“You want the solution to inflation?  Hi, friends.  Marshall Lucky here for New Deal Used Cars, where we’re lowering inflation not only by fighting high prices, not only by murdering high prices, but by blowing the living s**t out of high prices.†– Used Cars
Tom Brady isn’t alone – Lance Armstrong will do anything to his ball to win, too.
I drove to Burger King® for lunch for the first time in a long time. I don’t eat lunch most days to stay in shape, and I keep reminding The Mrs. that spherical is a shape. On the days that I do eat lunch, it’s hard to beat Chick-fil-aâ„¢ – they’re fast, they’re polite, the restaurants are clean, and they put massive amounts of heroin in the chicken – there is no other way to explain how addictive those stupid chicken sandwiches are. I generally prefer beef to chicken, but the people at Chick-fil-a© are wizards.
I’m still waiting for them to offer a Steak-fil-a® sandwich. Mmmm, now that’s probably worth a stoning!
Anyway, I ordered a burger, fries, and a drink.  The price for the meal? Nearly $10. American dollars – not that wrapping paper they use in Justin Trudeau’s country. I remember back when a sit down lunch at a restaurant was available for a shiny nickel could be had for less than $5. $10 for a burger, fries and an iced tea?
This was inflation in action. Clearly you can see that the government rate of inflation – official truth – shows that inflation is low, at between 0.7% and 3% over the last decade. But how true is that number?
The government does something interesting contortions when it measures inflation – it fudges the number. When the government comes up with the inflation number, the government looks at things people buy – say, a computer. Since computers have gotten roughly a zillion times faster over the last forty years, the government assumes that we’re getting a zillion times more computer for our money. In one sense that’s true – my computer today has more memory and is far faster than any computer I’ve ever owned and is demanding a living wage, free healthcare, and a right to vote.
But in another sense, my computer isn’t a zillion times better. I’m using it for a word processor. Sure, the program is better today than in 1995, but it’s maybe 10% better, which is a metric smuckfest© away from a zillion percent better.
Likewise, if I were to play a game that would have been impossible to play back in 1995, it’s not 500% better. There were great games in 1995 – Doom® would like a word with anyone who disagrees. Sure, the richness of the games in 2019 is better, but Alia S. Wilder gave The Mrs. a copy of a video game that came out in 2002 for Christmas 2019. The Mrs. was thrilled – the storytelling, she said, held up really well.
It’s not only computers, but other products like cars – add an air bag that I didn’t ask for? That increases the “value†to the government guy doing the calculations even though I never asked for one and it’s never helped me even a little bit. All in all, computers have been deflating in price according to the government. This helps to offset some of the hugely inflationary items like healthcare and education. But I’m not sick, and I’m done with school. What’s a more realistic gauge of inflation?
Hamburgers. One of the best gauges is the Big Mac® index:
If this graph is right, a Big Macâ„¢ will cost $10 in 10 years. Or it will be made from spare Swedish people – and if you are what you eat, we’ll all be the victims of this policy.Â
Graph source, Seeking Alpha® (LINK).
Big Mac© hamburgers are made across the country and the same twoallbeefpattiesspecialsaucelettucecheesepicklesonionsonasesameseedbun has been made for decades with little variation from Portland, ME, to Portland, OR. Indeed, they’re made across the world and are one gauge of the value of local currency used by The Economist™ to judge the relative purchasing power of local currency.
The cost increase we’ve seen in a Big Mac™ is substantially higher than inflation. And it’s not because it’s a premier burger on the market – in almost any city you can find a better burger than a Big Mac© so it’s not like McDonalds® can increase the profit on a Big Mac© because people will not take a substitute. Nobody goes to McDonalds® for excellent food – they go there because of self-loathing because the food is generally consistent. Heck, your humble author even went there today for research for this article. You can get a McChicken™ for a McDollar©, but McDonalds® doesn’t include any McHeroin™.
So, you’re telling me that when Congress is out of money it can just write itself a check and deposit it?
Even before McDonalds®, the United States was no stranger to inflation, just like my waistline. During the Revolutionary War the Continental Congress authorized $241,552,780 of money to be issued – I still wonder what the $780 was for – Washington’s Netflix® subscription?
