I = T + ii + D / Y
We take a capital asset, such as a factory or an apartment building or a hedge fund or whatever and given the price of the asset at acquisition one uses the accounting Identity above thus:
Inflation equals Taxes paid, plus Interest Paid, Plus Insurance, plus accumulate depreciation divided by the years of service.
Apply to your home for example: You buy your home for 250,000 borrowing 200,000 dollars at 5% interest. Your property tax is lets say 1% of the value and your insurance in about .5 % your mortgage payments for 30 years mean you pay back not 200,000 but 400,000 thus on average you pay $6300 of interest annually. Watch the real world real estate market 30 years from now your house if maintained will sell for roughly the original price plus the interest $200,000 plus the property taxes approximately $100,000, plus the insurance approximately $50,000 and plus the depreciation lets say 200,000 the land was 1/5th. How does this stack up to reality?
250,000 to 800,000 in 30 years??? Thats 4% price inflation.
Logically for capitalism to work the capitalist must recover the long term costs of capital operation.
Wages do not cause inflation, taxes, tax la and interest and insurance cause inflation.
