It's a damn good thing people on fixed incomes don't live to be 400 and don't have to hold all their savings in cash. Aside from the basic nonsense of projecting purchasing power over periods in which what you can now purchase didn't exist.
This is of course also nonsense, but the one good that has existed that entire time is land. Manhattan was purchased for 60 guilders in 1623, projected to $24. According to Bloomberg, the estimate of Manhattan land value in 2018 was $1.74 trillion. Amusingly, thanks to the magic of compounding, that actually only implies a 6.5% average annual inflation rate.
Of course, land is a capital asset and expected to appreciate, but this is granting the Hacker News inflation hawks worst case that inflation rates should include nominal price increases in capital assets.
I'm having trouble finding decent data on this, but it looks like a guilder averaged about 10g of silver at the time? So saying Manhattan was worth 600g of silver, that's about 21.16 oz. The present value of Manhattan in ounces of silver is 62,142,857,142. That is 5.674% annual inflation denominated in silver.
Not bad for the dollar, I guess? Less than 1% per year worse decrease in purchasing power compared to silver?
I have no idea how the website I was looking at computed a dollar to guilder conversion rate a century and a half before the United States existed, though.
It genuinely does not matter whatsoever how much $1 buys you at any given time. It's a unit, like a liter, except one whose definition changes over time.
Roughly speaking, you can approximate this in your head by vintaging a dollar. A 2019-dollar is worth more than a 2020-dollar. They're different 'things.' But it doesn't matter because...
Your job is not to save money. Your job is to save value. You save value by exchanging dollars for investments. It's a medium of exchange and an intentionally-lossy short term store of value.
A currency should be (1) predictable (2) stable (3) fungible and (4) cheap and easy to exchange. It only needs to hold its value for as long as it takes you to either invest it or spend it on productive assets. Any longer than that is a non-goal.
Wages have kept pace with inflation. You can argue they should be higher but that's a social policy issue not a monetary policy issue. Without inflation they would have just been flat in notional terms. In a deflationary environment they would have gone down in notional terms. That part doesn't matter.
If you want to make things better for the lower class and reduce inequality, go talk to Congress. Vote for stronger unions, vote for a higher inflation-pegged minimum wage, vote for a wealth tax, vote for an estate tax, vote for universal healthcare. Stop tilting at windmills.
> Your job is not to save money. Your job is to save value
I could not disagree more. For much of human history, and most of American history, saving currency was exactly how you saved value. You already created value in exchange for the money; now you should be able to hold on to that value until you want to spend it. The fact that putting money under your mattress is no longer a viable strategy is why we have massive and growing wealth inequality. It is horribly unrealistic to assume that every person can or should become financially savvy enough to make smart investments in the global economy, and it is naive to think that just buying some index is efficiently allocating capital.
> Wages have kept pace with inflation.
Wages have barely kept up with CPI [0], which is not true inflation (see my other comment on this thread). While I don't agree with most of their economically illiterate proposed solutions (minimum wages, wealth taxes, etc.), the people clamoring about a living wage have a point these days. It makes sense that CPI and CPI-adjusted wages will always be a flat line, by the way. I recently learned that the CPI basically just measures the annual median American's budget via their consumer spending survey, which is of course directly related to wages.
The average person doesn't need an "investment strategy". They "invest" most of the money buying stuff they actually think might help them, and the rest goes in a savings account, index or pension fund where businesses that do have a strategy use it to generate returns. On the other hand, it's better for the average person that need access to capital to grow businesses and create jobs that people with significant holdings of capital have some downsides from not letting anybody use it.
Imagine a wealthy person in 1635 has 1% of the dollars in the US. Their investment strategy regards actually using those dollars to help people as too risky, so they instead bury it in the ground. Four centuries later, thanks to millions of non-wealthy people working billions of hours and some very clever inventions and investments and no thanks at all to the wealthy miser, 1% of the US comprises many of the world's successful businesses and modern cities full of technology. Does the heir of the wealthy miser have a rightful claim on 1% of four centuries of other people's labour and capital being put to better use if he digs up the dollars? I would say no.
