From Charles Hugh Smith’s Of Two Minds blog:
It’s starting to feel like a $5 bill is the new $1 bill: everything that could be purchased with one or two dollars not that long ago is now $5 or even $10. A few days ago I was enjoying the Butte County Fair in California’s farm belt (the Central Valley), and it seemed like a rural county fair was a price baseline that was far enough away from the urban artifice of $100 meals at fancy bistros to reflect the statistically elusive real-world inflation.
Everything was $5, or close to it: the carnival rides for kids: $5. The games (ring toss, etc.): $5. Funnel cakes, cotton candy, etc.: $5.
Whatever wasn’t $5 was $10: pulled pork sandwiches, etc. There was almost no need for $1 bills, except at the admission booth: adults, $8 per day; kids and seniors, $4.
So let’s add up the costs for a family of two adults and two kids. Let’s say the kids each get four rides — that’s 4 x $5 = $20 x 2 = $40. Each kid gets two food items: $5 x 2 = $10 x 2 = $20, and gets to play two games: $5 x 2 = $10 x 2 = $20. That’s $80.
The parents get something to eat and maybe play a game or two: that’s another $40. The admission fee is $16 for adults and $8 for the kids, $24. Parking is $5.
The family spends about $150 at the county fair for a day. Add an extra kid or a few other purchases and the cost pushes up to $200.
This trend of $5 being the minimum purchase price and outings costing $200 is not unique to county fairs. Some friends attended a San Francisco Giants baseball game recently, and they were delighted to buy seats online for a discounted price of $64 each. Add in $25 parking (or $20 in BART train fare) and a few $10 cups of beers and $10 hotdogs, and it costs $200 for two people to attend a major-league baseball game (at least in a desirable locale with a winning team).
Now I readily confess to being frugal. Not making much money for extended periods of time tends to encourage frugality. Frugality is also the only way most of us non-silver-spoon types can accumulate capital (savings) to invest in ourselves and our own enterprises.
Two-hundred dollars seems like a lot of money when I think of what else it can buy. Two-hundred dollars bought all of the gasoline for our 2,000-mile camping trip last summer (our 1998 Honda Civic gets 40 miles to the gallon on the highway), and all of the groceries for our household for a month. (We have a garden, eat low on the food chain and shop almost exclusively at Costco and ethnic markets.)
Two-hundred dollars will buy a new Skil 77 worm-drive Skilsaw ($149.99), or a new designer-label suit at a premium outlet. (After being dragged to the outlet by foreign friends awhile back, I bought an excellent Calvin Klein suit for less than $200 that will last decades.)
Meanwhile, earned income is declining when measured in purchasing power. The median household income in Butte County is about $43,000, and $54,000 nationally.
Courtesy of chartist extraordinaire Doug Short, here is a chart of the changes in median household income since June 2009:
How long can households afford $200 outings as their real (adjusted for purchasing power) incomes continue eroding?
We are constantly reassured that inflation is near-zero — 2% annually or less. On the ground, it seems that stuff manufactured in the global supply chain is still relatively cheap, as are energy and food — at least compared to what they cost elsewhere, or could cost if supply chains get disrupted.
There are no limits on the cost of government services or government-controlled sectors such as healthcare. Our city garbage service fees just jumped from $356 quarterly to $453, a 27% increase. Note to Federal Reserve: 27% is not 2%.
Our monthly healthcare insurance (paid entirely by us, as we’re self-employed) leaped $300 per month over the past few years, from $900 per month to $1,200 per month. These increases add up to thousands of dollars a year. That is not 2% inflation.
Clearly, healthcare, government services, events, food purchased away from home and live entertainment are increasingly unaffordable to the bottom 90%.
Photo Credit: The.Comedian