And Another Thing

 

Lying With Graphs 101. Or, as DemoCommunist
 fabulists would say, "False, but accurate".

Yesterday's graphic, useful as it was to open the discussion, is lying even worse still. No, really.

Because the financial idjit that made the graphic totally forgot that while $1 buys 1 Hershey bar now, in 1913, $26.14 would have bought 1,307 Hershey bars.  Not 30, as described in the graphic. The bars were 2¢ apiece back then. Whoops.

Double bonus: The price of a cup of coffee in 1913? Also 2¢.

So, empirically, you could have also bought 1,307 cups of coffee with your $26.14.

Or 50 of either with a 1913 dollar. Or 25 of each.

IOW, in real commodity-based pricing, your dollar is worth exactly 50 times less now than in 1913. That would be...2¢. Color me shocked. Gold, chocolate, coffee: all confirm the data. BTW, another data point: average wages in manufacturing in 1914 were 22¢/hr, or about $11/wk. That would be $11/hr or $2200/wk now, based on purchasing power. After taxes. If you're not clearing that now after taxes, IOW making the price of between 1/2 and 1 ounce of gold/week, you've lost ground over your grandfather and great-grandfather. The average weekly wages, per the .Gov , are around $900/week or so in manufacturing. Pre-tax. So it's not your imagination that you're losing ground, no matter what you do. You are. Figure that $900/wk is taxed at 20%, bringing it down to $700ish, versus $1100 that should be earned with dollar-parity. Your real wages, IOW, have slipped nearly 40% because of just inflation in the last century. You're making less actual money, and everything is costing more inflated dollars to buy. And it doesn't last as well. See if this rings a bell:

You don't need to watch it all. You're living it every day.

$26.14 is now supposedly worth $1. But $1 is worth 2¢. To have the same $26.14 as you had in your pocket in 1913, you'd need $1307 in dollars right now. Or $2407.69 in gold. That's 5000% cumulative inflation over a tad more than a century. It's about 4% annually, every year, forever, compounded. And bear in mind, the government pays no taxes on inflated dollars. You do. Put another way, your dollar bill from 1913, when it was gold-backed, should now measure 18 inches high and nearly 4 feet long, because that's now much it's been inflated. That's a beach towel. If you wanted to know how much it's shrunken in value, it should measure 1/10" tall by not quite 1/4" long. That's this small, depending on your monitor:

$1 today. Actual value size.

QED

The graph is also glaringly wrong in yet another way: From the creation of the US Federal Reserve, in December of 1913, until FDR took us off the gold standard in June of 1933, the value of that $26.14 did not decline and go every which way: $26.14 in dollars was worth the exact same amount the entire twenty years' time, and the cash was redeemable in gold at any bank. That's the whole point of gold-backed currency. So the first twenty years of that graph should be a flat horizontal line.

The gyrations inaccurately portrayed above are the only other way you get price increases: scarcity. In this case, due to a World War, followed by a boom of too much money chasing too little goods and services. That's not inflation, it's simply Supply and Demand doing what they do. You could look it up. The dollar didn't become worth less until it was de-coupled from gold. Now, it's worth so much less, it's worthless, in real terms. 

From 1837 to 1933, the US economy, with a gold standard, featured regular boom-and-bust cycles. It always recovered, because the dollar was sound. We stopped having boom-and-bust. We had a Great Depression, worsened by socialism until finally, it took a World War and scarcity, coupled with 160% employment, to reverse out of it.

But uncoupled from gold, the economy never really recovered. We just inflated our way out of it. Like a bus slipping over a cliff, inch by inch, with Uncle Sugar shoveling dirt under it and into it, to tip the center of gravity, to try and slow the slippage. You need more dirt, the further towards the abyss you slip. Eventually, you need so much dirt you're trying to shovel the entire former contents of the Grand Canyon into the back seats, just to balance the load. Ain't nobody got time for that. And you run out of room. Then it looks like this, times 8 billion.

That's how you get to 100 trillion dollar banknotes. Because a $50 today (not a $20) is a $1 from 1913. And we're headed for it being $100 bill, soon. Long before you get to $100 trillion, the paper and ink are worth more intrinsically than their actual face value. Hence the toilet paper and kindling stage. And the whole thing leaves that Wile E. Coyote dust puff at the bottom. Starring you, and everyone you know, to Six Degrees Of Bacon. [Hint: That's everyone.]

And the only two reasons - conjoined at the hip - for taking sound currency off a gold or silver standard - is to increase the cash supply, and steal from people either holding or accepting debt instruments - dollar bills, in this example - with inflation, and by paying for real goods with more and more inflated dollars, which inevitably becomes a death spiral. When a non-gold-backed "dollar" is now worth less than 2¢, you've about reached the maximal ability of that Ponzi scheme, and the whistle is about to be blown, with gravity kicking in rapidly at that point. FTR, 40% of all the US dollars that have ever existed have been created - mainly digitally - in the last few years. I say yet again, 

BRACE FOR IMPACT.

Because the first time the US economy hiccups, the whole house of cards comes all the way down. Look what one sector eating it did to us in 1999 or 2008. Now imagine that with everything, simultaneously.

 A Vegas casino is required to have a dollar in cash in the vault for every dollar of chips in play. The USGov has no such requirement. So imagine a casino where they just keep paying you out with chips, and then everyone tries to redeem them. But the till is empty. Hilarity ensues. People get trampled. People get shot in the face. Expect both, on a societal scale.

Graphs like the above is what happens when they don't even teach history to people who make such graphs.

Mafz Iz Hard. History + Mafz is apparently Chinese Calculus to some people.

But I just explained monetary policy and most of basic economics to you, not to mention a summary of a lot of world history since 1000 B.C., in two posts. You're welcome.

Bonus: GMTA twice.