9 ms·

That's a nice story. The real reason was the US dollar was on a gold standard during that period of time. In the late 50's to 60's the US begin to issue more c

by meric 11y ago

That's a nice story. The real reason was the US dollar was on a gold standard during that period of time. In the late 50's to 60's the US begin to issue more currency than their gold holdings were increasing, leading the countries like France withdrawing gold from the US (and apparently, inflation, according to this article), and finally the dissolution of the gold standard in 1971. Since the US dollar was fixed to gold there was little to no inflation, because the ratio of gold price to goods price is much more stable. In 1950 - A coke was 5c, median household income $4000[1] per year = 80000 cokes per year. In 2015 - A coke is $2[2], median household income $50500[3] per year = 25000 cokes per year. In real terms adjusted by the price of coke, the median household income has fallen by 69%. (for giggles). 1. http://web.stanford.edu/class/polisci120a/immigration/Median%20Household%20Income.pdf http://web.stanford.edu/class/polisci120a/immigration/Median... 2. http://www.humuch.com/prices/CocaCola-Bottle-20oz500ml/______/40#.VZDGuO2qqko http://www.humuch.com/prices/CocaCola-Bottle-20oz500ml/_____... 3. http://www.mybudget360.com/how-much-do-americans-earn-what-is-the-average-us-income/ http://www.mybudget360.com/how-much-do-americans-earn-what-i...