A contrived example ignoring the inheritance taxes on whoever digs it up, but an interesting point to address.
Consider:
1. The money supply can grow without inflation, as GDP grows (via fractional reserve banking).
2. The number of years (400) is irrelevant -- the question is, does an heir deserve anything? I would argue that a value creator has the right to pass on wealth, and the government has a right to tax it (inheritance tax).
3. You are ignoring how someone came to acquire 1% of the money supply in the first place. They must have created a tremendous amount of value. How much further into the future did they push forward society in acquiring that wealth? Years? Decades?
Finally: I am not advocating for a deflationary currency. I think 1% inflation is a reasonable concept. The Fed aims for 2%, but measures it with a CPI that is broken, and so the true inflation rate ends up being something like 3.5% or more, which causes all sorts of problems, most notably wealth inequality and asset inflation. Not hyperinflation, but not a picnic, either.
1) I'm glad you agree that the money supply should still grow and that fractional reserve banking has its uses (many critics of inflation do not). Of course it is also fractional reserve banking that generates the inflation, and whilst it is in theory possible for the Fed to force inflation down to zero with higher interest rates, that actually benefits the rich who lend the money more than the poor who borrow it, even before we get into deflation threats.
2) I agree with both your points on inheritance, but subtracting six or seven generations of inheritance tax from the original example still leaves our inheritor with the economic output of multiple modern cities their capital was not used to build, as opposed to a few plantations, villages and exploration parties (and it's not too difficult to envisage scenarios where the inheritance tax is skipped: if the gold bars are simply found under treasure trove laws, for instance)
As for 3: have you looked at the sort of people that held enormous wealth in the 1600s? Most of them inherited it from the feudal system. If anything, their concentrations on wealth held society back rather than pushed it forward, especially when they were disincentivised from doing anything with it. (and the less said about how some of the actual self-made millionaires of the era plundered their wealth, the better...) I'm sure other people have pushed society on and been suitably rewarded for it, but that doesn't mean that choosing to hold it back in future by preventing access to the capital accumulated should be cost free. Investment isn't risk free; noninvestment shouldn't be either.
If we are assuming nothing changes, comparing now to 400 years ago is unproductive, and there is no point hypothesizing if this person was Napoleon-esque.
In a more realistic, modern interpretation, Rockefeller sold his assets and buried his wealth circa 1900. Rockefeller did, undoubtedly, push forward industry a huge amount. While he is considered a monopolist, it was never the detriment of consumers. Kerosene prices fell dramatically over Standard Oil's tenure.
If he hid 1% of the money supply in a trust after paying all inheritance taxes and fees, to be opened today (let's say 1% of real GDP in his time), his wealth today would be about 0.02% of real GDP. His heir experienced tremendous inflation, in terms of their influence on the economy, whereas their buying power stayed roughly the same, in this hypothetical non-inflationary world.
Sure, in this different hypothetical world with no deflation or inflation the Rockefeller heirs preserve rather than increase the buying power of their capital by refusing to allow it contribute to growth for several decades. That doesn't necessarily sound deserved either.
Especially when we consider that zero inflation is achieved by higher interest rates, generating higher compounding returns for the wealthy who do invest, imposing higher borrowing costs on everyone else, and leading to slightly lower growth compared with a modest, predictable rate of inflation. Probably more recessions too, since struggling companies can't cancel pay rises they never award and probably go straight for redundancies. These aren't upsides for people who don't have piles of cash they're uninterested in doing anything with
They buried it, remember, they didn't invest it into CD's with high interest rates. If they did put it in a bank, then your whole point is moot, because any bank that pays interest is actually lending your money to generate that interest, so the capital was actively involved in the economy the whole time.
An aside: pre-central banking, that isn't how interest rates really worked. Inherently, interest rates increase with inflation. The opposite exists only at far below-market interest rates as an artificial byproduct of the way central banks typically inject money into the economy (by buying cheap/low interest government bonds), which paradoxically contributes to inflation.
