I’m starting to rethink my deflationist stance.
My basic Austrian training says that as applicants for jobs increase and wages decrease, that’s deflation.
As housing prices continue to plummet, irrespective of a dead cat bounce, that’s deflation. And with my new computer being half the price from a few years ago with three-times the power, that’s deflation.
However, I must admit that shrinkage is running rampant, and most assuredly, that is inflation?
Let me explain.
Recently, during one of my cross country sojourns, I was between flights in the City of Brotherly Love, Philadelphia, PA.
Since it was too early for one of their famous Philly cheesesteak sandwiches (7:30AM), I opted for a breakfast sandwich. My choices, of course, were egg and cheese, egg and cheese with bacon, egg and cheese with sausage, and egg and cheese with ham.
It certainly seemed there was no scarcity of egg and cheese.
Normally, I defer to the sausage add on, but this time I thought I’d live dangerously and go for the Black Forest ham.
As I arrived at my departure gate and opened my sandwich to add some ketchup, I saw what I thought was ham, but couldn’t quite be sure.
I asked the couple sitting next to me to indentify the innards of my sandwich. The guy, with no real interest, casually said “eggs.” The woman, who had a little more interest, said “eggs and something.”
This piqued the curiosity of the guy, and upon further examination, the three of us all identified it as “a semblance of ham, one-inch long and ¾-inches wide.”
Considering half the sandwich was four-inches long and three-inches wide, the ham looked a little sparse, to say the least.
I then recalled to my inquisitive sandwich analyzers that one year ago the exact same sandwich featured ham which filled the entire sandwich. The shrinkage of the most costly item was 75%, yet the price, cheerfully announced, was still the same at $4.95.
You don’t have to be a rocket scientist to know that less of a product at the same price is just as inflationary as the same quantity of product at a higher price, maybe even more so. Oh well, they had me.
If I wanted to eat, I had to take off my economist hat, at least for breakfast. And by the way, don’t even get me started regarding bags of potato chips.
That’s definitely shrinkage as an art form.
Along with his 40-years of dedication in the financial services industry, Bill is the President and CEO of GPSforLife, has recently authored a highly successful book entitled 44th: A Presidential Conspiracy, publishes his dynamic monthly financial newsletter MacroProfit, and faithfully continues his third decade on the radio with It’s All About Money, which can be heard weekdays on Money Radio in Phoenix and in podcast form on his website (and on smartphone apps) published at billtatro.com weekdays at 5pm Eastern. Bill can be reached via email at email@example.com and on Twitter @tatroshow.