June 7, 2011
Virtual Money, Ugly RealityBy Jim Mahoney
On the eve of the last great inflation, a buddy of mine left the Air Force, went home, and got a job as an entry-level machinist. Still living on military pay, we whom he left behind could not believe how much he was earning.
It's still hard to believe today.
To those of us who lived through it, the seventies made for a confusing and angry time. Every trip to the store was an adventure. Price labels grew on everything like barnacles. Peeling them back meant exploring an infuriating history of ever-increasing prices.
Politicians at every level seized the opportunity to scapegoat anyone who dared offer products for sale. Any producer or merchant, from farmers to property owners, was fair game. "Friends of the people" offered "solutions" of every kind, from rent control to price controls on gasoline.
Consumer journalists rose up, tempering their righteous finger-pointing with useful ideas to help stretch dollars. In spite of all their crusading, not one ever uncovered the rip-off happening before our eyes.
It took the great political contrast of 1980 to demonstrate by action what caused the pain and dislocation of the previous decade. The change in the political, economic, and intellectual winds beginning in 1980 revealed the truth for anyone willing to look.
Almost overnight, gas rationing ended, and the pump lines disappeared as the new administration lifted price controls. Eventually, after several years of painful austerity, the economy began to rebound, and ballooning prices settled down. With respect to oil, the economy entered a period of abundance and stability. It lasted about twenty years.
Today, we are on the threshold of another, far greater inflation. Unless we who lived through the last one recall the lessons we learned in the '80s, not only are we doomed to relearn them, but we'll do it while facing the greatest social upheaval in our history. Today, we don't have the testimony of five or six layers of price tags, as bar codes conceal what's happening to our wallets at the checkout line.
However, we do have the internet. Sites like this reveal what's really happening. The last time around it wasn't until history played out before us that we realized that the problem wasn't increasing prices. Despite what those labels seemed to say, it was all a consequence of the destruction of our money.
Eventually, as inflation cooled, we came to realize that the "greedy" landlords, grocers, and even OPEC sheiks were just bogeymen, convenient and effective distractions covering for the real thieves.
Another lesson of the '80s was that commodity prices are remarkably stable when compared one to another. The old story of the ancient Roman buying his tailor-made toga and a nice pair of sandals for an ounce of gold still rings true. Today, with gold around $1,500, an ounce will still buy some nice threads and a decent pair of shoes.
A more mundane measure is gasoline. Use the calculator and check the current value of a 1932-64 quarter. A $35.06/oz silver price yields $6.34 for just one of the quarters that Americans used before 1965. Gasoline that's $4.30 a gallon in today's currency, is just under $0.17 a gallon in terms of real silver money based on that silver quarter! That's about as low as it got during the price wars of the early '60s, when oil companies actually competed for business.
Once again, the great swindle is happening in plain sight, but very few seem to notice.
In the sixties, it wasn't surprising; there was plenty of distraction.
The orderly world of the '50s was about to break apart in the turbulence of the '60s. The great social convulsions were just beginning. Leave it to Beaver left the airwaves in June 1963, taking the world of the Cleavers with it.
In August 1963, MLK gave his "I Have a Dream" speech. By early November, Vietnam grabbed the headlines with the bloody assassination of the Ngo brothers in Saigon. A month later, America was changed forever. The election year distractions of 1964 followed. The new money was introduced the following year with matter-of-fact press releases. In 1965 the war escalated, and the "war on poverty" was just getting under way. Before long, women were abandoning their homes and children and demanding their place in the job market. They got far more than they bargained for.
Within ten years of the introduction of the new money, working wasn't an option for most women; it was a matter of family survival. "Liberated" from their homes and children, women became full-paying members of the work force, laboring in the vast fields of the great American tax plantation.
The revolutionary distractions of the women's movement invaded every home. With the rise of the female breadwinner, the stature of men inevitably shrank. The accompanying incessant feminist carping began an unrelenting cultural castration that continues to this moment in every corner of our lives.
In the nineties, jobs that once employed men and supported families finally vanished altogether. It's impossible for a service economy to create as much value per hour as a manufacturing one. Not only was the wealth-generating capacity of the American economy crippled by off-shoring manufacturing, but more importantly, the value of the men that worked those jobs evaporated with the jobs themselves.
Today, public-sector unions claim to provide the standard of living that manufacturing once did. However, rather than voluntary exchange, unions accomplish this by extortion resting on the force of arms leveled at their neighbors. The unions' dizzying disconnect with reality is setting the stage for catastrophe.
For example, in my hometown, the median annual school district salary is over $64,000, while the per capita income is just $41,000. You don't need a Nobel Prize to see that the wrath now quietly brewing will threaten the fabric of my peaceful little town. The same will happen across the nation.
Whatever happened to that world of Ward and June?
My AF buddy's starting wage suggests an answer. Although we'd been using silver-plated slugs and Federal Reserve Notes since 1965, the economy of 1971 was still much closer to that of 1964 than the inflated one that followed just a year or two later. For his efforts, my friend earned a princely $5 an hour. Before you laugh out loud, use the calculator and do the math. What entry-level blue-collar job pays $120 an hour these days? Is there one that pays $60?
This time, the inflation will find no one left at home. June is already working. Soon, the cruelest joke in American history will be on us.
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