Sunday, November 14, 2010

Reply to Adrian Vance

A response to Adrian Vance's blog.

You are more generous to the state than I. My inflation estimate was ten times from 1964 to 2000 alone.
A Coca-cola was a nickel at work and a dime at the gas station in 1964. Fifty cents and a dollar in 2000.
A loaf of bread 18¢ to $1.80. A gallon of milk 32¢ to $3.20. In 1965 had a lucky Summer job, a union job that paid more than my minimum wage cohort. Grown men were buying homes and raising families on it ... $2.25 an hour. The equivalent paid $22.50 in 2000. That top of the line Ford Mustang I bought for $3200 in 1969? My son bought the equivalent for $32,000. There are others, but it general I find a ten-fold increase from 1964 to the year 2000.

There were, of course, exceptions: medicine, taxes, and gasoline.
1) Medicine was much cheaper in 1965 when I spent a week in the hospital, but it consisted of penicillin, aspirin, measuring temperature and blood pressure, and sleeping pills. Had I had my throat cancer then rather than in 2005, I would have had no radiotherapy, no micro surgery, no chemotherapy. In other words, I would be long dead.

2) My taxes went to 40 times the amount I paid back then but allowing for 10x inflation (in amount, not the damage done by inflation) that is only 4 times. Four times? That's still a lot.

3) And finally gasoline: Remember two Summers ago? When gas was 4 dollars plus a gallon? When everyone was told to blame those evil oil companies? I thought it was cheap. In 1964 one dollar would buy four 25¢ gallons of gasoline. In 2008 one dollar would buy four gallons of gasoline - one SILVER dollar. It wasn't the gasoline that changed. It wasn't the silver dollar that changed. It was that paper thing, the FRN, the only bill of all the different kinds ever printed¹ in this country that actually purports itself to be the dollar and not redeemable with a dollar. That was the one that changed. But we were told to damn the oil companies, not the government and dutifully we did. But for the longest time, our gasoline has been incredibly cheap compared to 1964. It is just the numbers that look bigger.

You appear old enough in your avatar to have been around in the Spring of 1964. I was awaiting graduation and had college, girls and other things on my mind and did not notice the world around me. The media was concerned with the grassy knoll and ignored all else. The most important thing in my lifetime occurred. It was one of Lyndon Baines Johnsons' very first official acts, something he had been wanting to do since 1932 when he was a Representative from Texas and a protégé of Senator Sam Rayburn, and instrumental in removing private ownership of gold - He demonetized silver. Then can blame the Nixon shock, stiffing de Gaulle's run on our under-priced gold, thus breaking Bretton Woods, but the truth is the tie to silver is more responsible for our inflation that lack of gold is. The tie to silver was the tie to limited dollar printing.

Thank you for you patience, and I have enjoyed what I have read and will go read some more.

¹ http://luxomni.blogspot.com/2008/08/as-constant-as-dollar.html

1 comment:

adrianvance said...

Sir, or Madam: I was teaching high school chemistry at Fairfax HS in LA when you were in school. My estimate of 9X inflation is pretty well verified and fits the curve of inflation since 1913, when you use 1.045^X where X is the period for the values.

Thanks for your response and keep reading. I do a new piece every day and they only take two minutes to read, but will give you some interesting stuff for the water cooler or dinner table. Always be interesting.