There were 2.8 million Americans during that time period and let’s assume that two out of five Americans was working (women stayed home, and kids weren’t required to report to the fish gutting plant until age five) for cash that would be nearly full year’s wages FOR EVERYONE WORKING based on the sources I could find.
The Continental collapsed in value – that’s where the phrase, “not worth a Continental†(which is strangely absent from Urban Dictionary®, the must be behind the times) came from. After the United States was finally formed, the Continentals were allowed to be redeemed – for 1/40th of their face value in United States bonds. I’m sure this made everyone who had Continental currency thrilled that they had gotten rid of the King. At least in Great Britain they had Universal Healthcare and free ocelots in every pot.
The currency collapse of the Continental at least had an echo in the Constitution. It led directly to the addition of the following clause:  “No State shall . . . make any Thing but gold and silver Coin a Tender in Payment of Debts.† That sounds pretty simple.
Yet.
The Constitution lists the things the government is allowed to do. Despite reading it again and again, there is absolutely no power listed for the Federal Government to issue money. None. Paper money issued before 1863 was primarily issued by private banks, and the value of a paper dollar actually varied, typically dropping if the state was kinda bad at regulating banks or if the state was far away. The value of a gold coin didn’t vary because gold is gold ().
I think the Michigan $3 bill would have been more popular if they had put Scarlett Johansen on it, so I put her over the picture of the cow.
When writing this post I ended up writing a LOT about how the government took over the power to create money during the War of Northern Aggression Civil War and the evolution of a single national currency – United States Notes, and then decided it read more like a snarky term paper for Macroeconomics 201, which I already passed back when a Big Mac® was as cheap as my ex-wife. So I cut it out.
TL;DR: The story is one of increasing Federal control and centralization of both money creation and supply. The biggest change was when Franklin Roosevelt confiscated the gold of the American people and made it illegal to own more than five ounces of bullion or coins. The reason? Roosevelt wanted to print more money for his alien masters so they would restore the power of walking to his withered limbs, though they betrayed him and turned him into a flightless waterfowl. Or was that the Twilight Zone®? Anyway, the real reason was that by law the Federal Reserve had to have 40% reserves in gold on the money it printed. Back in 1933 apparently they pretended that laws actually applied to people in power.
But Roosevelt stole the gold.
Presto! More gold for the Fed! There were several high-profile cases where people were prosecuted for owning gold to keep the masses in line. Immediately after taking the gold, Roosevelt raised its price by 40%. He had, effectively, devalued the dollar with a stroke of a pen. This immediately made everyone in the United States who had money poorer, which, I hear, is exactly the cure for an economic depression.
And that’s inflation: making money worth less. What people didn’t realize was that by taking the gold, Roosevelt took away the only constraint on printing money. 145 years after the Constitution was written, that pesky “gold and silver†clause was gone. There’s no way that this turns out bad, right?
Too bad they already had enough air guitarists.
Nixon took the next logical step – he removed any constraints on printing by revoking the gold standard – the dollar was now backed by nothing. Ford, dimly realizing it didn’t matter, made gold legal to own again since after forty years it ceased to be considered money by people. Gold was a curiosity. Silver had been dropped from America’s coins in the 1960’s as a “cost saving measure†– so America’s money was based on a promise. A promise made by Nixon.
We now live in an era where it’s considered virtuous to have a slight inflation of 2% or so a year. Benjamin Franklin spotted this con over two hundred years ago when he noted that the inflation of the Continental dollar had been a tax to pay for the Revolution. Inflation is just that, it’s a tax. It’s a silent one. You still have the same $100 bill you had last year. Nobody stole $2 from you. Except that they did, and they bought themselves something nice, like salaries for everyone at the EPA when you weren’t looking.
The government takes money through taxation. It also takes money through inflation – and it’s been slowly stealing the savings of every American for nearly 90 years.
The Fed ruins all the best bikininomics graphs.
Source (LINK)
It feels funny, because many of you have read this before, some of you have read this message 100 times. Maybe, just maybe the Big Mac® can be worth something as inflation picks up speed. Perhaps when a Big Mac® costs $10 someone might notice?
Nah. It’ll be fine.
