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The Change In Cost Of Living Since 1938
The drip-drip-drip of Fed-induced inflation is hardly felt by most Americans even on an annual basis; but take a step back over a generation of currency debasement and it becomes clear. As the following image shows, the cost of living since 1938 has, simply put, exploded. With incomes up just 30x in those 76 years, the cost of a home has risen 70x, the cost of bacon has risen 100x, and the biggest of all, the cost of a Harvard education has risen 142x. Insidious... "the road to poverty is paved with small inflations."
h/t @History_Pics
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Mises Economic blog provides some more color on where America is heading... The Road To Poverty Is Paved With Small Inflations...
The value of Venezuela’s currency plummeted to record lows on the black market last week, with 100 ‘strong’ bolivars exchanging for $1 (ten times lower than the official rate), and annual price inflation reaching 63%. Chavez’s successor Nicolas Maduro, continuing to denounce the “capitalist economic war” on his socialist regime, now blames airlines for trying to collect ticket revenues the government isn’t able to pay. Meanwhile, the Venezuelan economy is showing symptoms of a rapidly forming crack-up boom: shortage of basic amenities, power outages, depletion of dollar reserves by 30%, and looming debt default. As people scramble to exchange paper money for anything and everything that can still be found on store shelves, “over there”—say their Columbian neighbors just across the border—“there’s no food.”
The ‘final and total catastrophe of the currency system’—as Mises called the terminus point of any sustained inflation—was in fact brewing in Venezuela long before Maduro’s regime, and the country experienced even higher price inflation in late 1990s. But because people held the belief that prices might fall at some point in the future, and continued to increase or maintain their cash balances, the earlier stages of the inflationary process were drawn out over many years. However, two Caracas entrepreneurs have warned that it is now too late for the government to salvage anything: “people clearly haven’t had confidence in [the bolivar] for decades; and even less now… It doesn’t look like the market has much confidence in the government’s ability to get things under control”.
While Maduro’s regime is leading its people to poverty in a quick, conspicuous manner, other governments are more willing to wait and conceal their intentions. Moderate price inflation has been simmering for decades in Western economies, where central banks make it their official mission to keep prices increasing at an annual rate of 2%—which means doubling them over the course of 30 years. Beneath this goal of ‘price stability’, central banks’ balance sheets quadrupled by 2012 and brought about a global financial crisis. However, this produced no rampant commodity price inflation, and no flight into real goods is likely to happen in the foreseeable future.
But does that really mean that we’re a world away from Venezuelan-like problems? As Mises pointed out, not necessarily:
If you talk about a catastrophe of the money, you need not always have in mind a total breakdown of the currency system… [Price] changes are not the same, nor [do they occur] to the same degree in various countries. But one should not exaggerate the difference in the effects brought about by the greater inflations as against the smaller inflations. The effects of the “smaller inflations” are also bad. […] If the government destroys the money, it not only destroys something of extreme importance for the system, the savings people have set aside to invest and to take care of themselves in some emergency; it also destroys the very system itself. Monetary policy is the center of economic policy (Mises 2010, 31-2)
[W]hat we have to realize, what we have to know when we are dealing with money and monetary problems, is always the same… the increase in the quantity of money, the increase of those things which have the power to be used for monetary purposes, must be restricted at every point (Mises 2010, 24)
Great or small, inflation hurts the masses, leading to the destruction of savings, as well as unemployment and overall impoverishment, while concentrating wealth in the hands of elites privileged by their position in the monetary hierarchy. If inflation doesn’t stop, the breakdown of the monetary system—whether fast or slow—will also bring about the destruction of the social division of labor. From this point of view, the difference between inflation ‘over here’ and inflation ‘over there’ is only a matter of how quickly we become poor.
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Saving in gold would have worked generally well except for the period of time in which the government declared what the price of gold would be.
The period of time in which the gubmint declated what the price of gold would be? When did that period end? Oh, wait...
It is not the 2-3-4% inflation, which is a big deal, it is the short-term rate below inflation which is. Otherwise, as long as my savings keep up with inflation (because the short-term rate should normally be above it, what we have today is confiscation plain and simple) and my salary keeps up with it, what's the issue?
