Reality of Inflation

Discussion in 'Economics & Trade' started by Nemiahsis, Oct 13, 2014.

  1. Nemiahsis

    Nemiahsis New Member

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    It occurred to me recently that the CPI and various other labor and wage Statistics don't add up.

    In 1994, when I was still in high school, my parent's sold their home in Salem, Oregon for $65,000. That same house today would cost about $150,000.
    In 1994, my parent's bought a home for $55,000. That same house today costs about $175,000.

    In 1994, my mom left her grocery deli manager position making $11 an hour. That same position today earns $13 an hour.
    In 1994, my mom got hired at a local department store for $7.15 (to start) an hour as a checker. Today, that same job pays $10.50 an hour to start.
    In 1994, my step father left his job making $10 an hour as a courier for a bank. Today, that same job makes $14 an hour.
    In 1994, my step father was hired at an auto dealership, which is commission based (percentage), and as such I cannot compare. But in 1997, he left that position to work for the county doing park maintenance for $11. That same job today earns $14.50 an hour.
    In 1997, I filled my first tank of gasoline for $1.12/gallon. Today, it costs $3.15-$3.45 a gallon.
    In 1998 before work, I used to stop at a convenience store on my way to work where I bought a pre-made sandwich for $1.69, a cup of coffee for $.25, and a 1-liter of water for $.69. Today, pre-made sandwiches at the SAME store cost $3.49, coffee costs $1.29, and 1 liters of water cost $1.29.

    Other prices I can genuinely recall paying in 1998:
    Donut: $.35 cents (Safeway, INC) Today: $.69 cents
    Burger King Whopper: $.99 cents Today: $2.99
    8-Piece Chicken Bucket (Safeway Deli): $3.99 Today: $8.49
    1 lbs lunch meat (Deli-Bought): $1.29 a pound, Today: $5.49/pound
    1 dozen eggs: $.79 cents, Today: $2.79
    1 loaf bread: $.49 cents Today: $1.59
    1 gallon milk: $1.99 (Rite Aid), Today: $3.49

    I don't doubt subsidization and various other factors impact the way prices affect certain goods, but am I right to argue that prices have increased roughly twice the rate (or more) than wages have in the last 20 years?
     
  2. OldManOnFire

    OldManOnFire Well-Known Member

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    You are right, however, you are wrong if you believe inflation and wages should parallel each other. The supply and demand of labor primarily determines the cost of labor. If we have 25 million uneducated and/or unskilled workers and we only have 15 million of these types of jobs, there will be pressure to reduce the labor wages...no matter what inflation is doing. Lastly, the cost of labor varies by location, as does inflation; for example compare both in San Francisco versus Redding, CA...
     
  3. dujac

    dujac Well-Known Member

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    billionaire corporatists are actively working, through the gop, to reduce wages and benefits of american workers
     
  4. OldManOnFire

    OldManOnFire Well-Known Member

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    If you truly believe in these types of conspiracies then you are clueless to reality...
     
  5. perdidochas

    perdidochas Well-Known Member

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    Well, the thing is some things are much cheaper today than they were. For example, computers and their accessories. I remember buying my first computer printer (dot-matrix, black and white) in 1985. It cost over $400. Now, I can get a color inkjet with scanner and copier for about $80. (in 2014 dollars, that dot matrix printer cost $884)

    When I first drove in 1982, gas was $1.50 a gallon. A matinee at the movie theater was $1. A ticket at night was $3.

    CPI says that $1 in 1994 is worth $1.61 today. Not quite twice.


    http://data.bls.gov/cgi-bin/cpicalc.pl?cost1=1.00&year1=1994&year2=2014
     
  6. dujac

    dujac Well-Known Member

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    evidence says it's you that's clueless

    [video=youtube;5Hmhdv_OSvA]https://www.youtube.com/watch?v=5Hmhdv_OSvA[/video]
     
  7. jackson33

    jackson33 Well-Known Member Past Donor

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    Rising cost of a product or service increases are primarily the result of labor cost along the path for that product. That is if the only cost for something is labor, cost has not changed that much. If it involves manufacturing, transport, retailing, the total cost of labor in each category is added to the final cost. Cost of machinery, trucks that transport, store upkeep, LOCAL/STATE taxes have all added to the final cost, will be reflected.

