A question about inflation and money?
Discussion
I was discussing inflation with my Dad the other day and he's convinced that money used to go further in the past.
Let's say I have £10 in my hand now and that for arguments sake it was worth £5 in 1990. That fiver in 1990 would buy me more stuff than the £10 today.
I have a couple of examples to further demonstrate.
The bungalow that my Dad's Uncle bought in the mid 60's cost him £2000. That same bungalow today is worth around £250,000 - £300,000. In the film The Ladykillers (1955) they steal I believe £60,000. So you could buy roughly thirty of these bungalows with that money back then.
How much would thirty of these bungalows cost now? 7.5million. Yet according to the bank of England inflation calculator £60,000 in 1955 would be just under 1.7million today.
Another somewhat macabre example is that of the Black Panther (Donald Neilson) who kidnapped Lesley Whittle in 1975 and demanded a £50,000 ransom. A large sum of money back then, the equivalent of about half a million today.
But would someone today put 3 years worth of planning and risk a life sentence for half a million? I doubt it. Maybe for 5 million but not much less. (Yes I know people get murdered for less).
So did money actually go further in the past?
Let's say I have £10 in my hand now and that for arguments sake it was worth £5 in 1990. That fiver in 1990 would buy me more stuff than the £10 today.
I have a couple of examples to further demonstrate.
The bungalow that my Dad's Uncle bought in the mid 60's cost him £2000. That same bungalow today is worth around £250,000 - £300,000. In the film The Ladykillers (1955) they steal I believe £60,000. So you could buy roughly thirty of these bungalows with that money back then.
How much would thirty of these bungalows cost now? 7.5million. Yet according to the bank of England inflation calculator £60,000 in 1955 would be just under 1.7million today.
Another somewhat macabre example is that of the Black Panther (Donald Neilson) who kidnapped Lesley Whittle in 1975 and demanded a £50,000 ransom. A large sum of money back then, the equivalent of about half a million today.
But would someone today put 3 years worth of planning and risk a life sentence for half a million? I doubt it. Maybe for 5 million but not much less. (Yes I know people get murdered for less).
So did money actually go further in the past?
Depends.
A colour TV in 1986 was £400. That's about £1,200 (on average) in today's money. You can get the equivalent now for less than £200 (and it has more than 4 channels)
Cars were monsterously expensive in the 60s & earlier.
I reckon most things are probably cheaper in real terms today.
(Or things were just tougher in the old days)
A colour TV in 1986 was £400. That's about £1,200 (on average) in today's money. You can get the equivalent now for less than £200 (and it has more than 4 channels)
Cars were monsterously expensive in the 60s & earlier.
I reckon most things are probably cheaper in real terms today.
(Or things were just tougher in the old days)
Something like 15 years ago Elizabeth Warren (a prominent US politician) gave a really interesting lecture that analysed where people’s spending goes.
https://youtu.be/akVL7QY0S8A
The collapse of the cost of electronic goods has masked rises in other areas. One average working person cannot raise a family like in the 1970s ideal.
https://youtu.be/akVL7QY0S8A
The collapse of the cost of electronic goods has masked rises in other areas. One average working person cannot raise a family like in the 1970s ideal.
Excess wealth being pumped into assets causing housing costs to rocket doesn't help. Nor does the fact that wage growth have been stagnating for many people as said assets inexorably shoot upwards.
If you reduce housing costs to olden-day levels as a proportion of salary then you realise just how cheap everything is. Even minimum wagers would have vast sums of disposable income since food costs are stupidly cheap and wages very high compared to 40-50 years ago.
Stuff is incredibly cheap these days, but all that money has to go somewhere so it just get hoovered up by investments.
People just had less stuff to spend their money on as well. Nowadays computers, smartphones and internet are essential for functioning in society and they still aren't cheap, but 20 years ago you'd have thought me mad if I that you practically can't get a job unless you have access to an internet connection
If you reduce housing costs to olden-day levels as a proportion of salary then you realise just how cheap everything is. Even minimum wagers would have vast sums of disposable income since food costs are stupidly cheap and wages very high compared to 40-50 years ago.
Stuff is incredibly cheap these days, but all that money has to go somewhere so it just get hoovered up by investments.
People just had less stuff to spend their money on as well. Nowadays computers, smartphones and internet are essential for functioning in society and they still aren't cheap, but 20 years ago you'd have thought me mad if I that you practically can't get a job unless you have access to an internet connection
Thin White Duke said:
Let's say I have £10 in my hand now and that for arguments sake it was worth £5 in 1990. That fiver in 1990 would buy me more stuff than the £10 today.
No, it would buy the same 'cos you just said so...Thin White Duke said:
The bungalow that my Dad's Uncle bought in the mid 60's cost him £2000. That same bungalow today is worth around £250,000 - £300,000. In the film The Ladykillers (1955) they steal I believe £60,000. So you could buy roughly thirty of these bungalows with that money back then. How much would thirty of these bungalows cost now? 7.5million. Yet according to the bank of England inflation calculator £60,000 in 1955 would be just under 1.7million today.
You're picking just one (rather volatile) asset from the many used to calculate inflation.Thin White Duke said:
Another somewhat macabre example is that of the Black Panther (Donald Neilson) who kidnapped Lesley Whittle in 1975 and demanded a £50,000 ransom. A large sum of money back then, the equivalent of about half a million today. But would someone today put 3 years worth of planning and risk a life sentence for half a million? I doubt it. Maybe for 5 million but not much less. (Yes I know people get murdered for less).
