Thursday, December 22, 2011

The Magic and Miracle of the Marketplace: Christmas 1964 vs. 2011 - There's No Comparison

1964 Sears Christmas Catalog
Here's a seasonal holiday post from CD last year at about this time, and with a link today from Art Carden in a related post at the Mises blog:

Pictured above are some color TVs from the 627 page 1964 Sears Christmas Catalog, available here at WishbookWeb along with many other Christmas catalogs from 1933 to 1988.  The original prices are listed ($750 for the Sears color TV console and $800 for the more expensive one), and those prices are also shown converted to today's 2010 dollars using the BLS Inflation Calculator: $5,300 for the basic console TV model and $5,650 for the more expensive model ($5,473 and $5,838 in 2011 dollars).   

To put that in perspective, the pictures below illustrate what $5,300 in today's dollars would buy in the 2010 marketplace:



Bottom Line:  For a consumer or household spending $750 in 1964, all they would have been able to afford was a console color TV from the Sears Christmas catalog.  A consumer or household spending that same amount of inflation-adjusted dollars today (about $5,500) would be able to furnish their entire kitchen with 8 brand-new appliances (refrigerator, freezer, dishwasher, range, washer, dryer, microwave and blender) and buy 9 state-of-the-art electronic items (laptop, GPS, camera, home theater, plasma HDTV, iPod Touch, Blu-ray player, 300-CD changer and a Tivo recorder).  And of course, even a billionaire in 1964 wouldn't have been able to purchase many of the items that even a teenager can afford today, e.g. laptop, GPS, digital camera.  

As much as we might complain about high unemployment, a sub-par recovery, a dysfunctional Congress and a huge deficit, we have a lot to be thankful for, and we've made a lot of economic progress since the 1960s as the example above illustrates, thanks to the "magic of the marketplace."  

51 Comments:

At 12/22/2011 1:27 PM, Blogger Ed R said...

I thought you Austrian/hard money folk were telling us how bad inflation has been since 1913.

 
At 12/22/2011 2:04 PM, Blogger Bruce Hall said...

... and the $0.35 per gallon of gas in 1964 is equivalent to $2.19 ... no comparison.

 
At 12/22/2011 2:04 PM, Blogger Bruce Hall said...

excuse me ... $0.30 per gallon.

http://www.1960sflashback.com/1964/economy.asp

 
At 12/22/2011 2:06 PM, Blogger bix1951 said...

complaining is the national passtime

 
At 12/22/2011 2:06 PM, Blogger morganovich said...

ed-

mark is deliberately picking consumer electronics, the space that drops in price more rapidly than any other.

look at say, gasoline, which is up over 10X in that period and you get a very different picture.

the average price of the home in which you got those gifts in 1964 was $18,000, only 6% of the current price (17X increase).

you have to be very careful about the composition of baskets of goods/services when you go looking at price comparisons.

 
At 12/22/2011 3:54 PM, Blogger Jet Beagle said...

morganovich: "the average price of the home in which you got those gifts in 1964 was $18,000 only 6% of the current price (17X increase)."

$18,000 probably bought one a 1400 sq ft, 1 car garage home in the 1964 Dallas suburbs. Today, in the average Dallas suburb, such a home, with a 2 car garage, now costs about $140,000.

 
At 12/22/2011 4:07 PM, Blogger Jet Beagle said...

morganovich: "you have to be very careful about the composition of baskets of goods/services when you go looking at price comparisons."

The truth is, though, very few of the consumer goods we buy today were available in 1964. That's true not just in electronics, but in probably half the consumer goods categories.

Take food, for example. The variety and quality of frozen and canned goods available at the A&P of 1964 was far inferior to what we can find today. The variety and quality of produce would be laughable by 2011 standards.

Or consider the woodworking tools offerred today at very reasonable prices by Sears or Lowe's. Compare them with what Sears sold 50 years ago. No one with any sense would prefer the dangerous and limited funcionality of those tools from that era.

Is consumer electronics the only category where prices have dropped or remained flat? I'm not familiar with power tool prices from 50 years ago, but I know the price for a basic table saw has declined since 1976.

 
At 12/22/2011 4:16 PM, Blogger VangelV said...

I'll play.

In 1964 a sum of $5,300 would have bought you 151 ounces of gold. For 151 ounces of gold I could by the median house in the US today and still have enough money to buy a nice Lexus.

 
At 12/22/2011 4:24 PM, Blogger Jet Beagle said...

VangeIV, you're not playing the same game at all. Mark was referring to consumer and household goods, not commodities.