    As for those "so called rich capitalist", their the ones that invested the money allowing growth that in the end kept your final cost as low as it is....Big Box retailers for instance, buy products by the truck load, many have their own trucks and use self operated Warehouses to distribute. Amazon, uses thousands of individual distributors, skipping some of those cost...all small retailers will pay for.

    High Tech products WERE higher as R&D was involved and fewer customers. As customers increased the cost have come down. Not very long ago, maybe three years, a 32 Inch Wide Screen TV would cost 500$ and now you can find some for 250$ or so, same for all Apple Products or High Tech Software.

    Other things involved are State/Federal Regulations, permits and such, which have to paid for or the Company will be out of business and lost jobs the result. Your seeing it now, but Web Retailers are being attacked from many Governments, seeing the future of their taxes to cover hundreds of programs seeing that tax base, being lost.
     
  8. cjm2003ca

    cjm2003ca Active Member

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    you arent even close to the truth....
     
  9. dujac

    dujac Well-Known Member

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    you don't know what you're talking about

    [video=youtube;71CyRYy7y3g]https://www.youtube.com/watch?v=71CyRYy7y3g[/video]
     
  10. galant

    galant Banned

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    any HONEST review of prices shows that they have doubled every 15 years, since about 1970 (when I started watching them). So stuff costs about 8x as much. Some things cost a lot more than that, but other things are much cheaper (or were not even available, like computers). But man, if you aint CLEARING 8X what you were clearing in 1970 (same skill level, which can't really be done, in one person). then you've take a hit. Min wage cleared $1.25 an hour in 1970, and it bought 3 gallons of gas. That would mean a gross of $13 an hour, today, at the very least. I rented a BIG old farmhouse in 1970, in central/southern Ill, for $50 a month. Today, it would be at the very least $500 per month.
     
  11. galant

    galant Banned

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    the MAIN reason for inflation is gov/t printing of MUCH more $ than any increase in productivity can justify. the rest of the world notices this bs, and demands more $ for everything that they sell us, which drives up prices. It's mostly noticable in the price of gold, to which all other things are "pegged". Gold, in 1970, was $135 an oz. Now it's 9x that much. what a "coincidence". actually, it's cause and effect, not coincidental at all.
     
  12. dujac

    dujac Well-Known Member

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    it has already been explained to you why slow, steady rates of inflation are beneficial to the most people

    all your comments are doing is showing that you don't understand the basic principles of economics and finance
     
  13. Liberalis

    Liberalis Well-Known Member

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    There are many reasons for the stagnation of real wages. A big reason, I would argue, is employer provided health insurance. Employers pay the vast majority of insurance premiums for workers who get employer provided health insurance. Because premiums have increase so dramatically over the past few decades, any wage increases are going straight towards making up that difference. Couple that with Federal Reserve monetary policy and you've got a terrible wage situation.
     
  14. galant

    galant Banned

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    shove your "slow steady" 5% per year up your wazoo, dude. nobody's passive, safe investments clear ENOUGH more after tax and self employed SS (ie, 14% of profit) to cover that loss. in fact, many very active, involved bizes don't gross the 12% per year necessary to cover that, with NO profit for all the work. Which is why people don't start bizes. YOu'd have to make 20-30% return, every year, to make a small biz worth screwing with.
     
  15. OldManOnFire

    OldManOnFire Well-Known Member

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    Microsoft and Apple and many others have billion$ in cash sitting all over the world and none of this excess cash determines how much workers earn. If a company stops paying health insurance, or FICA taxes, or corporate taxes, etc. virtually none of the savings will go into wages...
     
  16. OldManOnFire

    OldManOnFire Well-Known Member

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    The main reason for inflation is spending...slow or stop spending and inflation goes down...speed spending and inflation goes up...
     
  17. Anders Hoveland

    Anders Hoveland Banned

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    I have always wondered what the actual effects of severe inflation would look like.
    Would wages rise at the same rate as the rise in prices? In other words, maybe things would not change that much but all the money amount would just be more and more.

    I think the main effect of inflation would ultimately be to decrease the purchasing power of the government. In other words, they would not be able to spend as much (when adjusted for inflation).
     
  18. OldManOnFire

    OldManOnFire Well-Known Member

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    Severe inflation generally causes prices to increase and the value of the dollar to decrease...less purchasing power.

