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Thread: Inflation Calculation

  1. #1
    My Mail is Forwarded Here Undertow's Avatar
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    Inflation Calculation




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    I've been reading quite a bit of LIFE Magazine from the mid to late 30's. As I go, whether in the articles themselves or in advertisements, I often see prices for goods and services listed. Same goes for old catalog scans from Sears, etc.

    In order to have a better grasp of the era, and in order to get a feel for how an advertisement or article would have been received, I've been using an inflation converter to determine what something would cost today. (Like this one.

    I'd like this thread to discuss US currency inflation and prices of goods and services, and how accurate the "rule of thumb" conversion really is. Or, perhaps a discussion on how something then would have actually been more attainable than now.

    For my first example, I would refer to men's suiting of the late '30's. It is quite common to find a higher quality three piece suit of worsted wool priced in a Sears catalog at $15; shoes would be about $9; a hat roughly $9 as well; ties merely $2. This entire ensemble would convert to $242 for the suit, $145 for the shoes and hat each, and $32 for the tie. Yet, one must ask how accurate this is? A nice three-piece suit for $242 would be a steal today, same with the shoes and hat. The tie seems about par.

    What do you folks think?
    "We all die. The goal isn't to live forever, the goal is to create something that will." ~ C. Palahniuk

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    Bartender LizzieMaine's Avatar
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    I've always been very wary of "inflation calculators" because they don't take into account factors beyond the rise and fall of the dollar. For example, if you bought a copy of Life magazine in 1942, it'd set you back a dime. The Inflation Calcuator says you'd pay $1.40 for that same magazine today, which is ridiculous -- when Life folded for the second time in 2000, the cover price was already up to $3.99, and nowadays a quality national magazine is often $4.95 or $5.95 a copy. Clearly the inflation of the dollar isn't the only factor contributing to that, and the calculators don't take those other factors into proper account.
    Go out and fight so life shouldn't be printed on dollar bills. -- Clifford Odets

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    Bartender jamespowers's Avatar
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    First of all, we are no longer on the gold standard. Our currency simply floats. If you instead calculated the price of something in equivalent gold to gold dollars then you would have something there. Gold was $34 per ounce in 1934. It is at about $1,600 per ounce today. If you figure that a suit cost 15/34 of an ounce of gold then an equal amount of gold today would be about $706. The shoes and hat yield high numbers $423 each. A $95 dollar tie is also what you could purchase with an equal amount of gold today. Interesting. I think I could buy any of those items today with those numbers. An interesting exercise but not too scientific.
    I need to think about getting paid in gold.
    People think they are so rebellious and original, when really they are just banal, boring and dumb.

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    My Mail is Forwarded Here Undertow's Avatar
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    Hmm, dividing by the gold standard - now that's a trick worth using! But then wouldn't that still push the items into an almost unattainable price? I mean for goodness sake, a $650 Plymouth would convert to $30k! Or a turntable at $14.50, while relatively expensive in that era, would convert to roughly $680! I'm sure those things were typically out of someone's range, but that seems extreme. On the other hand, I think it's a more realistic conversion is some ways than the automated one I posted. If $.10 equals out to about $4.70, that almost makes sense.

    However, I've been thinking along Lizzie's lines of reasoning - some costs have arbitrarily risen, while others have fallen. I wish I could get a handle on which was which! Haircuts might cost $.25 at the barber in 1938, but would that really convert out to $4 (auto convert) or $11.75 (Gold Standard conversion) today? In fact, typical barber cuts range anywhere from $13-20 anymore. Either way, that's higher than the conversion. Grumble...

    How about this: would it be reasonable to say that Howard Hughes Lockheed, which he used to fly around the world, and which cost him roughly $60k in 1938, should convert to something like $970,000 or maybe even $2,823,000.00? The man was rich, after all.
    "We all die. The goal isn't to live forever, the goal is to create something that will." ~ C. Palahniuk

  5. #5
    Bartender jamespowers's Avatar
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    Quote Originally Posted by Undertow View Post
    Hmm, dividing by the gold standard - now that's a trick worth using! But then wouldn't that still push the items into an almost unattainable price? I mean for goodness sake, a $650 Plymouth would convert to $30k! Or a turntable at $14.50, while relatively expensive in that era, would convert to roughly $680! I'm sure those things were typically out of someone's range, but that seems extreme. On the other hand, I think it's a more realistic conversion is some ways than the automated one I posted. If $.10 equals out to about $4.70, that almost makes sense.

    However, I've been thinking along Lizzie's lines of reasoning - some costs have arbitrarily risen, while others have fallen. I wish I could get a handle on which was which! Haircuts might cost $.25 at the barber in 1938, but would that really convert out to $4 (auto convert) or $11.75 (Gold Standard conversion) today? In fact, typical barber cuts range anywhere from $13-20 anymore. Either way, that's higher than the conversion. Grumble...

    How about this: would it be reasonable to say that Howard Hughes Lockheed, which he used to fly around the world, and which cost him roughly $60k in 1938, should convert to something like $970,000 or maybe even $2,823,000.00? The man was rich, after all.
    Realistically, what would a Plymouth cost today?

