Annual inflation rates 1975-1986
“Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man.” Ronald Reagan
MAIN TOPIC: Inflation is Upon Us
Take a look at the charts. The first one lists the annual inflation rate for 1975 to 1986. From 1975 to 86, inflation ranged from about 2% in 1986 on up to 13.58% in 1980 and a cumulative 110.36% for the ten year period.Now, take a look at the inflation rates from 1975 to 1986 (in the second chart) and compare them with those of this last decade! The cumulative inflation rate of this past decade is a paltry 28.37%. Big difference! If you bought a $50 item in 2000, factoring in the rise in inflation, that item would cost about $64.19 this year. And many goods such as Asian imports and electronics have actually declined in price.
Compare recent inflation with that from 1975 to 1986 where a $50.00 item purchased in 1975 would cost $105.20 in 1986. Now, that is a huge difference. Although you may not be thinking much about inflation now, you should be.
Practical Application; Inflation Busting Strategies
When I was a little girl, my mom bought huge amounts of toilet paper, canned goods, and other non-perishable items on sale and stored them in the basement. Although it was annoying to hunt down a roll of toilet paper in the basement; now I totally get it. During those times, with increasing inflation, buying large quantities on sale was a true inflation hedge! Recently, many individuals wait for items to drop further in price before purchasing. With high inflation, don’t wait to buy an item, if the price is good.
Begin developing inflation busting strategies now and you will be better equipped to cope with the almost certain future price increases.
Consider these shopping and investing tips:
- Stock up on sale commodity items. With cotton prices sure to rise, clean out the Hanes aisle during their underwear sales.
- Don’t forget the towels and sheets during the annual January white sale.
- Paper towels, napkins, toilet products etc. are other products to stock up on when on sale.
- Think of other non-perishables to buy in bulk.
- Avoid buying bond funds now! With interest rates sure to rise, the principal value of the fund will decline as interest rates rise.
- Keep a diversified portfolio, as the future is uncertain. It won’t protect you from market declines, but with diversification, when one investment class falls, another may increase.
- Pick up my 20 Minute Guide to Investing for time tested investing strategies in an easy to digest ebook.
ACTION STEP:
Get a notebook and label it: “(your name) Personal Finance” and keep it by the computer. Use it to keep all of your personal finance goals, thoughts, activities, and plans.
- Make an effort to buy in bulk when prices are low on standard items. (But don’t overbuy items you don’t need!)
Caveat: This article is for information purposes only and may not be appropriate for your individual situation.
What inflation busting recommendations do you have?
Instead of stocking up on commodity items, how about we think bigger? What do you think about acquiring more rental properties? If inflation is going to blow up, we might as well leverage as much as we can right now. Is that a good way to hedge against inflation? Over the long run, rental income will go up with inflation while mortgages stay the same.
retirebyforty recently posted..Epic Fail on Black Friday 2010
@Retire-Are you reading my mind? You are absolutely correct. If you have met your basic financial needs, have a 6 month savings cushion, then buying assets on sale (for appreciating assets) like financing and real estate is a wonderful idea!
I’m going to come off as sounding evil here, but I want interest rates to sky-rocket. One of my dad’s friends sold the family farm in 1980 or so and invested it in T-bills or something similar (and safe) at 18%. That’s my fondest dream – safe and high.
Jacq-So much depends on whether you are a borrower (mortgage, car, credit card debt) or lender (think CDs and bonds). Lenders would appreciate some higher rates! I just received the last coupon (interest) payment on a 20+ year bond paying 12% interest from the 1980′s! There are pros and cons to every economic scenario.
Oh I’ll be a lender.
No mention of gold or real estate?
Since you Americans can get 30 year fixed mortgages… a nice rental property could look pretty attractive.
Kevin@InvestItWisely recently posted..Walkin’ in a Winter Wonderland
Buy TIPS and I-bonds. Both of these securities keep pace with inflation.
Hi Kevin, Gold is way too expensive now with more downside than up. As Retirebyforty suggested, Real estate is on sale now, so if you have the resources, now is a good time to get into the market! In fact, I’m glad you mentioned it Kevin, for those with their other financial needs under control, this is a sweet time to venture into a rental property. (Beware, managment is time consuming and requires a nice cash cushion for those unexpected expenses)
Mark-Great suggestion. TIPS and I Bonds were designed as inflation hedges. I recommend buying individual TIPS and I Bonds and dollar cost averaging (spreading your purcases over time). Thank you for bringing these investments up!
Great suggestions!
My thing is buying stamps (that don’t have the prices on them) and bus tickets lol.
youngandthrifty recently posted..5 Tips to prevent eating out from eating a hole in your wallet
I wish I had the money for real estate right now, because that is exactly where I would be headed.
We already stock up on staples, just because I love to take advantage of sales. However, that was a great tip you gave about bonds.
Well, all commodities have shot up, not just gold.
What do you think about “black gold” ?
Invest It Wisely recently posted..Book Review- The Great Credit Contraction
@Mark-TIPS and I Bonds are a good suggestion. Although I would not put all of your cash in them right now, but dollar cost average into them. (Buy TIPs or I Bonds at regular intervals)
As for as household items, we have managed to fill 4 large bins full of various items that we got for next to nothing shopping at CVS (and a little from Walgreens)! Since we are in debt, we haven’t done much with our investments, yet. But I plan to look at them in the next few weeks!
Unfortunately, the price of many commodities have gone up. This means that investors must be willing to perform a lot of research and not just buy off of basic suggestions or historical patterns.
Khaleef @ KNS Financial recently posted..CVS Shopping for Black Friday 2010 – Saved 127- Spent 167- Made 190
@Kevin-Are you referring to “black gold” ie oil (like in the Beverly Hillbillies)? I have made a decision not to worry about having a commodities allocation in either the portfolio I professionally manage or our personal one. I believe with enough diversification across a variety of asset classes, investing in commodities is unnecessary.
. As I’m sure you know, best use of your cash is just paying off the non mortgage dept as quickly as possible!
@Khaleef-Your CVS foray’s are always impressive
very cool site. Filled me with a even better comprehension this country’s economy. Thanks a lot buddy
This is an excellent post and thanks for sharing. With rising inflation levels another anti-inflationary strategy would be to stock up on commodities themselves, in addition to commodity items as mentioned in your post, im talking silver, rice etc; all of the things that tend to do excellently in an inflationery environment. The two mentioned still remain depressed in terms of price, so still a lot of money to be made
Alex Young recently posted..The Financial Statement – A Primer
Real estate is a safe bet – but you will need to be patient and it does take work on some continual basis. I prefer diversification in the stock market…. it is easier and if you do the math it’s probably a better return.
@Alex, Inflation is certain to come, the only question is when.
@Frosty-Real estate is definitely a lot of work, there is no such thing as passive income. All income generation requires work. Only time will tell which returns outperform. It would be nice to have a look into the future.
When inflation will come and interest rates will go up there will not be too many people who will want to pay high interest rates on mortgage and real estate prices will go down.
Pay off all of your loans, fix everything around house set aside some money, buy gold coins and wait. Government will punish savers.
Good luck.
Hi Barb.
Inflation will come in next 2-3 years.
@Arthur, I agree that it’ll be hear sometime in the foreseeable future.