dimitar 11y ago
Since the US dollar was fixed to gold there was little to no inflation, because the ratio of gold price to goods price is much more stable. This is true only in some sense on average. There was in fact both very significant inflation and deflation, but they evened out over the long term. People thus could use gold-backed money for savings. It still was a worse asset than bonds to save in, even if you account for sovereign defaults in that era.
- deleted 11y ago
  [deleted]
- branchless 11y ago
  Yep, money is not a store of value. They have us right where they want us.
  - gnaritas 11y ago
    "They" don't have us anywhere, money is not supposed to be a store of value, it's a medium of exchange. Assets are stores of value.
    - liopleurodon 11y ago
      then what's the point of a savings account? to get screwed over?
      - dragonwriter 11y ago
        > then what's the point of a savings account? A savings account isn't cash, its an immediately-callable loan from the account holder to a financial institution; for the account holder, it provides an asset with very good liquidity (but perhaps marginally worse than that provided by a checking account), essentially zero risk, but poor returns (but perhaps marginally better than that provided by a checking account). Its a way of meeting short-term spending needs (but perhaps slightly longer term than that met by a checking account). Demand deposit accounts (both checking and savings) in general are, like cash, basically for short-term spending, but where the bank provides some benefits (actual storage, along with access mechanisms more convenient for many uses than pulling physical bills out of a storage locker).
      - pionar 11y ago
        A savings account is nothing more than a loan from you to the bank.
      - gnaritas 11y ago
        Savings accounts are for short term liquidity, not long term stores of value. Long term, look to bonds, stocks, and other asset classes. Money is for spending, not storing.
- tosseraccount 11y ago
  http://www.moneychimp.com/articles/econ/inflation_calculator.htm http://www.moneychimp.com/articles/econ/inflation_calculator... Inflation 1900-1972 : 2.3% Inflation 2000-2014 : 2.24% Gold had nothing to do with it. The value of the US currency has always been a based on trust. In practice the US government did not exchange gold for dollar bills anyway. The Zerohedge theories of gold just doesn't work.
  - innguest 11y ago
    - clueless keynesian trusts government numbers. - clueless keynesian does not know government changed the way to calculate inflation several times throughout the years (and barely knows what 'inflation' means anyway). - clueless keynesian can't cope with the cognitive dissonance of asking themselves why the government needs to change the way they measure something if it's so "constant" like 2.24-2.3%. - clueless keynesian therefore thinks he knows more than all the traders and insiders posting at ZeroHedge. - clueless keynesian therefore thinks the bankster priesthood since 1913 know more about money than the sum of all people that lived in the past 5000 years using gold as money.
    - tosseraccount 11y ago
      Keynesian? You're projecting. US currency is and always has been backed by the US economy and military. Not gold.
      - innguest 11y ago
        An Austrian "projecting"? Hah. So you think after May 1971, Switzerland and France redeemed USD$50M and USD$191M, respectively, in US products and soldiers? Because my sources tell me they redeemed it in gold. Has Germany been trying to redeem their US deposits in US products and soldiers? OR did they ask for gold? So much for your "is and always has been". Seems like depositors don't really care about US products and soldiers, more like, just its gold.
        tosseraccount 11y ago
bbcbasic 11y ago
> In real terms adjusted by the price of coke, the median household income has fallen by 69%. The price of a Coke isn't real terms though. Because at 5c it was artificially constrained as mentioned in the article. More interesting would be the price of a house, or daily groceries (of equivalent quality) vs. salary.
- meric 11y ago
  This is an article about cola. :) It's a comparison for fun.
  - bbcbasic 11y ago
    Ok. Funny :-)
- SilasX 11y ago
  Also, the comparison should probably be made with respect to the after-tax income.
ams6110 11y ago
You're not accounting for the size of the portion. The nickel bottle of Coca-Cola was 6oz. Today's standard vending machine bottle is 20oz.
- dunham 11y ago
  Which gives us 480,000 ounces of coke in 1950 vs 505,000 ounces of coke in 2015. A 5.2% increase in the amount of coke you can buy for a year's salary. (I'm actually kinda surprised the price is that stable.)
  - vetinari 11y ago
    It's easier to sell one bigger package than several smaller. I would not be surprised, if the 505,000 ounces in 20oz packages cost less to produce in 1950 prices, than 480,000 ounces in 6oz packages. (Just one physical package, not three separate).
    - peterfirefly 11y ago
      Plastic bottles instead of glass bottles probably also help. You don't have to be nearly as careful when you handle plastic bottles. (I /think/ they are also cheaper to produce.)
      - csn 11y ago
        And considerably lighter. Good for logistics.
    - ams6110 11y ago
