Sunday, April 30, 2006

The Inflation Calculator

Check out the inflation calculator.

By plugging in a few numbers, you are instantly able to compare the value of the dollar in various years, from 1800 through 2005. I’ve played around with it, and noticed a few things.

Compare the value of $10,000 in 1800 (the beginning of the calculator’s statistics) to 1913 (the first year of the establishment of the Federal Reserve). In this 113 year period, we actually experienced an overall drop in prices – deflation. What cost $10000 in 1800 would cost only $5674.03 in 1913.

Why? Very simple. During this time, the dollar was backed by gold, and there was no central bank that had control over the entire monetary system, empowered to inflate the currency at will. Economic growth during this time enabled the production of various goods and services to be accomplished with greater and greater efficiency. The dollar was a stable form of currency, and the goods and services available for purchase in the economy became cheaper relative to the dollar, which had a more-or-less fixed (or slowly growing) supply. It is a basic economic truth that if the quantity of good “A” increases, while the supply of good “B” stays the same (or decreases, or increases at a lower rate than “A”), then one unit of “B” will command more of good “A” in a given exchange. It's the basic law of relative scarcity.

Now, compare $10,000 in 1913 to 2005 (the years of the Federal Reserve’s existence). What cost $10000 in 1913 would cost $191099.09 in 2005. In the 92 years of the Federal Reserve’s existence, expansion of the money supply has caused the value of the dollar, in terms of its purchasing power to drop incredibly…by what? 2000 percent? …and most of that came after Nixon completely the tie between the dollar and gold in 1971. In fact, from 1913 to 1971, what cost $10k would have been inflated to just over $40k, while $10k in 1971 would be the equivalent of about $47k on 2005.

The Federal Reserve is the greatest threat to liberty known to man. It is a thiefm able to steal the riches out from underneath the U.S. citizenry, without it’s victim even knowing the theft is taking place. It is the cause of the business cycle, the boom-bust ritual which causes capital to be malinvested, while eroding prospects for a prosperous and secure future. A fiat currency has no real value beyond a political promise that the government will ensure its value.

It’s time to abolish the Federal Reserve, and put the dollar firmly back on solid ground, out of the reach of scheming politicians and their inflation-hounds at the central bank.

Oh…and one other thing… My first job, when I was in high-school, I made $3.50/hour washing dishes at a local restaurant. That was 1989. Today, that would be the equivalent of making $5.46/hour. How many high school students make that at their part time jobs? Think about it next time you hear someone complaining about raising the minimum wage.

4 Comments:

Blogger Francois Tremblay said...

There's nothing good about the minimum wage. It is exploitation of the poorest in society (especially teenagers) in favour of people who already have jobs.

12:32 AM  
Anonymous Libertarian Jason said...

Amen, bro...

7:05 AM  
Blogger Fred said...

My first job was washing dishes, too. Three nights a week for minimum wage. But it was neat cause, being in high school and living at home, I always had plenty of money. It made me quite well off compared to other kids that didn't have jobs.

That was back around 1971, I believe.

8:39 AM  
Anonymous Libertarian Jason said...

I was born in 1971.

What was the minimum wage back then?

10:34 AM  

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