Let us turn to the mailbag:<\/p>\n
\u201cNo, our money is just fine, Vin,\u201d writes in one correspondent, answering my column of Nov. 21. \u201cIn spite of what the gold bugs would have you believe; the value of the dollar is still, historically and relatively speaking, at the place it was a century ago.\u201d<\/p>\n
It\u2019s hard to believe anyone who\u2019s allowed unsupervised use of a computer can think the dollar is worth as much as it was a century ago — or even 50 years ago, for that matter. You don\u2019t have to be a degreed historian or a doddering geezer to know that gasoline cost about 25 cents a gallon in 1960, that a new Ford Mustang cost $2,500 to $4,500 when introduced in 1965. A Coca-Cola cost a nickel in 1910, but today it\u2019s a dollar in a far less expensive disposable plastic bottle. (Yes, today\u2019s \u201csingle\u201d bottles hold more — though not that much more. Besides, shouldn\u2019t the price have dropped after Uncle Sam made them take out the coca, which was the main point?)<\/p>\n
In 1910, the grocery store sold steak for about 15 to 20 cents per pound (two dimes then comprising about a seventh of an ounce of silver, you understand). Today, each pound will run you five to 10 new greenback \u201cdollars,\u201d assuming you don\u2019t pay extra for the fancy stuff at Whole Foods.<\/p>\n
Between 1909 and the 1920s, Henry Ford drove down the cost of a new car from $850 to $290 through efficiencies of scale. By 1940 a competing Plymouth coupe still cost only $645, with most of that cost increase explained by added features — you couldn\u2019t have much real inflation while the dollar was tied to gold and silver.<\/p>\n
The result? If you put your money in the bank at 3 percent interest, way back then, and let it compound awhile, when you withdrew the balance it would actually buy more than your initial principle! So people invested and the economy grew.<\/p>\n
Inflation — and \u201ccapital gains taxes\u201d — can discourage that behavior.<\/p>\n
I\u2019ve never bought a new car, but I\u2019m told average list these days is $29,000 — even with discounts and other gimmicks, you\u2019ll probably pay $23,000 plus a lot of interest charges unless you\u2019ve got that much in cash.<\/p>\n
Is today\u2019s car a better value because it\u2019s got disc brakes and an automatic transmission and a heater? Sure. A fifty-times-better value? No. In fact, given that they\u2019ve added efficiencies of scale, figured out how to use less steel and fewer human work-hours to build each one, the cost of cars should have dropped. The inescapable conclusion is that the dollar is worth two to four cents compared to the 1910 or 1930 dollar.<\/p>\n
So the rhetorical trick here must lie in that all-purpose qualifier \u201crelatively\u201d — as in, the value of the dollar is still \u201crelatively\u201d at the place it was a century ago.<\/p>\n
\u201cRelative\u201d to the escudo-euro, the drachma-euro, or the pound? Europe largely abandoned gold and silver even earlier than America, in the 1920s, declaring de facto domestic bankruptcy and printing up coins out of junk metal when they found they couldn\u2019t cover the ruinous cost of the World War with real money.<\/p>\n
When the British sovereign — a quarter-ounce gold coin — was worth a pound, and an American one-ounce gold coin was valued at 20 dollars, the pound was obviously “fixed” at about five dollars. Today you can pick up a British paper \u201cpound note\u201d for about a buck and a half, American money. So the dollar is stronger against the pound, \u201crelatively\u201d speaking, than it was in 1914.<\/p>\n
But all this shows is that Britain\u2019s larger welfare state went downhill earlier, ruining its currency faster. Saying we\u2019re \u201cin just as good a shape as the Europeans, today, currency-wise\u201d is supposed to be reassuring? Haven\u2019t there been some riots over there, recently?<\/p>\n
Or perhaps our correspondent means the fact that a dollar will only buy 4 cents worth of merchandise compared to 1910 is OK, because we all make salaries 25 times higher than we would have been paid in 1910.<\/p>\n
That sounds good, except that a single American wage-earner — even a \u201cblue collar\u201d worker — could support a family of five in a free-standing house up through the 1950s, while now it takes two adult full-time incomes to support the average family of four in a free-standing house. Why is that? (And meantime, as currency inflation continues to erode our purchasing power, who will we soon have to send out to earn a third salary to see us through? The dog? The 12-year-old?)<\/p>\n
