We are repeatedly told how the value of our money is not going very far and we can purchase a lot less than we could in the past. People mistakenly tell us how inflation is killing our standard of living making us all poorer. Of course, they tell us this communicating to people around the world for free on devices that have more computational power than what could be purchased for millions of dollars decades ago.
The reality is that technology, which is fueled by money, ends up accelerating over time, raising our standard of living. Most do not consider what cost money in the past yet is free today.
Consider this article. How much would it have cost 40 years ago for me to get this information?
It is hard to tell but the analysis starts with some type of newsletter. Thus, it would have to have a mailing list with everyone on it. If a stamp cost 10 cents, that would mean sending it to 100 people is $10 in postage. Of course, we need to add in the cost of producing the newsletter along with the envelop to mail it. Would that run another $10? Perhaps it would be $20 to reach 100 people.
Of course, if I was a "professional" journalist, my article might appear in a publication. In that instance, the readers would have to spend anywhere from a quarter to a couple dollars for the publication.
Today, this is simply posted without cost to me on Leofinance while there is no charge to anyone for reading it.
Is this a simple case? Of course. But how often do we repeat this event in our lives today?
Technology penetrates most areas of life. Those industries where it has not, are the ones that have, so far, failed to see technological deflation. This is on its way though.
Food Consumption
We all heard the fears that we will not have enough food. The fact the global population is growing, we are told, means there will be billions starving. This was the mantra since the 1960s.
However, the reality is our food production keeps increasing. We have more than enough food to feed everyone in the world. The issue is not with our production but, rather, the distribution. Since we do not get it to where it needs to be, many are going hungry. Hence, the fear for all those decades was unfounded.
Time is our most constant element. We each have only 24 hours in a day. Because of that, we can break down the hours we pu tin earning each facet of our basic sustenance. When we view things from this perspective, we can understand how much better things are getting.
Another way to look at it in terms of where does our money go. We already covered how Energy Prices Dropping As A Percentage Of Total Expenditures. Since this is a vital component of any budget, it is essential to have a firm grasp on it.
There is a second necessity that no household budget can overlook. That is f in how much of our overall expenditures are going to that.
ood. This is something that we also need to frame properly to understand how things are truly going.
It should come as no surprise, as technology allowed for the increase in food production, we see a radical shift
Here is a chart detailing what took place over the last 60 years.
It is evident that going out for food is on the rise although that as much as on would expect. Nevertheless, there was an increase in that category. However, what is happening with food at home, it tells a completely different story.
In 1960, roughly 13.75% of disposable income was spent on food at home. By 2018 this dropped to 6%, a decline of 56%.
Perhaps people eating out more caused a decline in the at home numbers. Even so, we can see the overall went from 17% of the disposable income in 1960 to 11% almost 6 decades later. That is still a drop of 35%.
Of course, this is a much different story than we hear from the masses. We are told how we are spending more for the basic necessities when, in reality, we have more income to spend on other things. As food and energy consumption requires less of our income, we can afford things such as Netflix, Spotify, or a new smartphone.
Exponential Technology
Many will look at this and claim the trend is over. The above chart cuts off in 2018 so many will state that, since we saw a recent run up in prices, that will last forever.
If we look closely at the chart, we can see there were periods where the trend did temporarily go the other way. It was not a reversal, just a momentary condition that, ultimately, resulted in a return to the longer term norm.
As for this concept stopping, just take a look at what is taking place right now.
Many do not think of agriculture as high-tech but this shows how this is one of the most advancing industries there is.
Just look at some of those categories:
- Drones and Robotics
- Smart Irrigation
- Sensors
- Animal Data
- Farm Management Software
This is advanced stuff. Agriculture is a technology industry and here are 100+ firms that are working on pushing things even further ahead.
And one thing we know about technology, when it enters the picture, it drives costs down.
Therefore, do not buy into the claims that we are falling further behind. The reality is that technology is penetrating every industry. This disruption is going to eliminate obsolete companies while allowing more efficient entities to take over.
This is simply how it works. We are in an exponential technological era. We are going to witness exponential deflation.
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