"what's the issue?"
what's the issue with counterfeiters?
it's exactly the same. the debasement of the currency - inflation - happens *after* the new money is spent into the economy so it acts as a wealth transfer mechanism from everybody else to the counterfeiters aka banking mafia.
they get away with it because a) it's legal for them to counterfeit money and b) they only steal a small amount from each person a year
edit to address the specific points:
"Otherwise, as long as my savings keep up with inflation"
1) "as long as"
2) "my"
even if the savings rate is above the real inflation rate and you personally have enough savings to offset the loss in your non-savings (i.e. if you can only afford to save 10% of your income then only that 10% is protected) that's only ever likely to be a minority. everyone else is being slowly robbed.
I agree completly!
This system slowly sucks the currency right out of you.
Let us think of it like juice, perhaps orange juice from a real orange, today when squeezed you get a glass full but three years from now, the orange looks the same size, but only a few drops come out. would you complain. yes, of course, would you continue to buy them, no, but it seems when they steal the juice from the currency nobody seems to notice or care.
why is it so?
We are systematically being robbed of our freedom/time/currency its all the same.
Our only hope is that some 3rd world country awakens the western worlds sheeple and helps them to understand this. We seem to be too busy with American Idol or sports to care/learn/teach.
What is needed most is real leadership, perhaps like Kennedy, but it did not work out so well for him/us, we are still stuck with the corrupt financial system, slowly transfering our freedom/production/wealth to the greedy!
Perhaps this explains why history takes forever to happen!
What were you saying? The NLDS was on...
central banking = legalized counterfeiting
Coin Act of 1792, section 19, still says that any government official that debases the money of the United States shall suffer the penalty of death.
http://nesara.org/files/coinage_act_1792.pdf
That money as referred to in the act is no longer debased. It is gone.
The counterfeiting is not legal, just successfully uncontested.Lucky for the FED that they're not government officials. And, as you noted, there is no money, only currency. Debase away, Mr. Yellen.
That is right. And to point out the severity of the penalty for counterfeiting at the time of the founding of the US is only to point out how seriously citizens regarded the concept of money.
The penalty against those who debase the currency, no matter how severe, is no longer an issue today. Today's issue is to identify the difference between money and counterfeit since this is the cause of the problem. The conceptual grasp of that difference is pretty much overlooked. Without knowing what money and counterfeit are, then how could anyone attribute the actions of others as facilitating either?
Thus, as long as authorities claim that they are not counterfeiting but instead "printing money" then how could one accuse them of counterfeiting?
Most reasonable people (and that is quite a presumption) know that the cause of the economy's ills is the introduction of new currency into the current pool of existing currency. The second step then to any lasting solution (the first step is the conceptual identification of money vs counterfeit) then is to stop the introduction of new currency into the system. To this end and in this manner, individuals would have to do productive work to obtain any portion of the existing currency and the purchasing power of that currency would necessarily rise.
You know you are in trouble when the money falls apart in your hands and you can't tear the toilet paper.
There is a reason why housing is on top of that list!
Note that rent was only 18% of income. Note that today it's more like 40% (and higher). Note that the average house was only 2.5x yearly salary. Now it's more like 5-7x.
I lubbs me some of dat inflation!
Yes Massa!
sleigher:Today the average income is 50k and average home price is roughly 250k.
Then the average income was 1700 and average house was 3900.
So has income not grown or are houses way overpriced? Or both?
Apples and Oranges?
Yup, we need to raise minimum wage to about $700 an hour or so, then we'll be back in the hunt.
What's worse, taxes were much lower in 1938. Which means, if you perform the same comparison on after-tax income, the insanity is much worse!
The human predators who call themselves governments, [central] banks and corporations are absolutely eating honest, ethical, benevolent, productive [and naive] human beings alive.
Your right. I did some calculations on a newer post but did not use after tax. Have no idea what taxes were back then but surely less.
Historical income tax rates...
http://taxfoundation.org/article/us-federal-individual-income-tax-rates-...
Lots of other taxes were much lower then too.
Bacon up by 100X would mean $32/lb today compared to $0.32/lb back then. Must be some pretty nice pork.
Can we see this list in Oz of gold and silver...