It is possible to find a few comparable items which are far more expensive, and you and morganovich can cite exceptions to "prove" Mark wrong. But the typical 1964 household had far less spending power than did the typical 2011 household. If measured the sensible way - hours of work required to acquire almost every household good - 2011 would come out far ahead.

 
At 12/22/2011 4:26 PM, Blogger Walt G. said...

I remember 1964 very well--that's the year I had to have ether to get a tooth removed at an oral surgeon. That stuff is very nasty when you wake up. They don't use that shit anymore.

If I had to choose when to live between 1964 and 2011, I pick now. I would elaborate further, but I have to get back to work using my wireless connection on my laptop computer from home sitting in front of my fireplace in my heated massage recliner. I need the money wired to my account in a couple of hours so I can order some items on EBay if I cannot sleep tonight and get up early. Life is rough, but somebody has to do it.

 
At 12/22/2011 4:33 PM, Blogger Walt G. said...

VangeIV,

I think you lose. Gold could not be privately owned in the U.S. until the Nixon administration. You can own it now, so that is one more thing available now that was not available in 1964.

 
At 12/22/2011 4:55 PM, Blogger AIG said...

Darn you China!! We must stop their unfair trade practices!

As for Vangel's cute little Ron Paul-moment, he clearly fails again. Gold is not the only thing in the world to have gone up in price since that time. In fact, a heck of a lot of things have gone up in value a lot more than gold.

Your comparison makes about as much sense (and it makes no sense, so don't kid yourself)...as if I said that if I had $5000, in 1986, and bought 50,000 shares of Microsoft, today I would have 1.3 million dollars...enough to buy 7 homes near the median price in the US.

Microsoft beats "gold" hands down :)

 
At 12/22/2011 6:50 PM, Blogger Mike said...

If anybody happens to know Bix, you may want to call an ambulance. I think he has Seasonal Affective Disorder. Yesterday he was pondering the worth of private property and today he sees having a better lifestyle as complaining....sounds like somebody's about to get rid of all their stuff.

 
At 12/22/2011 7:07 PM, Blogger Marko said...

While I agree that Mark's assertion is true, I am not sure the comparison in this case is right. If I recall correctly, a console color TV in 1964 like the ones showed were the top of the line largest nicest TVs available at the time. Currently at Sears, the top of the line largest nicest TV costs 5,499. I just checked. So in a way, things haven't changed that much. The top of the line is really expensive. I agree that the 3D 75" laser view is better than the TV in 1964, but the cost for the best is weirdly the same.

 
At 12/22/2011 7:09 PM, Blogger Marko said...

On a related and perhaps spurious point, if you wanted to make an accurate reproduction of the tv offered in that 1964 sears catalogue, it would cost an awful lot, maybe more than $5k. The wood cabinet will be nicer than anything you can buy mass market today, at minimum.

 
At 12/22/2011 7:25 PM, Blogger AIG said...

"On a related and perhaps spurious point, if you wanted to make an accurate reproduction of the tv offered in that 1964 sears catalogue, it would cost an awful lot, maybe more than $5k."

Yes. But if one wanted to make an accurate reproduction of a horse-drawn cart today, it would also cost more than it did in 1865 to make one, because obviously the economies of scale and skill is not there anymore.

But, on your first comment that top of the line TVs cost the same today as they did then; yes. But, if we converted the TV into units of comparison...because a "TV" is not a unit of comparison, we'd get considerably cheaper "units" today. Ie, a top of the line TV today may cost the same as a top of the line back then, but the one today is probably 500 times better, by some particular parameter which I won't pretend to know.

 
At 12/22/2011 7:36 PM, Blogger kmg said...

morganovich blathered :

mark is deliberately picking consumer electronics, the space that drops in price more rapidly than any other.

That is a pretty dumb statement, since electronics continuously sucks up other products that were previously not electronics.

Remember when cameras used film? When audio was recorded on tapes? When phones had cords and the whole family had to share one?

Electronics is precisely the right measure, since it keeps swallowing up needs met that were previously met by products that were not electronic.

 
At 12/22/2011 7:40 PM, Blogger kmg said...

And the 2020 picture in this series will be vastly more impressive than even the 2010 picture.

 
At 12/22/2011 7:52 PM, Blogger VangelV said...

VangeIV, you're not playing the same game at all. Mark was referring to consumer and household goods, not commodities.

But that is the trick that inflationists love to use. They pick something where technological advances and productivity increases drive down prices and say that there is no inflation even when the currency has managed to lose more than 80% of its purchasing power. What we should have seen is a steady decrease in prices across the board, including commodities as savings increased their purchasing power just as we did during the 19th century under the gold standard. But we didn't as the huge spending due to the Vietnam War and the Great Society programs destroyed the Bretton Woods arrangement. Since then we have seen the expansion of the welfare/warfare state hollow out real capital investment to the point where the US is on the brink of economic collapse. While no collapse needs to take place over the short term, kicking the can down the road will only ensure that the situation becomes worse in the long run.

