Comments on: Inflation in Real Life http://allfinancialmatters.com/2006/11/18/inflation-in-real-life/ A personal finance blog dedicated to discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance. Fri, 20 Nov 2009 19:56:44 -0800 http://wordpress.org/?v=abc hourly 1 By: Flexo http://allfinancialmatters.com/2006/11/18/inflation-in-real-life/comment-page-1/#comment-48050 Flexo Wed, 22 Nov 2006 07:59:58 +0000 http://allthingsfinancialblog.com/?p=1362#comment-48050 Perhaps they can delay retirement, but they can't delay death. Eventually, the large number of baby boomer-workers will disappear -- whether due to retirement or death doesn't really matter on the grand scale (but of course it matters on the individual level). Sorry to be so morbid. :-) Perhaps they can delay retirement, but they can’t delay death. Eventually, the large number of baby boomer-workers will disappear — whether due to retirement or death doesn’t really matter on the grand scale (but of course it matters on the individual level). Sorry to be so morbid. :-)

]]> By: Miguel http://allfinancialmatters.com/2006/11/18/inflation-in-real-life/comment-page-1/#comment-47977 Miguel Tue, 21 Nov 2006 23:57:05 +0000 http://allthingsfinancialblog.com/?p=1362#comment-47977 Rich, given all the figures on how horribly unprepared for retirement most folks in the U.S. are, I seriously doubt the projected retirement rates you read about all the time. A large bulk of that figure will be delaying retirement, both out of necessity, as well as out of preference. Traditional retirement is headed towards extinction, as it probably should anyhow. Rich, given all the figures on how horribly unprepared for retirement most folks in the U.S. are, I seriously doubt the projected retirement rates you read about all the time. A large bulk of that figure will be delaying retirement, both out of necessity, as well as out of preference. Traditional retirement is headed towards extinction, as it probably should anyhow.

]]> By: Matt http://allfinancialmatters.com/2006/11/18/inflation-in-real-life/comment-page-1/#comment-47400 Matt Mon, 20 Nov 2006 19:28:41 +0000 http://allthingsfinancialblog.com/?p=1362#comment-47400 The power of inflation is the same power of compound interest. The growth over time becomes huge even if the individual growth per year is small and because the yearly growth is so small people forget to take it into account properly. Good Post. The power of inflation is the same power of compound interest. The growth over time becomes huge even if the individual growth per year is small and because the yearly growth is so small people forget to take it into account properly.

Good Post.

]]> By: Rich Slick http://allfinancialmatters.com/2006/11/18/inflation-in-real-life/comment-page-1/#comment-47278 Rich Slick Mon, 20 Nov 2006 03:23:54 +0000 http://allthingsfinancialblog.com/?p=1362#comment-47278 Nigel, The total population of the US is 300 million. India has 1 billion and China has 1.3 billion. The numbers are just staggering and I simply don't see how it'll "even" out without some sort of detrimental affect to US worker but only time will tell. Worse yet, we have 80 million people retiring from work here over the next 20 years so you really have to wonder who's going to be stepping up to the plate to lead the world in the next few decades. Fortunately, I'll be visiting China sometime next year and I'll take a first hand look at what's really happening there. It seems just about everyone I know is planning on a trip to China for business reasons sometime next year. Nigel,

The total population of the US is 300 million. India has 1 billion and China has 1.3 billion. The numbers are just staggering and I simply don’t see how it’ll “even” out without some sort of detrimental affect to US worker but only time will tell. Worse yet, we have 80 million people retiring from work here over the next 20 years so you really have to wonder who’s going to be stepping up to the plate to lead the world in the next few decades.

Fortunately, I’ll be visiting China sometime next year and I’ll take a first hand look at what’s really happening there. It seems just about everyone I know is planning on a trip to China for business reasons sometime next year.

]]> By: Nigel http://allfinancialmatters.com/2006/11/18/inflation-in-real-life/comment-page-1/#comment-47083 Nigel Sun, 19 Nov 2006 18:11:57 +0000 http://allthingsfinancialblog.com/?p=1362#comment-47083 Rich (post #3): Your argument about globalization's effect doesn't tell the whole story. One could argue equally well that the cost savings due to outsourcing will allow companies to reduce prices, leading to lower inflation in the US. In reality, the effect of outsourcing may not be as much as people think. I cannot speak for China, but in India the local salaries and living expenses are increasing so fast that it will eventually make the cost savings due to outsourcing to India much less attractive. Rich (post #3):
Your argument about globalization’s effect doesn’t tell the whole story. One could argue equally well that the cost savings due to outsourcing will allow companies to reduce prices, leading to lower inflation in the US.

