The Federal Reserve wants 2 percent inflation. So do I — I think.
When I was a young man, I was 5 feet, 7 inches tall, weighed 145 pounds and was a B student in high school. My parents lived in a house worth $16,000 in a town of 25,000 population. I liked to play sports, but I also liked to draw, and — get this — I liked opera. After graduating from college, I bought a Volkswagen for $1,900 — a monthly payment I felt I could afford since I had a salary of $4,800 a year. I did not own a supercomputer, which then cost about a million dollars, and I did not fly in an airplane when I went away to college or went on vacation. That summarizes me in my time. You get the picture, right?
Sorry. You don’t, really. Because those numbers are what economists call nominal — that is, in name only, and not adjusted for inflation. You’re presumed to have considerable difficulty understanding them today. So let me make the proper statistical adjustments.
At 5 feet 7, adjusted for changes in the average height, it was like I was really 5 feet 10, and my weight, similarly adjusted, was approximately 200 pounds. For verification of this surprising expansion, I suggest you go to an all-you-can eat buffet and see for yourself the new obesity average in our America; it changes all the numbers. Looking back, and keeping in mind my adjusted weight, I think I should have played regularly on my high school football team. As it turned out, it was lucky I didn’t, because the boys who actually played in those years, when similarly adjusted, would weigh 300 pounds. They would have crushed me still. The same thing happened to my basketball chances. At 5 feet 10, adjusted, I might have been a player, because even the boys under the basket were only about 6 feet tall back then. However, adjusted for the same conditions that brought me to 5 feet 10, the taller boys were now 6 feet 7. I still couldn’t get a rebound.
It was a different story in the classroom, however. Adjusted for inflation, I’m happy to say, I was an A student, and the fact that half of the student body became A students also just tells you how smart we all were.
That $16,000 house I lived in was really worth $250,000 in today’s dollars, but had it been enveloped by metropolitan sprawl, I think it is safe to say that it would have approached $325,000. We were quite wealthy back then. Had we known, we could have taken out a bigger mortgage. As I said earlier, the population of the town was 25,000, but adjusted for today’s numbers it was as if it were 60,000. We should have had a better hospital, more cineplexes and certainly more restaurants, like now.
The fact that I liked sports made me a normal boy, I think. But adjusting for today’s improved psychological understanding, and considering my interest in drawing, plus my taste for opera, made me to some extent feminine — 20 percent, I’d say. This wouldn’t be inflation in the normal sense, but it is an expansion of knowledge and insight, and surely that should be measured, too. To be fair, of course. And accurate.
A new car, like my first Volkswagen — which was a simple one, with no gas gauge, no air conditioning and about 40 horsepower — would have cost about $25,000 in today’s dollars, if I could find one that primitive in order to make the proper comparison. I would have no problem paying for it, however, since my adjusted salary would be $50,000 a year. But a tank of gas no longer would cost $5, as it once did.
That’s why I didn’t own a computer. That million-dollar machine of my youth was worth, in today’s dollars, only $399. I’m just being fair. If we’re adjusting for inflation, we must also adjust for deflation. That computer I didn’t own saved me a lot of money. And the trip to Chicago that used to take 12 hours by car now takes just one hour by air. I gained 11 hours in my life, free to use however I want. And if I wish, I can see an opera “live from New York” for the price of a movie ticket. Deflation has its benefits, too. I hope the Fed gets it right.
Donald M. Hall, of Minneapolis, is a retired stockbroker and author of “Generation of Wealth.”