Posted by: Josh Lehner | January 12, 2015

Ron Swanson Inflation

We’re going to start Monday off with something fun. Tomorrow starts the 7th and final season of NBC’s Parks and Recreation, which is one of my favorite shows. Ron Swanson, the libertarian Parks Department Director not only is comedic gold but has many fascinating personality traits. Chief among them are his eating habits and his lack of trust in fiat money (he has no bank accounts and stores his money in gold.) Now that the aging middle-manager is approaching retirement, I was wondering how well he is set-up for the next phase of his life. In particular, what has the price of gold done to his household budget and how have commodity prices impacted his favorite foods? (There’s quite a bit to analyze here. I did this for fun recently. Ask my wife.)

Ron is possibly best known for his love of breakfast foods, specifically bacon and eggs. Unfortunately for him, the real price of bacon and eggs in the Midwest is about as high as it has ever been. 2 lbs of bacon and 2 dozen eggs retails for about $14 today, up from around $10 for much of the past 20 years. However, even with the recent uptick in grocery store prices and decline in gold prices, the cost of bacon and eggs as measured in ounces of gold is still considerably lower than in recent decades.

SwansonBacon

Another Swanson favorite is the Turn ‘n Turf. Here, similar to bacon and eggs, the real price has increased considerably in recent months. Prices are back to the mad cow disease scare days of the early to mid-2000s. However Ron’s long-run game of investing in gold is still paying off for him so far, as Turn ‘n Turf measured in ounces of gold is still lower than in much of recent years.SwansonTurf

However, while the libertarian Ron may dislike the government in principle, his household budget is being squeezed from all sides. The costs of his favorite foods are increasing, while the price of gold is falling, however so are his real wages. Local government wages in Indiana are effectively flat in the past decade and down about 3 percent in recent years. As such, Ron needs to spend a higher share of his current income on his food than ever before.

SwansonWages

To sum up, Ron is currently in pretty good shape although recent trends are worrisome. He faces two major risks to his outlook for both his current lifestyle and his retirement.

First, commodity price swings can wreck havoc on not only food prices but also the overall value of his assets since he is clearly not diversified in his savings and investments. Food prices are notoriously volatile, but do represent a risk nevertheless. However the price of gold is the lynchpin for Ron’s savings and lifestyle. So far his gold investments over the years have served him well, however the price of gold is falling — down about one-third in the past couple of years — but it still remains higher than in the 1980s and 1990s. Second, while public sector budgets are coming back, local government employment in Indiana isn’t growing (about 5% below pre-recession levels) and wages are falling. Furthermore, while many states’ pension funds are underfunded, Indiana’s appears to be in worse shape than the typical states according to a Morningstar report. Ron may be living the good life now in a cushy middle-manager job, big gold investments and a new family, however the outlook is highly uncertain.


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