The Rockefellers (and anyone else burying their money) don't earn the high interest rates, but higher interest rates for everyone else are necessary to push inflation down to zero. Other generally wealthier savers will benefit from that compound interest, but anyone who borrows money will be worse off. That's a lot of productive poorer people's purchasing power reduced to preserve that of people who choose not to participate in the economy
Anyone who borrows money is better off in an inflationary environment because your loans are denominated in the dollars over the year of issue, but you repay them in inflated dollars.
This means anyone with a mortgage, a credit card, or any other kind of loan debt.
> I could not disagree more. For much of human history, and most of American history, saving currency was exactly how you saved value. You already created value in exchange for the money; now you should be able to hold on to that value until you want to spend it. The fact that putting money under your mattress is no longer a viable strategy is why we have massive and growing wealth inequality. It is horribly unrealistic to assume that every person can or should become financially savvy enough to make smart investments in the global economy, and it is naive to think that just buying some index is efficiently allocating capital.
Actually, predictably very low long term rates of inflation was one of the main causes of inequality for much of the period of human history for which we have reliable tax data (18th century to the beginning of the 20th century). When inflation is predictably low, and economic growth is low (as it has almost always been - the majority of growth is tied to population growth), the wealthy only need a modest after-tax rate of return on their capital in order to stay ahead of inflation and increase their relative wealth basically without bound. If inflation is high or erratic, then those debts which the wealthy rely on quickly disappear. As the chart in the OP shows, this was basically true in the United States throughout the 19th century and up until the eve of WWI, with the notable asterisk of the Civil War; it helps explain increases in inequality in the antebellum period and through the Gilded Age. It's even more clear if you look at the Insee statistics for CPI in 19th-century France, where inflation was consistently low and no disruptions on the level of the US Civil War occurred. (France on the eve of the first World War was staggeringly unequal - although the United States is fast heading towards that mark.)
> I could not disagree more. For much of human history, and most of American history, saving currency was exactly how you saved value.
For much of human history we pooped in the street and murdered each other with reckless abandon - then we found a better way. I'm not sure the rose colored glasses mean much here.
That may have been how we did things in the past, but there's no reason to couple a medium of exchange (short term) and a store of value (long term). There's really no justification for it, and the economy has been much better off for it. Stability has improved dramatically over a gold standard.
> The fact that putting money under your mattress is no longer a viable strategy is why we have massive and growing wealth inequality.
As I explained these are completely unrelated. You're conflating a social policy issue with a fiscal policy issue. There's no reason to believe that if inflation were 0% wages would not have remained exactly constant in notional dollars, and if there was deflationary currency they wouldn't have just gone down in notional dollars.
> It is horribly unrealistic to assume that every person can or should become financially savvy enough to make smart investments in the global economy, and it is naive to think that just buying some index is efficiently allocating capital.
> Wages have barely kept up with CPI [0], which is not true inflation (see my other comment on this thread).
Agree to disagree.
> While I don't agree with most of their economically illiterate proposed solutions (minimum wages, wealth taxes, etc.), the people clamoring about a living wage have a point these days.
> For much of human history we pooped in the street and murdered each other with reckless abandon. I'm not sure the rose colored glasses mean much here.
Is this a straw man or a red herring? Try to avoid your logical fallacies on HN, regardless.
> That may have been how we did things in the past, but there's no reason to couple a medium of exchange (short term) and a store of value (long term). There's really no justification for it, and the economy has been much better off for it. Stability has improved dramatically over a gold standard.
There is a reason. Normal, hard-working people can thrive under that simple system, and wealth inequality does not systematically increase to the betterment of the financially savvy. Which is exactly what is happening in our inflationary utopia you are describing. Where have you been? I don't know what metric you are using to define stability, but keep in mind bear markets are the only periods in American history where wealth inequality reliably decreases as capital is reallocated [0]. Staving them off at all costs benefits the wealthy more than the many.
Betterment, which you linked, is a free market solution to a policy problem, but it's about 50 years too late, and unless they capture 100% market share, they aren't going to solve the problem going forward (and of course they will scoop some nice fees off your savings).
> Agree to disagree.
With data?...
All of your points hinge on CPI being a correct measure of inflation. It isn't [1]. CPI quite literally measures what typical Americans are buying, and how much of it they are buying. I.e. their budget. A budget directly set by their wages.