      It's a set of tradeoffs. The 6oz bottles were (I think) returnable. Even better than recycling, they only needed to be washed/sterilized to re-use. I'm old enough to remember Coke and other brands in returnable bottles up to 16oz. They were heavy. The transportation costs savings with the lighter plastic bottles (combined with maybe the raw materials savings, and savings not having to transport, handle, wash, and sterilize the emptys) made plastic more economical than returnable glass. Manufacturing cost for glass bottles almost certainly higher than plastic. You have to melt either sand or recycled crushed glass which takes a lot of energy. Some jurisdictions do have returnable plastic bottles. They are much heavier than the disposable ones but still lighter than glass. Interestingly for some reason beer in plastic bottles has never caught on, it's mostly sold in glass bottles and cans.
jewel 11y ago
Here is a chart that covers the time period in question. The 1880s was right in the middle of a long period of slow deflation, so a bottle of coke was actually getting slightly more expensive for a period of nearly 30 years: http://www.economics-charts.com/images/cpi-1800-2005.png http://www.economics-charts.com/images/cpi-1800-2005.png
JohnyLy 11y ago
Interesting comparison: inflation is much faster than wage rises.
- higherpurpose 11y ago
  Some countries have the minimum wage linked to inflation. While that can have some disadvantages as well (in certain short term periods), overall it's probably much better off in the long term for the population.
  - eru 11y ago
    > [...] overall it's probably much better off in the long term for the population. [...] if a minimum wage is a good idea in the first place.
    - bjelkeman-again 11y ago
      When isn't it a good idea to have a minimum wage?
      - meric 11y ago
        In an environment with little social welfare, a minimum wage will disproportionately negatively affect workers with disability because they can almost never get hired, and do not receive sufficient support from the government. They will be at the mercy of affection or pity from family and friends.
      - superuser2 11y ago
        When you are optimizing for employment ratio. Zero minimum wage gives 0% unemployment and creates millions of jobs. Those are some great achievements to have if you're running for reelection. There is no reason to support a minimum wage if you don't care about quality of life.
        rogerbraun 11y ago
derefr 11y ago
> In real terms adjusted by the price of coke, the median household income has fallen by 69%. (for giggles). Not necessarily that far-out: since the core CPI that goes into inflationary figures is measured using things like the cost of a loaf of bread, I always thought it'd be nice to be able to flip that around, and see historical economic charts measured in loaf-of-bread-units. It would also allow for easy cross-comparison between figures from different countries. (To go actually far-out, though, wouldn't it be interesting to have a salary and a bank account denominated directly in inflation-compensated purchasing-power, such that if you got paid 1 BreadBuck, it would buy you exactly one loaf of bread today, tomorrow, or twenty years from now?)
- jcstauffer 11y ago
  re: your parenthetical, this Planet Money episode (http://www.npr.org/sections/money/2010/10/04/130329523/how-fake-money-saved-brazil http://www.npr.org/sections/money/2010/10/04/130329523/how-f...), describes Brazil's real, which was introduced as essentially that - an inflation-proof currency, replacing the cruzeiro, which was destroyed by hyper-inflation.
  - deleted 11y ago
    [deleted]
tim333 11y ago
In 1900 A coke was 5c, average income $438 per year = 8760 cokes per year. So in coke terms wages shot up 1900 to 1950. Or coke was just cheap then. http://usa.usembassy.de/etexts/his/e_prices1.htm http://usa.usembassy.de/etexts/his/e_prices1.htm
drzaiusapelord 11y ago
>$1.00 at the beginning of 1900 had the same purchasing power as $5.38 at the end of 1972. I wouldn't call 2.3% Annualized Inflation Rate "little to no." >$1.00 at the beginning of 1990 had the same purchasing power as $1.86 at the end of 2014. What's interesting is that in the past 25 years we have a similar AIR. 2.5%. 72-1990 may have just been an anomaly, especially if you see that 1972-1980 alone had a AIR of 8.6%. I think a lot of the gold standard weirdos are purposely being disingenuous by ignoring the big economic issues of the 70s and 80s to play up their pet theory.(war spending/war debt, oil crisis, government overspending/massive deficit spending, manufacturing leaving, savings and loan scandal, 1980s recession, etc) If the gold standard is the only that that can bring out sub 3% inflation then you're simply wrong as we've been in the 2's since the 90's. I don't think many younger people on the internet really appreciate how crazy the 70s and 80s were. The loan my dad got on our house when I was a kid is like 3x or almost 4x my interest rate, which is insane. Clearly things have stabilized since then while we're still not on any precious metal backed currency. I think you guys are missing the forest for the trees here. Calculator here: http://www.moneychimp.com/articles/econ/inflation_calculator.htm http://www.moneychimp.com/articles/econ/inflation_calculator...