Manipulated gold and silver prices, priced in USD? What's the point?
even with the manipulation. A silver quarter could still come close to buying a tax free, gallon of gas.
1932-1964 Washington Quarter$0.25 $3.0346
median income 1970: $8k (both rounded)
median house 1970: $24k factor 3x
median income 2014: $60k (both rounded)
median house 2014: $300k factor 5x
If you multiply all the food items by the 30x wage adjustment you will notice that food is actually quite cheap with regard to inflation-adjusted salaries.
An egg is an egg, but it is very hard to compare the difference in quality levels between cars back then and the cars of today.
In fact, in the car example if I multiply that by 30, for $25,000 I can get a car that will last for a few hundred thousand miles, have air-conditioning, stereo, safety features like airbags/ABS, get terrific gas mileage be much less polluting and more powerful etc. etc. Much nicer and better features for the money than what came before.
Not to let the Fed off the hook, but despite the constant bubbles and crashes they cause, human ingenuity has created massive increases in the standard of living for the population.
Now, the college degree is a whole different story. A lot more expensive for the same education, though the country club living environment is a lot better.
Agreed.
Not to mention we benefit from a space program. Can fly international on a whim. Go diving in the sea anywhere on the planet w/exception to Fukishoma
http://blogs.motortrend.com/the-25-mpg-model-t-why-havent-we-done-better...
Ford model T got 25 mpg.
Model T weighed only 1,200 pounds with a top speed of 45mph. Would be interesting to put modern 38+ mpg engine in a 1,200 lb car and see what the mpg jumps to.
Let's strip a 2,700 lb honda civic down to 1,200 and see what happens to mpg.
The magic happens when you put on the skinny tires with the wood spoked wheels.
Alternatively, the road to '1984' is paved with paving stones printed on the Fed's 3 D printer
WHY are inflation-adjusted home price and stock price histories rarely shown?
BECAUSE they look like this!
http://www.showrealhist.com/yTRIAL.html
http://www.showrealhist.com/RHandRD.html
“Cost of living”
Well, in general of course it cost more to live in America today.
What kind of roads did they have in 1938?
We had polio eradicated until Reagan legalized the illegals.
In 1938 50% of crotchfruit were squeezed on the kitchen table.
Grandparents were free to die in the marital bed.
No Geico.
People had worms.
Children lost eyes and choked to death all the time. SIDS was rampant.
Priests roamed free in the orphanages. They even got Steve McQueen.
Even the IMF SDR is sweating bullets.
/ lol
Even bernake can't get a loan. Oh the irony:
http://blogs.wsj.com/economics/2014/10/02/tight-credit-why-ben-bernanke-...
Yea, he’s a common folk, just like, the common folk.
It’s a circus balloon.
Even bernake can't get a loan. Oh the irony:
http://blogs.wsj.com/economics/2014/10/02/tight-credit-why-ben-bernanke-...
If I understand correctly, the USA dollar stayed at about the same purchasing power throughout the 19th Century, and yet there were tremendous advancements in science, technology, and medicine throughout that century. So I think I don't agree that it is necessary to sacrifice the value of the currency to keep science marching on, producing continual improvements to the quality of life. I think it is only necessary to NOT STOP scientists and inventors.
In the 20th Century, we got the Fed, and therefore inflation, because the Fed created and is still creating massive amounts of money out of thin air. No doubt some good things were done with some of that easy money, but also, I believe, some bad things, and I definitely believe that the easy money created easy waste for many and easy profits and an easy road to dominance for those who had the direct access to the easy money.
Much science research came from the users of the “GI Bill”… not to mention Germany after WW2.
One could argue the GI Bill was the gateway drug for financing education on a mass scale.
Does anyone remember their Great grandparents or grandparents telling you about the house mortgage burning ceremonies? I remember.
Nobody pays it off anymore, they just refinance.
Yep. Went to my grandparents. I am not sure I will have it ready for my grandkids. Maybe. I'm a financial prick these days.
My investments: Me.
Still have direct deposit?
Went to a K Mart today. Not by choice, in a diff area. Anyway, THAT place WILL be outta bizz soon. might as well walked into reg super market. And as far as ammunition, diff subject. Pile it while the getting is good. Shit is getting real stupid.
