To make a simple comparison about price inflation, I wanted to use an item everybody is familiar with, so I picked a McDonald's Big Mac. Whether you like them or not, you know what a Big Mac is. Two all beef patties, special sauce, lettuce, cheese, pickles, onions on a sesame seed bun. They are $4.99 for just the sandwich at my local McDonald's. If you're old, like me, you remember the 1970's jingle above.
Prices are going up, on all kinds of different things. Everybody's starting to complain about the price of this or of that. That's called inflation, and in reality it's a "stealth tax" the powerful people in this world use to fuck us all over and nab some of our money. In a "normal," reasonably healthy economy, the financial people try to keep the inflation rate at about 3%. So if something costs a $1.00 now, it will cost $1.03 next year. That 3% actually steals a lot of buying power away from people over time, but nobody whines much about 3% per year, we let it slide.
But we are not in a healthy economy, and haven't been since at least 2007, and even then, it's arguable. The Fed, the people in charge of screwing us all financially in the U.S., could not get hardly any inflation to happen for the last couple of years, and then, this spring, it shot up. Now the official CPI inflation rate is about 5.4%. That cuts out food and energy, which, of course, are things we buy a lot of, and that rise in prices even more. The official CPI inflation rate is pretty much always lower than what real people are actually paying for everyday items.
I'll get into why inflation shot up, and is staying up, in a future post. But prices are spiking in some things, rising slowly in others, and about the same in a few things. Some people are talking about "high inflation," and others are mentioning "hyper-inflation," in the business media. So here are some numbers to compare those different levels of inflation. In the 1970's, inflation peaked at about 6.55, dropped t, and then rose to 13%, dropped, then went back up to almost 15% in 1980, to give you and idea of the highest U.S. inflation rates in modern times.
Like I said in the caption above, a McDonald's Big Mac is now $4.99 at my favorite McDonald's. Here's what that Big Mac would cost with different rates of inflation over the next two years.
Above average inflation- Using a $4.99 Big Mac as an example:
5% annual inflation- October 2021- $4.99, Oct. 2022-$5.24, Oct 2023- $5.49
High inflation (near the highest rate hit in the 1970's)-
10% annual inflation- Oct. 2021- $4.99, Oct. 2022- $5.49, Oct. 2023- $6.04
Really high inflation-
25% annual inflation- Oct. 2021- $4.99, Oct. 2022- $6.24, Oct. 2023- $7.80
Baseline Hyper-inflation (there is no official definition, but 50% per month is considered the lowest level of hyper-inflation, generally)
50% per MONTH- Oct. 2021- $4.99, Oct. 2022- $645.30, Oct. 2023- $83,574.03
Yes, with hyper-inflation, a $4.99 Big Mac would cost $83,574 in two years.
(I did the hyper-inflation numbers by hand, and rounded to two decimal points each step, so your figures on a calculator may vary a bit)
Yes, with the lowest level of hyper-inflation, prices going up 50% every month, a $4.99 McDonald's Big Mac would cost $83,574 in two years. Now you understand why some people are so freaked out about hyper-inflation.
So what will our actual inflation rate be in 2022 and 2023, and beyond? Looking at everything I see happening now, probably between 10% and 25% at times. We should have a big stock market and real estate market crash coming soon, and if those happen, inflation will slow down, for a while. But my best guess now is that real world inflation, what we will actually be paying on everyday items, will bounce between 5% and 25% in the next 2-3 years.
Just assume virtually everything you buy will rise in prices dramatically in the next 2-3 years. If that's the case, how to you live your daily life? Think bout how you get paid, in particular. More ideas on all this in future posts.
I'm not trying to diss McDonald's, I like a Big Mac now and then, and decided to use it as a basic example of how prices rise at different inflation rates. I could have used any well known item. So there's a comparison of rates we are likely to see in the next couple of years, and rates we hope we don't see.
Hyper-inflation is when the government or central banks just keep printing or creating new money (fiat currency) with no gold or other stable asset backing it. The value of money goes into a downward spiral until the currency is worthless. This has happened to EVERY fiat currency in history, and will happen to ours at some point (but not necessarily soon).
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