Growing or Shrinking
Sunday, October 10, 2010 at 6:05AM I think it is a miracle that our economy grows at all. I can't say that I have an intricate understanding of the way we calculate GDP or inflation. But here are the things from my life that are pulling the deflationary lever:
Computers: In 1988 I bought at 286 machine for $5,000 -- now I buy computers for less than $1,000.
Cell Phones: In 1990 my cell phone bill was $600 per month. It is still $600 per month but I have 11 phones and a handful of data devices on it.
Housing: I do pay more for housing because my family is bigger and we have upgraded our house. But I don't see any reason to expand any further and at 30 years old, my house is a long way from wearing out. On a larger scale, we have about 15% vacancy in housing units (empty houses, rental units, and other unoccupied inventory) I would say it will be a while before we need more housing as a nation.
Cars: We just bought a car for about the same price as the last new car I bought in 2002. And this one is nicer.
Media: I pay less for my phone, internet, cable TV, music, and movies than in the recent past.
Travel: We seem to get great deals on airfare and hotels whenever we decide to travel. We may be traveling more that we used too -- so this could be a net increase.
Healthcare: Our family spending on healthcare -- even with insurance -- goes up significantly every year.
Education: My kids are now in private school because I could not risk a public education. Up a bunch here too.
In the end, more items are going down or staying flat than items going up. The ones going up, healthcare and education, are going up a lot. So my personal net GDP change is up. This "growth" is pretty much a demographic thing -- my kids are growing up and requiring more medical attention and more education spending. Without those two things, my individual GDP change would be down.