In reality, the effect of outsourcing may not be as much as people think. I cannot speak for China, but in India the local salaries and living expenses are increasing so fast that it will eventually make the cost savings due to outsourcing to India much less attractive.

]]> By: T.S. http://allfinancialmatters.com/2006/11/18/inflation-in-real-life/comment-page-1/#comment-46967 T.S. Sun, 19 Nov 2006 03:11:43 +0000 http://allthingsfinancialblog.com/?p=1362#comment-46967 You should check out Tom's Inflation Calculator: http://www.halfhill.com/inflation.html The calculator allows you to see the affect of retail price inflation or wage inflation on amounts. A $52k salary in 1985 equals about $96k based on wage inflation in that time period or almost $98k based on retail price inflation. If you take the $86k Chemical Engineer salary back to 1985 based on wage or reatil price inflation it would have been about $46k. Try out the calculator and see how much your salary would have been in the past based on the documented wage and retail price inflation. This gives a really good picture of what your neighbor would be making. $144k based on a 5% annual increase is not realistic, just look at the rates for engineers on Salary.com and you will see that wages in general track against the market and inflation. What could have happened, is your neighbor moved into management into a different pay structure if he kept working. In general, pay for jobs move upward pretty much with inflation over the long term. Short term demand could make one position get better pay initially, but this will eventually even out. You should check out Tom’s Inflation Calculator:
http://www.halfhill.com/inflation.html

The calculator allows you to see the affect of retail price inflation or wage inflation on amounts.

A $52k salary in 1985 equals about $96k based on wage inflation in that time period or almost $98k based on retail price inflation.

If you take the $86k Chemical Engineer salary back to 1985 based on wage or reatil price inflation it would have been about $46k.

Try out the calculator and see how much your salary would have been in the past based on the documented wage and retail price inflation.

This gives a really good picture of what your neighbor would be making. $144k based on a 5% annual increase is not realistic, just look at the rates for engineers on Salary.com and you will see that wages in general track against the market and inflation. What could have happened, is your neighbor moved into management into a different pay structure if he kept working.

In general, pay for jobs move upward pretty much with inflation over the long term. Short term demand could make one position get better pay initially, but this will eventually even out.

]]> By: Daly http://allfinancialmatters.com/2006/11/18/inflation-in-real-life/comment-page-1/#comment-46960 Daly Sun, 19 Nov 2006 02:19:19 +0000 http://allthingsfinancialblog.com/?p=1362#comment-46960 SIGH...I give up. This is why the formulas should be left to JLP. Sorry, JLP!! (My formulas was pretty accurate because it factored in two kids and the cat's cut). SIGH…I give up. This is why the formulas should be left to JLP. Sorry, JLP!! (My formulas was pretty accurate because it factored in two kids and the cat’s cut).

]]> By: Daly http://allfinancialmatters.com/2006/11/18/inflation-in-real-life/comment-page-1/#comment-46959 Daly Sun, 19 Nov 2006 02:15:28 +0000 http://allthingsfinancialblog.com/?p=1362#comment-46959 Hey, html omitted the rest of my formula. I gotta make sure to share it! Let's try again. Salary in the Future = [Today’s Salary × (1 + Inflation Rate)^Number of Years]/[(Age^number of years) Hey, html omitted the rest of my formula. I gotta make sure to share it! Let’s try again.

Salary in the Future = [Today’s Salary × (1 + Inflation Rate)^Number of Years]/[(Age^number of years)

]]> By: Daly http://allfinancialmatters.com/2006/11/18/inflation-in-real-life/comment-page-1/#comment-46958 Daly Sun, 19 Nov 2006 02:13:09 +0000 http://allthingsfinancialblog.com/?p=1362#comment-46958 Boy, if we weren't doing what if's scenarios, I would really hate to see a realistic formula. If I were to make one up, it might go something like this: Salary in the Future = [Today’s Salary × (1 + Inflation Rate)^Number of Years]/[(Age^number of years) Boy, if we weren’t doing what if’s scenarios, I would really hate to see a realistic formula. If I were to make one up, it might go something like this:

Salary in the Future = [Today’s Salary × (1 + Inflation Rate)^Number of Years]/[(Age^number of years)

]]> By: » Blog Links of the Week on Blueprint for Financial Prosperity http://allfinancialmatters.com/2006/11/18/inflation-in-real-life/comment-page-1/#comment-46952 » Blog Links of the Week on Blueprint for Financial Prosperity Sun, 19 Nov 2006 01:56:43 +0000 http://allthingsfinancialblog.com/?p=1362#comment-46952 [...] Inflation sucks. (well, on an individual level, it’s good on a macro level) [...] [...] Inflation sucks. (well, on an individual level, it’s good on a macro level) [...]

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