Quick note, the 1996 $130k salary, when adjusted for inflation, is about $230,000 in 2021 dollars.
* Residential real estate inflation: $355k [1]
* Stock market inflation: $770k [2]
* Dollar supply inflation: $712k [3]
You'd have to earn between $350k and $700k/year for your dollars to have the same asset buying power as $130k/year in 1996.
[1]: https://fred.stlouisfed.org/series/MSPUS
[2]: rough approximation through the S&P500 https://www.tradingview.com/chart/?symbol=SP%3ASPX
When considering the price of assets, a generalized rise in prices has the same relative effect as inflation in consumer goods; the decline in the purchasing power of money relative to other assets.
The fact that some people benefit from assets inflation because they owned outsized amounts of assets compared to the rest of the population, is orthogonal to that base mechanism. Someone with a huge stock of oil would also benefit from an increase in oil prices following consumer goods inflation.
Beware using convoluted gymnastics to hide simple truths. "Inflation" is first and foremost an English word. Human languages are abstract and powerful, there's more value in generalizing words to understand other realities, than restricting their use to a single "dictionary of economics" definition pointing to a single metric with predefined inputs.
"When considering the price of assets, a generalized rise in prices has the same relative effect as inflation in consumer goods; the decline in the purchasing power of money relative to other assets."
Someone owned the asset before you bought it and that person became wealthier as the asset prices rose.
If I buy a house for $250,000 and suddenly it is $500,000 then I am suddenly $250,000 wealthier. If I buy 2 liters of milk for $6 and a week later I want to buy more but now it is $12 then I am poorer because the things I consume cost more.
Economists use the term "inflation" to refer to the loss of value that some consumables suffer as the money supply grows. But the concept doesn't apply to assets because the owner of an asset can sell the asset and reap the rewards. By contrast, if I buy some milk, and keep it in my refrigerator for 20 years, I can't then sell it and benefit from inflation.
When we talk about economics, inflation refers to a loss of value. Rising asset prices refer to a gain in value.
Under your crazy definition, where inflation applies to assets, there has been no gain in wealth since the beginning of time, since the rising prices of all assets are thought of as a loss instead of a gain, under your definition.
About this:
"than restricting their use to a single "dictionary of economics" definition pointing to a single metric with predefined inputs"
Every profession uses certain words in specialized ways. If you don't like the way some topics are discussed in a given branch of knowledge, then just don't participate in those conversations. I will assume, since you are on Hacker News, that you don't have a problem when engineers give special meaning to "message" or "bus" or "event" or "queue" or "broker".
> If I buy a house for $250,000 and suddenly it is $500,000 then I am suddenly $250,000 wealthier. If I buy 2 liters of milk for $6 and a week later I want to buy more but now it is $12 then I am poorer because the things I consume cost more.
If I have a milk factory selling bottles at $6 and suddenly it is $12 then I am suddenly twice wealthier. If I save $250,000 to buy a house but a week later it is $500,00 then I am poorer because the things I want to buy cost more.
In any case, the proof is in the pudding as they say. If you chose to witness the successive explosion in dollar supply > asset prices > manufacturing costs > consumer goods prices, attribute it to simply "COVID-19 and supply chain disruptions", and call people seeing correlations "crazy", then good for you. There's not much argumentation possible.
> Every profession uses certain words in specialized ways. If you don't like the way some topics are discussed in a given branch of knowledge, then just don't participate in those conversations. I will assume, since you are on Hacker News, that you don't have a problem when engineers give special meaning to "message" or "bus" or "event" or "queue" or "broker".
It's one to give special meaning to words in a particular context and it's another to refuse their use in slightly different contexts because it differs from the most common usage.
This is absurd. There has certainly been inflation, but the value of the stock market (and dollar supply) are not directly relevant to a person's buying power.
The residential real estate price rise is a real factor, but even that is offset by the fact that most people buy homes with mortgages and mortgage rates are so much lower today (7.8% in 1996 vs ~3% now). I can't find the numbers now, but as I understand it the median home is more affordable now for the median income than it was in 1996 (again mostly due to cheap mortgages).
To come at this from another angle: in 1996, $130k was not in the top quintile of earners. Today, the top quintile starts at ~$250k[1]. People earning $350k-$700k are well into the top quintile of earners and likely into the top 10% or beyond; they are much richer than someone earning $130k in 1996.
Summary: $130k is still a relatively solid income (top 25% of earners), but $350k-$700k today is not the equivalent of $130k in 1996.
https://www.wolframalpha.com/input/?i=%24130k+1996+USD+in+20...