3 ms·

I think it's a lot worse than what you're saying. The price of gold was $45/oz in 1970. 52 years later it's $1,800/ounce. That's roughly 7.6% a year or 45x incr

I think it's a lot worse than what you're saying. The price of gold was $45/oz in 1970. 52 years later it's $1,800/ounce. That's roughly 7.6% a year or 45x increase. If you use the inflation provided by the government, CPI, (1), they say inflation is only 3.6%/year or roughly 7x since 1970. Obviously we have a discrepancy. Is the dollar worth 45x less than 1970 or 7x times? When we look at prices of things like education, housing, and healthcare, the 45x number makes a lot more sense. Education has 30x in price over the same time period (2). If you're comparing prices in dollars, it feels like education got really expensive compared to the basket of goods the BEA tracks but in reality, education requires less gold than it did in 1970. Our incredible supply chains and manufacturing automation have lowered most consumer prices such that we don't really notice inflation but when you look at things that can't get much cheaper like housing, healthcare, education, asset prices of all sorts, you can't miss the fact that they correlate more closely with gold than the USD. Since we went off the gold standard, the US government has been inflating the currency which in effect, taxes holders of USD. The US gets away with it because of its military but how long can that last? The absurd rises in prices aren't crazy. They're catching up with reality. We can't just keep printing our currency and hope our military is strong enough to enforce this economic fantasy. (1) https://www.in2013dollars.com/us/inflation/1970?amount=1 https://www.in2013dollars.com/us/inflation/1970?amount=1 (2) https://www.yahoo.com/now/average-cost-college-jumped-incredible-122000732.html https://www.yahoo.com/now/average-cost-college-jumped-incred...

md_ 5y ago
Education and health care are both subject to Baumol’s cost disease. “Our incredible supply chains and manufacturing automation have lowered most consumer prices such that we don't really notice inflation…” What’s your definition of “inflation”? It sounds like it’s something other than purchasing power, which is surprising to me. “The US gets away with it because of its military” So do countries with smaller militaries have…less inflation? More? More or less monetary growth? It’d be interesting to see if the data bear out your hypothesis.
- dumbfoundded 5y ago
  You really misunderstand the Baumol effect. It's about why jobs with no productivity gains have higher salaries over time (it's to keep up with places were wages did grow due to productivity gains). It's used to explain why jobs like musicians have increases salaries over long periods of time. My definition of inflation is simple: dollars to gold. If you measure things in grams of gold, our current situation makes a lot of sense. A random basket of good subject to complicate macro trends makes no sense. Pretty much everything takes less gold to purchase these days. Assets like property, health care, and education actually require less gold to acquire than 50 years ago but not that much less. Products like consumer goods, require much much less gold now. This makes sense. We can develop property faster and cheaper but we can't make land so it's only a bit less gold. Mass produced goods are an order of magnitude cheaper due to automation. Now let's go back to dollars. Every time the US prints dollars, it taxes the system. The total value of the system is the same but now the US government has some spending cash and everyone else holds a bit less. Why would any want to hold dollars? Partly, no one does. The richer you are, the less of your net worth you hold in dollars. But the world is forced to use dollars. Originally, the US & England came together to create an international gold backed currency system to logistically enable transactions without shipping tons of gold. In 1970, President Nixon abandoned this system (1). Please really do look at this chart and it's impossible to ignore when it happened. Our military & economic momentum are the only reason any uses dollars. It's complicated to describe all the ways but the biggest is that our navy guarantees safe global trade without piracy and fragmentation. If the US Navy disappeared, international shipping would quickly dissolve to squabbles on laws and borders. Small military conflicts would break out around the world. China's already hinted at as much in the South China sea. The Strait of Hormuz would become a war zone. We can argue about specifics but long story short, the world uses dollars heavily and doesn't want to. Every country would of course rather have everyone else use their currency. I think we can agree that the world uses dollars despite not wanting to. Domestically, the move away from gold is killing the middle class. It's a disgusting trick the wealthy have pulled. Essentially by creating the dollar, forcing everyone to use it, and then printing more, the owner class has stolen gold. Cheaper consumer goods from automation & global supply chains has lessened the impact but this newest generation is finally realizing they never afford a house or education for their children. The fact that the average life expectancy has gone down in the US is the craziest thing ever and should be a source of deep shame. To fix this, we only need two things: Fix the dollar to a specific amount of gold & Transfer a massive amount of wealth from the rich to the poor. It's obviously complicated and a bit fuzzy to describe but any denial of the general situation is like denying climate change. Gold was $40 and now it's $1800. The numbers are right there and pricing everything in gold makes it simpler to see. (1) https://www.macrotrends.net/1333/historical-gold-prices-100-year-chart https://www.macrotrends.net/1333/historical-gold-prices-100-...