Btw, re: #2, you linked to a Forbes opinion piece. Forbes opinion section is basically a glorified Medium. Not only is that write-up from 2004, so almost 18 years old, it was written by someone unaffiliated with Forbes. I would encourage you to put as much stock in a Forbes opinion piece as something you read on Medium. In a lot of was its worse because it lends them the credibility of Forbes - but you wouldn't believe the garbage you find mixed in there.
Some people would naturally respond to the content of the article. Others would naturally appeal to authority or ad hominem the author. Some food for thought.
CPI ostensibly worked the same way in 2004, by the way. Based on your other comment linking the definition of CPI, it seems like you have no idea how it's calculated. Even I didn't know the details until recently -- I just knew the numbers weren't matching up with my models and very obvious price data.
So here's how it works. In the US, a consumer expenditure survey is obtained by the BLS [0]. This determines what items account for typical Americans' spending, and in what quantity, to determine weights [1]. Price data is obtained, with in-house selected indices and hedonic adjustments [2]. These prices are multiplied against the weights, summed, and reflected as a ratio compared to the previous year. The Wikipedia page provides a nice summary [3].
What is the problem with this? Well, the problem is in the consumer expenditure survey.
If wealth inequality is stagnant, this is actually a decent measure of inflation in so far as it affects people's personal expenses. However, if wealth inequality is increasing (and the assets and expenses of the wealthy are not factored into this survey, which they are not), inflation can only increase so much as median Americans' wages increase (plus their debt). When prices are increasing, Americans buy dramatically different amounts of the expensive items (you can see that in the weights in [1] in the mid 2000's when gas prices varied significantly) to fit their budget, under-weighting the items that are manifesting high inflation. Inaccurate hedonic adjustments and any other adjustments done behind closed doors could also account for why CPI veers so far from independently calculated inflation measures like the Big Mac Index, but the core of the problem is that the inflation weights are reactionary to inflation and there isn't much of a delay on letting weights change each year.
So, that is why real wages adjusted for "inflation" is a straight line.
> Some people would naturally respond to the content of the article. Others would naturally appeal to authority or ad hominem the author. Some food for thought.
This was a general comment on the quality of Forbes opinion pieces not an ad hominem attack. It's worth mentioning it because I think there's a strong tendency to trust the Forbes brand, but it doesn't extend to their blogging platform. That's why I actually separated it from my other reply.
Inflation is defined relative to basic goods and necessities, not to all goods - or to luxury goods, and there's a reason for that. Prices of goods change all the time for all sorts of reasons. Lobster used to be garbage food, now it's luxury. Same with sushi, monkfish, oyster and pig trotters. If the quantity of lobsters in the ocean start going down and the price of lobster increases, does that mean inflation is happening? Even if people switched from lobster to salmon? Certainly not in my opinion. Nobody's not entitled to a constant basket of necessities isolated from the world around them.
Basing the inflation definition on basic goods and needs at the time is a reasonable proxy due to their broad-based requirement by individuals. Nobody needs luxuries by definition. Luxuries are expensive by definition. Luxuries tend to be scarce and their price as a result fluctuates substantially. But further, they're a product of social tastes that change for any reason or no reason.
Weights are adjusted because the price of things changes for all sorts of reasons, and the goal is to index against a basket of common necessities - not specific necessities for that reason.
A good analog would be the S&P 500 and the Dow Jones. Those index components change regularly as some companies fall out of favor and others rise to prominence. They reflect the economy but not specific companies. That's not a bug, it's a feature IMO.
The weights being adjusted is reactionary to the cost and availability of goods and the preferences of consumers, and that's totally fine. A platonic, isolated increase in price is not inflation, it's just what it says on the tin - an increase in price.
> Basing the inflation definition on basic goods and needs at the time is a reasonable proxy due to their broad-based requirement by individuals
But what of non-luxury goods that aren't included like housing? If the CPI is to measure essentially the value of the dollar to what is required to live, isn't it useless without housing?
Why is housing left out? I surmise it wouldn't fit the inflation targets the fed claims to be attempting.