He may have thought £50K was all he could get; an achievable sum, and that he wouldn't get caught. Few murderers reckon on getting caught! Plus he clearly wasn't what you'd call wealthly in the thinking department.Thin White Duke said:
So did money actually go further in the past?
Depends where your reference point is. In terms of 'What can I buy for £1?' obviously yes. But people earn very much more of them than they did. So if you earn 10x as much you can pay 10x as much and stay the same. If you start with 'What can I buy for a week's salary?' then In practice some things have got more expensive, like property, and some things have got cheaper, like TVs and fridges.Edited by Simpo Two on Friday 7th May 20:32
TubbyAngel said:
egomeister said:
It depends what you are buying. A US focussed example:
Ha! In the time it took me to find the video link you’d posted a diagram that nearly summarises the findings (but perhaps not the conclusion)I'd suggest it also shows parallels with the relative decline of developed western economies compared to the challengers in the east. It is becoming progressively more costly to invest in ourselves - things that form the foundation for long term economic growth.
egomeister said:
I'd suggest it also shows parallels with the relative decline of developed western economies compared to the challengers in the east. It is becoming progressively more costly to invest in ourselves - things that form the foundation for long term economic growth.
Good spot. In short, 'stuff' is cheaper (because it takes advantage of overseas low wage economies) but 'services' (which have to be home-grown) are more expensive. If taxation was lower, people wouldn't need to earn so much.2 sMoKiN bArReLs said:
They used to use Mars Bars to calculate how your spending power has changed, but more latterly it's a Big Mac.
A buddy of mine used a pint of Guinness as his comparator-index, I remember him telling me. Moved to somewhere in Sweden, where Guinness was pricy (years back), but his wage rise allowed him to buy more. Had he used it all on Guinness.
Luckily he didn’t: still alive
I think how you view inflation also depends on your level of disposable income. In my experience this seems to increase disproportionally with age.
I can remember when a decent Steak at a Bernie Inn seemed like a lot of cash, but now people seem happy to pay a fortune for some minced beef of unknown origin stuck between a Sesame bun, served with chips hardly worthy of the name.
Subscriptions are another killer. At one time, you could either afford something, or not. Now people are happy to pay massive monthly fees to rent a branded phone, new car, or rent a house rather than work out what needs to be achieved to actually buy an asset.
I can remember when a decent Steak at a Bernie Inn seemed like a lot of cash, but now people seem happy to pay a fortune for some minced beef of unknown origin stuck between a Sesame bun, served with chips hardly worthy of the name.
Subscriptions are another killer. At one time, you could either afford something, or not. Now people are happy to pay massive monthly fees to rent a branded phone, new car, or rent a house rather than work out what needs to be achieved to actually buy an asset.
rdjohn said:
I think how you view inflation also depends on your level of disposable income. In my experience this seems to increase disproportionally with age.
I can remember when a decent Steak at a Bernie Inn seemed like a lot of cash, but now people seem happy to pay a fortune for some minced beef of unknown origin stuck between a Sesame bun, served with chips hardly worthy of the name.
Subscriptions are another killer. At one time, you could either afford something, or not. Now people are happy to pay massive monthly fees to rent a branded phone, new car, or rent a house rather than work out what needs to be achieved to actually buy an asset.
In the 60s and 70s renting TVs was very common. Judging from the name of the company that provided lots of them, radios had been commonly rented in the days when 'wireless' was nothing to do with the internet but something you used to listen to the home service.I can remember when a decent Steak at a Bernie Inn seemed like a lot of cash, but now people seem happy to pay a fortune for some minced beef of unknown origin stuck between a Sesame bun, served with chips hardly worthy of the name.
Subscriptions are another killer. At one time, you could either afford something, or not. Now people are happy to pay massive monthly fees to rent a branded phone, new car, or rent a house rather than work out what needs to be achieved to actually buy an asset.
The further you go back, the more inflation figures don't work.
For example, I remember watching some programme that had a stately home built in eighteen-canteen. They had all the records from the build, which detailed everything, materials, labour, furnishing and so on. Say it was £50k, they then said "So that £50k in 1820 would now be £2million". Which was clearly b
ks, as it would now be hundreds of hundreds of millions.
For example, I remember watching some programme that had a stately home built in eighteen-canteen. They had all the records from the build, which detailed everything, materials, labour, furnishing and so on. Say it was £50k, they then said "So that £50k in 1820 would now be £2million". Which was clearly b
ks, as it would now be hundreds of hundreds of millions.snuffy said:
The further you go back, the more inflation figures don't work.
For example, I remember watching some programme that had a stately home built in eighteen-canteen. They had all the records from the build, which detailed everything, materials, labour, furnishing and so on. Say it was £50k, they then said "So that £50k in 1820 would now be £2million". Which was clearly bks, as it would now be hundreds of hundreds of millions.
That doesn't mean inflation figures don't work. It just means that some things have gone up more than inflation, just as others have gone up less. It's an average. Being able to look at such historic records and see that EG stately homes were relatively cheaper then than now is the precise point of calculating historic inflation.For example, I remember watching some programme that had a stately home built in eighteen-canteen. They had all the records from the build, which detailed everything, materials, labour, furnishing and so on. Say it was £50k, they then said "So that £50k in 1820 would now be £2million". Which was clearly b
ks, as it would now be hundreds of hundreds of millions.Gassing Station | Finance | Top of Page | What's New | My Stuff