Observations on Wage Increases, Inflation and Quality of Life
One of the biggest fallacies which is spread around the internet from alternative financial and investment sources is that the US dollar has lost somewhere around 95% of its value since the creation of the Federal Reserve in 1913. Though this is somewhat true, there is much more which needs to be considered.
Most of us have seen some chart or another which shows the steep climb of dollar inflation, or the steep decline of dollar devaluation, depending on which perspective you want to view the data from. But missing from such charts are other data sets which, when added, present a different version of events.
Presenting one-sided data while ignoring complimenting data which provides inconvenient conclusions works great for those selling financial services and pumping fear based buy-now precious metal scripts. The truth is that when a full picture is considered and all data is correlated we begin to understand that things are not as bad as some are stating.
Along with dollar devaluation we need to also consider wage increases over the same time period. The Consumer Price Index, which ironically enough started being tracked in 1913, requires the additional data set of wage increases to determine the actual loss or gain of dollar purchasing power over the last 104 years.
Sure, the dollar value has decreased by 95% over that time period, but wages have increased anywhere from the same percentage to 250% greater than the actual inflation which took place. The data, and interpretation of that data, are as various and fluctuating as one would imagine.
Economics is like that. Ten people could analyze the exact same data and come to ten different and equally defendable conclusions. Online forums and commentaries are full of such debates between those who think they know and those who really think know.
So how do we determine which is right and which is wrong? Perhaps that is not even the question to be asking. Observation is one of the most fundamental and informative of the human tools which we have been naturally gifted with. Should we be asking – what am I observing?
The quality of life in the western world is dramatically better than it was a century ago. Most would agree with this observation. We have more conveniences today. Centralized heating in our homes, air conditioning, fridges, washers and dryers, cars, phones, computers, huge availability of all sorts of food, both good and bad, and access to more information than at any other time in human history.
It should be obvious to most that outside of minor fluctuations the standard of living has improved based on the fact that wage increases have kept pace with inflation as measured by the Consumer Price Index.
Energy costs have been the most volatile over the last century for sure, with large spikes, but there have also been drops in energy, as well as other staples of everyday life, such as food products and the availability of opportunity.
Outside of energy costs, education costs have been one of the outriggers which have increased at a faster rate than other CPI measured products and services. This is definitely a problem but one that might make it irrelevant as costs continue to increase while access to alternative forms of education and information provide people with free entrance through the gates of education and knowledge.
There is one detrimental area where the relative stable purchasing power of the dollar meets with the increase in quality of life. That area is debt based consumerism.
All of the conveniences of the modern world have come with a price. Comforts aren’t free and we all want to make our lives easier. As such, the availability of personal credit has expanded at an exponential rate since the end of World War Two. Credit cards and home mortgages have both contributed to an increase in quality of life while also contributing to an increase in socioeconomic stress and cultural simulations as everyone leverages as far out as possible to have the dreamy existence sold through the television.
This expansion of personal debt has caused a massive decrease in disposable income. But what is our personal responsibility in this outcome? It’s easy to remain in a red frame and blame the world for our own problems. It’s harder to shift to a green frame and take personal responsibility for our actions and habits. The world wants to keep us in the red frame because it keeps us unaccountable. Unaccountable people require systems and structures to hold the accountability for them.
Do you see how the gears of the world machine move against us? It keeps you focused on the external while you should be focused on the internal.
The complex nature of our confusion and reliance on questionable sources and erroneousness information has contributed to whole generations of people who are easily led down the path of falsification. Simple statements and headlines such as the dollar losing 95% of its value in 1913 are used to suck even more from us, and we never take the time to dig deeper or look through the information to better understand the structure and purpose of the information being provided. – JC
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JC Collins can be contacted at firstname.lastname@example.org