Either way, when a measure becomes a target it fails to be a measure.
Edit: Just another thought. Is today's produce even equivalent to that of 60 years ago?
Today's corn is genetically modified and soaked in `safe` glyphosate. If the CPI was honest they'd at least have to acknowledge that the food we eat today is of extremely so lesser quality.
Today's nearest equivalent would be to eat a wholly organic diet. If one were to hold the quality of food stable, that too would have to show a _much_ higher rate of inflation.
> But what of non-luxury goods that aren't included like housing? If the CPI is to measure essentially the value of the dollar to what is required to live, isn't it useless without housing?
Housing is included by proxy of rent. [1]
I think you'll generally find that rent growth has significantly outpaced mortgage costs, and therefore housing is overrepresented in the CPI. [2] This makes intuitive sense, after all, people tend to refinance into lower interest rates (and the general trend has been down) whereas rents seem to only go up. So, by using rents your housing costs go up a lot more over time (indicating higher inflation) as compared to using mortgage principal and interest payments.
Cost of a Big Mac in 2000: $2.51 (in 2000 dollars)
$2.51 (2000) in 2021: $3.92 (in 2021 dollars, CPI adjusted)
Cost of a Big Mac in 2021: $5.66 (in 2021 dollars)
So a Big Mac in 2021 is 44% more expensive than what CPI would explain.
If the Big Mac would be an item in the CPI, it would gradually be removed from it because the more expensive it becomes, the less Big Mac's a person would buy.
Arguing that items which become more expensive are rightly removed from the CPI because they become "unnecessary luxury items" is fine for modelling consumer behaviour, but misleading for establishing inflation metrics.
I think the Big Mac index is an excellent measure of the inflation of Big Macs. However, it is not designed to measure inflation as felt by the average consumer, it is designed to measure purchasing power parity. How far a given unit of one currency will go in one country versus another.
The CPI basket includes all sorts of non-big Mac related items. For instance, residential housing, commute costs and so on.
Even within the CPI basket, the basket is an average. Certain things will go up more than the average in certain things will go up less, but that’s how averages work. Check out the breakdowns on how the various index components of gone up and down over time.
The price of a Big Mac is an aggregate of the costs of its ingredients, labor, production, storage, distribution, marketing, etc...
A Big Mac can also be considered to deliver roughly the same perceived value to the customer over decades which is useful for an inflation metric. This is in contrast to items prone to technological efficiency gains which are getting cheaper and are favoured by CPI weighting adjustments.
And still, even considering the efficiency gains and cost reduction for energy and transportation the cost of a Big Mac still does not fluctuate around the CPIs 2% average. Its average annual inflation over the last 20 years is ~4% and roughly twice as high as CPI claims.
> Is this a straw man or a red herring? Try to avoid your logical fallacies on HN, regardless.
Neither, I was pointing out that just because we used to do things a certain way doesn't meant they were inherently better. In fact, "for much of human history" things were much worse, and we were approaching them in ways that are by and large inferior.
This is a kind of declinism bias or rosy retrospection bias. [1]
> There is a reason. Normal, hard-working people can thrive under that simple system, and wealth inequality does not systematically increase to the betterment of the financially savvy.
You're once again missing the forest for the trees. The unit itself doesn't matter. How much of it you have matters and what you put it to work doing matters.
> Where have you been? I don't know metric you are using to define stability, but keep in mind bear markets are the only periods in American history where wealth inequality reliably decreases as capital is reallocated.
Boom and bust cycles under the gold standard were dramatically exaggerated, in part because no entity could stabilize the medium of exchange. As bad as 2008 was, I guarantee you the Great Depression was worse.
> Betterment, which you linked, is a free market solution to a policy problem, but it's about 50 years too late, and unless they capture 100% market share, they aren't going to solve the problem going forward (and of course they will scoop some nice fees off your savings).
It's not a public policy problem, it's a public policy solution. Your job in a capitalist economy is to allocate capital to the most productive investment. If you choose to abdicate that responsibility you can pay a fee to Wealthfront of Betterment to do it for you, or you can pay a 2% per annum fee and keep it at home.