The wife and I went to the Walmart in MB. It's a fucking riot if you enjoy people watching.
She exchanged a new ZTE that lasted only 5 days. Mrs Atomizer is hard on phones. She claims it was the fault of beach sand. Shakes my head. She can go through phones as if it were a box of tampons.
I little Friday night humor.
It's not easy to find 10mm.
That reminds me, where is my Megastar? Haven't seen it since I moved in March.
Inflation is a feel good metric.
Everyone hopes their children and grandchildren fare better in life than they did.
The main metric of success is income.
So when little Johnny tells you in the year 2030 that he makes $30/hour delivering pizzas, you can lay on your deathbed happy in the illusion that he will live a long prosperous life.
As long as he doesn't mention that a pizza costs $50.
Sweetheart what you and many others just simply DO NOT GET is that is that it does no all come down to money. Period.
So wrap your simple brain around that. Money means absolutely nothing.
All the games. all the cheats. all the frauds. all the jewels are meaningless.
If you have extra, you could send it to me.
Whacko is correct. Get over the binge buying. If you cannot purchase in cash, you can't afford it.
Why do you think there are so many credit card commercials for cash back rebates? Their asshole is about to suck up their head.
The US had the world's highest standard of living in 1937. Today, the US is around the 15th!
Here is aomething not mentioned in this piece: Whenever the Feds get involved in something {subsidize it}, the cost of said sector/product skyrockets. I remember back in 1982 when our first was born. My 20% of the delivery co-pay was paid in full in just six months {and that was back when they kept mothers in the hospital for allot longer than they do today.} The whole bill was around $3200. Baby formula was $1.69 for a tall can of ready made Infamil. Huggies diapers were $3.29 a bag. Then along came WIC, and these products were subsidized. What do they cost today? It's mind blowing.
and I think Cog D gets that.
Absolutely none of this means anything. We are molecules of meaning and in the longer run of the universe all this sadness will fade. And the idiots (Dimon and back-track Greedspan) are bought and devoid of any soul. They are devoid of any soul.
How to exist with no soul? Well do a career follow. There is no clearer path to depravity and loss. What does it mean to sell every semblamce of compassion and justice? I guess you have to hit them early. And dangle the carrot AND HOLD THE KNIFE. It is not as if Dimon and the gang were any smarter. Cause they were not. They just had the carrot dangled and the knife shown, likely from birth in many cases.
Take a look and be honest. If you were shown a way to "heaven" but on the backs of all people? iF YOU were given the choice of earning a dubious living? or a street to success? ALL YOU HAVE TO DO IS PARK YOUR MORALS?
And I am not talking religion. Morality is beyond religion IMHO. Religion fucks it up, much to the satisfatction of politicos.
I know I digress. I am sorry if I insult Roman Catholics, Jews, Moslems, Hindus, whatever. Are you all insane? Are every single one of you "terrorists"? None of it, not one single text, makes any kind of sense. Not one little parable, not one frigging "sin". Not one sanction and not one beheading. Not one church.
I DIGRESS. People here read about this and that.
But what gets sidelined is any semblance of simple human awareness. Apparently there are higher evolutions of mammals (and I think, myself, of LIFE itself) but mammals who possess self-awarenss sureoly should have a greater goal than rigging markets to impoverish DNA.
There is something so basically STUPID, flat out stupid.
And, there is a total diisconnect. disconnect? Bullshit garbage that sets the BAR OF EXCELLENCE. The frigging bar? And sets a bar that denies all spiritual behvior. That polarizes any opinion.
I value opinion. Whatt I am suspicious of is dogma. Blind snd censored opinion. Sort of like "immaculste. virgin birth. or MAYBE cartoons of Islamic figures.." Could go on an on. But it all speaks to a void of discussionn of death. BUT more NB on life.
I refer back.
Women understand far more than FX trading. And more than cheating.
