A Four-Wheeled Measure of Inflation

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by Eric Peters EricPetersAutos.com

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Uncle says inflation is only robbing us of 2 percent of our wealth each year. (That is what inflation does – it undermines the value of the cash you have – unless the cash you have is increased by an amount equivalent to the increase in inflation – which for most of us does not happen.) More reputable sources such as John Williams’ ShadowStats claim the actual figure is closer to 6 percent.

Since I write about cars for my living, I have another measure: The year-to-year increase in the price of cars that are the same this year as last year. What are called “carryovers” in the jargon of the car industry. If a given make/model of car is carried over to 2013 without any changes relative to the 2012 version of that car, then the price ought to be about the same – or even less, given that it’s no longer the newest, latest thing.

But in fact, it is almost always more.

The 2013 Ford Transit Connect I just reviewed (see here) is a case in point. The 2012 version of this vehicle carried an MSRP – or base price – of $22,035. The identical in every respect 2013 version, however, has an MSRP of $22,265 – a difference of $230.

Now, let’s dissect this a little. On the face of it, that $230 increase is not exorbitant – it works out to about a 1 percent uptick relative to the MSRP of the 2012 Transit. But, one should also take into account that whatever funds one had available last year are – by the government’s own admission – devalued by at least 2 percent. Which means, the typical person – that is a person, whose income doesn’t uptick along with inflation – needs at least 2 percent more Fed Money Money to this year to make the same purchase he could have made last year. Which means, at minimum, we have a 3 percent uptick in the amount of Fed Money it takes to buy a 2013 Transit Connect vs. a 2012 Transit Connect.

And using the Transit Connect as an example is being over-generous to the private banking cartel that styles itself the “Federal” Reserve. Because the Transit is a model that’s not been updated significantly since its launch in 2010 as a 2011 model. Thus it is a three-year-old model, and one that’s not hugely popular, either. Such factors tend to depress prices (in real terms). Let’s look at what may be a more relevant example:

The Fiat 500 micro-car was introduced here as a brand-new model in 2012. It had an MSRP of $15,500. The identical 2013 version of the Fiat 500 is priced $500 higher – at $16,000. That’s about a 4 percent uptick, year-to-year. Which means, you’ll be paying about six percent more to buy a 2013 Fiat than you would had you bought the same car in 2012. That six percent tracks exactly with the number touted by Shadowstats.

Now, to be fair, it’s true that a number of 2013 model new cars “only” cost a couple hundred bucks more than their 2012 equivalents. But the thing to focus on is they all cost more than their 2012 equivalents. These rising-for-no-other-reason prices are tangible proof of inflation. And of our impoverishment. Each year, we have to come up with more Federal Reserve “notes” to purchase a given item. Cars are no exception. They continue to get more costly – not so much in real terms, but in terms of the amount of money – “notes,” actually – it takes to buy them.

Over time, the amount is absolutely shocking – because it is vastly more than even the 6 percent annually reported by Shadowstats. How much more? Here’s an example:

Regular readers of my column know I own a 1976 Pontiac Trans-Am. I’ve owned this car for 20 years – and am only the second owner the car has ever had. I have the original window sticker from 1976, when it was brand-new. The base price was $4,987. In current (2012) Fed Funny Money, that transmutes into $20,281 – an almost exactly four-fold increase in the quantity of Federal Reserve “notes” one would have to possess today in order to travel back to 1976 and buy a new Trans-Am.

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Eric Peters [send him mail] is an automotive columnist and author of Automotive Atrocities and Road Hogs (2011). Visit his website.

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