I've heard it quoted that the dollar today is worth about 4 cents compared to the dollar in 1913 when the Fed was created. When looked at in those terms one would expect that our standard of living has decreased by about 25 times over the past 100 years or so.
The simple fact is it hasn't. Due primarily to technological advances the average salary today buys more clothing, more boots, hammers, and horses than it did in 1913.
My question is this. Do you think future advances will out pace future inflation and provide us with a higher standard of living. That's the point isn't it? The rest is just a bunch of numbers.
Our standard of living has decreased compared to what it would have been without inflation. The standard of living has increased in spite of inflation, not because of it.
"In a modern democracy, no matter whom you vote for, the government always gets elected" -Christopher Westley
That feels like a very hypothetical question with numerous variables. I hope that future advances in productivity do out-pace inflation so that standard of living improves. Assuming that the sky doesn't fall, Mars doesn't attack, developing and matured economies don't suddenly collapse, and government is brought to heel here in the U.S., I think we'll be ok.
boohickey11, how can inflation decrease the absolute standard of living of a society? I though it promoted a relative distribution of wealth (those with first contact with the new money are richer now because they have more money and the level of prices is the same; and the ones last to have contact with the new money would lose, because they would see prices going up with the same amount of money in hands), but, in absolute terms, the standard of living would remain the same.
Inflation helps the debtor most. He gets to pay back his loan with devalued money. Despite all the crap you hear from Bernacke that's whats really on his mind
In the same way taxes do: It diverts resources from more to necessarily less productive endeavors. This is because, in the initial transaction, something is received for nothing. When the state prints money and uses it to buy bombs, resources are pushed away from things that make the world better and toward mass murder.
Luiz Mario Brotherhood: boohickey11, how can inflation decrease the absolute standard of living of a society? I though it promoted a relative distribution of wealth (those with first contact with the new money are richer now because they have more money and the level of prices is the same; and the ones last to have contact with the new money would lose, because they would see prices going up with the same amount of money in hands), but, in absolute terms, the standard of living would remain the same.
That's a really good question. So Zimbabwe and Aregentina and the Weimar Republic all have nothing to whine about. Their standard of living is the same as it ever was.
Your analysis of what happens with the new money is right. It goes to the lucky ones first etc.
But there is another aspect you don't mention. The ones who get it first get it without having produced anything. Normally you have money because you produced something, got paid for it, and now you have money to spend. So that you don't consume unless you have also produced. Or if you borrowed the money, you will eventually produce enough to pay back for your consumption.
Those lucky guys who get the free printed money, however, consume without producing anything in return, not before and not after. They bleed the country of its resources, lowering the standard of living.
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It's easy to refute an argument if you first misrepresent it. William Keizer
If you're one of the lucky ones that can borrow now at today's low interest, do it you'll be payin it back with Zimbabwe dollars 30 years from now.
Use that borrowed money to buy real estate or commodities. Don't blow it on crap.
Azure and Smiling Dave, thank you. :)
YW bro
inflation, especially at its hyper levels can cause all kinds of other problems too. You become more and more focused on the short term. As soon as you get your hands on money, you want to get rid of it immediately like a hot potato, just so that you can get your hands on as much 'stuff' as possible. There is no saving, waiting to invest in the right opportunity, passing on an offer in order to get a better deal from someone else. Its buy something, anything as quick as you can, preferably necessities, and worry about bartering with your stockpile of stuff you don't really like later.