See also globalization reduc`min cost@ BasicHealthy Food
In China over 40Y salary went up 100~1000 times, rEstate appreciated as much (if not more). CPI inflation also stayed high for years, but probably less than salary. That’s why living standard improved for ordinary wage earners.
Fancy food, branded clothing, residential property, luxury car, branded college [3] … inflation largely driven by exclub. Xiaosheng.Liang (梁晓声) is the first to point out — As exclub demand increases, vendors increase prices. I think governments can’t do much about this demand, except property cooling measures.
Consider this semi-realistic scenario —
- your salary has grown by 100%+ (i.e. more than doubled) over 10Y, but may gradually plateau or decline.
- your equity asset portfolio has appreciated by almost 100% over 3Y, though you worry about crash. See Shiller: live more like millionaires
- your rEstate asset portfolio has appreciated by (weighted) average 100% over 20Y, though you are not sure about bubble
Q: is your burn rate rising along?
A: it depends on the individual lifestyle (creep), and savings habits. So in some cases, burn rate would not rise as much as salary and investments. Look at my friend AshS.
Q: Compared to the China experience, is the above scenario evidence of currency depreciation (i.e. falling purchasing power)?
A: income and asset inflation perhaps, but I think CPI basket (your own, not the official basket) of goods in Singapore may show a modest inflation like 1-2%. You can easily verify that using your own food basket price, transportation price etc
Q: is rEstate and housing inflation ignored by CPI?
A: basically yes, but rental inflation is a major component of CPI. A home is classified as an investment asset rather than a consumption. See consumption inflation: inapplicable@realEstate
Based on these answers, the scenario can be very lucky, something like carefree easy life, provided AA) you maintain low burn rate and high brbr like 2.5 , and BB) the bulk (not a tiny portion) of your savings go into those high-growth investments exemplified above.
Actually, I choose to avoid BB in favor of current income.
Q: if you are “lucky” as explained, then how relevant is your own effort?
A: tricky. See blogpost on internal locus of control. Effort is part of each element. 1) Many people (me included) dare not touch U.S. stocks, so their mutual funds or Asia stocks are possibly less spectacular. 2) rEstate portfolio requires cash flow and (if overseas) active management
[3] U.S. elite private universities raise tuition fees at around 5% per year, based on my UChicago experience. This is clearly a luxury. This is the highest inflation in my personal experience.
— A paradox
(This scenario is fairly realistic. For tcost, I won’t explain the evidence.) I would say many of my peers enjoy salary and rEstate asset growth, but still complain. They complain about work-life balance, job insecurity, technology churn, parenting cost, housing cost, …. and their mediocre salary, but their income is in the top 5% nationally. Paradox !
I guess the paradox has to do with exclub and FOMO. See my “dream job” mail to CSY.
A similar paradox is FOMO^livelihood.
feeling richer^inferior @unchanged income #FOMO^livelihood explains “People feel richer when they rise relative to perceived peers, regardless of inflation/deflation, or income rise/fall.”
Therefore, these peers (XR, Deepak, CSY,,,) are actually much richer than before and much richer than their fellow countrymen, thanks to income and asset inflation, but they choose to benchmark with high flyers, spend like them, and therefore feel poor.