It is possible to find a few comparable items which are far more expensive, and you and morganovich can cite exceptions to "prove" Mark wrong. But the typical 1964 household had far less spending power than did the typical 2011 household. If measured the sensible way - hours of work required to acquire almost every household good - 2011 would come out far ahead.

Let me remind you that a typical 1964 household was able to own a house, two cars, and raise two-point-something children one one salary that required 40 hours of labour by one parent. The salary allowed for a nice vacation and for savings that would look after the kids' education and retirement needs. So please don't tell me just how much more purchasing power we really have today.

 
At 12/22/2011 8:02 PM, Blogger VangelV said...

I think you lose. Gold could not be privately owned in the U.S. until the Nixon administration. You can own it now, so that is one more thing available now that was not available in 1964.

Actually you lose. Gold was a global commodity and was tied to the USD at a price of $35.10 per ounce. The number of ounces that would buy a stereo then will buy a house and a very nice car today. Real money has gained purchasing power. The currency hasn't.

 
At 12/22/2011 9:33 PM, Blogger kmg said...

Let me remind you that a typical 1964 household was able to own a house, two cars, and raise two-point-something children one one salary that required 40 hours of labour by one parent.

Hogwash. They can do that today too, if they restrict themselves to luxury levels of 1964 and buy no products that did not exist then.

Plus, your view is very US-centric. That US manufacturing wages were high for a couple of decades in the 50s and 60s does not mean it was any less of a fleeting bubble than the dot-com bubble.

Life Expectancy, the ultimate indicator, is higher than in 1964.

Check out the Human Development stats from the UN.

 
At 12/22/2011 9:36 PM, Blogger kmg said...

Another slimy trick the 'commodity zealots' use is to only reference commodities that have risen in price (gold), while ignoring commodities that have dropped in price (natural gas, corn, wheat).

One can also argue that GB of RAM, TB of Storage, TeraFLOPs of Processing Power, etc. are also commodities and can be used to measure the size of an economy. All of the above are used my more people on a daily basis than Gold.

 
At 12/22/2011 9:42 PM, Blogger kmg said...

Let me remind you that a typical 1964 household was able to own a house, two cars, and raise two-point-something children one one salary that required 40 hours of labour by one parent.

Let me remind you that in late 1999, a 24-year-old kid could make millions on his dot-com stock options, just by working at the dot-com company in Silicon Valley.

Since that is no longer common today, our purchasing power as a society must be vastly lower, by your logic.

 
At 12/22/2011 11:17 PM, Blogger VangelV said...

Hogwash. They can do that today too, if they restrict themselves to luxury levels of 1964 and buy no products that did not exist then.

Actually, no they can't. A family of four can't have the same lifestyle and savings rate on one salary based on a forty hour work week. If you look at costs for taxes, transportation, health care, insurance, and tuition today they would consume most of the salary that an average middle class employee who worked a forty hour work week. This is why people work longer hours and have two income households if they want to educate their children properly.

Plus, your view is very US-centric. That US manufacturing wages were high for a couple of decades in the 50s and 60s does not mean it was any less of a fleeting bubble than the dot-com bubble.

You may be right. But that is not what the point is. The point is that in the 1950s and 1960s it was easier to raise a family than it is now because overall after-tax costs were lower. The reason should be obvious. In those times government consumed far less of national income than it does today. (all levels) The growth of government was not financed out of taxes but by using the printing presses and inflating. Since then the USD has lost more than 80% of its purchasing power even though productivity increases and technological advances have kept prices from exploding as much as they otherwise would have.

But my argument is simple. If there had been no inflation prices would have fallen as they did in the 19th century and we would have more people who would be able to retire because they savings actually increased in purchasing power.

Life Expectancy, the ultimate indicator, is higher than in 1964.

Once you adjust for smoking, drinking, and damage done due to malnutrition during the hard times in the 1930s life expectancy is not all that much higher. People live longer today because they have more information about what a healthy lifestyle is and because they have fewer bad habits.

Check out the Human Development stats from the UN.

I have. My points are still valid.

 
At 12/22/2011 11:20 PM, Blogger juandos said...

" I agree that the 3D 75" laser view is better than the TV in 1964, but the cost for the best is weirdly the same..."...

Good point marko but I'm guessing here that as % of income the '64 televion was quite a bit more expensive than the price indicates...