However, money only has value when it changes hands, not when its jammed under your gramma's mattress. Inflation encourages investment to keep capital flow moving. GDP is in fact money supply times velocity. This is how the economy functions.
> All of your points hinge on CPI being a correct measure of inflation. It isn't.
> The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them. Changes in the CPI are used to assess price changes associated with the cost of living. The CPI is one of the most frequently used statistics for identifying periods of inflation or deflation. [2]
> It genuinely does not matter whatsoever how much $1 buys you at any given time. It's a unit, like a liter, except one whose definition changes over time.
Except that the whole point of units like liters, inches, or joules is that they remain constant and unchanging over time. Money should be a unit of measure, not a changing unit. In what sense is a changing unit a unit?
> Your job is not to save money. Your job is to save value.
But value is subjective, so how can you save it? Different people will make different and subjective valuations of thing based on a host of criteria - a vegan won't value a burger anywhere as much as a hungry carnivore would.
The dollar, as a money, should be a constant unit. Then people could value it as they see fit, some choosing to hold more or less of it for the proverbial rainy day.
> The dollar, as a money, should be a constant unit. Then people could value it as they see fit, some choosing to hold more or less of it for the proverbial rainy day.
Define constant. Do you want the value to remain constant? If so, why? And more importantly, how? You have to adjust the supply to offset for increased productivity, to offset increased population, to offset decreased spending.
If you just want a certain quantity then it's not constant because its value will fluctuate inherently with the economy around it. As a result, it will tend towards deflationary, which is generally a death sentence economically. If something is worth more in the future why spend it? Just look at Bitcoin. Nobody spends it. Nobody. Why would they, number go up? If that were the case with a national currency nobody would have jobs, they'd just sit home and watch number go up lol. We've never tried this because even with a gold standard the supply increased over time.
The fluctuations in market value would make it borderline impossible to maintain as a unit of account.
This is why the current system is ideal - you get your medium of exchange and unit of account, and you get store value however you want. This is maximum economic freedom. If you want to back your personal economy with gold, go to town! Steve wants to back his with Bitcoin - more power to him. If I want to back it with productive assets, that's cool too!
Don't force everyone into your preferred store of value, certainly not because you don't trust them to allocate their value towards an optimal vehicle.
Picking a random listing for forest land in upstate New York (no land), maybe $1K-$5K per acre. (Of course, even at the time, Manhattan was known to be on the ocean with a good harbor so not really a fair comparison.)
I think that's exactly the point OP was making. They are saying that even in a situation like Manhattan where nobody had any idea that the land would one day be worth a fortune, the average annual percentage increase in land value has not actually been that high. Certainly if you picked some random plot of land that's not part of a huge city, the numbers would be even smaller.
Yes, it makes about as much sense to talk about the ROI of a soon-to-be-winning lottery ticket before and after the winning numbers are announced while ignoring the losing tickets.
It wasn't purchased from the people who inhabited the island. [0] The dutch created a deed to claim the island, and paid one village to move to make the deed seem legit. [1]
Claiming that Manhattan was purchased for cheap is similar to claiming that the Louisiana purchase only cost 65¢ per acre. The Louisiana purchase didn't transfer land to the U.S. from the inhabitants, it purchased conquest rights from the other European powers.
> for the majority of the area, what the United States bought was the "preemptive" right to obtain Indian lands by treaty or by conquest, to the exclusion of other colonial powers.
The right response to all of these kinds of things is 'so an iPhone only cost $150 in 1665?'
EDIT: To make the point more clearly - we get a very accurate global map for free (with ground level pictures, even!), but that would have been an unimaginable luxury anytime before 2000.
Some of the functions of an iphone could have been somewhat replicated with enough money.
The very wealthy could afford to pay musicians to play the music they wanted when they wanted it.
(Somewhat) detailed maps were available for large sums of money or sometimes painted on walls. If you had enough money, you could commission an expedition to map somewhere.
You could pay someone to carry messages to those you wanted to communicate with.
Skilled artists could paint pictures of your food, or selfies, if you were prepared to sit still long enough.