Taking 2013 average income of 52000 divided by 1800 == 28.888 or 29 as a multiplier
Gasoline today = $2.90 Per Gal
Car = $24940
Rent = $783
Harvord Tuition = $12180
Bacon = $9.28
Milk = $14.50
Eggs =$5.22
Sugar = $17.11
Coffee = $11.31
I'll let the readers decide the results. Would have been worse had I used the $1,731.
rent 783$, that's a room in a house with shared kitchen and bathroom
It goes back to the productivity gains we have seen and food/clothing/etc is a much % percentage of a household's budget but what he haven't figured out is how to really effectively improve productivity in a host of service-related items consumers rely upon especially education and healthcare. Every country in the world has seen notably increases in both especially over the past 30 years whose main cause is due to a lack of the kind of productivity increases we have seen in other sectors of the economy.
Taxes and misc governmental fees throw a wrench into the simple calculation. But, maybe the regulatory costs of production zero out the consumer taxes/fees. I don't know.
Inflation only benefits the FIRE (Finance, Insurance, and Real Estate) community. Without inflation money could not be lent on assests that do not go up, insurance could not be sold to protect the value of the loan on the asset, and real estate / assets bought on leverage would not be purchased based on manufactured inflation in order to feed the cycle. Deflation when allowed to occur in a free / non manipulated market is the check on business models that make poor decisions. The 99% would be better off without the FIRE economy, but it is so entrenched, that major systemic failure through a true default on debts would clean the slate. It is possible we are getting closer to the reset, since the 99% are so over indebted, and have no way of chasing the inflation / consumption model much longer.
you definitely got it right the second time
Throw pensions and Social Security into the mix as well.
Unfortunately the FIRE guys also have control of the propaganda / media. They have everyone believing that the higher the markets goes,then things must be better. Hmmmm?
Until the establishement of the Fed, we had growing economies and deflating prices, and there was never a problem with that. That's what should be the results of ever improving technology and advancements.
Inflation is a product of the Federal Reserve, pure and simple.
of frac reserve lending/money creation, really...
Born in lust turned to dust. Born in sin, cmon in.
In 1978 when i was in high school, my mother gave me $2 per day for lunch money. I bought two gallons of gas and a pack of smokes with it.
In 1978 when i was in high school, my mother gave me $2 per day for lunch money. I bought two gallons of gas and a pack of smokes with it.
Pensions.
Pensions have caused a lot of this.
Without PROFITS doubling less than every working generation, 25 years or so, pensions are a fiscal impossibility.
It is just math.
You cannot pay a man for today, plus tomorrow, plus inflation, plus additional regulation, plus for profit healthcare and not expect the costs of things to increase.
Now throw in the Federal overspending and indebtedness.
Only one way out of this mess and it won't be pretty. Insanity can only continue until it can't, and math is a law of the universe and will someday no longer be denied.
Just think, at this rate our kids and grandkids won't have a pot to piss in or a window to throw it out of. But all these rich bastards will.
Then, I conclude we all should try to light a candle and try to become a rich bastard rather than piss on the matches. Let's do our pissing on the robbers, Uncle Sammy being the worst.
Uncle Sam and his pensioned henchmen.
You're right about short-sighted future obligations that governments, corporations, and other institutions have taken but did not make adequate mechanisms to properly fund them.
However, as the outright fraud that Hank Paulson, Tim Geithner, Ben Bernanke, and now Lew, and J Yell have perpetrated by simply printing quadrillions of brand spanking new, never b4 existed FRNs, to take care of the obligations and some trilions of "Bonus Money" thrown in for good measure, of Goldman Sucks, Chase, Merrill, Bear Stearns, Lehman, AIG and the rest of the Jewish Mafia in New York and D.C. due to the Financial space owning the government, there is a way to pay for those Pensions just as easily.
There does not have to be a mess. Just as they did in 2008 and continuing for the last 6 years, they can print the quadrillions to take care of those promises, which at the very least would help offset the astronomical imbalance between the elite and the rest of the human beans.
They must do that and my guess is, they have and they are. And that is why J B T F D has been so profitable for those who took a chance that the FED would somehow restore the markets to pre-2008 levels and add 10% for our troubles.
So far, it has worked for the pensions, 401ks, and SEPS, and all the other 'insurance' people have taken out for their retirement. Those equity securities have mostly been all made up. The Bond market however was not so addressed as the rates on new issuance prove. That does however make the bonds issued b 4 the debacle of 2007-8 valuable.
