Posts Tagged ‘Monetarism’

Inflation through the ages

November 17, 2010

These charts are from a clipping of a Wall Street Journal reprint of an article in Forbes magazine’s March 1, 1975, issue.  I saved the article because I thought it was so interesting, and I still think it is interesting.

The price index was compiled by an Oxford economic historian named E.H. Phelps Brown from records of prices of food, cloth and fuel in Oxford, England, over the centuries.  It shows that inflation is not a normal state of affairs.  Prices have fluctuated around a base level except during two periods of history, the 16th century and the 20th century.

Phelps Brown also compiled a record of wages in both money terms and real terms – not just what a carpenter at Oxford was paid, but what he could buy with his wages.  The record showed that, in modern times, wages go down as well as up.  During the 16th century, the wages of an Oxford carpenter doubled in terms of pennies, but fell by two-thirds in terms of what he could buy.  It was not until 1880 that Oxford carpenters regained the lost ground.

Click on Measuring Worth for the U.S. Consumer Price Index starting in 1774 and continuing into the present.  In 2009, the CPI dropped for the first time since 1949 and is expected to fall again this year.

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