Challenge 384 Response
by Karlos Allen
In Rusted Chrome, O’Leary speculates that he might be “broke in a week” if he had to pay Margie in 1940’s-era dollars. But after about a hundred years of inflation, wouldn’t a 1940’s pay scale be laughably small?
I assumed that while the pay scale of the 1940’s would be quite low the buying power of 1940 dollars would be quite high so that while inflation has increased the wage it has also decreased the value of the dollar.
So the exchange rate between 1940's dollars and 2035's dollars would be ruinously in Margie's favor...
Copyright © 2010 by Karlos Allen
Hm... I can see how that might work, Karlos, but I suspect it involves a hidden assumption, namely time travel. Let’s say O’Leary pays Margie the equivalent of a 1940’s wage; for example, $50 a week adjusted for inflation in 2035. Yes, that’s oodles of dollars. But the cost of living has also inflated. Margie is no better off — and may even be worse off — than she would have been in 1940.
O’Leary can lose only if he has to time-travel back to 1940 and somehow scrape up the cash to pay Margie at the equivalent pay scale in 2035. If O’Leary were diligent about it, he might drain off the M1 supply and leave the country flat broke.
On the other hand, Margie could time-travel back to 1940 and spend the money from her own century. I can just see her shopping now:
Shopkeeper: “This dollar bill is dated 2035. We don’t take postdated money. What’s a dollar worth in today’s money, where you come from?”
Margie: “Uh... ten cents?”
Shopkeeper: “I guess it has souvenir value. I’ll give you a nickel for it.”
Margie: “Okay.” Hey, there’s a market for these things. I may be on to something...
While I can’t claim to be very smart in these matters, I can give you an example of do-it-at-home time travel. A year or so ago, I bought a GIC (Guaranteed Investment Certificate, the Canadian equivalent of a U.S. certificate of deposit) in trust for a decedent’s grand-daughter. A GIC has to be denominated in Canadian currency, but the inheritance paid for it in U.S. funds. I added a provision that the interest be distributed monthly in U.S. dollars. If you’re up on the business news, you can already guess where this scenario is heading.
At the time, the loonie was trading at 82¢ to the greenback. No sooner did I sign the papers than the value of the Canadian dollar began to take off like the space shuttle. It has even reached par. Who knows which way the exchange-rate roller-coaster will go next, but talk about jackpots: that grand-daughter been collecting interest at 2010 rates generated by capital multiplied by the 2008 exchange rate. And I’ve been wishing ever since I’d heeded my own advice.