I know this does not conform to the attack on the FED that the shorts have been engaged in for 6 years, in a sane world Goldman would be a burnt cinder on the New York streets by now but absent that, I know that the retirement funds of total strangers, my family and many of their friends in the tens of millions have been restored and that is some kind of left handed blessing.
Restored at what cost?
The 'restoration' of these accounts has only been accomplished through the mass printing of paper money by the Fed, the actual balance sheet which underpins this 'recovery' would make Bernie Maddoff blush.
The first real hiccup in the US government or US economy will start the unstoppable landslide. Not only has the Fed artificially propped up our economy but all of Europe's also.
It's to late to change anything....they pissed it all away
Another misleading article from ZH. All "specified" items converted to todays prices are cheaper. Things not specified are more difficult to calculate because as I said they are not specified. When you say "new house" for example. What is the square footage? When you say "new car" is it a economic or luxury? Anyways, I did the mat here on past articles. ZH quote and write this kind of articles so their whining readers can justify their laziness and keep whining. Average wages in 1938 were 0.62 cents (10 hour labor day) today is 24 bucks (8 hour labor day). minimum wage was 0.25 today is 7.25. Do the mat yourself and see that the " specified" items on the list are cheaper. Now if you compare not specified items, like a car for example you never know if you are comparing apples to apples or to bananas. For example a Toyota corolla will cost you 20 grand. Divided to the official average pay in America you get around 833 hours of labor to buy this car. In 1938 you would need 1387 hours of labor at the average hourly pay to buy a car. Thats deflation. And a 1938 car did not have AC, air bags, ABS etc, so you are getting a better product cheaper. So to all the ZH readers with their head stuck in the sand: " do you guys want some cheese with your whine?
calculate the costs of penny whistles and moonpies, nigga!!
ZH has done a near perfect job in exposing a great many inequities, indicted conspirators, and generally, politicians worldwide who have treated themselves like kings while mistreating their consitiuents, and further with the constituents' tacit approval.
But they are losing a lot of cred by the chicken little stats they use that are not vetted for truthiness.
And those thumbing you down are only further adding to the descent into irrelevance that ZH will become if if doesn't get its objecitve house in order.
You're right in everything you wrie, except the word "mat".
Look who's whining now
Platypus, I like this approach of attaching the value of one's productive time as the measure of for what it can be exchanged. I don't think though that it indicates deflation. What about the variable of computers, robotics, and a host of other technological advances that can be attributed to the exponential productivity gains of our age and therefore a higher quality product obtainable for less labor?
To say that this exchange of our daily time for higher quality products indicates deflation is to ignore the fact that there is indeed an ongoing increase in the volume of currency introduced into the economy and that this inflation of currency does not represent the introduction of value into the economy but the theft of value from the economy.
Your approach of identifying the labor of one's time as productive work for the exchange of the product of another's productive work should not be misconstrued to give a pass to those who do no productive work at all but nevertheless manage to obtain the products of someone else's productive work and this is the diffience between the inflation or deflation of currency; viz, there is either an exchange of productive work or theft from productive work and the price of which is not relevant to that moral issue.
The main point is about the sensationalism of those kind of articles. As I said in older posts, I'm not denying inflation. But the nominal change in value of the dollar used in the context of measuring inflation is misleading. ZH LOVES to do it because it attracts more people to the site. So misinformation is used in exchange to revenues.
Understood. Sensationalism sells. Sometimes the best one can do is simply state the truth and show how it must be true. Not to state the truth and remain silent is to sanction the lie. Thanks for showing.
..and yet, the living is so much better. The people more prosperous, the country the strongest in the world. comparison with 1938 is absurd...better if you compared standards of living with the height of US power during the Vietnam war, the apex of US power, wealth and influence...it isnt for nothing that man reached the moon in 1969 and has never come back there since.
Gold rose fairly steadily 375% over 6 years..why did they not knock it back down significantly for 6 years?
side note...in 1938 the federal income tax on $50,000 was 4%. 21% less than today
GOVERNMENT IS THE ELEPHANT SITTING ON THE CHEST OF FREE ENTERPRISE