Yeah, the numbers in the parent comments of this thread make me wonder how useful those “in today’s dollars” conversions are in general. Especially considering entire markets that existed in the 30s don’t today (or do but are vastly smaller, like horses would have played a bigger role and shoe shining was a job) and new markets exist today (like the entire tech sector). Is it even meaningful to compare money between those two timeframes without putting it in some specific market context?
Depends on what you want to buy. An inflation index uses select goods and services that are thought to represent the general economy but it’ll be different for any one individual.
This is the right question. Many goods and services have far eclipsed the average rate of inflation. Housing being one of them. But hey, we can buy cheap TVs now, so it all balances out, right?
If the official inflation figures (which are used to calculate that equivalent amount) understate the real inflation, that has the side effect of mathematically makinh the official GDP figure larger (because inflation is used to deflate the nominal - in dollars - GDP to create the official one).
There absolutelly is a political interest in the official Inflation understating reality (because it lets politicians claim as GDP Growth something is just the mathematical result of that understating error in the inflation figures).
It neatly explains why inflation is so consistently understated that dollar amounts at spearated by over half a century points in time which those official inflation indices tell us are worth the same do not in fact buy the same (i.e. are not worth the same) by a massive distance.
Random errors in measuring inflation would be just as likely understate it as overstate it and would not result in this difference in worth of a dollar amount thats several hundreds % off from the worth of present day dollars as measure by what it can actually buy.
Which begs the question, is $1,731 really equivalent to $37,393? Because it sure sounds like we aren’t using the right metric for that conversion.
We should be comparing purchasing power instead of raw inflation.
Yeah, the numbers in the parent comments of this thread make me wonder how useful those “in today’s dollars” conversions are in general. Especially considering entire markets that existed in the 30s don’t today (or do but are vastly smaller, like horses would have played a bigger role and shoe shining was a job) and new markets exist today (like the entire tech sector). Is it even meaningful to compare money between those two timeframes without putting it in some specific market context?
Well, you only had to save about 2 years worth of wages to buy a new home (if you didn’t spend any)
Doubt you can do that this day and age.
6 months to buy a new car. Which is about the same as now.
3 months to pay for Harvard. Now about a full year.
Inflation is the combined change in prices, not just the change for one good.
There were no 30 year mortgages in 1938. Home prices are more related to the monthly payment than anything else.
Maybe? I do not have enough information on it to speak intelligently. What % of adults (let’s say over 25) were homeowners then compared to now?
Depends on what you want to buy. An inflation index uses select goods and services that are thought to represent the general economy but it’ll be different for any one individual.
This is the right question. Many goods and services have far eclipsed the average rate of inflation. Housing being one of them. But hey, we can buy cheap TVs now, so it all balances out, right?
If the official inflation figures (which are used to calculate that equivalent amount) understate the real inflation, that has the side effect of mathematically makinh the official GDP figure larger (because inflation is used to deflate the nominal - in dollars - GDP to create the official one).
There absolutelly is a political interest in the official Inflation understating reality (because it lets politicians claim as GDP Growth something is just the mathematical result of that understating error in the inflation figures).
It neatly explains why inflation is so consistently understated that dollar amounts at spearated by over half a century points in time which those official inflation indices tell us are worth the same do not in fact buy the same (i.e. are not worth the same) by a massive distance.
Random errors in measuring inflation would be just as likely understate it as overstate it and would not result in this difference in worth of a dollar amount thats several hundreds % off from the worth of present day dollars as measure by what it can actually buy.