Will Your Dollar Buy What You Want?
What’s a dollar worth these days? Does anyone really know? What most people think is that a dollar no longer buys what it used to.
But is that accurate?
What Determines The Value Of A Dollar?
Would you pay a million dollars for a painting by one of the great masters? Would you pay $1,000 for a set of golf clubs? Former President Nixon’s home just went on the market for $75 million — any takers?
Prices are nothing more than perception. If you want to own a masterpiece and you have the money there's no problem is there?
If golf is your passion why not play with the same clubs the best golfers in the world use? Money is a tool to make things happen. But it only has value if you can trade it for things only you want.
The Buying Power of A Dollar
In 1965 I made $2.50 an hour working in a factory that made glass bottles. That $2.50 had the buying power of $18.63 in 2015 dollars. But things cost a lot less back then.
The question is why did they cost less, and why do they appear to cost more today?
Let’s Build A Car
When Henry Ford began building cars he had a workforce of 14,000 people. He increased their pay to $5 a week. Twice what everyone else was paying.
The popular story is that he wanted his workers to be able to afford to buy his cars. That’s not the reason. Henry wanted to attract the best workers from his competitors and reduce his turnover of people doing the same repetitive job day after day.
As he improved his assembly line process he was able to make more cars with fewer people. As a result he could afford to start paying fewer people more and attracted even better employees without increasing payroll costs.
More people with more buying power were added to the economy and they were able to buy more and better things.
People began investing and improving their products and services which commanded higher prices to satisfy the growing demand of customers with increased buying power.
Some Final Thoughts
If a product or service can improve my life what is that worth? It’s priceless. If I am able to produce more with less effort what’s that worth?
Thirty years ago a blog like this would not have been possible. I would type these thoughts on a typewriter, have to have them reproduced by a printer, and then somehow distribute them to a limited amount of people. Not remotely profitable.
Now I type on a laptop, upload the story to our website, and millions can read it all over the world for a few pennies.
A dollar has no value if there is nothing to buy. A dollar has more or less value depending on its ability to access something you want. How much you want it defines the true value of the dollar.
If a buck is too much to pay for a candy bar then there is no perceived value in buying it. It’s overpriced.
But if you really need a sugar high then it might be perceived as a bargain.
But either way the candy bar still costs a buck. Only the perceived value in the mind of the buyer has changed.
What’s valuable to you today?