inflation without income 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.

[jeeman]

I agree with those who said inflation is a side-effect of the increased money supply.

Let’s say you made $2000/month, but then I gave everyone $2000 to buy that item that costs $2000. The price of that item will jump to reflect the demand. If I took $2000 away from everyone and burned it, then the demand will drop and the price of that item would drop.

Inflation has occurred in the last 10 years, disguised by rising stock wealth and home equity, due to an increase in the credit offered. People were priced out of houses, but it wasn’t considered inflation back then.

Now, house prices are dropping fast, and some traders have speculated in hard commodities, such as oil and food. Now, all of a sudden, inflation is exploding? I think not. I think the play money moved from the stock market to the real estate market to the commodities market.

As credit continues to contract, cash will be needed by banks to repair their balance sheets, leading to more margin calls. Leveraged traders will have to continue selling their equities and commodities to meet those calls, leading to a downturn in the markets.

Think of it this way…so you’re spending $300/month more in food and gasoline. Meanwhile, your home dropped in value by $2000 that same month, and your income stayed the same. Are you going to add to the demand of luxuries or reduce your demand for them? Look at Subway and Starbucks…they are offering CHEAPER food to entice you back to their stores.

Our money supply is contracting, and even more so with the trade deficit which is an outflow of our dollars from this country. We have less cash and credit than a year ago.

[jeeman]

I agree with those who said inflation is a side-effect of the increased money supply.

Let’s say you made $2000/month, but then I gave everyone $2000 to buy that item that costs $2000. The price of that item will jump to reflect the demand. If I took $2000 away from everyone and burned it, then the demand will drop and the price of that item would drop.

Inflation has occurred in the last 10 years, disguised by rising stock wealth and home equity, due to an increase in the credit offered. People were priced out of houses, but it wasn’t considered inflation back then.

Now, house prices are dropping fast, and some traders have speculated in hard commodities, such as oil and food. Now, all of a sudden, inflation is exploding? I think not. I think the play money moved from the stock market to the real estate market to the commodities market.

As credit continues to contract, cash will be needed by banks to repair their balance sheets, leading to more margin calls. Leveraged traders will have to continue selling their equities and commodities to meet those calls, leading to a downturn in the markets.

Think of it this way…so you’re spending $300/month more in food and gasoline. Meanwhile, your home dropped in value by $2000 that same month, and your income stayed the same. Are you going to add to the demand of luxuries or reduce your demand for them? Look at Subway and Starbucks…they are offering CHEAPER food to entice you back to their stores.

Our money supply is contracting, and even more so with the trade deficit which is an outflow of our dollars from this country. We have less cash and credit than a year ago.

[jeeman]

I agree with those who said inflation is a side-effect of the increased money supply.

Let’s say you made $2000/month, but then I gave everyone $2000 to buy that item that costs $2000. The price of that item will jump to reflect the demand. If I took $2000 away from everyone and burned it, then the demand will drop and the price of that item would drop.

Inflation has occurred in the last 10 years, disguised by rising stock wealth and home equity, due to an increase in the credit offered. People were priced out of houses, but it wasn’t considered inflation back then.

Now, house prices are dropping fast, and some traders have speculated in hard commodities, such as oil and food. Now, all of a sudden, inflation is exploding? I think not. I think the play money moved from the stock market to the real estate market to the commodities market.

As credit continues to contract, cash will be needed by banks to repair their balance sheets, leading to more margin calls. Leveraged traders will have to continue selling their equities and commodities to meet those calls, leading to a downturn in the markets.

Think of it this way…so you’re spending $300/month more in food and gasoline. Meanwhile, your home dropped in value by $2000 that same month, and your income stayed the same. Are you going to add to the demand of luxuries or reduce your demand for them? Look at Subway and Starbucks…they are offering CHEAPER food to entice you back to their stores.

Our money supply is contracting, and even more so with the trade deficit which is an outflow of our dollars from this country. We have less cash and credit than a year ago.

[jeeman]

I agree with those who said inflation is a side-effect of the increased money supply.

Let’s say you made $2000/month, but then I gave everyone $2000 to buy that item that costs $2000. The price of that item will jump to reflect the demand. If I took $2000 away from everyone and burned it, then the demand will drop and the price of that item would drop.

Inflation has occurred in the last 10 years, disguised by rising stock wealth and home equity, due to an increase in the credit offered. People were priced out of houses, but it wasn’t considered inflation back then.

