Nov
29
Changes in Prices Since 1893, from David Lamb
November 29, 2007 |
When I read books from long ago and it states dollar figures I'd like to know what the relative dollar figure is today. For instance, in 1893 during the Panic here in the U.S., if a bank were to make a loan of $15,000, what is the equivalent of that loan today?
I found many ways to try to give me an idea of the relative value, by using the following: CPI, GDP deflator, Consumer Bundle, Unskilled wage, GDP per capita, and Relative share of GDP.
Using the same figure as above here are the numbers computed via the Measuring Worth website:
In 2006, $15,000.00 from 1893 is worth:
$346,788.99 using the Consumer Price Index
$321,038.30 using the GDP deflator
using the value of consumer bundle *
$1,736,739.13 using the unskilled wage
$2,888,877.50 using the nominal GDP per capita
$12,838,014.07 using the relative share of GDP
*Data for consumer bundle only starts in 1900.
After viewing the numbers I still don't understand what $15k in 1893 is worth in 2006. Or, which of the above figures is correct?
Greg Van Kipnis replies:
Income has grown more rapidly than the cost of things people buy, hence a disparity in the rise of 'price' measures (CPI) and 'income or output' measures (unskilled wage, per capital GDP). Your question relates to consumption not income. However, the answer depends on the purpose of the loan.
The question you ask: "…if a bank were to make a loan of $15,000, what is the equivalent of that loan today?" Appears to be related to the general price level, hence the CPI or GDP deflator gives the right answer.
If the question were: "In 1893 it cost $15k to buy a 2000 sq. ft. house in New York City, how much would I have to borrow today?" then you would have to use a different price index. The answer might be close to $2 million.
Comments
2 Comments so far
Archives
- May 2013
- April 2013
- March 2013
- February 2013
- January 2013
- December 2012
- November 2012
- October 2012
- September 2012
- August 2012
- July 2012
- June 2012
- May 2012
- April 2012
- March 2012
- February 2012
- January 2012
- December 2011
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- June 2011
- May 2011
- April 2011
- March 2011
- February 2011
- January 2011
- December 2010
- November 2010
- October 2010
- September 2010
- August 2010
- July 2010
- June 2010
- May 2010
- April 2010
- March 2010
- February 2010
- January 2010
- December 2009
- November 2009
- October 2009
- September 2009
- August 2009
- July 2009
- June 2009
- May 2009
- April 2009
- March 2009
- February 2009
- January 2009
- December 2008
- November 2008
- October 2008
- September 2008
- August 2008
- July 2008
- June 2008
- May 2008
- April 2008
- March 2008
- February 2008
- January 2008
- December 2007
- November 2007
- October 2007
- September 2007
- August 2007
- July 2007
- June 2007
- May 2007
- April 2007
- March 2007
- February 2007
- January 2007
- December 2006
- November 2006
- October 2006
- September 2006
- August 2006
- Older Archives
Resources & Links
- The Letters Prize
- Pre-2007 Victor Niederhoffer Posts
- Vic’s NYC Junto
- Reading List
- Programming in 60 Seconds
- The Objectivist Center
- Foundation for Economic Education
- Tigerchess
- Dick Sears' G.T. Index
- Pre-2007 Daily Speculations
- Laurel & Vics' Worldly Investor Articles
Real estate is relative. A 2000 sq. ft. house in Ohio is probably significantly less then $2 million.
In 1893 that $15k was in gold, $20 = 1 oz. of gold. $15,000/20 = 750 oz. of gold x $800(todays gold price) = $600,000.