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While watching Antiques Roadshow last night (I know… exciting life, right?) I saw a great example of the insidious effects of inflation. The show featured a guy who had brought in a huge (and rather ugly) “slit drum” from Papua New Guinea for an appraisal. If you’re not sure what I’m talking about, it’s basically a big, hollowed out log sitting on a couple of smaller logs.
Anyway, he had apparently bought the drum in 1976 and got what he thought was a steal of a deal… $3k, marked down from the original price of $6k because the shop was going out of business. He’d had his eye on it for awhile and decided to swoop in and buy it during the going-out-of-business sale.
So after talking to the appraiser, what did he learn? His drum was worth $3k-$5k now. Not too bad, right? It held it’s value, and maybe even increased a little bit. But did it really?
This particular show was recorded in 2010, so I fired up my favorite online inflation calculator and punched in the relevant numbers. And guess what? His $3k investment didn’t really turn out that well. As it turns out, $3k in 1976 would have been worth $11, 359.95 in 2010.
Now sure, his drum could’ve (according to the appraiser) been worth 10x more if it had been from the 19th (instead of 20th) century and had been in better condition. And sure, he got to enjoy it over the years (if it’s possible to enjoy an enormous, hollow log), but the larger point still stands…
While inflation is often almost invisible from one year to the next, it really adds up when considered over longer periods of time. In the 34 years under consideration, the value of a dollar fell to roughly 1/4 of its original value. Yikes!