inflation without income inflation

[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.

[PadreBrian]

The onlt jobs that have kept up with inflation over the last 8 years has been bio-tech and defense companies. That’s it.

[PadreBrian]

The onlt jobs that have kept up with inflation over the last 8 years has been bio-tech and defense companies. That’s it.

[PadreBrian]

The onlt jobs that have kept up with inflation over the last 8 years has been bio-tech and defense companies. That’s it.

[PadreBrian]

The onlt jobs that have kept up with inflation over the last 8 years has been bio-tech and defense companies. That’s it.

[PadreBrian]

The onlt jobs that have kept up with inflation over the last 8 years has been bio-tech and defense companies. That’s it.

[CA renter]

Then there are the incomes of CEOs, hedge fund managers and other sundry (successful)traders.

When we value capital over labor, we will end up with the least productive society with the greatest wealth disparity.
—————–

Inflation can be viewed in different ways. There’s credit, which can result in extreme price inflation without any income inflation (espeically with globalization) — see housing bubble, student loans/education, stocks, bonds, commodities, etc. — all leveraged. This is very dangerous, IMO, and we are seeing the aftermath of a massive, inflationary credit bubble that had really got going in the early 80s.

It will be interesting to see how far things can unwind.

[CA renter]

Then there are the incomes of CEOs, hedge fund managers and other sundry (successful)traders.

When we value capital over labor, we will end up with the least productive society with the greatest wealth disparity.
—————–

Inflation can be viewed in different ways. There’s credit, which can result in extreme price inflation without any income inflation (espeically with globalization) — see housing bubble, student loans/education, stocks, bonds, commodities, etc. — all leveraged. This is very dangerous, IMO, and we are seeing the aftermath of a massive, inflationary credit bubble that had really got going in the early 80s.

It will be interesting to see how far things can unwind.

[CA renter]

Then there are the incomes of CEOs, hedge fund managers and other sundry (successful)traders.

When we value capital over labor, we will end up with the least productive society with the greatest wealth disparity.
—————–

Inflation can be viewed in different ways. There’s credit, which can result in extreme price inflation without any income inflation (espeically with globalization) — see housing bubble, student loans/education, stocks, bonds, commodities, etc. — all leveraged. This is very dangerous, IMO, and we are seeing the aftermath of a massive, inflationary credit bubble that had really got going in the early 80s.

It will be interesting to see how far things can unwind.

[CA renter]

Then there are the incomes of CEOs, hedge fund managers and other sundry (successful)traders.

When we value capital over labor, we will end up with the least productive society with the greatest wealth disparity.
—————–

Inflation can be viewed in different ways. There’s credit, which can result in extreme price inflation without any income inflation (espeically with globalization) — see housing bubble, student loans/education, stocks, bonds, commodities, etc. — all leveraged. This is very dangerous, IMO, and we are seeing the aftermath of a massive, inflationary credit bubble that had really got going in the early 80s.

It will be interesting to see how far things can unwind.

[CA renter]

Then there are the incomes of CEOs, hedge fund managers and other sundry (successful)traders.

When we value capital over labor, we will end up with the least productive society with the greatest wealth disparity.
—————–

Inflation can be viewed in different ways. There’s credit, which can result in extreme price inflation without any income inflation (espeically with globalization) — see housing bubble, student loans/education, stocks, bonds, commodities, etc. — all leveraged. This is very dangerous, IMO, and we are seeing the aftermath of a massive, inflationary credit bubble that had really got going in the early 80s.

It will be interesting to see how far things can unwind.

[(former)FormerSanDiegan]

[quote=kev374]yes, I understand the traditional relationships – that the buying power is decreased.

However, I wanted to determine the value of the currency as how much effort it would take to obtain that money…which is how that $1000 is view as in the effort to obtain it.

I am trying to see if the money would have the same perception of value by people… in the context of how hard it is to obtain it.

If it took you 8 hrs of sweat to obtain $10 today and 5 years from now it is the same then how would you value $10? Regardless of how much things cost.

Yes, if we earned more and things cost more then something of a fixed value, that $10 would be less significant. But what if income was constant.[/quote]

Your question is a bit naive, so let’s do a thought experiment ..