by meric 11y ago

dimitar 11y ago

Since the US dollar was fixed to gold there was little to no inflation, because the ratio of gold price to goods price is much more stable. This is true only in some sense on average. There was in fact both very significant inflation and deflation, but they evened out over the long term. People thus could use gold-backed money for savings. It still was a worse asset than bonds to save in, even if you account for sovereign defaults in that era.

deleted 11y ago
[deleted]
branchless 11y ago
Yep, money is not a store of value. They have us right where they want us.
- gnaritas 11y ago
  "They" don't have us anywhere, money is not supposed to be a store of value, it's a medium of exchange. Assets are stores of value.
  - liopleurodon 11y ago
    then what's the point of a savings account? to get screwed over?
    - dragonwriter 11y ago
      > then what's the point of a savings account? A savings account isn't cash, its an immediately-callable loan from the account holder to a financial institution; for the account holder, it provides an asset with very good liquidity (but perhaps marginally worse than that provided by a checking account), essentially zero risk, but poor returns (but perhaps marginally better than that provided by a checking account). Its a way of meeting short-term spending needs (but perhaps slightly longer term than that met by a checking account). Demand deposit accounts (both checking and savings) in general are, like cash, basically for short-term spending, but where the bank provides some benefits (actual storage, along with access mechanisms more convenient for many uses than pulling physical bills out of a storage locker).
    - pionar 11y ago
      A savings account is nothing more than a loan from you to the bank.
    - gnaritas 11y ago
      Savings accounts are for short term liquidity, not long term stores of value. Long term, look to bonds, stocks, and other asset classes. Money is for spending, not storing.
tosseraccount 11y ago
http://www.moneychimp.com/articles/econ/inflation_calculator.htm http://www.moneychimp.com/articles/econ/inflation_calculator... Inflation 1900-1972 : 2.3% Inflation 2000-2014 : 2.24% Gold had nothing to do with it. The value of the US currency has always been a based on trust. In practice the US government did not exchange gold for dollar bills anyway. The Zerohedge theories of gold just doesn't work.
- innguest 11y ago
  - clueless keynesian trusts government numbers. - clueless keynesian does not know government changed the way to calculate inflation several times throughout the years (and barely knows what 'inflation' means anyway). - clueless keynesian can't cope with the cognitive dissonance of asking themselves why the government needs to change the way they measure something if it's so "constant" like 2.24-2.3%. - clueless keynesian therefore thinks he knows more than all the traders and insiders posting at ZeroHedge. - clueless keynesian therefore thinks the bankster priesthood since 1913 know more about money than the sum of all people that lived in the past 5000 years using gold as money.
  - tosseraccount 11y ago
    Keynesian? You're projecting. US currency is and always has been backed by the US economy and military. Not gold.
    - innguest 11y ago
      An Austrian "projecting"? Hah. So you think after May 1971, Switzerland and France redeemed USD$50M and USD$191M, respectively, in US products and soldiers? Because my sources tell me they redeemed it in gold. Has Germany been trying to redeem their US deposits in US products and soldiers? OR did they ask for gold? So much for your "is and always has been". Seems like depositors don't really care about US products and soldiers, more like, just its gold.
      - tosseraccount 11y ago

bbcbasic 11y ago

> In real terms adjusted by the price of coke, the median household income has fallen by 69%. The price of a Coke isn't real terms though. Because at 5c it was artificially constrained as mentioned in the article. More interesting would be the price of a house, or daily groceries (of equivalent quality) vs. salary.

meric 11y ago
This is an article about cola. :) It's a comparison for fun.
- bbcbasic 11y ago
  Ok. Funny :-)
SilasX 11y ago
Also, the comparison should probably be made with respect to the after-tax income.

ams6110 11y ago

You're not accounting for the size of the portion. The nickel bottle of Coca-Cola was 6oz. Today's standard vending machine bottle is 20oz.

dunham 11y ago
Which gives us 480,000 ounces of coke in 1950 vs 505,000 ounces of coke in 2015. A 5.2% increase in the amount of coke you can buy for a year's salary. (I'm actually kinda surprised the price is that stable.)
- vetinari 11y ago
  It's easier to sell one bigger package than several smaller. I would not be surprised, if the 505,000 ounces in 20oz packages cost less to produce in 1950 prices, than 480,000 ounces in 6oz packages. (Just one physical package, not three separate).
  - peterfirefly 11y ago
    Plastic bottles instead of glass bottles probably also help. You don't have to be nearly as careful when you handle plastic bottles. (I /think/ they are also cheaper to produce.)
    - csn 11y ago
      And considerably lighter. Good for logistics.
  - ams6110 11y ago
    It's a set of tradeoffs. The 6oz bottles were (I think) returnable. Even better than recycling, they only needed to be washed/sterilized to re-use. I'm old enough to remember Coke and other brands in returnable bottles up to 16oz. They were heavy. The transportation costs savings with the lighter plastic bottles (combined with maybe the raw materials savings, and savings not having to transport, handle, wash, and sterilize the emptys) made plastic more economical than returnable glass. Manufacturing cost for glass bottles almost certainly higher than plastic. You have to melt either sand or recycled crushed glass which takes a lot of energy. Some jurisdictions do have returnable plastic bottles. They are much heavier than the disposable ones but still lighter than glass. Interestingly for some reason beer in plastic bottles has never caught on, it's mostly sold in glass bottles and cans.

