Inflationary Myths
The online world of full of inflationists. They refuse to face reality. To make matters worse, they espouse garbage that is completely a false narrative, mostly out of ignorance.
Here is one such example. This is the epitome of what we are dealing with.
Wow. Where to begin with this one. Of course, the one tweeting takes a screenshot like that and jumps to a ton of conclusions. But then, isn't that always the case on the Internet.
Lets tear this apart.
To start, the tweeter says it took two years worth of income to buy that house in 1938 but now it is 30X that. Really?
We will presume this photo was for the United States so we will use those numbers. The household income in the U.S. is roughly $52,000. That means, for a 30x, this house had to cost $1,560,000. Without knowing the details, it best be a damn nice house.
Do really think the house that is being referred to is a in the 7 figure range? More likely was the average price of a home in the US. Well, the idea that it takes 60 years worth of income, even in what looks like a housing bubble, to buy a home is absurd.
Of course, this is only the start of the discussion.
Is there are person who believes a house in the 1930s even compares to one of today?
Let us start by looking at the size of the home. I don't know what it was in 1939 but here is what NAHR said starting in 1950:
In America, the National Association of Home Builders reports that the average home size was 983 square feet in 1950, 1,500 square feet in 1970, and 2,349 square feet in 2004.
The average home size went from 983 square feet to 2349 in 54 years, a jump of 2.39 times. As bad as that sounds, later in same article on Investopedia we see this:
In 2018, the average size of a new home in the U.S. increased to 2,623 square feet.
That is a whopping 2.66 the size of the home in 1950. For sake of this article, we will presume that the size didn't change much from 1939-1950.
In other words, contrary to what the person tweeting said, we are NOT talking about the same house. The size of homes in the United States (and countries like Australia) have gotten progressively bigger. Do you think this person took it into consideration? Of course not.
There are other factors to consider too.
For example, there is a good chance that the home in the 1930s did not have central heating or air conditioning. Wiring for AC systems didn't even begin until the 1940s, meaning it was rare in homes even in the 1950s. This meant that power for things such as dryers were non-existent for the average home.
I would say we also can toss energy efficiency out the window. Speaking of windows, depending upon where one was located there is a good chance that was jalousie windows. If you ever dealt with them, you know they always leaked air while also having the tendency to break.
How about the roof? Do you think they had 30-50 year shingles like today? Not likely. It is safe to say that we would get maybe 15 years out of the roof in 1939, if we were lucky.
Back then, there was no PVC piping. They were most likely using copper or possible, even worse, lead. The later was linked to many health problems and stopped being used 100 years ago.
We also likely had asbestos in the home too. That was common up until the 1970s in the United States. This was not the only dangerous element in the house as there was also lead in the paints at that time too.
In other words, the 1939 home was a health hazard.
Yet here is someone trying to compare a home in 1939 to one of today. They are nowhere near the same thing. Of course, this is not factored in the discussion, just that the price is higher. It all sounds good when we omit most of the facts as well as the technological advancements of that time.
This is what is commonly done with inflation argument. People try to compare things from the past without acknowledging they are completely different animals.
Another way of framing this entire discussion is to ask this twitter if he or she would even want the 1939 home, as it was in 1939? Most everyone would say, of course not. The thing about technology is that it provides us many comforts that people didn't have 70 or 80 years ago.
Nevertheless, people still frame this discussion this way. So either this individual is completely ignorant to the way things are or trying to promote an ideology.
Which one is it? We can only guess.
The bottom line is most people are clueless about inflation, looking at some nice pictures this the one shown above as a basis for an argument.
But since we like pictures, here is a good one. It shows the velocity of money and what it has done. Anyone who knows what the formula for this is will understand how a chart like this does not scream inflation. In fact, that is about as deflationary as it gets.
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I agree with you.👍
Ignorance is very common now a days.
The worst thing is that we also believe these kinds of people.
Even those who cannot understand a concept, jump in social media and post shit content.
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We definitely have an inflationary economy. Inflation is really just an increase in the money supply. That supply has increased a frightening amount lately. Rising prices are generally a trailing indicator. But where the costs rise depends on where the money is being put. Given continued record stock indicies I would say a lot is being put there.
But that doesn't mean every internet meme about inflation is true. People generally seem to use those sort of misleading memes to justify a higher minimum wage (which also leads to higher prices).
Housing prices specifically really depend on where you live. In some places prices have risen a lot. In other places not so much. Incidentally, the roof on my house built in 2003 was just replaced. Those 30 year roofs are quite expensive.
Everything is relative. If people are comparing to either people or food in a short time frame, then you can see inflation. It is because they are not looking at technology and food prices going up is because there is more demand than supply.
However if you look at things in a frame of things 20-30 years ago, then there is no inflation. This is because a $100 labtop is way better than a $10,000 labtop 20 years ago. Personally I think we are in a deflationary environment but the money printing is causing people to lose faith in the money thus prices are relatively higher in a short time frame.
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Australia is suffering a different but similar issue. Where people like to focus on the price of the home it is not like that in Australia, it is the land that is getting over valued.
Yes homes are bigger now and I'm building a big one.
I'm having this discussion with some friends currently. They bought their home in an outskirts working class suburb at the time. Sounds far but everything is close in Australia about 10min drive down the road. It cost $24,000 same house today worth $2 million.
Australia used to do quater acher blocks but now don't because home purchases through the purchase of land also have included infrastructure costs such as roads, paths, gardens, services, etc. Ontop of that once completed rates (annual council levy) is applied. That money is then used to upgrade existing areas that don't have that same infrastructure.
The disparity is someone buying today pays for their own infrastructure and then through rates pays for the person who paid $24,000 for house and land. They too get the same infrastructure but without the initial outlay.
In turn the new home builders home costs $860,000 on average to build. This then props up the entire area as the new person who builds pays more than the other person because the land price was more (rates are a % of the house and land combined value usually about 0.5% annually) I believe mine will be 0.06% per year.
The older home owner has now gotten a windfall and it is all untaxed. They are effectively profiting off new builders whom cover the cost of the upgrades which inturn creates value and the next person pays for the upgrades in the uogradded house cost. But the community do not receive the money back on the initial investment. The bank and the seller do.
I can not think of a better scam where I can get someone to give me something for free that they pay for that I can then sell for a profit and pocket the cash and not give it back or provide a % back to the initial investor.
Housing in Australia is a Ponzi scheme and as boomers control both policy and housing and have the greatest voting strength to tackle it is political suicide.
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I don't know what to do anymore ;(
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I think the gigantic debts the world has accrued over time has a role to play in there.
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Despite the very high prices
However, the buildings are wonderful and beautiful
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If ignorance is bliss, there should be a LOT more happy people walking around this planet. At least she's telling people to buy bitcoin, if for all the wrong reasons. One out of two ain't bad. lol
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This is more about what people perceive, and I think a big proportion of Americans ( "the working poor ") perceive that it is harder to get ahead in life and from their perspective, that's not wrong.
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STOPOnce again this is proof that I should have been alive in the 70's. Okay alive for more of the 70's I guess I should say. I think a 1500 Square foot house is the perfect size for my wife and I! It certainly is funny the conclusions people jump to. I am working on a post that I hope to publish today about another false narrative that people are spreading lately. I just need to get the okay on it!
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@taskmaster4450le those that even irritates me more are those people who display their ignorance with confidence,they believe they "KNOW IT ALL,and THAT THEY CAN NEVER BE WRONG".....what a foolish way of reasoning....
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