Inflation Used To Be MUCH Higher... Why Does It Feel Worse Today?

Summary

The video argues that today’s cost-of-living pressures can feel worse than the 1970s inflation crisis—not simply because people remember the past selectively, but because household costs, wage adjustments, debt burdens, and inflation measurement have changed. It also cautions that consumer-sentiment comparisons across decades are imperfect.

Main Financial Points

• Inflation measures don’t capture every household’s experience. The Consumer Price Index (CPI) tracks a weighted basket of goods and services, so cheaper goods such as TVs can offset rising costs for essentials like housing, healthcare, and education. The video argues that households may feel the increases in essential expenses more than they benefit from lower prices on discretionary goods.
• Housing is treated differently in the CPI today. Before 1983, the measure included house purchase prices and mortgage interest. Today, it uses owners’ equivalent rent—an estimate based partly on what homeowners think their homes could rent for. Because rents adjust more slowly than house prices, the video says this can make measured inflation lag changes in the housing market.
• Housing has become more expensive relative to income. A typical house cost a little over three times household income through the 1980s and ’90s; by 2022, it cost about five times income, a record according to the video. House prices across many major markets rose nearly 50% in under three years during the recent surge. A typical new home in 1970 is estimated to have cost about $200,000 in today’s dollars, roughly half the current cost.
• A revised historical comparison changes the picture. The video cites research that recalculated inflation using a consistent modern methodology. It says the underlying inflation that Fed Chair Paul Volcker needed to reduce was adjusted from about 11 percentage points to around five, similar to the adjustment needed in 2022. Conversely, rebuilding recent inflation using the older method—including house prices and mortgage interest—produced an estimated peak of 18% in November 2022 and a rate above 8% at the end of 2023, compared with the published figure of 3%.
• Workers had more protection against inflation in the 1970s. Union membership was about one in four Americans, compared with one in ten today. By 1977, roughly six in ten workers covered by major union contracts had automatic cost-of-living wage adjustments. The video says that in 1979, the old inflation method could overstate the cost-of-living increase by as much as 2.4 percentage points. Social Security payments rose 14.3% in 1980. By contrast, average American pay fell behind inflation for 25 consecutive months after prices surged in 2021.
• Income pressure is central to how inflation is perceived. The video cites a survey in which 81% of respondents said prices rise faster than wages. It also says people were about twice as likely to attribute a raise to their own performance as to inflation.
• Interest rates were higher historically, but today’s debts are larger. From 1978 to 1981, the Fed’s benchmark rate rose from around 7% to over 19%, while new mortgage rates climbed from roughly 9% to above 18%. From early 2022 to mid-2023, the benchmark rate rose from below 0.1% to 5.3%, and new mortgage rates went from 2.65% to nearly 8%. The video’s point is that high rates on smaller loans may be less burdensome than lower rates on much larger loans.
• Household debt and repayment timelines have grown. Household debt rose from about 60% of annual income in 1970 to 90% today, while the saving rate fell from around 12% in the 1970s to 4%. The average new-car loan now lasts nearly six years, compared with about three years in the 1970s. The video also notes that credit cards were much less widespread in 1970, when about one in six American families had a bank-issued card.
• Homeownership is later, and mortgages persist longer. The typical first-time buyer is now 40, compared with 29 in 1981. Among homeowners aged 65 and older, the share still carrying a mortgage rose from 21% in 1989 to 42% in 2019. The average balance cited rose from $18,000 to $86,000, adjusted for inflation.
• Sentiment data are difficult to compare over time. The University of Michigan Consumer Sentiment Survey reached 44.8 in May, its lowest reading in the survey’s history and below its 1980 and 2008 lows. However, survey methods and respondents have changed. The video says online responses run about seven points gloomier than phone responses, and Chicago Fed researchers estimate the survey may read 25–30 points lower than other measures suggest. The video therefore treats current sentiment as possibly comparable to the worst of the 1970s, rather than as a clean historical comparison.

Comparison Framework

The video recommends considering:

• Inflation measured consistently across periods.
• The rate of price increases separately from the price level households already face.
• Essential expenses—especially housing—rather than only the average CPI basket.
• Wages and cost-of-living adjustments, not just headline inflation and unemployment.
• Interest costs alongside loan size, debt levels, and repayment duration.
• Consumer-sentiment surveys cautiously, given changes in methods and respondent pools.

Assets, Sectors, and Instruments Mentioned

• Housing and residential real estate
• Mortgages and mortgage interest
• Consumer debt and credit cards
• Car loans and automobiles
• Social Security payments
• Oil and gasoline, mentioned in archival news clips and in the closing reference to another video

No investment instrument or ticker is discussed.

Disclosures and Cautions

• The subtitles contain no explicit “not financial advice” disclaimer or investment recommendation.
• The video emphasizes that inflation and sentiment statistics are affected by measurement choices and are not perfectly comparable across decades.
• It includes a sponsorship segment for The Ultimate Guide to Rebuilding a Civilization, which is not an investment product.

Presenters and Sources

• Presenter: Unnamed narrator of How Business Worked.
• Sources cited: Bureau of Labor Statistics; Federal Reserve Bank of New York; Congressional Budget Office; National Bureau of Economic Research; Larry Summers and co-authors; Paul Volcker; economist Alan Blinder; economist Stephanie Stantcheva (name rendered unclearly in the subtitles); University of Michigan Consumer Sentiment Survey; Chicago Fed; National Association of Realtors.