "digital economy"Written by Kurt Larsson
Gaining trust is one thing, retaining it is even harder. History teaches us that once trust is lost, fortunes usually disappear shortly thereafter. We may be at such a crossroads now with most popular man-made currency ever. As Margaret Thatcher was once purported to have remarked, “When you have to remind someone that you are a lady, you’re not”, which brings us to fate of U.S. Dollar…Trust a winner who believes in a higher power. The world was very different in 1944 than it is now. The United States of America was “The Arsenal of Democracy”. “God fearing” Americans were leading free world in triumph over evils of Fascism demonstrating a noble, yet friendly sense of humility and service. It probably seemed easy to trust a country made up of such down to earth “citizen soldiers” as David Ambrose once called us. On front of every Silver Certificate and sliver coin in circulation at time were words “In God We Trust”. Being “the land of free” it certainly didn’t seem to matter which god in particular you trusted while spending those dollars. It was more of a reminder, even to those of us that had not been in combat, that there was more to our multifaceted and colourful lives than that which passed in front of our noses. Up to then Americans had been used to a strong vision usually backed by strong, believable leadership. Slogans like “Manifest destiny” had been replaced by “making world safe for Democracy” yet we still acted liked we believed them deep in our souls. We had always been a spiritual country with “God on our side” and now we had proof; we won The War! With this as a backdrop, famous “Bretton Woods agreement” was signed in 1944 effectively substituting U.S. Dollar for gold as de facto reserve currency of world. The United States didn’t need much marketing and spin to sell Dollar at Bretton Woods as everyone clamoured to be on our team. By way, can you remember or more importantly, do you care who chairman of Federal Reserve Bank was during this glorious time? With all these factors supporting it, world was now invited to buy U.S. Dollars. Since they were trusted to be “as good as gold”, rest of world began buying them, with vigor. The Digital Age. Not long after Bretton Woods agreement; first Sperry Univac computer was invented. With invention of Univac Computer, digital age was born. It wasn’t too long before someone figured out that you could “make” money with computers. It wasn’t too long after that that financial community realized that you could “create” electronic money with computers too! What Inflation and Deterioration have in common: There seems to be, or at least feel like there is a strong correlation between explosive creation of electronic money and deterioration of our unified trust in our leaders’ vision and spirit. Indeed, inflation seems to affect more than our money! Many old-timers will tell you that during depths of depression in 1930’s it was very rare that anyone locked their doors, as thought of getting robbed was probably as foreign to them as an average house costing $250,000.00! Everyone was “in it” together. There was a “golden” sense of family and community that United States of America radiated out to rest of world and everyone else desperately wanted to be part of that club. From Bretton Woods onward, price of membership was now in Dollars. Pretty soon digital currencies were born and of course, daddy of them all was “Almighty Dollar”. If you are reading this article you have no doubt an understanding of what monetary inflation curve has looked like since “Bretton” Woods and its parabolic rise since subsequent invention of PC and Internet. But have we lost something less measurable yet, possibly more valuable on way? How we measure a loss of spirit or a loss of Trust The answer is that you don’t, but it is fairly easy to sense or read about in papers. One just has to look around to observe that USA of 2004 is not USA of 1944. For example, according to one study at time, biggest problem facing public high school in 1940’s was chewing of gum during class. The vision of “Making world safe for Democracy”, for those who still care, seems to have been replaced with either “The Worlds Police Force” or closer to home, “Shop till you drop”. Does “Shop till you drop” touch your soul like “Manifest Destiny”? Have you had “pleasure” of going through an airport in “The land of Free” recently?
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