Hi,

I was wondering what everyone's thoughts are on inflation destroying the purchasing power of your wages.

For example,
In Canada, (based on the average rate of inflation from 1914-2009 and monthly inflation source source:Stats Canada) if that average rate of inflation is kept the same ....in 45 years the average monthly income will be less than $500 per month (in Today's $ value).

What is my point? It's this: at some time in the future inflation will make life very hard to live. $500 a month in Canada will only get you a room to yourself and groceries. No car, clothing -anything else. Just basic life support for the average Canadian.

Is there something I'm missing? What is the long term solution to this? Self sufficiency? Ideas/Comments?


-NIM

I think you're forgetting to factor inflation with everything. Cost of products, certainly, but salaries increase as well. Not sure what math you're using for your $500/mo figure though.

Yeah, a car in the '50s cost $2000, but people brought home $100/week (or something ridiculous). I really don't think that inflation has affected things equally though. If Canada has an hourly minimum wage, look at how much that's changed while doing your math.

Long term solution? worst case, you make like mexico and re-do your money. "Nuevo pesos" ("new pesos") have been in use for maybe 10+ years, to replace the crap that had an exchange rate with the US of several hundred/dollar. Now it's more like 13/dollar.

Ah, the 50s! On my first "real" job, I earned the then minimum wage of 75 cents an hour, but then I could see a first run movie for 50 cents - lots of dates cost less than half a day's wages. Where did I put that Elvis album?

Some salaries may increase equally with inflation, but most do not, esp for those on the survival end of the yardstick.

Inflation is strictly manmade at the top of the food chain, it is NOT part of the natural order of things. Government always wants to change part of the economy without considering the long-term effects of their decisions. Nothing in economics exists by itself, every decision affects many other facets of it.

In the 60s, gold was worth about $35/oz. Today, it is worth about $1200USD/oz. The value of gold itself hasn't increased so much as our dollar has seriously deteriorated. Our government is printing money as fast as they can, spending it as fast as they can, and going into debt as fast as they can. When the money is first printed, it is worth more than when it trickles down to you and me. The more money in circulation, the less it's worth.

[The following is not an indication clear across the board, because there are other factors involved, too, but just to give you an idea...]

In 1968, gas was $0.28/gallon and CA minimum wage was $1.65. You could buy almost 6 gallons of gas for one hour of work.

Today, CA gas is about $3/gal and min. wage is $8, so you can buy about 2.6 gallons of gas for one hour of work. Minus deductions.

And to tell the truth, I don't think we've hit bottom yet. It's scary.

Sue

Start planning for things now. If I go buy a pants now I buy two and have a few more than what I need now so I could go a few years without buying any. I have several pair of good thick socks stocked up and an extra pair of shoes.
You can live without a car http://www.bikeforums.net/forumdisplay.php?20-Commuting
We moved to the suburb where all the jobs are moving to ,could have moved elsewhere and gotten a much larger house for the $ but were in the middle of everything here, could easily pick up a second job if needed. Pick the worst house in the best neighborhood.

Unfortunately inflation will always be around cause most countries in the west are debtor nations and depend on being able to pay back loans with cheaper dollars. Inflation also works well for those who get the money first so to speak, like government contractors and financial institutions. Good for borrowers, bad for savers. Long term solution? There isn't one. Just hope your income and investments beat the rate of inflation. People are very creative though and I think if things keep going the way they are there will be a huge growth in the barter economy, both tangible goods and exchangeable credits, lessening the ability of governments to manipulate your "currency." Plumber swapping services with a dentist for example. Although, never wanting to be left out of the action, I think they recently passed a law that requires you to pay taxes on barterable services now. Oh well.

You were always supposed to pay taxes on bartered goods/services. It was the catching that the IRS had problems with.

Sue

Inflation is the biggest hidden tax.
One of the things it does is save the government real wealth when it is paying off debt.
Inflation also reduces accumulated savings.
There is more to inflation than just consumer pricing.
Not everything about inflation is bad either.
Inflation actually benefits holders of real assets by depreciating their costs.
Another effect of inflation is it tends to increase the rate at which an economy can grow. First it allows central banks to keep an interest rate that seems positive while it is actually negative.
In terms of real investment this means a borrower actually profits by investing his cash in real businesses or commodities instead of financial instruments.

>if that average rate of inflation is kept the same ....in 45 years

any statician would laugh at that assumption. You can prove anything by picking a point or period and then extrapolating forwards at the same rate.
So the climate sceptics chose the hottest year ever recorded: '1998' and then use that to 'prove' the climate is getting colder. And it's undeniable that no year since has been as hot.
But if they'd chosen any other year, they'd have got a different picture.
Or racists in the UK chose the present rate of immigration to 'prove' that in 50 years we'll be crowded. But someone using the rate for another period; say the 70s. would 'prove' we'd be emptying in 50 years time.
In reality no periods features can be extrapolated forward at the same rate.
The Sock

Yep, that's my solution. Buy goods now that I'll need in the future. Shoes, tools, camping gear, etc...

Lots of camping gear.

-Blast