bushi
Ground Beetle
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Hello fellas
(you have to appreciate catchy topic titles, nah?
)
It suddenly struck me: every time I read some macro analysis, with long-term trends being looked at, all the charts & figures are given in "current year dollars", be it "in 2011 dollars" or more recently, "in 2012 dollars", or most recently, "in 2013 dollars" :rotflmbo: WTF, apparently, all these "year XXXX dollar" currencies are something different - if there is specific need, to distinguish between them, to get any meaningful analysis?
Of course the reason for that is obvious, and as "inevitable" and "desirable" in modern economy, as the sun rising in the morning, and setting in the evening. Inflation. But just think about it - what it really means - a dollar today, is in fact, something entirely different, than a dollar a year ago - even for the purpose of abstract analysis - if it is to be meaningful. For all intents and purposes, it is like a different currency, with the exchange rate, being always DOWN, versus what you'd have a year, five, ten years ago.
I've never spend so much time to digest it (conditioning goes a long way), but if you stop and look at that from such an angle, it makes it easier to understand, how insidious and treacherous inflation mechanism is. After all, would people put up with something like that: every year on January the 1st, their accounts, salaries, and the value of all their assets denominated in dollars (in fact, put any other fiat currency in this place) were exchanged, by some <1 exchange rate (say 0.98, for 2% inflation rate), for a "New Year Dollars", while being guaranteed, that "New Year Dollar's" purchasing power stays unchanged over many years? For some "greater economic good", and spending stimuli, as Keynesians want to have it?
I do not think so. Yet they put up with inflation (whatever the number is, still greater than zero), and just get along with their lives. But these two mechanism as described above, are precisely the same, as for the outcome.
How bizarre.
(you have to appreciate catchy topic titles, nah?
)It suddenly struck me: every time I read some macro analysis, with long-term trends being looked at, all the charts & figures are given in "current year dollars", be it "in 2011 dollars" or more recently, "in 2012 dollars", or most recently, "in 2013 dollars" :rotflmbo: WTF, apparently, all these "year XXXX dollar" currencies are something different - if there is specific need, to distinguish between them, to get any meaningful analysis?
Of course the reason for that is obvious, and as "inevitable" and "desirable" in modern economy, as the sun rising in the morning, and setting in the evening. Inflation. But just think about it - what it really means - a dollar today, is in fact, something entirely different, than a dollar a year ago - even for the purpose of abstract analysis - if it is to be meaningful. For all intents and purposes, it is like a different currency, with the exchange rate, being always DOWN, versus what you'd have a year, five, ten years ago.
I've never spend so much time to digest it (conditioning goes a long way), but if you stop and look at that from such an angle, it makes it easier to understand, how insidious and treacherous inflation mechanism is. After all, would people put up with something like that: every year on January the 1st, their accounts, salaries, and the value of all their assets denominated in dollars (in fact, put any other fiat currency in this place) were exchanged, by some <1 exchange rate (say 0.98, for 2% inflation rate), for a "New Year Dollars", while being guaranteed, that "New Year Dollar's" purchasing power stays unchanged over many years? For some "greater economic good", and spending stimuli, as Keynesians want to have it?
I do not think so. Yet they put up with inflation (whatever the number is, still greater than zero), and just get along with their lives. But these two mechanism as described above, are precisely the same, as for the outcome.
How bizarre.
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