Guest Post: Inflation Since The American Revolution

Tyler Durden's picture

Via Michael Krieger of Liberty Blitzkrieg blog,

As is clear by this chart, inflation was virtually unheard of until the Creature from Jekyll Island (the Federal Reserve) took over.  However, more importantly, things didn’t really start to get bad until the 1970?s right after Nixon took the nation off the gold standard in 1971.  Since that time, America has seen a period of non-existent real wage growth and a huge gap grow between the rich and the poor ever since.  Nothing like livin’ the debt slave dream!

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If that lasts longer than 4 hours, call a doctor.

JPM Hater001's picture

Are you kidding?  If it last longer than 4 hours I told my wife she's going to have to call a friend.

a growing concern's picture

I'm sure that proposal will really put her in the mood...

centerline's picture

Worth a try I suppose.  lol.

Esso's picture

What if it's her boyfriend she calls? Eeeek!

DaveyJones's picture

what do her enemies look like

willwork4food's picture

What if I still have..ah, company?

JPM Hater001's picture

Can't wait to see the return to baseline.

The Shootist's picture

Is that a bubble? What with fools using paper debt for commerce?

Landotfree's picture

They have been using paper for commerce for hundreds of years of, if not thousands of years based on verbal words.  

The problem is one of attaching interest to your medium of exchange, not one of paper.     The real problem is this.

When creation stops is when the real problems begin, as the system must collapse.

centerline's picture

Same chart as on HT's site.  So far, his work frame's things better than most in general terms.

This is the baseline answer to why we see bubble after bubble, stupid move after stupid move, no real punishment, etc.  It is credit creation at any cost now.  In plain sight for all to see.  

TruthInSunshine's picture

 Yesterday at the American Economic Association's 2013 Annual Meeting, Carmen Reinhart and Ken Rogoff offered a paper titled Shifting Mandates: The Federal Reserve’s First Centennial.

The paper included a cool chart of inflation since 1775.  The authors argue that inflation didn't take off until the U.S. went off the gold standard in 1933.

Landotfree's picture

Hogwash.   Interest is the rate of the increase of the money supply.   To say the money supply was not increasing from 1775 is pure hogwash.   

auric1234's picture

This only applies to unpayable debt. In a limited world, you can repay your debt with interest by offering the resulting surplus of goods and services that you obtained thanks for your indebtment.


XitSam's picture

Please note the chart is CPI. So it is price inflation being talked about.

cynicalskeptic's picture

Inflation is when the money supply increases FASTER than the value of the goods and services produced by the economy

If the money supply increases at the same rate as the economy expands you have NO inflation.  Only when the money supply increases faster then the value of the goods and services in an economy do you have inflation.

One of the problems in the US during 1700's and early 1800's was a LACK of 'money' - gold and silver coins were often in short supply - this 'good money' going to pay for imported items.  The patchwork banking system - where banks printed their own notes - led to a situation where counterfeits on 'good' banks were valued higher than real notes from 'bad' banks.  A given note was worth less and less the farther you got from the issuing bank.  'Panics' were a regular occurrence - and easily created when banks lent out a large amount of money getting people in debt then demanding repayment (in gold).  Thge lack of 'money' was a regular complaint.  Farmers couls be wealthy in land and crops but hard pressed to come up with cash to pay taxes (one of the reasons famrers backed the 'free silver' movement (a movement which was also inflationary).

In the past the amount of gold and silver in an economy increased slowly - roughly at the rate an economy expanded.   When the supply of precious metals expanded quickly (as after the Spanish conquest of the New World) - faster than the economy, you had inflation.  the discovery of gold in CA and silver in Nevada contributed to inflation BUT the gold from CA took time to enter the economy AND the economy grew quickly during that period.  MASSIVE silver supplies in Nevada threatened to undermine the US money supply but in 1873, the US demonetized silver to stop the 'arbitrage' between cheaper silver and gold - coining silver and swapping it for gold.

In Colonial America, states issued paper money to grease the wheels of commerce when money was in short supply and times were good BUT withdrew it from circualtion when the economy slowed.  Sadly governments rarely possess such self control and are far more prone to continually issue more and more money.

Inflation is reflected in the reduced buying power of money - when money is based on gold or silver it is also reflected in the debasement of that money - a decrease in the actual gold or silver content in coins.  This is shown clearly in Roman coins.

In 200 years, the sliver content of Roman coins dropped to almost 0 - from 100%   Note - the US ceased issuing 90% silver coins in 1964.  A silver dollar is now worth $23.32 in melt value.   That $20 gold double eagle is worth $1600 in melt value today (.9675 troy oz. of gold)

Even our base metal coins - old copper pennies and nickels are worth MORE for their metal value (3 cents in copper for an old pre 1983 penny and 7 cents for a nickel).

Even now Treasury is discussing reformulating coins because our zinc based pennies are rapidly beccoiming worth moere for their metal content.

willwork4food's picture

Yea, but did they have those cool Iphone's back in the 1970s???I think not.

Clearly, we are better off without a silly gold standard because we have cool Iphones now.

ShrNfr's picture

Remind me what happend in the early 1970s and 1965. Oh yeah, that's right, we went off silver and gold and full force into fiat. Realistically though, you should use a log scale for these things. It would be less deceptive.

cynicalskeptic's picture

That's NOT a log scale?   Seems like we're understating it then 'cause if they're using CPI numbers we've so manipulated THAT statistic since 1980 that the past 30 years of inflation are vastly understated by 'official' numbers.

