3 ms·

I have no idea how inflation works - what happens if you're an average Turkish person who had, say, 1000 lira in their bank account 10 years ago? If that 1000

I have no idea how inflation works - what happens if you're an average Turkish person who had, say, 1000 lira in their bank account 10 years ago? If that 1000 lira used to be able to buy you 100 meals at 10 lira each, and now the same meal costs 100 lira, have you effectively just become 10x poorer over the past 10 years? Does the government or your bank offer you higher savings interest on that lira as inflation rises?

deleted 3y ago
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philomath_mn 3y ago
Assuming the 10 year inflation rate came out to 1000% (or 26% annually) then your meal math would be correct. As for the bank, it really depends on the accounts and products they offer. I'd imagine a Turkish bond would offer a rate of return (in lira) somewhat correlated to their central bank target rate (now 45%), but a typical savings account will always be some spread lower than that. So, assuming constant rates for simplicity, if you got a generous 5% return on your savings account, then, after 10 years, your 1000 lira from 2014 would be worth 1000*(1.05)^10 = 1628.89 in 2024 lira. Unfortunately, those 1628.89 in 2024 lira is only worth 1628.89 / (1.26)^10 = 161.50 in 2014 lira. The real picture is more complicated (rates go up and down, inflation in one area will be different than another and there are different ways to measure) but that is the general idea.
- ta1243 3y ago
  What people fail to appreciate is the different value of work. If you do a week's work in 1900 and make one dohicky, you get paid 100 pieces of gold and spend 50 on bed and board and save the rest Is it fair to think that your work in 1900 for making one dohicky should be able to buy you two week's bed and board in 2000, where a new worker can make 50 dohickys instead of your one. Get rid of inflation and you are valuing work done in the past at least as much, and probably more, than work done today, and that's stealing from today.

deleted 3y ago

[deleted]

philomath_mn 3y ago

Assuming the 10 year inflation rate came out to 1000% (or 26% annually) then your meal math would be correct. As for the bank, it really depends on the accounts and products they offer. I'd imagine a Turkish bond would offer a rate of return (in lira) somewhat correlated to their central bank target rate (now 45%), but a typical savings account will always be some spread lower than that. So, assuming constant rates for simplicity, if you got a generous 5% return on your savings account, then, after 10 years, your 1000 lira from 2014 would be worth 1000*(1.05)^10 = 1628.89 in 2024 lira. Unfortunately, those 1628.89 in 2024 lira is only worth 1628.89 / (1.26)^10 = 161.50 in 2014 lira. The real picture is more complicated (rates go up and down, inflation in one area will be different than another and there are different ways to measure) but that is the general idea.

ta1243 3y ago
What people fail to appreciate is the different value of work. If you do a week's work in 1900 and make one dohicky, you get paid 100 pieces of gold and spend 50 on bed and board and save the rest Is it fair to think that your work in 1900 for making one dohicky should be able to buy you two week's bed and board in 2000, where a new worker can make 50 dohickys instead of your one. Get rid of inflation and you are valuing work done in the past at least as much, and probably more, than work done today, and that's stealing from today.