 
At 12/22/2011 11:27 PM, Blogger VangelV said...

Another slimy trick the 'commodity zealots' use is to only reference commodities that have risen in price (gold), while ignoring commodities that have dropped in price (natural gas, corn, wheat).

You are confused. Gold is money. Commodities are commoditeis. And please feel free to cite references showing that US wheat, natural gas, or corn prices have fallen since 1964. The way I remember it, natural gas was so cheap that it was flared away. All that flaring kept the price for residential and commercial users at pennies per Mcf.

 
At 12/23/2011 1:08 AM, OpenID Sprewell said...

Vange, you say "if there had been no inflation prices would have fallen as they did in the 19th century and we would have more people who would be able to retire because they savings actually increased in purchasing power." That's a simplistic and ultimately incorrect explanation of why purchasing power increases. Purchasing power increases because manufacturing and other forms of productivity keep going up, driving the costs of various goods down. The money supply can do nothing to help that trend. You may love how inflation was much lower a century ago, but very few are affected by higher inflation today, as they hold their value in money market funds or various other securities that tend to keep pace with inflation.

Very few ignorant people hold cash or other low-interest rate securities over long periods of time, so effective inflation, ie interest rates minus baseline inflation, for most people is probably lower today, in fact it's usually negative now. Gold is going to collapse in the coming years as the current bubble is unsustainable and both govt currencies and largely worthless physical commodities like gold or silver are about to replaced by new online tokens. You keep pushing an antiquated metal that is about to be completely obsoleted.

 
At 12/23/2011 2:09 AM, Blogger kmg said...

VangelV,

You are confused.

Projection. You are one of those commodity zealots who believes 1950s America was some garden of Eden (while using the Internet over Broadband, of course).

Gold is money.

Odd that the purchases I made from Amazon were by electrons and photons over fiber and copper.

Yep. The same standard of living is much cheaper today than in 1964.

YOUR living standard might be lower, but that is your own doing. The other 99% are doing better.

The way I remember it, natural gas was so cheap that it was flared away.

That is today. Natural Gas is at an all-time low.

Corn yields are at an all-time high.

You have no clue, and have no idea how flimsy and inaccurate your points are.

 
At 12/23/2011 3:09 AM, OpenID Sprewell said...

Hmm, I screwed that up, interest rates minus baseline inflation is real return, not effective inflation, and it's higher during the Greenspan era, not lower. Teaches me to dash off a comment about such a complex subject so quickly. ;)

 
At 12/23/2011 8:40 AM, Blogger VangelV said...

Vange, you say "if there had been no inflation prices would have fallen as they did in the 19th century and we would have more people who would be able to retire because they savings actually increased in purchasing power." That's a simplistic and ultimately incorrect explanation of why purchasing power increases. Purchasing power increases because manufacturing and other forms of productivity keep going up, driving the costs of various goods down.

Absolutely true. The increase in productivity causes prices to go down. That is exactly what we saw throughout the 19th century.

The money supply can do nothing to help that trend.

Not true. If you keep printing more and more dollars and increase their supply the purchasing power of the dollars you saved will go down.

You may love how inflation was much lower a century ago, but very few are affected by higher inflation today, as they hold their value in money market funds or various other securities that tend to keep pace with inflation.

That is also not true. A century ago one could be sure that savings would generate sufficient income to allow for a comfortable retirement. If you look at the US today you will find that most boomers cannot retire because they have not been able to accumulate much in savings and the savings that they do have are insufficient to allow them to have more than a few months without working.

Very few ignorant people hold cash or other low-interest rate securities over long periods of time, so effective inflation, ie interest rates minus baseline inflation, for most people is probably lower today, in fact it's usually negative now.

This is totally wrong. The bond market is huge and you have massive holdings of munis and treasuries by American 'investors.'

Gold is going to collapse in the coming years as the current bubble is unsustainable and both govt currencies and largely worthless physical commodities like gold or silver are about to replaced by new online tokens.

LOL. Gold and silver are perfect for the online world. They can be transferred electronically without worry that the supply can be increased without limit by banks and governments that look to enrich themselves through inflating the money supply. As JP Morgan said, "Gold is money, everything else is credit."

You keep pushing an antiquated metal that is about to be completely obsoleted.

That 'metal' has been money for thousands of years. Fiat money dies after mere decades.

 
At 12/23/2011 9:11 AM, Blogger VangelV said...

Projection. You are one of those commodity zealots who believes 1950s America was some garden of Eden (while using the Internet over Broadband, of course).

