The Glade 4.0

Go to:
http://data.bls.gov/cgi-bin/cpicalc.pl

Put in $1 in the first box.
Then put in 1913 (the earliest year you can, and incidentally the first year the Federal Reserve existed).

Put the current year (2009) in the second entry.

Click calculate.


See what you get.
Then, express that as a percentage over the original dollar.
Next, take that percentage and divide it by the number of years since then (96).
Finally, make either this face: this face: or this face: as you realize what the average inflation rate is in this country for the last ~100 years.

_________________
“The duty of a patriot is to protect his country from its government.” - Thomas Paine

22%?

_________________

Holy shitsnacks!

Exciting, isn't it Arafys?

_________________
“The duty of a patriot is to protect his country from its government.” - Thomas Paine

but if you put it the opposite way... $1.00 in 2009 has the same buying power as $0.05 in 1913; and $1.0 is 2009 has the same buying power as $0.26 in 1976

_________________
Darksiege
Traveller, Calé, Whisperer
Lead me not into temptation; for I know a shortcut

My point is, if you want to live to be, say, 100, you should probably use the average inflation rate for the last 100 years to determine what types of wage increases you need, and earnings on investments, etc. to have a comfortable retirement.

Therefore, you better earn 22% more per year, and your investments need to show 22% growth, in order to maintain their value, to speak nothing of actually growing.


Edit: It was just pointed out that that fails to account for the compounding.

This thread is therefore much less exciting than I originally intended.

_________________
“The duty of a patriot is to protect his country from its government.” - Thomas Paine

Want to pucker even harder?

Remember that the CPI uses hedonic adjustments and substitutions. And that the CPI number often is displaced by Core CPI which discounts prices of real-etate/rents and energy. The hedonic adjustments basically work like this: if an item increases in price, they can say it increased in value. The proportionality of these increases is the true price increase: if it got twice as expensive, but 50% better, the price only actually went up by 50%. If it got 3 times as better and they determine it got 3 times more expensive, it didn't change in cost. If it got 30% better but only increased in price by 10%, it got 15% cheaper or it's price went down to about 84.6% of the original costs.

Substitutions are exactly what they sound like. You might swap a Macbook out for a Laptop because they deem them to be similiarly close to the same product.

Now to really pucker your lips, take all these considerations in mind, which drive the estimation to be conservative to true inflation. Now put in your net paycheck and look at the value in 1913 dollars.

Look at it.

_________________
"It's real, grew up in trife life, the times of white lines
The hype vice, murderous nighttimes and knife fights invite crimes" - Nasir Jones

Holy crap... so if I put my new income for 2 weeks into that calculator... my income is the equivalent of making $73.21 every 2 weeks in 1913.

**** me.. putting in my YEARLY gorram salary... In 1913 I would not even be making 3k a year

_________________
Darksiege
Traveller, Calé, Whisperer
Lead me not into temptation; for I know a shortcut

Well, your century (okay, 96 year) figure still works out to 3% annually. That's still high enough to realize that, for instance, CD's aren't really investments at all. That's also plenty high enough to point out to me that I've lost real buying power ever since I've started working, as I've never received a 3% cost of living-based increase. I think the best I've managed was a 4% raise one year with good performance factored in.

But, to return a little zing to the discussion, let's note darksiege's $.26 1976 dollars to $1.00 2009 dollar, or $1.00 33 years ago equal to $3.85 today (again, as Rafael pointed out, that's INCLUDING the fraud the gov't uses to make the numbers come out less incriminatingly bad). Then, you realize that our inflation's been accelerating. Over the last 96 years, the average rate (with compounding) was 3% or so. Over 33 years, it's 4%.

Want to see how utter a failure Carter was for the nation's economy? Put in 1977 to 1981. You'll get $1.00 in 1977 was worth $1.50 in 1981. Over 4 years, that's a whopping 10.7% inflation rate!

_________________
"Aaaah! Emotions are weird!" - Amdee
"... Mirrorshades prevent the forces of normalcy from realizing that one is crazed and possibly dangerous. They are the symbol of the sun-staring visionary, the biker, the rocker, the policeman, and similar outlaws." - Bruce Sterling, preface to Mirrorshades

For the record.. I just used 1976 to compare how screwed things are now in contrast to when I was born.

