DGP>> I bought it
in 1995 for $22,000. If I replaced it
today, it would cost me over $50,000.
DGP - Using DE's theory/fact that productivity rate increases against equivalent inflation increases results in stable prices (i agree)...
That same vehicle SHOULD HAVE COST YOU ONLY ... $10,500 in 2016 due to increases in productivity, meaning IF there had been no INFLATION.
The rest of the post is probably pointless, and is only presented to show anyone interested at how I arrived
at that 'prepesterous'(sic,) conclusion.
--------------------
CALCULATIONS(kinda stream of consciousness, so might be difficult to follow):
Let's see...
22 years, 2.25xorigial price== double price every +/- 19years
Rule 72 = 72/19 == price increase rate 3.8% per year
=================================================
Actual Inflation(est. )
National Debt:
1996 William Jefferson Clinton $250,828,038,426.34 $5,224,810,939,135.73 5.0% 39.6% 8.9%
2016 Barack Hussein Obama $1,241,086,361,182.79 $19,391,704,027,667.12 6.8% 93.4% 48.3%
TODAY== 19.545 tril
Year Add/Sub Debt Cum Debt Yearly %inc Total Term % increas End of Term % ToyatalDebt
Department of the Treasury
1789 George Washington n/a n/a n/a n/a n/a
Quantitative Easing(the GUV does NOT publish nor ADMIT their true 'monetization' rate - it is hotly debated):
Debate - guv denials: http://www.merkinvestments.com/insights/2013/2013-12-03.php
Is the Fed increasingly monetizing government debt?
Axel Merk, Merk Investments
December 3rd, 2013
Fed Chair Bernanke vehemently denies Fed “monetizes the debt,” but our research shows the Fed may be increasingly doing so. We explain why and what the implications may be for the dollar, gold and currencies.
https://www.aei.org/publication/since-2009-feds-qe-purchases-transferred-almost-half-trillion-dollars-treasury-isnt-gigantic-wealth-transfer/
Minimum of 4.6 trillion 2008-2014
19.55+4.67==24.22 24.22/5.22== 2.32 doubling periods
22/2.32== 9.48 years == 72/9.48 == 7.59% MINIMUM INFLATION RATE AVG since 1996
=============================
7.59 - 3.8 == 3.79% MINIMUM PRODUCTIVITY RATE AVG SINCE 1996[/b]
WithOUT INFLATION - Productivity Increases would have DECREASED the cost from $22,000 to a cost of
72/3.79 == 18.97 year halving rate 22years/18.97== 1.16 halving periods ~~ 2.32x price reduction
22,000/(2*1.16) == 9.486%
======
Using an interest rate calculator for more 'exact' results than monkey's short-cut methods:
22,000 50,000 22 years X interest = 3.802%
5.22 19.55 22 == 6.180%
5.22 24.22 22 == 7.220%
22000 xxxx 22 (7.22-3.80==3.42) === productivity cost reduction to $10,500
Productivity here is used the same way (I think) that DE used it - as the efficiency increasing and the cost decreasing. Printed circuits resulted in huge productivity increases - and for years the prices fell
as production efficiency rose. HOWEVER: productivity is also used to mean a simple increase in the number of units produced - which, when it outpaces demand, also results in lower prices. In that case, productivity gains WOULD NOT have resulted in such a dramatic 'decrease' in price, because falling prices would have resulted in less production (ie reduction of supply). SO .... take all of the above with that caveat in mind.
=====================
For the true masochist, some (random) selected sources that went into constructing this post.
Ludwig von Mises on Money and Inflation pg.
pg158 Ch 15 ... (monkeynote: Simple Supply and Demand effect of PRINTING MONEY)
On the other hand, if the government does not raise taxes, does not increase its normal revenues, but prints an additional quantity of money and distributes it to government employees, additional buyers appear on the market. The number of buyers is increased as a result while the quantity of goods offered for sale remains the same. Prices necessarily go up, because there are more people with more money asking for commodities which had not increased in supply. The government does not speak of the increase in the quantity of money as “inflation;” it calls the fact that commodity prices are going up “inflation.” The government then asks who is responsible for this “inflation,” that is for the higher prices? The answer—“bad” people; they may not know why prices are going up but nevertheless they are sinning by asking for higher prices.
The best proof that inflation, the increase in the quantity of money, is very bad is the fact that those who are making the inflation are denying again and again, with the greatest fervor, that they are responsible. “Inflation?” they ask. “Oh! This is what you are doing because you are asking higher prices. We don’t know why prices are going up. There are bad people who are making the prices go up. But not the government!” And the government says: “Higher prices? Look, these people, this corporation, this bad man, the president of this corporation, …” Even if the government blames the unions—I don’t want to talk about the unions—but even then we have to realize what the unions cannot do is to increase the quantity of money. And, therefore, all the activities of the unions are within the framework that is built by the government in influencing the quantity of money.
