Why if I have $100 right now, 10 years later that same $100 will have less purchasing power? Why can’t our money retain its value over time, I’ve earned it but why does the value of my time and effort go down over time?
In: 5591
> why does the value of my time and effort go down over time?
The value of your time and effort (salary) for most people goes *up* over time, thanks to raises. It’s the value of $100 hidden under your mattress that goes down, so you should spend it or invest it instead.
Steady, predictable inflation is good for society, because it makes people who have money put it to work by investing in things.
If you have $100 sitting under your mattress, it will slowly lose value due to inflation. But if you instead put it in a bank, that bank will lend out some of your dollars to somebody else to build a house or start a company, and you get paid some of the interest from that loan. Society gets richer because your money was building a house instead of just sitting under your bed.
And it turns out that deflation is really bad for society. Imagine this: if you knew prices would fall 20% every year, would you buy a refrigerator today? No, you’d wait until later when prices were lower. And if everyone does that, the whole economy grinds to a halt.
It’s really hard to hit exactly 0% inflation, and going negative is really bad, so we try to get a little bit of inflation instead.
**Real inflation example with TVs**
**1983:**
* 50″ projection color TV cost [$1,695](http://www.wishbookweb.com/FB/1983_Sears_Wishbook/files/assets/basic-html/page-400.html#)
* Median US household income: $57/day
* Days to afford this TV: 30 days’ salary
**2021:**
* 50″ HD TV: [$250](https://www.pcmag.com/reviews/vizio-d40f-j09)
* Median US household income: $194/day
* Days to afford this TV: 2 days’ salary
So the median household can buy a 50″ TV with just over one day’s income today, vs. a whole month’s income 40 years ago.
**Real inflation example with eggs**
**1983:**
* A dozen eggs cost $0.89
* Median US household income: $57/day
* Daily income in # eggs: 64 cartons / day
**2021:**
* A dozen eggs cost $1.67
* Median US household income: $194/day
* Daily income in # eggs: 116 cartons / day
So the median household can afford almost 2x as many eggs as they could 40 years ago, ignoring other expenses.
[https://www.usinflationcalculator.com/inflation/egg-prices-adjusted-for-inflation/](https://www.usinflationcalculator.com/inflation/egg-prices-adjusted-for-inflation/)
[https://fred.stlouisfed.org/series/MEHOINUSA646N](https://fred.stlouisfed.org/series/MEHOINUSA646N)
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