Trend: The rate of inflation, compounding over time, really affects purchasing power.
There are several economists who see hyperinflation in our future. A high rate of inflation destroys savings and undermines confidence in paper money. Even a low rate of inflation causes erosion of purchasing power.
We should all keep an eye on the real rate of inflation, not the Consumer Price Index (CPI), which has been neutered by the government. (If you don't understand what I mean, see the videos at this link: Consumer Price Index.) For example, if your savings account pays a 3% annual interest rate and the real rate of inflation is 6%, you are losing 3% per year!
One of the reasons that gold has seen high demand lately is fear of hyperinflation.
Below are some statements from 1955. They illustrate how much inflation affects purchaing power over time.
'I'll tell you one thing, if things keep going the way they are, it's going to be impossible to buy a week's groceries for $20.00.'
'Have you seen the new cars coming out next year? It won't be long before $2,000.00 will only buy a used one.'
'If cigarettes keep going up in price, I'm going to quit. A quarter a pack is ridiculous.'
'Did you hear the post office is thinking about charging a dime just to mail a letter?'
'If they raise the minimum wage to $1.00, nobody will be able to hire outside help at the store.'
'When I first started driving, who would have thought gas would someday cost 29 cents a gallon. Guess we'd be better off leaving the car in the garage.'
'Did you see where some baseball player just signed a contract for $75,000 a year just to play ball? It wouldn't surprise me if someday they'll be making more than the President.
'I never thought I'd see the day all our kitchen appliances would be electric. They are even making electric typewriters now.'
It's too bad things are so tough nowadays. I see where a few married women are having to work to make ends meet.'
'It won't be long before young couples are going to have to hire someone to watch their kids so they can both work.'
'Thank goodness I won't live to see the day when the Government takes half our income in taxes. I sometimes wonder if we are electing the best people to congress.'
'The drive-in restaurant is convenient in nice weather, but I seriously doubt they will ever catch on.'
'There is no sense going to Lincoln or Omaha anymore for a weekend, it costs nearly $15.00 a night to stay in a hotel.'
'No one can afford to be sick anymore, at $35.00 a day in the hospital it's too rich for my blood.'
'If they think I'll pay 50 cents for a haircut, forget it.'