Money is a subject much on my mind these days. Though gas is routinely selling for more than $4.00 a gallon where we live, it is our mortgage that really makes me think about money. We love our house, and we are very happy with it (to date). It is also sucking up a lot of the excess capital that we used to spend on travel and eating out. There is no cushion in the monthly budget anymore; there are only things we need this month, a couple things we can afford this month, and things that will have to wait until some other month. And that savings account that used to make up our "rainy day fund"? It's still there and growing during the first six months of the year... but that money is all spent, on car insurance and property taxes in the last half of the year. I don't believe we are "house poor" (yet), but we are "house frugal".
The cause for all the increased costs in the Geek household crystallized recently while reading some of the responses to an interview with Nan Mooney in Salon.com: inflation. The response pointed out that devaluation of the currency occurs when an excess of capital is injected into any economy. That is what happened during the 1970's when the United States Treasury attempted to reduce the impact of high oil prices and soaring government debt by pumping up the money supply by literally printing more money. It is also what Wall Street and the mortgage brokers did in the early 2000's by making credit far too damn easy to get. Buoyed by all this additional "funny money" (created out of thin air through various financial derivatives to fund outrageous mortgages for people who couldn't really pay), housing prices more than doubled when salaries didn't. My salary has risen by a very healthy percentage since 2000, but it can't keep up with growth in the price of housing. Armed with half the capital I had in 2007, I could have purchased a home with a mortgage payment much more in line with what I was paying in rent. So even though the yearly rate of inflation over the last 8 years has not risen above four percent based on the Consumer Price Index, I have to think that the number has to be well into the double digits somewhere if the cost of housing is figured in. Say hello to our old friend stagflation. It's been 30 years, but you had to come back, didn't you?
(A part of me secretly has to think that the arrival of stagflation must be presaged by the appearance of hip-huggers and bell-bottoms... making the fashion choices of Britney Spears in some part a direct cause for the decline and ruination of America as a whole. It's a comforting thought.)
I can see the unease that people have with the value of their money based on how much talk a return to the gold standard gets these days. People want their money to feel like it is worth something... and the idea that a paper dollar is backed by a measured amount of gold certainly provides sentimental comfort. Yet, I think the idea rings hollow. The idea that you can dig up value intrinsically out of the earth is a lot scarier to me than creating it on paper based on a well-researched set of economic indicators. Besides, moving to the gold standard would do nothing to stop the kind of change in cost structure caused in the last eight years by the availability of tremendously easy credit -- credit card companies create the illusion of new money every time they issue you a credit card. And how many of the gold standard advocates would give all their credit cards, their car loans, and their mortgages? Not many, I fear.
on 2008-05-20 at 5:58 p.m.
The Wayback Machine - To Infinity And Beyond