Oops, did I say, “as money cheapens”? The notion that money gets cheaper, is a hard concept to understand. It was especially hard for my dad. Dad is not around anymore. And as he grew older, it was increasingly difficult for him to understand why the price of things had changed .
He felt cheated. Things just should not cost so much. We had a lot of conversations about the price of a Coke. To Dad a Coke cost a nickel. You put a nickel in the big red machine and a nice cold bottle of Coke came out. Whereas if Dad wanted 8.5-ounce Coke in his final years he would have had to fork over about $2.00. He just couldn’t understand. And he sure as hell wasn’t going to give someone or some machine two dollars for a nickel Coca Cola!
I would say “Dad, look at this bottle of Coke. Has it changed in any way?”
“Looks the same to me” He would say.
“Then what has changed, Dad?”
“Not a darn thing except the price. People are fools to pay that!”
I would hold up two one-dollar bills. “Dad this is what has changed. Dollars are cheaper than they used to be. It takes more of them to buy things because they are cheaper.”
“Dollars don’t get cheaper! People don’t buy money.”
“Yes, they do Dad. People buy dollars all the time. People from other countries will buy dollars when they come over for a visit using the money from their own country. You can also buy dollars with goods and services. When dollars become cheaper, people who make things or provide a service want more of them for the thing they are offering in exchange.”
There are factors that make things more expensive. If the availability is limited, competition for the limited supply can drive up price, land for example. Regulations can make the cost of building a product or delivering a service more costly. Changes in a product’s composition or in the scope of a service can also increase the cost and thus the price.
But don’t let the politicians fool you. When they talk about inflation what they really mean is that they are making cheaper dollars. The thing about dollars is that once we got off the gold and silver standard, there was no longer any limit on the number of dollars available. Our government can print all the dollars it chooses to print. With low Interest rates where they are, you could say money has become almost free. In effect, people will rent you money for a very small fee. [The exception being credit card debt where the lender charges for high bad debt risk] The more dollars there are in circulation the less precious they are, and the less people are willing to pay to get them. Today if you have extra dollars some banks may even start to charge you to store them for you. And if you are shopping with dollars, it takes more of them to buy things.
“That’s why you have to fork over $2.00 for your nickel Coca Cola, Dad. Those two dollars are only worth a nickel!”
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For signed copies of books by Tom Collins, go to TomCollinsAuthor.com. Unsigned print and eBook editions are available from Amazon, Barnes & Noble, and other online bookstores. Audio versions of The Claret Murders and Diversion are available from iTunes, Audibles and Amazon. eBook editions are also available through Apple iTunes’ iBook’s Store and Smashwords.com.
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