So, inflation. Prices and paychecks go up (though not toe-to-toe), and money loses value because it takes more money to buy the same thing than it took earlier. We hate it when it's high because prices go up, everything's expensive, we can't buy shit. Consumers cry. However, the opposite is just as bad.
Low inflation means prices aren't going up much, or at all. Consumers cheer. Very low inflation, however, close to 0% or even negative (that's deflation), is a problem. If prices start dropping, rational people will hold off from buying stuff because they'll wait for prices to go even lower. That can and will kill businesses because they don't get any revenue when people aren't buying stuff. And when business isn't booming, it can mean layoffs at your local grocery store or something, because business owners also want to save money.
Another thing where inflation has meaning, is debt. Mortgages, leases, etc. Even the 10 bucks you owe a friend. If inflation is high, those debts start having less impact on your money because by then you hopefully got a small raise, and so debts are easier to pay off. Low inflation makes debts bite just as hard, and much harder if deflation happens, because bread being cheaper doesn't mean your mortgage payments will be smaller.
Anyways, quick crash course on inflation done, hope you learned something. More educated Peters pls correct me. Barely educated Peter out.
So, inflation. Prices and paychecks go up (though not toe-to-toe), and money loses value because it takes more money to buy the same thing than it took earlier. We hate it when it's high because prices go up, everything's expensive, we can't buy shit. Consumers cry.
You're describing it wrong, which confuses people because you're missing the entire upside. It's very important to recognize that the common reddit narrative is wrong and wages/incomes do in fact grow faster than prices:
These are interesting. Thank you for sharing. However, I'm not sure if I'm missing something, but so far I see income growth graphs. These have some interesting insights, but, if possible, adding price change graphs for the time periods of the income growth graphs should paint a better picture.
I'm not saying prices and wages don't always grow toe-to-toe. Theoretically, they can. In some places, they likely do. But as far as I have seen, it's not the case.
From the same time period of 1967-2024, real household income had a cumulative growth of roughly 50%-150%, depending on household, according to the third link you provided.
In that same time, the consumer price index went from 33.4 to 313.7, which is a cumulative growth of 939%.
Now, I could be wrong, but if I'm not, then the purchasing power of the richest households got 6 times weaker since the late 60s. And almost 19 times weaker for the lowest income households.
However, I'm not sure if I'm missing something, but so far I see income growth graphs. These have some interesting insights, but, if possible, adding price change graphs for the time periods of the income growth graphs should paint a better picture.
All of those links include inflation adjustments. It's what the word "Real" means in the titles. The graphs are directly showing HOW MUCH FASTER wages/incomes grow than prices.
Now, I could be wrong, but if I'm not, then the purchasing power of the richest households got 6 times weaker since the late 60s. And almost 19 times weaker for the lowest income households
Ignorance is ok, but please apply some logic to gut-check. If that were true, we'd be boiling our shoes for soup like in the Great Depression, not buying ever-bigger cars and houses.
Ah! I knew something didn't make sense to me. Now it does. So according to the federal data, consumers are less poor now. Yet I doubt people are as happy as they probably should be.
Considering that real wages are adjusted for inflation, which itself is measured by the price index in most cases, could this mean that the price index itself lacks something?
As I understand it, the CPI is an index of all price changes. Begs the question what prices are included, and how they're weighted.
Yet I doubt people are as happy as they probably should be.
I agree with that, and I blame social media misinformation for what we see on this social media platform.
Considering that real wages are adjusted for inflation, which itself is measured by the price index in most cases, could this mean that the price index itself lacks something?
It's certainly not perfect, but mostly it's that individual situations vary a lot. For example, per what I was just discussing with soneone else, it matters a lot for your finances today if you're looking to buy your first home right now vs if you did 20 years ago.
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u/BalticHorndog 9h ago
Hi. Barely educated Peter here.
So, inflation. Prices and paychecks go up (though not toe-to-toe), and money loses value because it takes more money to buy the same thing than it took earlier. We hate it when it's high because prices go up, everything's expensive, we can't buy shit. Consumers cry. However, the opposite is just as bad.
Low inflation means prices aren't going up much, or at all. Consumers cheer. Very low inflation, however, close to 0% or even negative (that's deflation), is a problem. If prices start dropping, rational people will hold off from buying stuff because they'll wait for prices to go even lower. That can and will kill businesses because they don't get any revenue when people aren't buying stuff. And when business isn't booming, it can mean layoffs at your local grocery store or something, because business owners also want to save money.
Another thing where inflation has meaning, is debt. Mortgages, leases, etc. Even the 10 bucks you owe a friend. If inflation is high, those debts start having less impact on your money because by then you hopefully got a small raise, and so debts are easier to pay off. Low inflation makes debts bite just as hard, and much harder if deflation happens, because bread being cheaper doesn't mean your mortgage payments will be smaller.
Anyways, quick crash course on inflation done, hope you learned something. More educated Peters pls correct me. Barely educated Peter out.