Not at all. I just make the points that have yet to be refuted. If we are so much better off economically why is it that we can no longer have one breadwinner in a four person family support that family by working forty hours per week at the average middle class job?

Odd that the purchases I made from Amazon were by electrons and photons over fiber and copper.

Actually, they really were not. They were made by transferring title to what you had in your savings account to Amazon. That type of transaction has been happening for more than a century.

Yep. The same standard of living is much cheaper today than in 1964.

YOUR living standard might be lower, but that is your own doing. The other 99% are doing better.


Actually, according to the various databases I am in the top 1%. And that is even though I retired a decade ago after working 15 years. My savings have been supporting my family over that time and we have taken out of those savings three times more than were put into savings during my 15 years of work.

 
At 12/23/2011 9:11 AM, Blogger VangelV said...

That is today. Natural Gas is at an all-time low.

No, gas was so cheap it was flared away by producers. They don't do that today.

Corn yields are at an all-time high.

I have written many times on this blog and elsewhere about Norman Borlaug's revolution in agriculture so I do not dispute the productivity gains since the 1960s. But we were talking about prices and you guys have yet to cite the proper sources. I maintain that the huge increase in productivity should have caused the real price of corn to fall substantially. But it hasn't.

You have no clue, and have no idea how flimsy and inaccurate your points are.

My points are very accurate. Fiat money has been losing purchasing power throughout history. This is not surprising because the banks and government use the printing press and fractional lending to rob workers and investors of purchasing power. That is why any prudent investor should be looking at the free market's choice of money, precious metals. They cannot be printed and any increase in supply has to be done the hard way.

If you have been paying attention you would have noticed supply issues cropping up in the silver markets. The price is set by the paper markets. But when we look at the trading we note that eight hundred million ounces are traded each day just on the COMEX. That represents 80% of the world's total annual production and is 800 times larger than the amount of silver that can be delivered on a daily basis. That does not happen in wheat, oil, corn, etc., where the open position is just a few weeks of annual production.

We are seeing the last gasp of the paper traders. They can use the futures markets to drive down the price of silver and gold for a while but there is no way for them to do much damage to the physical markets. What I find fascinating is all of the shorting and borrowing that goes on in the Silver Trust. Whenever a SLV unit is sold short there are two claims on the amount of silver that is supposedly held in trust for the fund. But if you look at the prospective you find that the fund can actually lend out its physical metal to the very financial institutions that are shorting it. Not only do you have extra claims thanks to that shorting but there is less metal held in trust to satisfy those claims. Eventually this will matter and when it does the people who hold their physical in vehicles like the Central Fund, the Sprott Trust or in safety deposit boxes will find out why it made more sense to avoid paper vehicles like SLV and GLD. You better hope that gold and silver go down another 20% or so because it will give you a better opportunity to get into the bull market one last time before takeoff. I know that I am hoping for a pull-back because some of the best companies out there are likely to be even better values than they are today.

 
At 12/23/2011 9:29 AM, Blogger fabian hug said...

It's true that you can buy much more stuff now than in the 60's but then why this sour mood? In the 60's there was anticipation of good things to come, now there is anticipation of bad things to come. Is it justified? I don't know but a new TV will not improve your mood for too long.

 
At 12/23/2011 9:50 AM, Blogger VangelV said...

It's true that you can buy much more stuff now than in the 60's but then why this sour mood? In the 60's there was anticipation of good things to come, now there is anticipation of bad things to come. Is it justified? I don't know but a new TV will not improve your mood for too long.

In the 1960s kids were hiding under their desks in preparation for a nuclear attack, worried about being drafted to fight in a war in Asia, and were going through significant social transitions. It was hardly the carefree life that some want to portray it as.

Yet, the early 1960s were still a time when education and healthcare were cheap, effective tax rates were low, and the average man could hope to get a good job that would pay enough to raise a family and still save enough for retirement. While we have better electronics today, taxes, insurance, tuition, health care, and transportation costs are higher.

Mark does a very interesting thing. He looks at data that is heavily adjusted and that ignores several significant factors that effect the standard of living. Once the data is purged and massaged it can provide us with all the wonderful conclusions that the optimists want us to reach. But the real picture is somewhat different.

 
At 12/23/2011 9:52 AM, Blogger Jet Beagle said...

fabian hug: " In the 60's there was anticipation of good things to come, now there is anticipation of bad things to come."

I remember optimism in the the very early 1960s. But it didn't last long. Were you around in the 1960s? Does time perhaps cause some to forget the strife of bygone eras?

The U.S. in the 1960s was nearly torn apart by racial divides and by an extremely unpopular war. Riots in large cities were common. Popuilar leaders were assassinated. Anti-war violence was far more deadly and destructive than anything we've seen in the past decade.