It’s even worse than you think. Binging on nostalgia, I went into a McDs a few months ago and ordered a Big Mac for the first time in decades. I can’t quantify it, but I am 100 % certain that the little tiny hockey puck thing they gave me was WAY smaller than the Big Macs I remember from long ago in a galaxy far far away at the University of Tennessee during the Stone Age.
Shrinkflation. It’s a thing.
https://theconversation.com/shrinkflation-when-less-is-not-more-at-the-grocery-store-97240
Then there’s this…
https://www.latimes.com/food/dailydish/la-dd-wood-pulp-cellulose-burger-taco-20140630-story.html
Hmmm. I’ll stick with Panda Express – I do love a good Panda Burger with Extra Spotted Owl Fries.
It’s a slick game. The private sector adjust prices according to actual costs, and the government adjusts social security with a coin toss. All in all, they added so much water to the milk, you can see through the glass.
Don’t forget taxes. Since the Boomers are retiring now, they’d love to take a piece of that, and do a wealth tax. It’s too late for an ex-wife tax – I would have loved to have given them half of that . . .
You are correct: the Big Mac is smaller in diameter, and the patties thinner, than it was originally, let alone since 10 years ago.
They figured no one would notice.
Wrong.
I had a McChicken sandwich this week (experimenting for the blog!) for the first time in 20 years. It was tiny! They always used to put too much mayo on. Now? I think they have a mayo mister.
It is. Except in movies. I’m not sure they can do a movie that isn’t shorter than about 60 hours in 2019.
http://bastionofliberty.blogspot.com/2019/10/tyranny-at-margins.html
Would you like fries with your order?
Tom S.
Love Fran’s stuff.
Theres a nice book for understanding inflation and what the government is doing called “whatever happened to penny candy?”. I gave it to my kids but I don’t think they read it… stupid kids…. You know Barry printed about 100 million dollars a month for his entire tenure and gave it to the banks, did no one think that would cause inflation?
I’m actually surprised it hasn’t hit like a tidal wave. When it does, it will be like Oprah jumped into the pool – everybody’s gonna get wet.
I’m actually surprised it hasn’t hit like a tidal wave. When it does, it will be like Oprah jumped into the pool – everybody’s gonna get wet.
In a similar vein, I stopped at a Krystal (a Southern thing) and got a sack of THEIR burgers. (I was on the road every weekend a year ago to visit my dad weekly during his last year in a nursing home. Lots of drive thru fast food on the way up there and back). In my youthful memory, Krystal used to have really tasty beef patties – again, decades ago when I last tried it. This time around. I literally could not finish the bag of burgers I got and I will never have another. The patties were pinkish-grey, not the beefy brown I remember.
https://thetakeout.com/usda-pink-slime-meat-beef-lean-finely-textured-1832561890
https://www.foodsafetynews.com/2012/03/whats-wrong-with-pink-slime/
Disgusting. And this crap cost three times per burger than what I remember.
https://external-preview.redd.it/DLQ-n6nwoWMGdbBUGRWPDk9KQI43B4qg4H0myFNR2aw.png?width=640&crop=smart&auto=webp&s=4b80c2be76b9a772b19aa4bb43f2d7f21dded550
Ha! I love graphics like that.
Yeah. Around here, the best burger is Sonic. I’ve never had a Krystal – sounds like I should skip it.
One “hiding in plain sight” way to hedge against inflation is to invest in series-I US Savings Bonds. You can only buy them from the US Treasury, and only sell them (redeem them) to the Treasury, so there are no middlemen talking about them to get their skim. The interest rate on these bonds tracks the CPI, so you’re never stuck with a 2% bond in a 10% world. Risks? Who really trusts the CPI, anyway? (not the readers of this article!) It’s still better than cash under the mattress (0%, or -100% if you’re robbed), a deposit in a bank (0.0000001%, minus fees), or a negative-interest German bund.
People who are eager to sell you some gold… (wait a minute. If it’s such a good investment, why are they trying to sell it?)… also claim that it’s a hedge against inflation, but AFAIK it’s just too easy to steal (or force-sell, as described by our gracious host, above).
Don’t be obtuse.