    Although there might be some correlation between inflation and wages, IMO wages will not necessarily track with inflation...some jobs might while other jobs may not track inflation.

    I'm thinking the federal government will spend whatever it pleases, whether it's funded by taxes, or debt, or printing it's own money. Not that this will happen, but what if everyone stopped buying government debt bonds...would government reduce spending equal to the deficits which are now around $500 billion? I doubt it because I think today's politicians can rationalize spending no matter what is happening...
     
  19. dujac

    dujac Well-Known Member

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    try to get something right for once, the target rate is 2%
     
  20. Nemiahsis

    Nemiahsis New Member

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    Define educated.

    High school dropouts earn about 10-25% more than non English-speaking immigrants working illegally on average.
    High school graduates earn about 5-10% more than high school dropouts (thank free and required higher education, a subsidy).
    College-Educated workers compose most of the middle class.

    If college were every made free, or god forbid required, we would see the collapse of the middle class worker in favor of a middle class small-business owner for a short time, then a collapse of small to medium business and the remaining middle class as a result of strong reductions in consumer spending and favoritism of cheaper macro supply chains (as a result of lessor wages).

    Without incentives, controls, checks, and balances to keep the middle class strong, and the lower class working (and not socially carried), while continuing to aim to keep America competitive in global markets (such as Asia, where a bulk of the population demographics are college educated), the free market system you are proposing (market sensitive) will lead the US and other developed nations full circle. In 50 years, we will have commoners and elites.. with an insignificant few in-between.
     
  21. Nemiahsis

    Nemiahsis New Member

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    I agree. When factoring in health, utilities, housing costs, etc, etc, CPI is extremely understated. Combine this with reductions in volume of products (seen a 1/2 gal of ice cream lately? They dont exist. 2/5 gallon now. Same price. Same weight on CPI). What does concealing actual inflation do? 2 things most notably: lower interest rates (which exasperate the situation), and reduced entitlement payouts such as Social Security (who better for the Federal Reserve to prey on than the weak and the elderly) and the unemployed. In addition, public workers whose salary is based on CPI suffer (defeating the purpose of Keynesian economics), as well as private workers who are falsely fed misguided excuses as to why they don't get a raise this year, leading to civil unrest and malcontent. What are its long term effects? Major economic collapse instead of minor (when the top-heavy boat tips). Who will get the blame? Probably everyone except those who are actually responsible.
     
  22. Nemiahsis

    Nemiahsis New Member

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    The government will always spend more. The executive and legislative branches, directly tied to budget, are propped up by super pacs and buddy systems fed directly by federal reserve bank stakeholders and massive contractors such as Lockheed Martin. Behind the non-audit-able red tape of the Fed is probably Lockheed and every other major mass government and foreign contractor. We'll be buying a potato pancake with apricot syrup for $1,000,000 USD and a loaf of bread for a bucket of $5,000 notes (similar to the end-game of the deutchmark and zimbabwe $$) before they suffer losses...
     
  23. OldManOnFire

    OldManOnFire Well-Known Member

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    Educated enough to obtain a job.

    About 30% of working middle class have college degrees.

    I didn't propose any market system??
     
  24. JoakimFlorence

    JoakimFlorence Banned

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    Inflation can be a very difficult term to define. Because prices can go up without there being any inflation. And similarly, it is also possible for there to be inflation without the price for a particular good changing.

    We have to be a little careful how we examine the situation.
     
  25. OldManOnFire

    OldManOnFire Well-Known Member

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    It's all factored in;

    The CPI represents all goods and services purchased for consumption by the reference population (Consumer Price Index for All Urban Consumers or Consumer Price Index for Urban Wage Earners and Clerical Workers). The Bureau of Labor Statistics (BLS) has classified all expenditure items into more than 200 categories, arranged into eight major groups. Major groups and examples of categories in each are as follows:

    FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals and snacks);
    HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture);
    APPAREL (men's shirts and sweaters, women's dresses, jewelry);
    TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance);
    MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services);
    RECREATION (televisions, cable television, pets and pet products, sports equipment, admissions);
    EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories);
    OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses).


    I agree that it's BS to force business to pay for health care, however, if business did not provide health insurance it's unlikely the savings will ever go into wages. It will go to promote the business, increase the business, into profits, etc. and only into wages if the business is having trouble competing for labor...
     

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