_________________
Darksiege
Traveller, Calé, Whisperer
Lead me not into temptation; for I know a shortcut

First thing I did.

_________________
Los Angeles Kings 2014 Stanley Cup Champions

"I love this **** team right here."
-Jonathan Quick

http://goldismoney.info/forums/archive/index.php/t-5957

In 1913, bread cost about 6 cents a loaf, I have yet to pay anywhere near $120 for a loaf of bread.

Gas was 12 cents a gallon. Anyone paying $240 a gallon yet?

A gallon of milk was 36 cents, $720 a gallon anyone?

A new car was $490. While you can buy a new car for around $1,000,000 I think the same level of car they are referencing would be in the $25,000 range.

I find your converter flawed and purposely alarming DFK! Misinformation at the least.

_________________
The U. S. Constitution doesn't guarantee happiness, only the pursuit of it. You have to catch up with it yourself. B. Franklin

"A mind needs books like a sword needs a whetstone." -- Tyrion Lannister, A Game of Thrones

Is the change away from the gold standard in there somewhere?

_________________
Raell Kromwell

Micheal,

I am trying to figure out how the link DFK provided is flawed... when using my own numbers above... $1.00 in 2009 has the same buying power as $0.05 in 1913. You can buy a loaf of bread for just over a dollar in many stores in Vegas.. $.06 in 1913 is $1.31 in 2009

That fits in perfectly with your numbers.

Again using the calculator DFK provided... $.12 cents a gallon works out to $2.62 a gallon. That is currently right under

Also using your number of $490 for a brand new car; that would come to $10,689.37 in 2009 money which is about what I paid a few years ago for my 2006 Chevy Cobalt.

Using the same site you linked:

Average Income $1,296.00 is $28,272.31 in 2009
Loaf of Bread $.06 is $1.31 in 2009
Gallon of Gas $.12 is $2.62 in 2009
Gallon of milk $.36 is $7.85 in 2009 (this number is off by a bit more than double... But from what my grandparents told me.. Milk was was delivery only which would explain the variance in the cost.)
New Car $490.00 is $10,689.37 in 2009
New House $3,395.00 is $74,062.10 in 2009 (I wish they were that cheap!)

I would not think to tell you that you are wrong, but I think your calculations may be a bit off.

***EDIT: One of the posters on that thread you linked is also using incorrect math. Except for one specific thing he says.. Bread at $6.00 a loaf. The good stuff can be that much. And it is worth EVERY penny! (A good Cracked Honey Wheat mmmmm). But the OP is saying that a penny then is a dollar now. This is also inaccurate.***

_________________
Darksiege
Traveller, Calé, Whisperer
Lead me not into temptation; for I know a shortcut

Hmm, 23 times is 2300 percent

I was being kind and only multiplying by 2000, then forgot to bring it back down from percent to whole numbers.

Okay, my mistake, and my apologies.

_________________
The U. S. Constitution doesn't guarantee happiness, only the pursuit of it. You have to catch up with it yourself. B. Franklin

"A mind needs books like a sword needs a whetstone." -- Tyrion Lannister, A Game of Thrones

Actually, DFK!'s tool is useful for validating the observation that inflationary economic policy exists to marginalize the Labor Class and the Professional Class in the United States. After all, if the value of a dollar as purchasing power is consistent with the cost of staple materials for 96 years, then it is as I have always said: inflation always outstrips average wage gains by just enough to prevent mobility. And, if you think that's not depressing enough, you should add in the scaling marginalization of income vis-a-vis taxes to further legitimate the notion that our government, post FDR, is generally opposed to economic mobility.

_________________

Most of the growth in money supply is "suspended" right now because it's tied up in debt obligations that will never be repaid. When the Treasury sells a bond, and that bond finally matures, the Treasury just sells another bond to pay for the bond maturity and the interest is monetized or rolled over into an additional bond.

