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To: ctdonath2

>>Got some analysis of those numbers? Might help me crunch out some more economic boundary conditions I’ve been pondering.<<

If by “economic analysis” you mean how did I get them, all you need to do is use the “y to the x” key (take “y” to the “x” power) on a calculator, assuming it has one.

If you forecast 20 years of 15% inflation, put 1.15 in for “y” and 20 in for “x”. The answer is 16.36, meaning prices will be 16 times higher than they are now. Divide, say, the price of a car at $25,000 by the 16.36 and you get $152. So, if you have the price of a car stashed somewhere in a sock, in 20 years of 15% inflation, you’ll be able to buy a nice dinner out with your wife with that $25,000.

Alternatively, the car in 20 years will cost you $25,000x16.36 or $409,000. That may sound ridiculous, but I was eating nickel candy bars as a kid that cost over a dollar now, and that nickel candy bar was already way up from my parents’ childhood days. And the old “Dime Store” is now a Dollar Store.

If you don’t have a y to the x key, just multiply the 1.15 times itself 20 times. At the end of one year, prices are 1.15 times the beginning price. At the end of two years they’re 1.15x1.15 or 1.32 times the beginning, etc. Using this method, you can gradually raise the inflation rate, say starting at 5%, then 8%, then 12%, etc., by using 1.05 x 1.08 x 1.12, etc.


52 posted on 08/09/2011 7:16:35 AM PDT by Norseman (Term Limits: 8 years is enough!)
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To: Norseman

Ack. Sometimes I ask stupid questions, especially when the consequences of the issue invoke cognitive dissonance (say, $25,000 for a modest dinner out...).


53 posted on 08/09/2011 9:44:40 AM PDT by ctdonath2 ($1 meals: http://abuckaplate.blogspot.com/)
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