The economic situation was different, of course. Kennedy's tax cuts caused an early 1960s boom. But LBJs excesses ignited the inflation we sufferred for two decades.

 
At 12/23/2011 10:22 AM, Blogger Walt G. said...

1960s? My dad had one income, one small house, 1 black-and-white TV that got about 6 channels on a good day, one corded dial telephone on a party line, no air conditioning, and no savings. We fit the average 2.5 kids in our house: my little sister is short. These living conditions were common--we were not alone.

People died of old age sooner and from things that are commonly healed nowadays such as pneumonia and clogged heart arteries.

The 1960s and Happy Days are cool nostalgia items, but give me the 21st century any day.

 
At 12/23/2011 10:51 AM, Blogger juandos said...

"Anti-war violence was far more deadly and destructive than anything we've seen in the past decade"...

Now some of the seditious, felonious swine (who were a very small % of the anti war protesters) ended up revered and taking tax payer dollars as educators...

Is this a great country or what?!?!

 
At 12/23/2011 11:13 AM, Blogger T J Sawyer said...

From my copy of the 1964 Bulletin of the University of Portland.

Tuition, per semester: $500

No wonder dad wouldn't buy us the color TV!

 
At 12/23/2011 2:16 PM, OpenID Sprewell said...

Vange, you assume that as the Fed kept printing more dollars, that savers were too dumb to demand higher interest rates to compensate. That may be true of a few people but not for most, which is why interest rates rose so high in the late '70s, to match inflation. The problem with inflation is when there are unexpected wild swings, and I showed you the data before that such swings were worse during the gold era, while inflation is smooth and steady in the Greenspan era. :) Savings do not magically "generate sufficient income to allow for a comfortable retirement." Those are returns to productivity, which are not swamped by inflation as long as interest rates adjust. The fact that many boomers have not saved enough is a completely different issue. Yes, the bond market is huge and many people hold TIPS that are pegged to inflation, your point is? People like you may continue using e-gold for online shopping, but most won't, that's the problem for your silly yellow stuff. If JP Morgan thought only gold was money, I'm guessing he was too dumb to know that fractional-reserve banking was already rampant during his lifetime, with most bank notes backed by their non-gold assets.

There is no "money," there is only what we choose to accept in return for our goods, whether paper notes or whole chickens. The populace has completed the transition to fiat money, which is why you cannot pay with gold in any grocery store you enter, and why new online tokens are about to obsolete even fiat money. Trumpeting that gold was used for thousands of years is like trumpeting that the horse and buggy were used for centuries, so what? Both are completely obsoleted by modern technology, you just don't realize it yet. ;) I honestly hope you aren't betting the farm on gold and silver, like Ron Paul apparently is, because you will be devastated by the coming gold collapse. All the old standbys that Ron Paul is in, like real estate and gold/silver, are about to be completely made extinct in the internet era and those still stubbornly clinging to them, without the economic intelligence to realize this, will pay a heavy price.

 
At 12/23/2011 4:17 PM, Blogger VangelV said...

Vange, you assume that as the Fed kept printing more dollars, that savers were too dumb to demand higher interest rates to compensate. That may be true of a few people but not for most, which is why interest rates rose so high in the late '70s, to match inflation.

This is not true. The treasury market is being driven by the banking system, not by individual investors at the margin. If investors balk the Fed prints more money and exchanges it for lousy assets held by banks. In turn, those banks use the newly created money (or credit) and buy treasuries. Rates stay low because the supply of money and credit grows.

The problem with inflation is when there are unexpected wild swings, and I showed you the data before that such swings were worse during the gold era, while inflation is smooth and steady in the Greenspan era.

That is not true. There were no bouts of 'wild' inflation under the classical gold standard. Even when massive amounts of gold were discovered in California and Australia the price increases were minor in comparison to the inflation over the past 20 years.



Savings do not magically "generate sufficient income to allow for a comfortable retirement."

Sure they do. Savings are invested in productive capital that leads to productivity increases and lower consumer prices. In the absence of price inflation one can live off quite comfortably from the interest on savings.

Those are returns to productivity, which are not swamped by inflation as long as interest rates adjust.

But the markets are manipulated and the interest rates cannot adjust. What do you think that central banks and the primary dealers do when they set rates and play with the yield curve?

 
At 12/23/2011 4:17 PM, Blogger VangelV said...

The fact that many boomers have not saved enough is a completely different issue.

No, it isn't. Money printing and inflation discouraged savings and got most boomers to turn into speculators. They wound up chasing bubbles created by the central bankers and got wiped out.

