Inflation over the Years

The US has always and will always have inflation. In Finance there is a statement that a dollar today is worth more than a dollar in the future. This is due to inflation, and an investor must make more return than the inflation rate in order to accept the investment.

This makes the average consumer question what they should do today. There are two choices, a consumer can buy a product today or risk the product being more expensive in the future. We are going to consider that consumer X has the funds to buy the product today.

This scenario is best seen with coffee. When a consumer goes to the grocery store, they may notice coffee is continually rising in price. However, the US government has placed an import tariff, or tax on the American citizen; but in a way coffee has experienced double or triple digit inflation.

Inflation is usually caused by product input prices increasing. Labor is always increasing and base commodities are traded on the open market; and can rise and fall at will. For example AI facilities recent demand for silver has caused silver to reach a record high. Everyone that works wants to make more money, so labor cost will always increase across the economy.

Sometimes industry collude, an illegal practice, and all agree to raise prices across a sector. Apartment rents are a common example. No matter what location a person visits in a city, apartment rents are usually very close in price. I am in no way suggesting that apartment complexes are practicing collusion.

The Bureau of Labor Statistics compiles prices in a weighed average to form the Consumer Price Index or CPI. The index is based on a current price of goods compared to the base year of 1983.

To sum up this blog post Inflation will always exist. As long as we do not see inflation levels of 1000 percent it is ok. Inflation each year should be around 3 percent or less. We should never expect to see deflation in CPI. One product occasionally shows deflation or a decrease in price; Crude oil and gasoline for example. Due to the current political environment, deflation in the price of oil will not be happening anytime soon.