Roger Schlesinger

The titled subjects are the talk of the financial town and yet so few understand what either really are, especially inflation, and how it relates to our economy, workers, and individuals.

Add into the mix the Federal Reserve Bank and you have misunderstanding on top of lack of knowledge and together they make up some of the greatest mistakes we ratify in our financial lives. How do I know? I see what people have done with their finances and read what people say about some of my solutions and realize they either don't understand or they can't make the moves that are necessary to protect themselves.

Inflation is caused by too much money chasing too few commodities or goods, demand push, or in some cases by a price surge in certain commodities (like lumber) that forces sudden cost increases in correlating industries (like houses) thereby forcing prices up (cost pull). These occurrences have always been with us and probably always will be in our economy.

Inflation has been mitigated in its "sting" partially because of the way we measure it. The components have changed over the years and the fact that we remove food and energy when measuring the core inflation is one of our most curious exercises. The one thing that is certain in all of our lives is that we use food and energy every day. I dare say that isn't true of the other items that make up the inflation gauge.

In 1957 gasoline was around 18 cents a gallon, in 1973 around 37 cents a gallon and now we are looking at over $3.00 a gallon. The cost of driving has risen as fast or faster than any other commodity and yet it is "volatile" and not part of the core. ( I realize that taxes add a great deal to the price of gasoline, especially in California, but that doesn't change the fact of the incredible rise in the cost to us). Milk was fair traded in California until the late 1970's at $1.26 a gallon and since that was repealed it has gone to $3.50ish a gallon.

In 1966-7 when I was dating a meal at the best restaurant, including tip, was under $10 for two people. That doesn't generally cover the parking at the "top spots" today.

I used to take my kids (3) to the Dodger games and the day would cost under $20. I can't guess what it would be today but I am sure $100 wouldn't come close. When I was a kid the movies were 16 cents and as a young adult 50 cents. Now $8 is cheap and $10 isn't unusual.

When I graduated from college my goal was $10,000 a year. This speaks volumes about adjusting your goals as you grow.

Roger Schlesinger

Roger Schlesinger's Mortgage Minute is heard on hundreds of radio stations and daily on the Hugh Hewitt radio show and Michael Medved shows. Roger interacts with his hosts and explores the complicated financial markets in order to enlighten his listeners and direct them along their own unique road to financial freedom.