Yes, the bond market is huge and many people hold TIPS that are pegged to inflation, your point is?

TIPS are pegged to the reported CPI, not the true inflation rate.

People like you may continue using e-gold for online shopping, but most won't, that's the problem for your silly yellow stuff.

Perhaps. But history tells us that all fiat currencies get wiped out and lose significant purchasing power quite quickly. The USD is no exception.

If JP Morgan thought only gold was money, I'm guessing he was too dumb to know that fractional-reserve banking was already rampant during his lifetime, with most bank notes backed by their non-gold assets.

He knew it well. But unlike you, he actually understood the nature of money.

There is no "money," there is only what we choose to accept in return for our goods, whether paper notes or whole chickens.

Money started off as a commodity and evolved until the free market settled on gold. That ended with the passage of legal tender laws.

The populace has completed the transition to fiat money, which is why you cannot pay with gold in any grocery store you enter, and why new online tokens are about to obsolete even fiat money.

We have seen many currencies get wiped out in the past few decades. Since the gold window was closed the FRN lost more than 80% of its own purchasing power. It might help if you paid attention.

Trumpeting that gold was used for thousands of years is like trumpeting that the horse and buggy were used for centuries, so what? Both are completely obsoleted by modern technology, you just don't realize it yet. ;)

Nonsense. Modern technology has not made money obsolete. And a currency that can be created out of thin air is not sound.

I honestly hope you aren't betting the farm on gold and silver, like Ron Paul apparently is, because you will be devastated by the coming gold collapse. All the old standbys that Ron Paul is in, like real estate and gold/silver, are about to be completely made extinct in the internet era and those still stubbornly clinging to them, without the economic intelligence to realize this, will pay a heavy price.

LOL Did you see what happened to the investors in internet stocks? I think I would rather be with Eric Sprott, John Embry, and Ron Paul on this one. You hold on to your fiat money and I'll be more than happy to own gold, oil, and silver.

 
At 12/24/2011 1:01 AM, OpenID Sprewell said...

Vange, I'll leave aside the rest of your gold bug drivel and focus on this manifestly wrong statement, "Modern technology has not made money obsolete." In fact, it already has, as most transactions are done with plastic these days, whether credit or debit cards or even checks, far more than cash. Smartphones and mobile devices are about to take the last step and cut even the $ signs out, so that you'll be able to trade completely new online tokens with your smartphone, instead of continuing to use plastic to nominally trade dollars. If you can't see this coming, I honestly despair at your inability to reason about these matters.

 
At 12/24/2011 1:33 AM, Blogger plusaf.com said...

You guys are so funny... about forty years ago my (then-) father in law complained about the "high cost of everything today..."

After a few minutes of questioning him, I discovered that, compared to his youth dating back to the Great Depression, a loaf of bread or a quart of milk cost roughly the same in the early 70's if you measured each in Hours Worked To Buy It...

Likewise, I was filling my first car's tank in the early 1970s with 29.9-cent premium gas (the car cost about $5400 in 1970 dollars when I bought it), getting 12 mpg and costing about 6 dollars to fill the tank for 240 miles of driving.

The last car I bought for myself, in 2004, today gets 44 mpg, takes regular lead-free at something under $3.50 a gallon, costs about $35 to tank up and takes me about 450 miles between fill-ups.

(and the car cost me about $32,000 in 2004 dollars.)

Things haven't changed all that much if you look around.

Actually, now that I think about it, my first house in 1973 cost about $24,000 and an average house in the US with similar land and square footage is somewhere in the $240,000 range... and the same make and model of my car today goes for about $50,000, and it's not a commodity, either, unless you consider the Corvette a commodity (see little photo above for a pic of my first car...)

Happy holidays and happy motoring, all!

 
At 12/24/2011 12:07 PM, Blogger VangelV said...

Vange, I'll leave aside the rest of your gold bug drivel and focus on this manifestly wrong statement, "Modern technology has not made money obsolete." In fact, it already has, as most transactions are done with plastic these days, whether credit or debit cards or even checks, far more than cash. Smartphones and mobile devices are about to take the last step and cut even the $ signs out, so that you'll be able to trade completely new online tokens with your smartphone, instead of continuing to use plastic to nominally trade dollars. If you can't see this coming, I honestly despair at your inability to reason about these matters.

You are talking about the means of payment. I am talking about money. There is a big difference between the two. And as I pointed out, the technological advances have made it far easier for commodity money to be used in transactions. That clears the way for a faster collapse of the fiat currencies.

You need an education.

 
At 12/24/2011 12:09 PM, Blogger VangelV said...

