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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