“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.
