The Matthew Ebel Economic Index

Podsafe artist Matthew Ebel has a popular album titled “Beer and Coffee“, not coincidentally two of the most consumed beverages by college students around the country. As a demonstration of how economic data as a whole can leave out things that are important to you as a college student, we present (somewhat tongue in cheek) the Matthew Ebel Economic Index, looking at countrywide historic and current beer & coffee prices as a way of judging inflation.

Here are the charts! Beer first, then coffee.

Price of beer per 16 oz. serving, 2004-2007

Price of 1 pound of roasted coffee, 2004-2007

Notice that beer’s price has steadily increased per 16 oz. serving in the last 3 years while coffee has been all over the place. What does this tell us? Well, if you consumed largely beer, you’d have to allocate more money each year to buy the same amount of beer. That’s inflation. Meanwhile, the cost of a pound of ground coffee has been all over the place – largely due to the fact that it’s an imported product, which means it’s subject to far more fluctuation than just economic conditions inside the United States, and is especially influenced by fuel and transportation costs.

What does this have to do with student loans and financial aid? Well, it’s all about understanding inflation – inflation means that the dollar in your pocket today is worth more than the dollar in your pocket tomorrow, particularly if you consume a lot of beer. The charts clearly show that $1.02 would buy you a can of beer in 2004, while you’d need as much as $1.16 in mid-2007 – and if you drink an average of a beer a day, that’s $51/year extra.

That’s why maximizing cash flow is so important – and a good way to do that is student loan consolidation. Likewise, if you take out private student loans that are indexed to the LIBOR rate, and you also happen to buy a lot of ground coffee at the supermarket – keep an eye on the price. A sudden spike in coffee prices likely also means that your interest rates on your loans are going up, too. Hey, that in turn might increase your beer consumption – so keep an eye on the Matthew Ebel Economic Index. Oh, and buy his album. It’s quite good.

Data derived from the US Bureau of Labor Statistics Consumer Price Index Average Price Data 2004-2007 for US cities; indexes are for 1 pound of ground coffee, roasted, and malt beverages.