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For Younger Generations, First Lesson In Inflation

Samantha Kobor, 14, who learned about inflation in fourth grade, unloads groceries at her Great Falls home. She says her allowance of up to $20 a week doesn't go as far as it once did.
Samantha Kobor, 14, who learned about inflation in fourth grade, unloads groceries at her Great Falls home. She says her allowance of up to $20 a week doesn't go as far as it once did. (By Lois Raimondo -- The Washington Post)
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By Kirstin Downey
Washington Post Staff Writer
Sunday, April 13, 2008

Economic theory is leaping out of the textbook and into real life for people in their teens, 20s and 30s, who are experiencing inflation for the first time.

Julie Catan, 23, was used to her regular pizza special: two large pies delivered to her house for $20. But when she called recently to place an order, the restaurant owner told her she would get only one large pizza and a side salad for that price.

"Why is it so much money?" Catan, a college student in New York visiting her sister in Alexandria, recalled asking. "What happened to the deal?"

The owner blamed it on inflation: Flour costs more, he said. Catan had to think back to remember the meaning of the word.

"I learned about it in social studies class -- I think it happened, like, during the Great Depression," she said recently, as she strolled down an Alexandria street with her friend Amy Mason, who has noticed prices rising as well.

"It's, like, $3.50 for a bagel, and it used to be $1.50," Mason said.

For two decades, Americans have been spared the pain of fast-rising prices. The Federal Reserve had effectively kept inflation at bay by carefully moderating the pace of lending, mainly by raising and lowering interest rate to speed or slow economic activity, but the patterns have been disrupted by easy credit, financial instability and surging demand for commodities on the global market.

The last time prices rose markedly was in the 1970s and early 1980s, when double-digit inflation led to wrenching economic recessions. In 1980, inflation reached almost 14 percent, but it has been lower than 3.5 percent for a decade.

But inflation is back. Prices have risen 9.2 percent since 2006 for groceries, gasoline, health care and other staples. It comes as wages continue to languish. The median family income has dipped 2.6 percent since 2000, or almost $2,000 a year.

Across the region, parents and grandparents are sharing with their children stories about hard times and how their relatives coped, a common pattern when economic eras change, said Lisa Wise, executive director of the Center for a New American Dream, a Takoma Park-based nonprofit that promotes consumer education and a thriftier approach to living.

"Money is very emotional," Wise said. "There is a psychological undertone in talking about the economy. It triggers a family's sense of their own history and their own family's experience."

Rising prices might bring an end to the "immediate gratification" culture in the United States, Wise said. People raised in the 1930s were highly conscious of the value of the dollar and spent carefully, she said, but Americans have since developed careless spending habits. Others have not had to worry about looking for ways to reduce spending.


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