In 1975, Mr. Construction boss made 30K per year in the construction business … about $15 per hour. Mom stays home. They live in a large ranch house with 7 children. They were able to feed and clothe a large family, send to private school and send 6 of the 7 went to college, and two to grad school.

Fast forward to 2008. Joe Dropout has a laborer job in the construction business making $15 per hour. He spends 45% of his income to rent a 2-BR apartment for his wife and baby. He relies on food stamps to buy milk and cannot afford insurance.

In both cases the 8 hours of labor is valued the same in dollar terms. The only difference is inflation.

[(former)FormerSanDiegan]

[quote=kev374]yes, I understand the traditional relationships – that the buying power is decreased.

However, I wanted to determine the value of the currency as how much effort it would take to obtain that money…which is how that $1000 is view as in the effort to obtain it.

I am trying to see if the money would have the same perception of value by people… in the context of how hard it is to obtain it.

If it took you 8 hrs of sweat to obtain $10 today and 5 years from now it is the same then how would you value $10? Regardless of how much things cost.

Yes, if we earned more and things cost more then something of a fixed value, that $10 would be less significant. But what if income was constant.[/quote]

Your question is a bit naive, so let’s do a thought experiment ..

In 1975, Mr. Construction boss made 30K per year in the construction business … about $15 per hour. Mom stays home. They live in a large ranch house with 7 children. They were able to feed and clothe a large family, send to private school and send 6 of the 7 went to college, and two to grad school.

Fast forward to 2008. Joe Dropout has a laborer job in the construction business making $15 per hour. He spends 45% of his income to rent a 2-BR apartment for his wife and baby. He relies on food stamps to buy milk and cannot afford insurance.

In both cases the 8 hours of labor is valued the same in dollar terms. The only difference is inflation.

[(former)FormerSanDiegan]

[quote=kev374]yes, I understand the traditional relationships – that the buying power is decreased.

However, I wanted to determine the value of the currency as how much effort it would take to obtain that money…which is how that $1000 is view as in the effort to obtain it.

I am trying to see if the money would have the same perception of value by people… in the context of how hard it is to obtain it.

If it took you 8 hrs of sweat to obtain $10 today and 5 years from now it is the same then how would you value $10? Regardless of how much things cost.

Yes, if we earned more and things cost more then something of a fixed value, that $10 would be less significant. But what if income was constant.[/quote]

Your question is a bit naive, so let’s do a thought experiment ..

In 1975, Mr. Construction boss made 30K per year in the construction business … about $15 per hour. Mom stays home. They live in a large ranch house with 7 children. They were able to feed and clothe a large family, send to private school and send 6 of the 7 went to college, and two to grad school.

Fast forward to 2008. Joe Dropout has a laborer job in the construction business making $15 per hour. He spends 45% of his income to rent a 2-BR apartment for his wife and baby. He relies on food stamps to buy milk and cannot afford insurance.

In both cases the 8 hours of labor is valued the same in dollar terms. The only difference is inflation.

[(former)FormerSanDiegan]

[quote=kev374]yes, I understand the traditional relationships – that the buying power is decreased.

However, I wanted to determine the value of the currency as how much effort it would take to obtain that money…which is how that $1000 is view as in the effort to obtain it.

I am trying to see if the money would have the same perception of value by people… in the context of how hard it is to obtain it.

If it took you 8 hrs of sweat to obtain $10 today and 5 years from now it is the same then how would you value $10? Regardless of how much things cost.

Yes, if we earned more and things cost more then something of a fixed value, that $10 would be less significant. But what if income was constant.[/quote]

Your question is a bit naive, so let’s do a thought experiment ..

In 1975, Mr. Construction boss made 30K per year in the construction business … about $15 per hour. Mom stays home. They live in a large ranch house with 7 children. They were able to feed and clothe a large family, send to private school and send 6 of the 7 went to college, and two to grad school.

Fast forward to 2008. Joe Dropout has a laborer job in the construction business making $15 per hour. He spends 45% of his income to rent a 2-BR apartment for his wife and baby. He relies on food stamps to buy milk and cannot afford insurance.

In both cases the 8 hours of labor is valued the same in dollar terms. The only difference is inflation.

[Author]

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