md_ 5y ago

Education and health care are both subject to Baumol’s cost disease. “Our incredible supply chains and manufacturing automation have lowered most consumer prices such that we don't really notice inflation…” What’s your definition of “inflation”? It sounds like it’s something other than purchasing power, which is surprising to me. “The US gets away with it because of its military” So do countries with smaller militaries have…less inflation? More? More or less monetary growth? It’d be interesting to see if the data bear out your hypothesis.

dumbfoundded 5y ago
You really misunderstand the Baumol effect. It's about why jobs with no productivity gains have higher salaries over time (it's to keep up with places were wages did grow due to productivity gains). It's used to explain why jobs like musicians have increases salaries over long periods of time. My definition of inflation is simple: dollars to gold. If you measure things in grams of gold, our current situation makes a lot of sense. A random basket of good subject to complicate macro trends makes no sense. Pretty much everything takes less gold to purchase these days. Assets like property, health care, and education actually require less gold to acquire than 50 years ago but not that much less. Products like consumer goods, require much much less gold now. This makes sense. We can develop property faster and cheaper but we can't make land so it's only a bit less gold. Mass produced goods are an order of magnitude cheaper due to automation. Now let's go back to dollars. Every time the US prints dollars, it taxes the system. The total value of the system is the same but now the US government has some spending cash and everyone else holds a bit less. Why would any want to hold dollars? Partly, no one does. The richer you are, the less of your net worth you hold in dollars. But the world is forced to use dollars. Originally, the US & England came together to create an international gold backed currency system to logistically enable transactions without shipping tons of gold. In 1970, President Nixon abandoned this system (1). Please really do look at this chart and it's impossible to ignore when it happened. Our military & economic momentum are the only reason any uses dollars. It's complicated to describe all the ways but the biggest is that our navy guarantees safe global trade without piracy and fragmentation. If the US Navy disappeared, international shipping would quickly dissolve to squabbles on laws and borders. Small military conflicts would break out around the world. China's already hinted at as much in the South China sea. The Strait of Hormuz would become a war zone. We can argue about specifics but long story short, the world uses dollars heavily and doesn't want to. Every country would of course rather have everyone else use their currency. I think we can agree that the world uses dollars despite not wanting to. Domestically, the move away from gold is killing the middle class. It's a disgusting trick the wealthy have pulled. Essentially by creating the dollar, forcing everyone to use it, and then printing more, the owner class has stolen gold. Cheaper consumer goods from automation & global supply chains has lessened the impact but this newest generation is finally realizing they never afford a house or education for their children. The fact that the average life expectancy has gone down in the US is the craziest thing ever and should be a source of deep shame. To fix this, we only need two things: Fix the dollar to a specific amount of gold & Transfer a massive amount of wealth from the rich to the poor. It's obviously complicated and a bit fuzzy to describe but any denial of the general situation is like denying climate change. Gold was $40 and now it's $1800. The numbers are right there and pricing everything in gold makes it simpler to see. (1) https://www.macrotrends.net/1333/historical-gold-prices-100-year-chart https://www.macrotrends.net/1333/historical-gold-prices-100-...