    No one took account of how much Hughes actually spent because he was known to be kind of unpredictable. About $3,000,000 sounds like something he would spend on a plane. How much did the Spruce Goose cost again?

    I kind of pulled the gold standard out of the hat but checking the results, I kind of like what I see. All those years to get that finance degree might have taught me soemthing.
    People think they are so rebellious and original, when really they are just banal, boring and dumb.

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    "A List" Customer Bluebird Marsha's Avatar
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    I've thought of this (very rarely, but I did think about it). The inflation calculator is a simple tool, and I guess it works to give a very general grasp of the thing. But when I try and "price" something, I think of it in terms of percentage of salary. Many professions have had wildly fluctuating levels of pay (compared to the general populace) so- I picked military base pay scales as my "unit of conversion". In 2012, my pay is roughly equivalent to a modern Major or Lt. Commander. Base pay for those ranks during WWII was about $250 a month. At $35, that suit and shoes is 14% of a 1940s era Lt Cdr.'s monthly pay. 14% of my monthly pay is a bit over $650. I don't know a lot about men's suits, but $650 would buy a nice, but not top shelf, women's business outfit- shoes included.

    The $650 Plymouth, would in terms of my hypothetical O-4, be about 2 and half months salary. In my 2012 pay, that would be about $12,000. I know it's not perfect, but it seems a bit closer to what dollars would buy in different time periods.
    Last edited by Bluebird Marsha; 03-21-2012 at 08:12 PM.
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    Bartender jamespowers's Avatar
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    Quote Originally Posted by Bluebird Marsha View Post
    I've thought of this (very rarely, but I did think about it). The inflation calculator is a simple tool, and I guess it works to give a very general grasp of the thing. But when I try and "price" something, I think of it in terms of percentage of salary. Many professions have had wildly fluctuating levels of pay (compared to the general populace) so- I picked military base pay scales as my "unit of conversion". In 2012, my pay is roughly equivalent to a modern Major or Lt. Commander. Base pay for those ranks during WWII was about $250 a month. At $35, that suit and shoes is 14% of a 1940s era Lt Cdr.'s monthly pay. 14% of my monthly pay is a bit over $650. I don't know a lot about men's suits, but $650 would buy a nice, but not top shelf, women's business outfit- shoes included.

    The $650 Plymouth, would in terms of my hypothetical O-4, be about 2 and half months salary. In my 2012 pay, that would be about $12,000. I know it's not perfect, but it seems a bit closer to what dollars would buy in different time periods.
    That sounds like a good measure but I suppose it would be subjective on what level of pay you use and where you are in the country. Base pay can be geographical and based on a certain standard of living where you are. Over here, I couldn't live on what someone in the midwest could live on. Housing being the number one cost difference.
    People think they are so rebellious and original, when really they are just banal, boring and dumb.

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    "A List" Customer Bluebird Marsha's Avatar
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    San Rafael, CA. Beautiful place- but the housing costs? OUCH! Unfortunately I know what housing there used to be. My great-uncle bought his house there- in the mid-60s. BUT, without knowing the exact price comparison, I'm guessing that a O-4 could live quite nicely in the 30s; if he lived in the Philippines, Hawaii, or Tennessee. Boston, New York, or D.C.? Not poverty row, but certainly not as lavish. I didn't even try and add in the variables: combat pay, location allowance, etc. EEK!

    Certain cases, like San Francisco housing, stereo equipment, or computer gear just don't translate well. The housing in the Bay area is astronomical in price increase. I think it's a case of having to toss out comparisons on the far ends of the scale.

    If you could find a profession in San Francisco, circa 1930s, that provided an equivalent lifestyle to what you currently have, and then come up with some "rate of exchange"?
    Last edited by Bluebird Marsha; 03-21-2012 at 08:38 PM.
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    Bartender jamespowers's Avatar
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    Quote Originally Posted by Bluebird Marsha View Post
    San Rafael, CA. Beautiful place- but the housing costs? OUCH! Unfortunately I know what housing there used to be. My great-uncle bought his house there- in the mid-60s. BUT, without knowing the exact price comparison, I'm guessing that a O-4 could live quite nicely in the 30s; if he lived in the Philippines, Hawaii, or Tennessee. Boston, New York, or D.C.? Not poverty row, but certainly not as lavish.

    Certain cases, like San Francisco housing, stereo equipment, or computer gear just don't translate well. The housing in the Bay area is astronomical in price increase. I think it's a case of having to toss out comparisons on the far ends of the scale.
    In the 30s the housing was closer to what it was around the rest of the country. After WWII and during for that matter, housing costs increased quite a bit and have stayed there. That is one of those cases where inflation is arbitrary---more or less based on the weather. No snow=more money.
    People think they are so rebellious and original, when really they are just banal, boring and dumb.

  10. #10
    One of the Regulars
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    Also keep in mind that inflation is not calculated on individual items, but all items as a group. As with any statistics, there are going to be inaccuracies based on singular items that behave differently than expected.

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