13 Jan 2017 Stamps Just Jumped Another Cent!

The price of a postage stamp just went up again. While a one cent increase in a postage stamp probably isn’t going to hurt anyone other than mass mailers, which isn’t necessarily a bad thing, the ever-increasing cost of stamps serves as a good reminder of the ever-increasing cost of everything else.

Fifty years ago, that’s well before email, one could send 20 notes to friends or checks to creditors for a dollar. Twenty years later that ratio had dropped to five letters for a dollar and we now stand at two.

But in the last thirty years prices of almost everything but healthcare and the occasional wild swings in energy, have seemed relatively stable. Take a look at the chart below to see how the rates of inflation in each category from stamps, to milk, to new homes have slowed in their rate of price increases.

A significant reason for the declines in the rate of price increases has been that our economy is not growing as fast as it used to grow. Another is that productivity (the average output produced relative to the costs incurred or resources consumed) has remained relatively high keeping costs down. In other words, producers of goods and services have been more efficient through the use of technology to keep prices down while satisfying demand.

Another reason that prices have remained low in the US is that our huge national debt has not yet become a problem. The US dollar remains the global currency and will likely continue to be so for the foreseeable future. As long as the dollar is the global currency, we remain relatively immune to the global economic forces faced by all other nations: That is, large national deficits in a given country drive up their borrowing costs (interest rates), which in turn drive up prices (inflation) in that country.

It is likely that our economy is on the verge of higher growth in the next few years as taxes and regulations fall. Dramatically increased federal spending on infrastructure will further serve to stimulate the economy. And, if healthcare costs can be reigned in, those savings among businesses and consumers alike will be directed toward more productive economic growth. And lastly, unless things change in our attitudes toward the nation’s debt, when the US dollar no longer serves as the global currency, we will face the same piper every other country faces – the bill will come due.

Whether or not we see rising prices greater than we have experienced in the past three decades, inflation remains one of the most important elements of financial planning. Even at 2% inflation, a dollar today buys only 82 cents worth of a thing or service ten years hence. If your plan does not adequately address the continuing threat of rising prices, you risk finding out well down the road when it’s too late to do anything about it. Let us help ensure you will meet every important goal you value, even as the price of those goals rise steadily in their costs.