inflation without income inflation

[HarryBosch]

You always value the money based on what it can purchase.

If someone gave you $10 then would you “value” that $10 more or less than if you had earned it?

Say I’m homeless, I dont work and someone gives me $10. I will value that $10 based on the amount of food and/or liquor I can purchase.

If I earned that $10 I would still value that $10 on the amount of food and/or liquor I can purchase.

[vagabondo]

The OP asked about the value of money in the context of how hard it was to obtain it. If someone gives you money, through no exchange of a good or service, you would probably perceive your effort in that exchange with infinite value but minimize the absolute value of that money received. See Paris Hilton or George Vanderbilt.

[vagabondo]

The OP asked about the value of money in the context of how hard it was to obtain it. If someone gives you money, through no exchange of a good or service, you would probably perceive your effort in that exchange with infinite value but minimize the absolute value of that money received. See Paris Hilton or George Vanderbilt.

[vagabondo]

The OP asked about the value of money in the context of how hard it was to obtain it. If someone gives you money, through no exchange of a good or service, you would probably perceive your effort in that exchange with infinite value but minimize the absolute value of that money received. See Paris Hilton or George Vanderbilt.

[vagabondo]

The OP asked about the value of money in the context of how hard it was to obtain it. If someone gives you money, through no exchange of a good or service, you would probably perceive your effort in that exchange with infinite value but minimize the absolute value of that money received. See Paris Hilton or George Vanderbilt.

[vagabondo]

The OP asked about the value of money in the context of how hard it was to obtain it. If someone gives you money, through no exchange of a good or service, you would probably perceive your effort in that exchange with infinite value but minimize the absolute value of that money received. See Paris Hilton or George Vanderbilt.

[kewp]

Inflation is an increase in the supply of money.

When you increase the supply of anything, its value relative to everything else goes down.

You are conflating price inflation with inflation of the monetary supply. The former usually follows the latter, but not always. Many (most) people make the same mistake.

In your example the purchasing power of both the individuals income and savings has decreased 50% relative to the example ‘item’.

A better example is to imagine that the guy was paid two ‘items’ a month and had one ‘item’ in the bank.

Fast-forward and he’s being paid one item a month and his item in the bank had to be cut in half. This is why inflation is called the ‘cruelest’ tax; as its really a tax on wage earners, savers and those with a fixed income.

For fun try plotting your salary over the last decade in barrels of oil instead of dollars.

[kewp]

Inflation is an increase in the supply of money.

When you increase the supply of anything, its value relative to everything else goes down.

You are conflating price inflation with inflation of the monetary supply. The former usually follows the latter, but not always. Many (most) people make the same mistake.

In your example the purchasing power of both the individuals income and savings has decreased 50% relative to the example ‘item’.

A better example is to imagine that the guy was paid two ‘items’ a month and had one ‘item’ in the bank.

Fast-forward and he’s being paid one item a month and his item in the bank had to be cut in half. This is why inflation is called the ‘cruelest’ tax; as its really a tax on wage earners, savers and those with a fixed income.

For fun try plotting your salary over the last decade in barrels of oil instead of dollars.

[kewp]

Inflation is an increase in the supply of money.

When you increase the supply of anything, its value relative to everything else goes down.

You are conflating price inflation with inflation of the monetary supply. The former usually follows the latter, but not always. Many (most) people make the same mistake.

In your example the purchasing power of both the individuals income and savings has decreased 50% relative to the example ‘item’.

A better example is to imagine that the guy was paid two ‘items’ a month and had one ‘item’ in the bank.

Fast-forward and he’s being paid one item a month and his item in the bank had to be cut in half. This is why inflation is called the ‘cruelest’ tax; as its really a tax on wage earners, savers and those with a fixed income.

For fun try plotting your salary over the last decade in barrels of oil instead of dollars.

[kewp]

Inflation is an increase in the supply of money.

When you increase the supply of anything, its value relative to everything else goes down.

You are conflating price inflation with inflation of the monetary supply. The former usually follows the latter, but not always. Many (most) people make the same mistake.

In your example the purchasing power of both the individuals income and savings has decreased 50% relative to the example ‘item’.

A better example is to imagine that the guy was paid two ‘items’ a month and had one ‘item’ in the bank.

Fast-forward and he’s being paid one item a month and his item in the bank had to be cut in half. This is why inflation is called the ‘cruelest’ tax; as its really a tax on wage earners, savers and those with a fixed income.

For fun try plotting your salary over the last decade in barrels of oil instead of dollars.

[kewp]

Inflation is an increase in the supply of money.

When you increase the supply of anything, its value relative to everything else goes down.

You are conflating price inflation with inflation of the monetary supply. The former usually follows the latter, but not always. Many (most) people make the same mistake.

In your example the purchasing power of both the individuals income and savings has decreased 50% relative to the example ‘item’.

A better example is to imagine that the guy was paid two ‘items’ a month and had one ‘item’ in the bank.

Fast-forward and he’s being paid one item a month and his item in the bank had to be cut in half. This is why inflation is called the ‘cruelest’ tax; as its really a tax on wage earners, savers and those with a fixed income.

For fun try plotting your salary over the last decade in barrels of oil instead of dollars.

[joestool]

[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.

[joestool]

[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.

[joestool]

[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.

[joestool]

[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.

[Author]

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