...
Then, it adds that this is due to “inflationary pressures.” They have invented many other terms also which I cannot remember, such silly terms, to describe this situation—“cost-push inflation,” “inflationary pressures,” and the like. Nobody knows what an “inflationary pressure” is; it has never been defined.1 What is clear is what inflation is.
...
If we want to have a money that is acceptable on the market as the medium of exchange, it must be something that cannot be increased with a profit by anybody, whether government or a citizen. The worst failures of money, the worst things done to money were not done by criminals but by governments, which very often ought to be considered, by and large, as ignoramuses but not as criminals.
... (Mises was FAR too kind - they ARE criminals - stealing our wealth.)
Ch 16 - Now what is credit expansion? Credit expansion is inflation also. The reason for making a distinction between credit expansion and simple inflation is because of the different effects that an additional quantity of money has upon entering the economic system by the two different routes. In simple inflation, the new money enters by spending on the part of government. The government spends additional sums created, for instance, for the purpose of carrying on a war. The effect of this spending is that prices of the things the government buys go up and consumers start to hoard. With credit expansion the additional quantities of money enter the economic system, not through government spending, but through loans of newly created credit to businessmen by the banks. So the prices of the things businesses buy go up. This brings about a “boom” in business. If this boom is not stopped in time, it develops into a great economic crisis. This is the trade cycle, the most interesting phenomenon of the capitalistic system.
....
https://mises.org/library/deflation-and-liberty-1 --
pg17 The libraries of our universities contain hundreds of books splitting hairs about unemployment, business cycles, and so on. But they rarely feature a monograph on deflation. Its evilness is beyond dispute.7
Yet this silent accord stands on shaky ground. A frank and enthusiastic endorsement of deflation is, at any rate in our time, one of the most important requirements to safeguard the future of liberty.
7The outstanding modern theoretician of deflation is Murray N. Rothbard. As we have stated above, Rothbard’s views on deflation seem to be deficient only when it comes to the practical issue of monetary reform. An overview of the essential tenets of Austrian deflation theory is in Joseph T. Salerno, “An Austrian Taxonomy of Deflation” (working paper, Auburn, Ala.: Ludwig von Mises Institute, February 2002). Among the few non-Austrian works that analyze deflation without undue emotional bias, see John Wheatley, An Essay on the Theory of Money and Principles of Commerce (London: Bulmer & Co., 1807), in particular Wheatley’s discussion of Lord Grenville’s plan for monetary reform on pp. 346–57; Lancelot Hare, Currency and Employment, Deflation of the Currency—A Reply to the Anti-Deflationists (London: P.S. King & Son, 1921); Edwin Cannan, The Paper Pound of 1797–1821, 2nd ed. (London: King & Son, 1925); Yves Guyot, Les problèmes de la deflation (Paris: Félix Alcan, 1923); Guyot, Yves and Arthur Raffalovich, Inflation et déflation (Paris: Félix Alcan, 1923).
...pg 40
Deflation is a drastic reduction of the quantity of money or of money substitutes, and it entails a precipitous decline of money prices. Such an event, be it ever so dramatic for a great number of individuals, is most certainly not a mortal threat for society as a whole.16
Imagine if all prices were to drop tomorrow by 50 percent. Would this affect our ability to feed, cloth, shelter, and transport ourselves? It would not, because the disappearance of money is not paralleled by a disappearance of the physical structure of production. In a very dramatic deflation, there is much less money around than there used to be, and thus we cannot sell our products and services at the same money prices as before. But our tools, our machines, the streets, the cars and trucks, our crops and our food supplies—all this is still in place. And thus we can go on producing, and even producing profitably, because profit does not depend on the level of money prices at which we sell, but on the difference between the prices at which we sell and the prices at which we buy. In a deflation, both sets of prices drop, and as a consequence for-profit production can go on.
There is only one fundamental change that deflation brings about. It radically modifies the structure of ownership. Firms financed per credits go bankrupt because at the lower level of prices they can no longer pay back the credits they had incurred without anticipating the deflation. Private households with mortgages and other considerable debts to pay back go bankrupt, because with the decline of money prices their monetary income declines too whereas their debts remain at the nominal level. The very attempt to liquidate assets to pay back debt entails a further reduction of the value of those assets, thus making it even more difficult for them to come even with their creditors. In the memorable words of Irving Fisher: "The more the debtors pay, the more they owe."
Finally, brethren, whatsoever things are true, whatsoever things are honest, whatsoever things are just, whatsoever things are pure, whatsoever things are lovely, whatsoever things are of good ...
| 