Of course, even this hypothetical gaggle of skilled servants following you around all day would still not be able to cover some of the basic aspects of a modern mobile phone, but if you can apply enough cheap labour, you can do quite a lot.
It was pretty rare that you'd know someone on another continent and want to face time with them, but if you did (and didn't want to spend months travelling), I think you'd be stuck using magic. Doctor Faustus for example used his deal with the devil to allow him to travel rapidly around Europe and visit famous people like the Pope.
I think it's fun how much of what a modern mobile phone gives us is an amalgam of magic from fantasy stories - Jack's harp that plays itself, Aragorn's Palantir, predictions of future weather and harvest (without even having to consult any entrails), summoning physical items to your location (with 1 hour prime), inhabiting and controlling remote drone servants, imbuing talismans you wear around your wrist with the power to keep you healthy, or binding you with someone else so they always know where you are.
And of course one of the main functions of magic in the ancient world is accessed through twitter - the power to curse an enemy.
> I think it's fun how much of what a modern mobile phone gives us is an amalgam of magic from fantasy stories
This goes deeper than most people realize. Think of fantasy stories which use some kind of crystal as a medium for magic. Well, a modern mobile phone literally works through crystals, we just don't think of them because they're usually encased in plastic or covered by a metal heat spreader. A LED lamp is literally a crystal which glows. And so on.
They also haven't died of cholera or due to a broken leg. I doubt an average child saw a coral reef, iceberg or a glacier in their lifetime at any point in history.
What the hell did you think kids used to eat, carrion and dirt? Tomato has been a staple food for several centuries now.
My grandparents and great-grandparents and their have all certainly eaten ripe tomatoes and their lifespan covers a revolution, a civil war, WW2 and a famine.
Obviously if you live in a different climate, then a tomato gets replaces by something else.
You think it’s harder being a homeless person with a phone vs not having one?
You also think a smaller percentage people are housing unstable today vs 1665? Be careful how you answer, because you have to include non-white people in that figure too.
I simply do not get your point. Housing is more expensive for a lot of reasons, but it’s sure as hell more abundant today than it was in the 17th century.
Lol, inflation is a measure of the supply of money vs. the supply of any non money thing. The whole “inflation is a monetary phenomenon” belief is why we’ve had “unexplained” falling inflation since China began exporting goods to the US.
And to the pigeon point, I can? It’s just a very very small part of the inflation basket, so it’s not super relevant. As for the dodo, were those ever consumption goods? I’m not getting your point.
EDIT: I’ll take an L where it’s due. The species passenger pigeon (which is extinct), not a pigeon used to transmit messages. But I guess the same point as the dodo applies, then.
The Passenger Pigeon went extinct because we used it as a cheap food source. They where sometimes fattened in captivity, but often just hunted. As such it was a commodity in much the same way as iPads or Oil.
iPads are famously not a commodity. They are a branded good.
And just to be clear, people still eat squab all the time. The fact that it’s a different species of pigeon likely has 0 impact on consumer welfare.
Is your point that resources are finite? I agree. And I also agree that fact is a major forward looking risk that could drive inflation, but if your argument is that there are numerous desirable things from the 17th Century that we do not have access to, then I’d have to disagree. Human innovation has just been too rapid over that period.
Many extinct species where known for being quite tasty without any surviving equivalents. Being unusually tasty is in fact why many species are extinct because people put extra effort into hunting them.
Now you personally may not particularly care but most species have a rather distinct flavor which is why flounder, salmon, etc are listed differently on a menu rather than as generic fish.
PS: Among my circle of friends Tablets/iPads are into the whole Tissue/Kleenex brand as synonyms with category.
I mean, it's sort of great that now this is just a back and forth about the specifics of squab, but I assure you, most squab farmed today will taste far better than 'game' passenger pigeon.
Not to blow up my own spot, but if you want better metaphors against arguments like mine, the Ansault pear and Gros Michel banana are better candidates.
> I mean, it's sort of great that now this is just a back and forth about the specifics of squab, but I assure you, most squab farmed today will taste far better than 'game' passenger pigeon.
How?!?
