Friday, June 10, 2011

Honest Abe

The amazing World Wide Web reports today that a man “stumbled” on $17,000 cash in the middle of a sidewalk.  First, why doesn’t this stuff ever happen to us, or people we know?  Second, the man turned it into authorities and “had no urge” to keep any of it (how noble).  What would you have done?  Think of all the ways this money could have worked for this man.  And if he was truly selfless, couldn’t he have done something really great to share it with the rest of us?  This man could have thrown the best party ever on this side of the Mississippi – we could have truly been the new generation of party people (just as JLo says we are).  Thanks a lot for doing the right thing.  Way to have a moral compass.

Given how much stuff costs these days, there may come a time when our Honest Abe (appropriately from Illinois) may wish he held on to that money.  Prices are always increasing over time, and not just for the goods and services we buy and consume.   It’s hard to miss the sizable taxes and other “fees” companies charge that are associated with the stuff we buy (try buying flowers online and we see that the shipping can cost more than the flowers!).   Given that we are increasingly buying stuff from other countries (imports), keeping aware of import prices can help us understand how our ability to spend (“purchasing power”) may be affected.  This is because the price we pay for imports, whether consumed directly or as an input into something we will eventually consume, will determine the ultimate price we pay for our everyday stuff.  In other words, because imports are so connected with the stuff we buy, the prices of imports are going to affect how far we can stretch our dollars.  Data released today shows import prices went up by 12.5% over the last year, or by 4.5% if you exclude petroleum (oil).  Let’s hope our dollars are stretchy.

In case you missed it, a large part of the price hikes we see (and the “fees”) has to do with petroleum (read: oil) prices over the past few years.  Data released today shows that from May 2010 to May 2011 crude oil import prices increased by 45% (although prices did show a slight decrease in the last month).  While paying at the pump is the most obvious sign of the price increase, high oil prices affect everything around us – from the transport of our goods to the energy needed to produce those goods (like cars).  You try going for a summer with no air-conditioning, see how many friends you have at the end.

Maintaining our quality of life is not getting cheaper.  Much of our everyday expenses depend on oil prices in some form or another.  Over the past 2 years (Q1 2009 to Q1 2011), the amount we spent on petroleum imports increased 104% (though it increased only by 26% in the last year, still not great).  Looking at real imports (adjusting for prices), it becomes clear price increases were entirely to blame (and then some!).  Honest Abe, can you honestly tell us you couldn’t think of better things to do with that $17K?

(Bureau of Labor Statistics, Bureau of Economic Analysis, Yahoo News)

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