The Last On Inflation – For A While

My mother has been gone for decades. My father passed away a few months ago. One of my sisters has been finding old correspondence. An aunt provided a letter about a day’s outing during their 1946 Ottawa honeymoon.

One day, they saw the city from the Peace Tower, the house of commons, and the senate chambers. Had lunch in a coffee shop and then toured the canal and the experimental farm. They had dinner at the Chateau Laurier, an iconic hotel beside the parliament buildings. You could visit the same sites today.

What you could not do is this:

“We had supper tonight at the Canadian National at the Chateau Laurier, really high brow. It’s dimly
lighted generally but has a well-lighted bandstand and a swell orchestra. We had a steak and
vegetables, chicken soup, tomato juice, raisin pie and coffee, and it cost us $4.00.”

I don’t know if you have been to the Chateau Laurier lately, but you cannot get a steak dinner for $2.00 a person. The Canadian National has not survived by name, but prices at Wilfred’s, the main restaurant in the hotel now are higher. Tripadvisor points out a price range of $58 to $96 per person.

Maybe the steaks are larger now.

Assessing value instead of price

It is safe to say that dinner in the main dining room of a fine hotel would be at least forty times higher today. Should we be concerned? Maybe.

People notice the price but have intuitively put prices into a box with their income and use that intuition to decide if the price value combination is acceptable. That’s why older people have trouble. Their intuitive package is mismatched with today’s prices.

If you look back, your intuition on prices likely formed when you were in your early twenties. How much were the essentials then? What was the price of a car, a house, a week’s groceries, or a gallon of gas? We often recall those and complain when we find them ten times or more today. What we might not remember is the other part of intuition. How long did we work to get the money to pay for the gas and groceries? I recently told someone that I have become much stronger as I have grown older. When I was 20, I couldn’t have carried $50 of groceries, while today, I can do it with one hand. $50 doesn’t MEAN the same thing as it used to. Success is about noticing meaning, not just the number.

Can you overcome intuition?

Yes, you can, but you have to consciously overcome the number. It is not intuitive anymore, just rational.

You must find your multiplier. Suppose you decide 1970 is your base. You will find multiplying by 10 will give you new intuition. Some things will look very cheap while others have fallen in price, often dramatically. The price to see a movie was about a dollar. Times 10, and it still does. A small black and white TV was about $150. Times 10 and you could buy a huge, very high-quality TV today. Much cheaper. Long-distance phone calls are now negligible. Electronics are a marvel at reducing prices. Computers are amazingly inexpensive if you see what you get for a day’s pay. In 1970, an average day’s pay would not buy much more than two bytes of disk memory. Today it would buy two 4-terabyte external hard drives.

Other things are clear, too. Wine and hard liquor are much cheaper, and beer is a little more. How odd is that? Cigarettes are much more. The idea of a good 5-cent cigar is no longer a point for discussion. Most of us would be happy with a good 5-cent nickel.

Life is relative, and you must work to assign meaning to it.

The complication

Taxes are different now. One summer in the late 1930s, my father worked as a payroll clerk for a business with about 250 employees. Two of them had income taxes deducted from their pay – the plant manager and the chief engineer. Today, all 250 would have taxes deducted at the source. An interesting aside about payroll. All pay was weekly and made in cash in an envelope. Which took longer, finding the amount to pay each person or calculating the needed number of pennies, nickels, dimes, quarters, dollar bills, two-dollar bills, five-dollar bills and so on? The currency calculation and the filling of the envelopes took much longer than the calculation of the pay.

We are affected by two forms of taxes. 

  1. Ones we see, like income taxes, sales taxes, and a 1.5% tax to administer an estate. We tend to deal with those.
  2. What we don’t see, like gas taxes, sin taxes, those on alcohol and tobacco, for example, and many others buried in the price. Did you know that life insurance premiums have a 2% provincial tax built into the premium? or a 9% royalty on crude oil? How about a 10% tax on entertainment tickets? Lotteries are a voluntary yet hidden tax, actuarially designed to be 50% of the ticket price.

The government refers to them as “revenue tools.” They are constantly looking for new ones.

Our intuition is harmed because we see prices relative to our income before taxes. If you earn $6,000 per month, a tank of gas for $100 is one-sixtieth of a month’s pay, but is it really? In terms of take-home pay, it is about one forty-fifth. A tank of gas takes half of Monday morning’s work to pay the bill. If the price-to-value comparison is correct, you get a clearer idea of value.

You’ll never discover all the hidden taxes. You could assume about half the money you earn and then spend ends up with the government.

The bits to take away

Prices are contextual, and you cannot assess their value until you account for that changing context. Try to see the meaning instead of the price.

When you do, you will find many things are less expensive than they were back when.

Hours of pay per unit of purchase is a valuable metric. It dulls the spending impulse. It’s especially true for children working their first job.

If you want to understand your spending and the effect of inflation, you must learn to be ruthlessly objective; otherwise, it is just whining.


I build strategic, fact-based estate and income plans. The plans identify alternate ways to achieve spending and estate distribution goals. In the past, I have been a planner with a large insurance, employee benefits, and investment agency, a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business. I have appeared on more than 100 television shows on financial planning. I have presented to organizations as varied as the Canadian Bar Association, The Ontario Institute of Chartered Accountants, The Ontario Ministry of Agriculture and Food, and Banks – from CIBC to the Business Development Bank.

Be in touch at 705-927-4770 or by email at

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