How can you assure anyone of that, when the passenger pigeon has been extinct for over a century?
(If you're talking from experience, you're easily the oldest HN poster.)
most people globally do hold most of their savings in cash, many people are unbanked and physical currency is the only way they have to preserve wealth.
Savings, yes. But those same demographics also save very little, and spend most of their income almost immediately with no opportunity for it to inflate.
Since debts/credits are made in nominal terms debtors are benefited by inflation, and creditors are benefited by deflation.
Example: in 2021 I borrow $100, with an agreement to pay back $105 in 2022. If inflation over that year is +10% (or any amount of inflation > 5%), then I benefit because the real value of what I pay back is only worth $105 * (1-0.1) = $94.5 in constant 2021 dollars.
If on the other hand, there is deflation (or any amount of inflation < 5%), I lose because the real value of what I pay back is higher than what I received. E.g. if there is 10% deflation, then the amount I have to pay back is now worth $105 * (1+0.1) = $115.50 in constant 2021 dollars.
Sorry you're absolutely right -- typo honest, not me brainfarting.
Inflation whittles away at your debt, which is why inflation is good for the average person who owns very little cash and has lots of debt (i.e. someone with a mortgage) - assuming that wages keep up with inflation so the cost of the weekly shop is still x% of the weekly pay slip.
Of course high interest rates offset that somewhat, but if interest rates are around inflation level, for those with debt (ie young people who haven't benefited from inheritence a lot) it's a good thing.
Some problems with this line of thinking: for much of US history (as demonstrated by the graphic), the value of the US dollar did not steadily decrease, but oscillated around the value of gold, and during many periods increased. So most of that inflation occurred in the last half century, dramatically increasing the inflation rate.
Granted, Manhattan had no buildings or relative importance in the economy when it was purchased either, so a better example might be some comparable tracts of farmland using their 1970 value (during Bretton Woods) and current value, and calculating from there.
EDIT: Doing so with this data [0] does indeed yield an inflation rate much higher than reported CPI, at 5.7% average over the last 50 years. You can see a similar higher rate by looking at the Big Mac Index [1]. Conclusion: Real inflation is higher than CPI.
> Amusingly, thanks to the magic of compounding, that actually only implies a 6.5% average annual inflation rate.
That's funny.
I wanna add some perspective on how meaningless that is though.
In 1623 most people you meet could not do exponentiation.
In 2021 you can turn a muni bond ETF into 6.5% return by levering it ~2x.
People harp about what you could and could not buy in 1623. Blah blah blah. That is a complicated argument to make about purchasing power. Its real limitation is the inability to model credit.
Not sure land is a great asset to use to estimate inflation.
Does Manhattan have the same value back when it was a spare key inhabited island 6,000 miles from Europe versus today when it’s a international hub with advanced infrastructure in place?
Land is weird in that it’s value is self-reinforcing. The more you do with it the more it’s worth (or at least more higher people value it).
The US dollar for a long period of time was backed by gold and was therefore pretty stable for that period so calculating inflation over 400 years is disingenuous at best. It would be interesting to see how much value it's lost since the gold standard started to be compromised and eventually discontinued in 1971.
This is of course also nonsense, but the one good that has existed that entire time is land. Manhattan was purchased for 60 guilders in 1623, projected to $24. According to Bloomberg, the estimate of Manhattan land value in 2018 was $1.74 trillion. Amusingly, thanks to the magic of compounding, that actually only implies a 6.5% average annual inflation rate.
Of course, land is a capital asset and expected to appreciate, but this is granting the Hacker News inflation hawks worst case that inflation rates should include nominal price increases in capital assets.
I'm having trouble finding decent data on this, but it looks like a guilder averaged about 10g of silver at the time? So saying Manhattan was worth 600g of silver, that's about 21.16 oz. The present value of Manhattan in ounces of silver is 62,142,857,142. That is 5.674% annual inflation denominated in silver.
Not bad for the dollar, I guess? Less than 1% per year worse decrease in purchasing power compared to silver?
I have no idea how the website I was looking at computed a dollar to guilder conversion rate a century and a half before the United States existed, though.