In 1964, my parents bought the house I would grow up in for $20,000. Today, Zillow says the house is worth $1.2 million.
“Wow!” you might think, what a tremendous jump in prices. The house today is worth 60 times more than it 57 years ago.
Here’s the real question: Is the house worth more, or is the dollar just worth less? Let’s look at the value of the house in ounces of gold instead of dollars:
In 1964, the average price of gold was worth $35.25 an ounce, so the house was worth 566 ounces of gold. Today, with gold trading at around $1,880 an ounce, the house is worth 638 ounces of gold. Considering that my dad finished the basement and turned the attic into two bedrooms, making a two-bedroom bungalow into a four-bedroom house, that extra 72 ounces of gold is a reasonable premium.
I think we can argue that the value of the house didn’t change, but our measuring stick (the U.S. dollar) did.Continue reading “Some Real World Examples of Inflation that Devalues Your Dollars”