Yes, we\u2019ve got nicer TVs and laptop computers, today, but I don\u2019t think that\u2019s the whole answer — or even most of it. Food, rent-or-mortgage and utilities are still the bulk of our costs.<\/p>\n
Meantime, if your grocery and electric bills go up by 10 percent in the next year — and I fear that\u2019s conservative, no matter how the federals rig their \u201cofficial inflation\u201d numbers — try telling your boss you need a 10 percent annual raise.<\/p>\n
Maybe where our correspondent lives, bosses go, \u201cTen percent? No problem! In fact, we were planning on bumping you 15 percent again this year! After all, we have to keep the dollar value of all our salaries \u2018relatively\u2019 the same after inflation!\u201d<\/p>\n
But back here where most of us live, inside the orbit of Uranus, assuming the boss doesn\u2019t say, \u201cActually we\u2019re closing our doors next week — at least it\u2019ll save you on commuting costs,\u201d the best-case scenario in the private sector these days is likely to be something more like \u201cSales are flat and profits are down. We\u2019re lucky to get 1 percent.\u201d<\/p>\n
Still, I suppose there\u2019s no convincing anyone who insists on believing their paper dollars have not lost value, that someone who was promised years ago their widow would be fine on a $2,000-a-year railroad pension was not cheated in any way by the banksters printing up all their new Monopoly money at the Federal Reserve.<\/p>\n
So perhaps I\u2019ll just conclude with this invitation: If you\u2019re convinced your grandma\u2019s 18-carat gold wedding ring and sterling silver flatware have the same value in \u201cdollars\u201d as they had in 1960 or 1940 or 1910, because \u201cthe value of the dollar is still, historically and relatively speaking, at the place it was a century ago,\u201d bring them by. We\u2019ll caravan to a nearby pawn shop where your goods can be checked for purity, at which point I\u2019ll gladly pay you in 2010 greenbacks $15 an ounce for the 18-carat gold and 90 cents an ounce for the 90 percent pure sterling silver — pretty much the fixed going rate in 1910, 1940 and 1960, when you could go to the bank and turn in a one-dollar greenback for a 90 percent silver dollar, on demand.<\/p>\n
That\u2019s a good deal, given that our 2010 greenbacks have \u201crelatively\u201d the same value today as they had back then … right?<\/p>\n
The Germans were \u201creleased from the chains of gold\u201d in favor of a fiat paper currency in the early 1920s. By 1923 they had to pass their paychecks over the factory fence to their wives at lunch time, so the wives could go turn them into a wheelbarrow full of marks to buy a loaf of bread right away, since the price would go up again by suppertime.<\/p>\n
Wait for it.<\/p>\n","protected":false},"excerpt":{"rendered":"
Let us turn to the mailbag: \u201cNo, our money is just fine, Vin,\u201d writes in one correspondent, answering my column of Nov. 21. \u201cIn spite of what the gold bugs would have you believe; the value of the dollar is still, historically and relatively speaking, at the place it was a century ago.\u201d It\u2019s hard […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"jetpack_post_was_ever_published":false},"categories":[18,37],"tags":[],"class_list":["post-647","post","type-post","status-publish","format-standard","hentry","category-economics","category-readers-write"],"jetpack_publicize_connections":[],"jetpack_shortlink":"https:\/\/wp.me\/pWqFl-ar","jetpack_sharing_enabled":true,"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/vinsuprynowicz.com\/index.php?rest_route=\/wp\/v2\/posts\/647","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vinsuprynowicz.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vinsuprynowicz.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vinsuprynowicz.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/vinsuprynowicz.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=647"}],"version-history":[{"count":1,"href":"https:\/\/vinsuprynowicz.com\/index.php?rest_route=\/wp\/v2\/posts\/647\/revisions"}],"predecessor-version":[{"id":648,"href":"https:\/\/vinsuprynowicz.com\/index.php?rest_route=\/wp\/v2\/posts\/647\/revisions\/648"}],"wp:attachment":[{"href":"https:\/\/vinsuprynowicz.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=647"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vinsuprynowicz.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=647"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vinsuprynowicz.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=647"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}