It is often claimed that since 1913 the value of the dollar has fallen 95% or similar. That may be so, but how do you respond to "yet in real terms, wealth and incomes are much higher than in 1913."
You work hard for a year and then someone steals your computer. On net, you're still better off. Problem?
Money And Prices (by Joseph T. Salerno)
Capital investment has allowed workers to be much more productive than they were in 1913 and hence to earn more in real terms. It has also allowed (together with competition) for goods to be made cheaper, hence allowing people to save more money. Capital investment is obviously linked to technological progress: John Deere starts marketing a new, much better tractor. Farmer saves and buys the new John Deere and becomes instantly much more productive than his neighbor using a horse-drawn plow. Same thing with threshers, harvesters, nitrogen-based fertilizers, computers etc.
Of course it's impossible to say if the rate of capital investment could have been higher with less or no devaluation and how this would have affected incomes and wealth: the law of diminishing returns is always a constant.
Good question. I've came across this too and was somewhat puzzled. Correct me if I'm wrong, but wouldn't it be true to say our nominal incomes rose instead of real incomes? Since, the dollar today is worth much less than the dollar of 1913. So our purchasing power is lower but our incomes are higher because of the increase in the money supply. I would like to hear more thoughts on this.
On a related note, this kind of reminds me of a recent post about the price of gold versus the dollar decline since 1913. (It was by this same OP, in fact).
I'd be interested to see further discussion about the discrepency between the value of the dollar and the price of gold.
No Austrian or any economist worth their salt ever claimed that the economy would cease to grow simply due to moderate inflation.