jewel 11y ago

Here is a chart that covers the time period in question. The 1880s was right in the middle of a long period of slow deflation, so a bottle of coke was actually getting slightly more expensive for a period of nearly 30 years: http://www.economics-charts.com/images/cpi-1800-2005.png http://www.economics-charts.com/images/cpi-1800-2005.png

JohnyLy 11y ago

Interesting comparison: inflation is much faster than wage rises.

higherpurpose 11y ago
Some countries have the minimum wage linked to inflation. While that can have some disadvantages as well (in certain short term periods), overall it's probably much better off in the long term for the population.
- eru 11y ago
  > [...] overall it's probably much better off in the long term for the population. [...] if a minimum wage is a good idea in the first place.
  - bjelkeman-again 11y ago
    When isn't it a good idea to have a minimum wage?
    - meric 11y ago
      In an environment with little social welfare, a minimum wage will disproportionately negatively affect workers with disability because they can almost never get hired, and do not receive sufficient support from the government. They will be at the mercy of affection or pity from family and friends.
    - superuser2 11y ago
      When you are optimizing for employment ratio. Zero minimum wage gives 0% unemployment and creates millions of jobs. Those are some great achievements to have if you're running for reelection. There is no reason to support a minimum wage if you don't care about quality of life.
      - rogerbraun 11y ago

derefr 11y ago

> In real terms adjusted by the price of coke, the median household income has fallen by 69%. (for giggles). Not necessarily that far-out: since the core CPI that goes into inflationary figures is measured using things like the cost of a loaf of bread, I always thought it'd be nice to be able to flip that around, and see historical economic charts measured in loaf-of-bread-units. It would also allow for easy cross-comparison between figures from different countries. (To go actually far-out, though, wouldn't it be interesting to have a salary and a bank account denominated directly in inflation-compensated purchasing-power, such that if you got paid 1 BreadBuck, it would buy you exactly one loaf of bread today, tomorrow, or twenty years from now?)

jcstauffer 11y ago
re: your parenthetical, this Planet Money episode (http://www.npr.org/sections/money/2010/10/04/130329523/how-fake-money-saved-brazil http://www.npr.org/sections/money/2010/10/04/130329523/how-f...), describes Brazil's real, which was introduced as essentially that - an inflation-proof currency, replacing the cruzeiro, which was destroyed by hyper-inflation.
- deleted 11y ago
  [deleted]

tim333 11y ago

In 1900 A coke was 5c, average income $438 per year = 8760 cokes per year. So in coke terms wages shot up 1900 to 1950. Or coke was just cheap then. http://usa.usembassy.de/etexts/his/e_prices1.htm http://usa.usembassy.de/etexts/his/e_prices1.htm

drzaiusapelord 11y ago

>$1.00 at the beginning of 1900 had the same purchasing power as $5.38 at the end of 1972. I wouldn't call 2.3% Annualized Inflation Rate "little to no." >$1.00 at the beginning of 1990 had the same purchasing power as $1.86 at the end of 2014. What's interesting is that in the past 25 years we have a similar AIR. 2.5%. 72-1990 may have just been an anomaly, especially if you see that 1972-1980 alone had a AIR of 8.6%. I think a lot of the gold standard weirdos are purposely being disingenuous by ignoring the big economic issues of the 70s and 80s to play up their pet theory.(war spending/war debt, oil crisis, government overspending/massive deficit spending, manufacturing leaving, savings and loan scandal, 1980s recession, etc) If the gold standard is the only that that can bring out sub 3% inflation then you're simply wrong as we've been in the 2's since the 90's. I don't think many younger people on the internet really appreciate how crazy the 70s and 80s were. The loan my dad got on our house when I was a kid is like 3x or almost 4x my interest rate, which is insane. Clearly things have stabilized since then while we're still not on any precious metal backed currency. I think you guys are missing the forest for the trees here. Calculator here: http://www.moneychimp.com/articles/econ/inflation_calculator.htm http://www.moneychimp.com/articles/econ/inflation_calculator...