Stoploss's picture

You're on it Mike, keep going, your getting closer.  Much closer.

Mentaliusanything's picture

Tricky "Dick" ...... The President that keeps on giving

Freddie's picture

LBJ's Vietnam War and "War on Poverty" had something to do with it as well.  LBJ got very very wealthy off of his "wars."

DavosSherman's picture

Whose the fucking dick giving Freddie a thumbs down for tellin the truth?

hairball48's picture

Many more than LBJ got rich back then. I was in the Med with the 6th Fleet, mostly drinking and chasing "real" whores :) when Nixon closed the gold window in August 1971.

Nixon was forced to close it, or give away all the gold in Fort Knox...assuming it was actually there :)

Investors abroad realized that the USA was trying to finance 1) Viet Nam war, 2) Space program 3) all the new "social programs" by borrowing. DeGaulle, of all people, called Nixon and the Treasury on it by demanding gold for their bonds...and that was that. No more gold convertability...even for central banks.

Congress then saw the opportunity to spend without restraint(deficits didn't matter)...and they been doing so ever since.

That's the way I remember it, but I'm just a poor, uneducated redneck.

thatthingcanfly's picture

...and Nixon, who was not so bad a President, by the way, probably had no choice in '71 but to put the final nail in the barbarous relic by ending gold foreign exchangeability. The damage from the disaster that was FDR's Presidency was already done; Nixon's only alternative would have been to allow De Gaulle et al to empty Ft. Knox. Not palatable.

Ayn NY's picture

I suspect if he would have threatened to withhold all debts owed to the US that France incurred from two world wars and the Marshall Plan, De Gaulle may have not been such a dick.

francis_sawyer's picture

Why weren't there any 'GENIUSES' back then thinking about minting Platinum coins?


Dime store fucking analysis...

HANK PAULSON (2008 bazooka) = KISSINGER [in different secretary role ~ on the point to 'advise' Nixon to renig on Bretton Woods for& on behalf of his buddies... Think Nixon though of that shit on his own?]... I welcome all competing syntheses [otherwise: STFU]...

dick cheneys ghost's picture

Didnt Henry work for the Rockefellers before he worked for Nixon? I think he did........and dont forget that the petrodollar was born while the nation was "enbroiled in Watergate" convienent (see yom kipper war)

A Nanny Moose's picture

What about the debt we were incurring, while failing to bail the Frogs out of their SE Asian Cluster fsck?

ali-ali-al-qomfri's picture

DE GAULLE predicted the US monetary crisis in 1965

vive la France

Salon's picture

It actually requires less input of value (labor plus capital) to do those things now due to productivity.

High education costs are due to rent seeking and subsidy. The cost of the product is not a good measure of the actual resources used to produce one unit of education or brocolli

liszt's picture

Sure. However, this world is over. 

Amos 2:14 The swift will not escape, the strong will not muster their strength, and the warrior will not save his life.





francis_sawyer's picture

 "If we acually took our time and did stuff right from the start, we would not go broke having to fix, or maintain, things all the time"


Yeah ~ but how then would the jews get their cut for sitting on their ass & doing nothing?... A noble (but IMPRACTICAL) dream...

francis_sawyer's picture

...SPACE RESERVED (for something PITHY)

fuu's picture

They did it all for the stabilitease.

Racer's picture

And that's under reporting the reality as well!

liszt's picture

Oh yeah, and since 2000 before Cristi the inflation rose a lot more !


Getting Old Sucks's picture

One thing I learned here is that credit creates money.  Looking at the chart, when our dollars were no longer backed by silver, it went straight up from there.  That's when the banks took over our money supply.


BTW, shouldn't a government control it's money?  Of course but slow as I am sometimes, it just dawned on me that the US of A.  Apparently, it hasn't dawned on our government yet though. 

auric1234's picture

I wouldn't trust my government to control money. Why would you?


Getting Old Sucks's picture

Cause all the one, two and a half, three, five, ten, twenty, fifty dollar, gold pieces I have use to legally represent those amounts.  That was real money.  Even the silver certificates, redeemable for silver was real money.  The governmant gave that away to the banks.  Jackson's saying is coming alive about banks controlling money.

I still gave you an up arrow cause now you are right :-)

auric1234's picture

I don't see why do we need government to dictate anything about money. The hell with useless nominal values. 1 ozt of gold is 1 ozt of gold, period. There's no point in pegging dollar with gold and call it a "gold dollar" whatsoever.


mikmid's picture

The bankers are in control now but when it crashes and everyone gets really pissed I don't know if the drones (man and machine) are going to protect them.

Salon's picture

People will be told it was Bush's fault, or the fault of the free market.

"if we only had a few more laws and more government control this wouldnt have happened. For the sake of our children and our future we have to do the right thing"

Sheeple will eat it up. Bankers get off scot-free

dbTX's picture

Talk about a hockey stick!!

wee-weed up's picture

Al-jazerra Gore porn!

Fap... fap... fap...

Never One Roach's picture

Looks like the price of dark chocolate high in the past 4 years!

(Anyone notice the price of gas creeping up again? Very Bullish!)

TrustWho's picture

The Reinhart and Rogoff paper must be interesting read, because they had to support the Fed's role. What was the paper's conclusion?