Show me the money! Why salary is not going up as much as the cost of living is!

The world is stuck between inflation, deflation and disinflation. In simple words, a global economic crisis that refuses to give up! 

Disinflation is reduction in the inflation rate. Prices are still rising during disinflation, but at a lower rate. The general price level still rises, but at a slower rate resulting in a lower rate of real value destruction in money and other monetary items. Although disinflation is – at present – a real risk, cumulative inflation is still drastically reducing the consumer’s purchasing power.


There is no absolute and objective gauge of inflation. Any particular measure is simply one way of making the calculation is based on a host of assumptions. Today, most of the costs that middle-class households face are going up considerably faster than the Consumer Price Index or CPI.

Inflation today is caused by the rising cost of raw materials is being offset by below-normal increases in wages. Simply put, my salary is not going up as much as the cost of living is!

Gasoline never goes down. Food prices never go down. Taxes on homes and vehicles and everything imagineable. Not going down. Unemployment. Going up !

There is a strong relation between disinflation, inflation and unemployment. Simply speaking, the rate of inflation can be slowed by increasing the rate of unemployment at a smaller rate which is spread over many years; or disinflation can be achieved quickly by increasing the rate of unemployment at a higher rate which is spread over a few years.

Real after-tax household income is down and economies today are sluggish worldwide. For sustained inflation to get going, workers have to be able to demand higher pay to make up for increases in their cost of living.

Economic crisis and recession is definitely not good for the economy. Everyone thinks that a recession is good to clean the "fat" out of the system, mop up excess, and pave the way for the next expansion. Until that process is complete, there isn't much from which a legitimate expansion can arise.

In theory Recessions put weak companies out of business and in so doing, resources (skilled workers, capital) are freed up to be deployed more efficiently elsewhere.  Stronger businesses use the contraction to firm up their bottom lines and grow more efficient are able to take advantage of  resources during the ensuing expansion.

In practical, Wealth – in the form of real assets such as real estate, money, businesses, stocks, and bonds - is being transferred from the poor and the middle class to the rich. As prices inflate, the rich get richer. This allows them to purchase even more assets. At the same time, the poor and middle class become worse off because they have fewer assets and more debt.

So effectively, the prolonged crisis will simply help the rich get richer.