[quote=kev374]It is an agreed upon concept that inflation lowers the value of savings and decreasing the purchasing power of the currency. But here is my question, if there is no income inflation isn’t the relative value of the currency still held?
For instance, say an item costs $1000 today and someone earns $2000/month and has savings of $1000 to exactly afford that one item.
Now forward some time period, that item costs $2000, earning is still $2000/month and savings is $1000 (forget interest income).
In both cases it still takes 15 days of earning to result in a savings of $1000. So in terms of “amount of work” required the value of the savings has not gone down.
Does this even make sense? I’m just trying to look at this from a different lens.[/quote]
Makes perfect sense: In nominal terms, your work still earns the same $1000. In real terms, the value of your work was cut in half.
Real is what matters.
