Talk:Purchasing power/Archives/2013

World Reserve Currency

It seems to me that the statement "...like US dollars which are the world reserve currency" needs further explanation. Different governments hold a range of different currencies in reserve - as such the US dollar is not a universal reserve currency. I assume the article is referring to reserves held by the IMF or World Bank, but it should make this clear. Does anyone know exactly what was intended by this statement? I'm adding "citation needed" to draw attention. Andipi (talk) 19:38, 26 December 2008 (UTC)

The US Dollar was officially established as the world's Reserve Currency by the Bretton Woods agreement, which established the US dollar as the 'anchor' currency, thus the above term. However, that system effectively ceased in 1971, but has now been effectively shored-up with the concept of the Petrodollar. That said, the world reserve currency status of the US dollar is deteriorating, and doesn't quite mean what it used to mean, although it is still a very valid and active concept. --108.178.100.10 (talk) 18:26, 21 August 2013 (UTC)

"if you had taken one dollar to a store in the 1950s, you would have been able to buy a greater number of items than you would today"

This is rather oversimplified. In most cases, it's true for the same or closely-comparable items, but there are a number of exceptions. A cheap calculator sells for about the same amount in 2011 US dollars as a basic slide-rule would have sold for in 1950 US dollars... AnonMoos (talk) 00:10, 4 August 2011 (UTC)

But you still don't know that the 'cheap' calculator would be even less expensive if you had not lost purchasing power in the example you give. The slide rule may have been manufactured by hand in the US using wood delivered by fuel that was obtained in less efficient, more expensive processes than is available today, and so on. It also never had wide appeal as a consumer product. A calculator can be 'inexpensive' today because the components are mass-produced in extremely large numbers on automated production lines. But unless you have a way to objectively determine the exact loss of purchasing power, then the fact may remain that we SHOULD have been able to purchase ten times the quantity of calculators for what we pay today, had we not had a loss of purchasing power over the last sixty years. The best we can do to objectively determine loss of purchasing power is to compare prices for things that are most similar to products available in the 20's or 50's, and it is still an estimate, due to the fact that there are other variables that can't be accounted for, such as changing consumer demand, and the input-materials price-changes due not to purchasing power changes, but due to changes in supply and demand for that material. Just try to find a product that is made the same way, with the same current consumer-demand, out of the same material, which itself is produced by the same means and appears to have the same supply/demand ratio, as sixty years ago. Pretty tough. Especially because fuel and energy-input costs tend to be a big component of all processes that yields the input-materials of all products. Today, no one really wants a slide-rule because calculators, PC's and smartphones are ubiquitous, so there is very little demand, and thus possibly no current mass-production of slide-rules at all, but even if there is, it is likely to be manufactured with machines out of plastics. Therefore, you can't even get a valid comparison between 50's slide-rule prices and 2013 slide-rule prices. This is an important point though. When you consider that so much capital investment (automation for example), and technological advancement has, in some areas, outstripped the loss of purchasing power to such a degree that in some areas we actually seem to have more purchasing power, then the degree of loss of purchasing power that has been estimated is probably too low. In other words, its not accurate to say we lost 'X' purchasing power because Big Macs are more expensive and I can buy less of them with my dollar than I could in the 50's. What we really need to determine is what Big Macs SHOULD have cost today (with the changes in costs to the inputs to the Big Mac, one of these being labor, which might be cheaper sans minimum wage, since if we had retained purchasing power, no min wage law would have ever passed). Then we can say we lost 'X' purchasing power because Big Macs are more expensive than they should have been. This means that in your example, the cost of a slide-rule in the 50's is a non sequitur. It doesn't follow that you can tell anything about purchasing power from the price of a wooden slide-rule in the 50's to a mass-produced calculator in 2013. The question should be what would the price of the calculator be in 2013 if we had not lost purchasing power at all for the last sixty years. --108.178.100.10 (talk) 17:55, 21 August 2013 (UTC)

"As Adam Smith noted, having money gives one the ability to "command" others' labor, so purchasing power to some extent is power over other people, to the extent that they are willing to trade their labor or goods for money or currency."

This sentence is 'screwy' to use a technical term. If the laborer willingly trades his labor for units of purchasing power, that laborer now has the 'power over other people', thus what is this statement trying to indicate? In any case, in my opinion, it contributes nothing to the explanation of 'Purchasing Power', and may only obfuscate it or detract from a proper explanation. Certainly, the word 'power' in 'Purchasing Power' is not referring to a 'power over people', but rather to the potency of a currency to purchase anything, be it labor, materials, or products. --108.178.100.10 (talk) 18:44, 21 August 2013 (UTC)

Quoting Blashka

What's the deal with "Blashka" (never heard of it) in "In inflation, there are some winners and some tremendously big losers (Blashka)."

Control over people, is this correct

Smith Nations: I can see quoting him on things like be productive and you can buy all the gold you want, or contracts written in wheat faring better than those written in gold. However, the bit about having control over people seams odd. Does this give insight into the technical term "purchase power"?