People sell gold because they don’t take it at the cashier window or the supermarket (yet!), and it’s too compact a store of wealth. Only an idiot thinks that situation will last indefinitely, or even for their own lifetime, unless they have terminal cancer.
Fiat money is the (foolish)exception. Not precious metals.
Gold was a medium of exchange for most of recorded history.
And it inflates 0%, over millennia.
BTW, if Series-I bonds are such a great investment, why are they selling them?
When your own argument undoes your own point, maybe rhetoric isn’t your game, Ike.
Yup. The FRNs will depreciate, and my bet is very badly, very soon (4-10 years).
But it really is a range-of-outcomes issue. How badly? All the way from half (probably certain) to complete collapse (??%).
I’m (like I mentioned) underweight precious metals, and can always use more lead, even though the last shipment made the floorboards groan.
I-bonds are better than Fells Wargo, but the average human in 2019 United States doesn’t understand gold and silver at all. In a near-collapse they would, maybe. There’s a reason all the people in Britain buried all that Roman money. Money (even gold and silver) disappeared for about 100 years.
In a complete collapse? All lead, all the time.
Maybe I should stockpile vaping pens and mango-flavored-nicotine?
I’ve not looked at the I-Bonds, but probably should – much better interest rate than Wells-Fargo, which does pay me some interest, but not much. The local (small) banks are much higher.
Well, I have some gold and some silver, too. A range of outcomes. To the extent that the taxonomy equals dollars (now) silver and gold (bad, but not catastrophic), and lead and seed (catastrophic), it’s part of playing the odds against a range of outcomes. I’m actually probably underweight gold and silver and lead.
There is a LOT of seed around this locale.
The gold grabbing thing made me wonder: how much gold was squirreled away in backyards and walls of houses and other hiding spots and never found? I assume the actual compliance rate was pretty low, like Beto coming for my AR compliance (which I don’t have of course) low.
I know that lots of people with metal detectors like to look. Primary place? Where the it was visible from the homeowner’s bedroom. So they could see it at night. Other good places to look? Former outhouses. Gold coins slip out of pockets.
I have a gold $100 FRN that was never turned in. Always have been tempted to try to turn it in for gold just see what happens.
You would probably end up in Guantanamo.
Our house was around during the gold grab, I should borrow a metal detector one of these days….
Yup. Old places liked Mason jars better than banks.
You’ve given me an idea, John Wilder. Fancy that.
By now everyone has seen those miraculous and creepy photos on the Interwebz of McDonald’s meals bought years earlier and promptly left uneaten and forgotten in a closet or a coat pocket or something (who the hell eats lunch out of their coat pocket in a closet? But I digress…)
I propose to buy up a significant quantity of Big Macs at the current market price, like a Hunt brother scarfing up silver, and squirrel them away for those ten years you advocate. At which time I will bring them forth like Kiss, redolent of mothballs and emerging from cold storage for yet another farewell tour, reselling the tasty little goodies for that lofty 10 bucks a copy. Since (unlike the members of Kiss) that sh!t don’t age, no one will be the Wilder, uh, Wiser. And I will make a killing, retiring Wealthy beyond the dreams of avarice.
Heck, its no less likely to fund that dacha on the lake than anything my financial advisor has talked me into through the years, for if he knew how to turn speckles into shekels, he wouldn’t be cold-calling me on Tuesday mornings with a revolving catalog of “exciting new investment opportunities”. And since consumables only seem to shrink over time (except for bagels on suburban Lawn Guyland – you seen one of those monster truck tire inner tubes, lately?) my giant, 2019 “Retro-burgers” ought to be quite the smash come 2029.
With my fortune assured, I must now hie me to the office to bid all of my future ex-coworkers a fond fvck-you-and-eat-rocks on the way to the golden arches, where I shall pull into the drive-thru and, like Chris Christie on a marijuana vape, order 2000 Big Macs and a diet Coke.
We should do that! Pop ’em in a vault. Has anyone figured out how to safely rehydrate one????
Americans think stealing and murder should be illegal, but should depositing less than $10,000 into your own bank account be illegal? Should feeding the homeless be a crime?
Even if theft was legal, would you be responsible at all if you didn’t lock your door and a thief stole from you?