After a few minutes of questioning him, I discovered that, compared to his youth dating back to the Great Depression, a loaf of bread or a quart of milk cost roughly the same in the early 70's if you measured each in Hours Worked To Buy It...

Given the massive amount of capital formation that took place that is evidence of high inflation. Think clearly before you post. We all make errors when we are in a hurry and omit certain important parts of our argument. But in this case, if you take some time to think you will figure out that your line of argument is totally wrong.

 
At 12/24/2011 2:03 PM, OpenID Sprewell said...

Vange, you really do need to learn how to read. Money is the means of payment, I'm saying it's about to be removed altogether, ie there will be no money anymore and we'll go back to online barter. :) Yes, we both know that e-gold will have a better chance once all payment is done online, but e-gold is already around now and nobody uses it for online transactions. That tells you something. Education isn't the problem, as you have clearly imbibed the gold bug mantra whole and uncritically, it's the ability to reason and tease out the future that is needed and in which you are seriously deficient.

This is evident in your nonsensical scolding of plusaf, where you somehow think high inflation is responsible for the fact that bread and milk supposedly cost him the same amount of hours of work after decades. The only way that could happen is if productivity growth was non-existent over the decades. Inflation can't affect hours of work unless it's from the moment he got paid to the moment he bought the bread, which is only possible in hyper-inflationary scenarios like Zimbabwe. The fact that you raise your silly gold bug specter of inflation even in this completely unrelated scenario shows you don't really know what you're talking about.

 
At 12/24/2011 7:54 PM, Blogger VangelV said...

Vange, you really do need to learn how to read. Money is the means of payment, I'm saying it's about to be removed altogether, ie there will be no money anymore and we'll go back to online barter. :)

Then you are a bigger fool than I thought. A civilized nation needs money. The internet will not change that.

Yes, we both know that e-gold will have a better chance once all payment is done online, but e-gold is already around now and nobody uses it for online transactions. That tells you something.

Yes it does. Why spend good money when you can use a fiat currency? Until the crisis of confidence hits the major currencies things will remain as they are.

Education isn't the problem, as you have clearly imbibed the gold bug mantra whole and uncritically, it's the ability to reason and tease out the future that is needed and in which you are seriously deficient.

There is no 'mantra.' There is only history, logic, and theory. You seem to have a problem with all three.

This is evident in your nonsensical scolding of plusaf, where you somehow think high inflation is responsible for the fact that bread and milk supposedly cost him the same amount of hours of work after decades. The only way that could happen is if productivity growth was non-existent over the decades.

No. There is another way. It is called inflation. The gains due to capital formation and higher productivity were eaten up by inflation.

Inflation can't affect hours of work unless it's from the moment he got paid to the moment he bought the bread, which is only possible in hyper-inflationary scenarios like Zimbabwe.

But it can. Money does not flow evenly in the economy and small changes somewhere can cause the prices in certain sectors to go up sharply.

The fact that you raise your silly gold bug specter of inflation even in this completely unrelated scenario shows you don't really know what you're talking about.

I do. That does not mean that I always provide the right argument because I happen to be quite busy at the moment. When things slow down I will be more than happy to lead you to the truth if you are willing to pay attention to it. Or you could pay more attention to Ron or morganivich.

 
At 12/24/2011 8:16 PM, Blogger moAb said...

Do you honestly think that many households spent $750.00 on Christmas spending per year in the early 1960's?

I think not from someone who lived through it.

 
At 12/27/2011 11:27 AM, Blogger HoudiniNFO said...

This is an apple to orange comparison. The color console TV in 1964 was a brand new technology. Just was brand new technology today comes with an expensive price tag, to cover R&D costs, the same was true back then. Only the wealth could afford this back then, just as the wealthy are the only ones who can afford new technology (e.g. home robotics), now.
To say this represents inflation / deflation effects is insane. Compare a basic no thrills appliance (like a basic washer) to a simpliar appliance now, if you can find the same (like a washer with no circuit boards). Then you see the true cost of inflation. Better yet, compare costs to comodities. In 1964, we were still on the silver standard. How many silver dollars at today's value you it take to a product now as compared to then.

We're not so well off.

 
At 12/28/2011 5:39 PM, Blogger William R. Barker said...

And those TV sets were made in American factories employing American workers.

I long for those days!

 
At 12/29/2011 10:00 AM, Blogger VangelV said...

And those TV sets were made in American factories employing American workers.

I long for those days!


Why? If Korea or Japan are better at producing affordable TVs then they should make them and export them to us. We should concentrate on what we do best. The only possible problem is if we are not very good at anything. But if that is true tariffs won't help.

 

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