Basically, the Treasury securities are a giant Ponzi scheme. This is because the money from the bonds never actually increases the productivity of Americans (or never increases it proportinally to the value of that bond fully matured) as it is squandered on social entitlement programs and tax revenues never see a real increase. A nominal increase in tax revenues may occur, but this means the bond gets paid back in debased currency, so the real purchasing power of that bond in Dollars is undermined proportionally).

What I'm getting at is that the growth in money supply over the recent years with the terrible monetary policy of Greenspan under both Clinton and Bush and now Mr. Bernanke under Obama accomadating the crappy fiscal policy of the bills coming out of Congress is going to be felt very real. Most of all, by those who earn a living on wages and don't own their wealth in the form of equities or real, non-cash type assets.

_________________
"It's real, grew up in trife life, the times of white lines
The hype vice, murderous nighttimes and knife fights invite crimes" - Nasir Jones

This isn't really shocking, most people just don't comprehend the crippling nature of compound interest. If you do one-year gaps down the line it shows inflation of 2-4%, a "good" inflation rate.

Except, John Maynard Keynes was wrong.

_________________

We really need a Celebrity Death Match of Khross vs John Maynard Keynes so we can put that dead horse to rest finally.

Aizle:

As long as the flawed theories of John Maynard Keynes continue to drive the economic policy of our government, the Horse isn't dead.

_________________

Unfortunately, 96 years ago there was a common thought (although hardly universal) that the gold standard, and the accompanying Great Deflation had been at the expense of the common worker; hence William Jennings Bryan and the Cross of Gold speech.



In other words, those in debt would still owe the same absolute number of dollars, but since the value of each dollar would fll and they'd be selling the same goods, they could mroe easily pay off the debt since it would be a smaller percentage of income.

Now, Bryan, of course was advocating a return to Bimetallism, not fiat currency, and the speech occured 17 eyars before the Fed was founded, to be sure. However, 17 years is not all that long, and Bryan was still a force in politics by that time, being Secretary of State.

I think it is important to consider how the issues appeared at the time. I don't think a century of issues can be boiled down to deflation = good, inflation = bad, and I think it's instructive to remember that issues looked rather different at different times in history.

_________________
"Hysterical children shrieking about right-wing anything need to go sit in the corner and be quiet while the adults are talking."

Diamondeye:

Any reason you're presenting a false dilemma, particularly one not stated in any of my posts?

_________________

Yes, this is the liquidation of debt through essentially shorting the dollar. However, wages are the slowest to respond to inflation, therefore prices rise in an inflationary scenario before wages do, and wage-earners are constantly "behind the curve" so to speak. So as a homeowner with a mortgage, probably a car loan and maybe a tiny portion of unsecured debt, the average worker can become richer if that debt gets liquidated by inflation faster than his assets depreciate. But then his wages are also worth less every year, and most employers do not have an annual wage adjustment for cost of living increasing due to inflation. Or if you do recieve a promotion or raise, it often comes with increased responsibility. Inflation offsets part of this wage increase and then you are also left with an increased workload.

The Fed issues debt securities insured against inflation, but as they measure inflation with the Core CPI (which is an extremely poor metric for the reasons I listed above), it can hardly be considered an inflation-hedge.

In the end, currency instability is bad, whether it is deflationary or inflationary; some types might wildly benefit depending on how they own their wealth.

_________________
"It's real, grew up in trife life, the times of white lines
The hype vice, murderous nighttimes and knife fights invite crimes" - Nasir Jones

Since I'm not, and in fact I'm neither asking you to solve any dilemma at all nor even arguing against you, but simply warning against oversimplification, I'll turn that around and ask why you're asking loaded questions. I think I more than adequately qualified what I was trying to say as cautionary. Are we overdue for a blowout argument or something?

I didn't quote your post to say you're wrong or to ask you to solve the dilemma. I understand perfectly well that you're not saying deflation = good, inflation = bad. I quoted it because it's short and you didn't take the time to explore in detail the historical persepctives or complexities. I know you're perfectly capable of that and I'm quite sure you're familiar with Bryan, bimetallism, the Cross of Gold speech, etc. I was expanding, not disputing.

_________________
"Hysterical children shrieking about right-wing anything need to go sit in the corner and be quiet while the adults are talking."

Nope, I was just asking for clarification on your dichotomy between inflation and deflation.

_________________