Now, house prices are dropping fast, and some traders have speculated in hard commodities, such as oil and food. Now, all of a sudden, inflation is exploding? I think not. I think the play money moved from the stock market to the real estate market to the commodities market.

As credit continues to contract, cash will be needed by banks to repair their balance sheets, leading to more margin calls. Leveraged traders will have to continue selling their equities and commodities to meet those calls, leading to a downturn in the markets.

Think of it this way…so you’re spending $300/month more in food and gasoline. Meanwhile, your home dropped in value by $2000 that same month, and your income stayed the same. Are you going to add to the demand of luxuries or reduce your demand for them? Look at Subway and Starbucks…they are offering CHEAPER food to entice you back to their stores.

Our money supply is contracting, and even more so with the trade deficit which is an outflow of our dollars from this country. We have less cash and credit than a year ago.

[jeeman]

I agree with those who said inflation is a side-effect of the increased money supply.

Let’s say you made $2000/month, but then I gave everyone $2000 to buy that item that costs $2000. The price of that item will jump to reflect the demand. If I took $2000 away from everyone and burned it, then the demand will drop and the price of that item would drop.

Inflation has occurred in the last 10 years, disguised by rising stock wealth and home equity, due to an increase in the credit offered. People were priced out of houses, but it wasn’t considered inflation back then.

Now, house prices are dropping fast, and some traders have speculated in hard commodities, such as oil and food. Now, all of a sudden, inflation is exploding? I think not. I think the play money moved from the stock market to the real estate market to the commodities market.

As credit continues to contract, cash will be needed by banks to repair their balance sheets, leading to more margin calls. Leveraged traders will have to continue selling their equities and commodities to meet those calls, leading to a downturn in the markets.

Think of it this way…so you’re spending $300/month more in food and gasoline. Meanwhile, your home dropped in value by $2000 that same month, and your income stayed the same. Are you going to add to the demand of luxuries or reduce your demand for them? Look at Subway and Starbucks…they are offering CHEAPER food to entice you back to their stores.

Our money supply is contracting, and even more so with the trade deficit which is an outflow of our dollars from this country. We have less cash and credit than a year ago.

[drunkle]

“if there is no income inflation isn’t the relative value of the currency still held?”

relative to what? if not goods (and the cost to purchase them), what else do you do with it?

what if you’re the farmer and you pay your workers 1000/mo. they in turn have to buy their food from you. what prevents you from simply charging them more? especially if you’re the only game in town? you have price inflation without wage inflation or monetary inflation…

[drunkle]

“if there is no income inflation isn’t the relative value of the currency still held?”

relative to what? if not goods (and the cost to purchase them), what else do you do with it?

what if you’re the farmer and you pay your workers 1000/mo. they in turn have to buy their food from you. what prevents you from simply charging them more? especially if you’re the only game in town? you have price inflation without wage inflation or monetary inflation…

[drunkle]

“if there is no income inflation isn’t the relative value of the currency still held?”

relative to what? if not goods (and the cost to purchase them), what else do you do with it?

what if you’re the farmer and you pay your workers 1000/mo. they in turn have to buy their food from you. what prevents you from simply charging them more? especially if you’re the only game in town? you have price inflation without wage inflation or monetary inflation…

[drunkle]

“if there is no income inflation isn’t the relative value of the currency still held?”

relative to what? if not goods (and the cost to purchase them), what else do you do with it?

what if you’re the farmer and you pay your workers 1000/mo. they in turn have to buy their food from you. what prevents you from simply charging them more? especially if you’re the only game in town? you have price inflation without wage inflation or monetary inflation…

[drunkle]

“if there is no income inflation isn’t the relative value of the currency still held?”

relative to what? if not goods (and the cost to purchase them), what else do you do with it?

what if you’re the farmer and you pay your workers 1000/mo. they in turn have to buy their food from you. what prevents you from simply charging them more? especially if you’re the only game in town? you have price inflation without wage inflation or monetary inflation…

[kewp]

I agree with those who said inflation is a side-effect of the increased money supply.

Inflation is defined as an increase in the money supply.

Or, at least, that is the economic definition of it.

[kewp]

I agree with those who said inflation is a side-effect of the increased money supply.

Inflation is defined as an increase in the money supply.

Or, at least, that is the economic definition of it.

[kewp]

I agree with those who said inflation is a side-effect of the increased money supply.

Inflation is defined as an increase in the money supply.

Or, at least, that is the economic definition of it.

[kewp]

I agree with those who said inflation is a side-effect of the increased money supply.

Inflation is defined as an increase in the money supply.

Or, at least, that is the economic definition of it.

[Author]

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