4 ms·

I see we're allowed to pick arbitrary timescales for measuring inflation. Lets measure a few 50 year periods instead of annual periods: 1970-2020 : ~560% 192

I see we're allowed to pick arbitrary timescales for measuring inflation. Lets measure a few 50 year periods instead of annual periods: 1970-2020 : ~560% 1920-1970 : ~ 94% 1870-1920 : ~ 53% 1820-1870 : ~ 12% If memory serves, we went completely fiat in ~1974, or roughly the beginning of the 1970-2020 period.

FabHK 4y ago
Inflation over half a lifetime is not really relevant. For investors, large savings should be in productive assets (debt or equity), and real rates (on bonds) or real returns (on shares) have been positive. For non-investors, real wages are much more important. But even including the high inflation in the 1970s and early 1980s (which Paul Volcker famously vanquished), that period from 1970 to 2020 averages less than 4% inflation a year. The four decades from 1982 to now have been pretty good on the inflation front. Which is much preferable to +20% one year, and deflation another year, as in decades prior.
- kragen 4y ago
  See https://news.ycombinator.com/item?id=32258546 https://news.ycombinator.com/item?id=32258546 for why 4% inflation over decades is relevant to average people. Dollar inflation over the past year has been I think 9%, higher than at any time since Volcker supposedly vanquished it. It's anybody's guess whether the vanquished inflation will be 0% or 15% over the next year.
  - FabHK 4y ago
    Next year will be closer to 0% than 15%, I wager. Let's see. You say inflation is important when: * you get a 30-year mortgage on a house. - true, but more inflation is better for you then. * sign a 99-year lease. - true, but more inflation is better for you then. * save money for retirement 45 years in the future. - that should not be in money, so the level of inflation is not relevant, real returns are (the difference between nominal returns and inflation). * buy a life insurance policy that probably won't pay off for 50 years. - yes indeed. Some of them offer inflation protection. * rent an apartment to someone under rent-control laws that can hold the rent fixed until they die. - yes indeed, good point. Also if you write a mortgage. That does not affect most average consumers, though.
    - kragen 4y ago
      As Retric points out in https://news.ycombinator.com/item?id=32258306 https://news.ycombinator.com/item?id=32258306, every transaction needs both a buyer and a seller to happen, so all of these things do affect most average consumers.
Retric 4y ago
Averaging inflation over 50 years is dressing for the average annual temperature rather than how hot it actually is today. The best measurement of stability is to take the absolute magnitude (1) value of inflation or deflation and average that. 20% deflation does horrific things to the economy and alternating randomly between 25% inflation or 20% deflation would insanely destructive. (1) 20% increase and 20% decrease don’t cancel each other out you want the inverse for negatives.
- kragen 4y ago
  Surely we can all agree that fiat currencies are often less volatile than commodity currencies but have higher average (signed!) inflation, but looking at the development of the US economy during the 01776–01932 period we're talking about, I wonder what you are thinking of when you say "does horrific things to the economy ... would [be] insanely destructive". You may or may not be aware that during that time period the US went from being a set of mostly agrarian colonies under the thumb of Great Britain to being the world's most prosperous economy, the world leader in industrialization, and the most popular destination for economic migrants, where supposedly "the streets were paved with gold" (a phrase originally used to ironically condemn London).
  - Retric 4y ago
    It’s hard to compare economies over such timescales, but in terms of PPP per capita the US was shockingly flat from 1776 to 1900. The overall GDP exploded due to a larger population and industrialization was in full swing, but people where also forced to farm more marginal land in the mid west largely using the same techniques from 130 years prior. The US started with extreme abundance of old growth forests, wild animal and fish populations, and farming some of the most productive land on the planet. The US was considered a land of opportunity for so long largely because there was so much to exploit, but people didn’t move to the west and then Alaska because the economy was booming. From 1900 to 1970 things far more consistently expanded with multiple boom times, but the Great Depression also shouldn’t be ignored. If anything it shows that a steady and growing economy is largely preferable to one with moderately faster growth but significantly more wild swings.

FabHK 4y ago

Inflation over half a lifetime is not really relevant. For investors, large savings should be in productive assets (debt or equity), and real rates (on bonds) or real returns (on shares) have been positive. For non-investors, real wages are much more important. But even including the high inflation in the 1970s and early 1980s (which Paul Volcker famously vanquished), that period from 1970 to 2020 averages less than 4% inflation a year. The four decades from 1982 to now have been pretty good on the inflation front. Which is much preferable to +20% one year, and deflation another year, as in decades prior.

kragen 4y ago
See https://news.ycombinator.com/item?id=32258546 https://news.ycombinator.com/item?id=32258546 for why 4% inflation over decades is relevant to average people. Dollar inflation over the past year has been I think 9%, higher than at any time since Volcker supposedly vanquished it. It's anybody's guess whether the vanquished inflation will be 0% or 15% over the next year.
- FabHK 4y ago
  Next year will be closer to 0% than 15%, I wager. Let's see. You say inflation is important when: * you get a 30-year mortgage on a house. - true, but more inflation is better for you then. * sign a 99-year lease. - true, but more inflation is better for you then. * save money for retirement 45 years in the future. - that should not be in money, so the level of inflation is not relevant, real returns are (the difference between nominal returns and inflation). * buy a life insurance policy that probably won't pay off for 50 years. - yes indeed. Some of them offer inflation protection. * rent an apartment to someone under rent-control laws that can hold the rent fixed until they die. - yes indeed, good point. Also if you write a mortgage. That does not affect most average consumers, though.
  - kragen 4y ago
    As Retric points out in https://news.ycombinator.com/item?id=32258306 https://news.ycombinator.com/item?id=32258306, every transaction needs both a buyer and a seller to happen, so all of these things do affect most average consumers.

Retric 4y ago

Averaging inflation over 50 years is dressing for the average annual temperature rather than how hot it actually is today. The best measurement of stability is to take the absolute magnitude (1) value of inflation or deflation and average that. 20% deflation does horrific things to the economy and alternating randomly between 25% inflation or 20% deflation would insanely destructive. (1) 20% increase and 20% decrease don’t cancel each other out you want the inverse for negatives.

kragen 4y ago
Surely we can all agree that fiat currencies are often less volatile than commodity currencies but have higher average (signed!) inflation, but looking at the development of the US economy during the 01776–01932 period we're talking about, I wonder what you are thinking of when you say "does horrific things to the economy ... would [be] insanely destructive". You may or may not be aware that during that time period the US went from being a set of mostly agrarian colonies under the thumb of Great Britain to being the world's most prosperous economy, the world leader in industrialization, and the most popular destination for economic migrants, where supposedly "the streets were paved with gold" (a phrase originally used to ironically condemn London).
- Retric 4y ago
  It’s hard to compare economies over such timescales, but in terms of PPP per capita the US was shockingly flat from 1776 to 1900. The overall GDP exploded due to a larger population and industrialization was in full swing, but people where also forced to farm more marginal land in the mid west largely using the same techniques from 130 years prior. The US started with extreme abundance of old growth forests, wild animal and fish populations, and farming some of the most productive land on the planet. The US was considered a land of opportunity for so long largely because there was so much to exploit, but people didn’t move to the west and then Alaska because the economy was booming. From 1900 to 1970 things far more consistently expanded with multiple boom times, but the Great Depression also shouldn’t be ignored. If anything it shows that a steady and growing economy is largely preferable to one with moderately faster growth but significantly more wild swings.