Wednesday, February 07, 2007

What is a dollar worth?

That's a question for which the Federal Reserve Bank of Minneapolis has an answer. They have introduced a Consumer Price Index Calculator. I tried an example:

If in 1974, I bought a gallon of gasoline at $0.99 (and I remember the shock of it going into three digits back then), then in 2007, the same gallon of gasoline would cost... $4.13. I remember when Dom was talking about the price of gasoline a while back, how when adjusted for inflation, it was actually cheaper now. And when increased fuel efficiency is taken into account, the present situation is looking even better.

I tried another one. When I first came to DC in 1980, my starting salary was $12,266, and it was just enough to support myself, living in a high-rise efficiency at $290/month. Were that episode to occur this year, I would appear to require $30,590, and that same apartment would run for $725/month. Theoretically.

But in fact, I'd be lucky to get it for under $1000. That's when the news gets bad.

The last time I bought a house was in 1983, for $86K. It should have sold in 1991 for just under $118K, but in fact it sold for $140K. In 2007 -- again, using only the cost of living as a guide with 1983 as a base -- it should cost just under $178K. In fact, even with the housing bubble deflating steadily around town, I would still be paying at least $250-300K.

I guess inflation isn't everything, is it? There is still that nagging problem with the issue of affordable housing. At this writing, the next installment on that subject is very much in preparation (with a lot of details to organize, you know?), and it should be up this week, or early next week at the latest. Stay tuned...


Dad29 said...

Don't forget Al Greenspan's "hedonic" adjustments to inflation.

David L Alexander said...

Why don't you link to me and write about it? Then I'll provide an update to this post linking to yours.

paul zummo said...

What strikes me about the market here as a fellow DC-area renter is that it is really neither a buyer or seller's market. I have a friend who has been trying to sell his house for four months and he's just had no luck. On the other hand, it's not like the prices, even if they've come down a little, are really great for many of us not so well-off would-be buyers. It seems like the worst of all worlds.

Of course, as you know from personal experience and your post highlights, rent here is just stupid. $1200 for a 450 ft. studio in DuPont. Been there done that, and that was two years ago. This place is insane.

Beanie said...

PEACE.A few more words from a man whom you dont know. The value of a dollar/Federal Reserve Note will always decrease not only because the powers at be/the government keeps producing these notes every day, it is because there is not enough gold and or silver(real money) to back these notes so they will always decrease in value. A noble man prophetcized that "There will come a day were you will see one of these notes on the ground and you will not bother to bend over and pick it up". Question??? You are a very wise man, will I be able to speak with you more frequently?PEACE,AND LOVE BROTHER.

David L Alexander said...

"You are a very wise man, will I be able to speak with you more frequently?"

You know where to find me.