Monday, May 21, 2012

Gas is cheaper today

Everyone probably already knows that the price for gas is high.  What you might not know is that gas is cheaper today then it was in the 70s.  Some websites might make you believe that gas is cheaper in 1959 then it is today.  This is simply not true.  Two sources have said this.  One of them said that based on inflation, gas price would be $1.86.  Gas apparently was $0.25 in 1959...so how could it be cheaper today?

$0.50 piece worth about $4.20 today

Well, you cannot take the current price today nor use the consumer price index to adjust for inflation.  Why not?  Well, if you use the CPI calculator and put in $0.25 it says that the dollar has the same buying power as $1.98.  It is a government site...it cannot be wrong right?

The Bureau of Labor Statistics does a great job.  We use the data they gather for the work that we do.  However, the fundamental flaw with the CPI calculator is that our currency was different back then.  The quarter and dimes were made out of silver.  If you go to coinstudy website...and look up a 1959 quarter you'll notice that the quarter is worth $4.72.    I'm not certain how often the website adjusts based on silver prices, but last time I checked gas was not $4.72 per gallon.  As of today, coinflation has the value of 1932-1964 quarters at $5.13.

Folks...this means that if you had all your wealth in quarters back in 1959 and held onto those quarters, then you would be wealthier today, then you were back in 1959.  If you held all your money in a bank collecting zero interest...then you would be much poorer today, then you were back in 1959.

If you look at the picture of my $0.50 piece...you'll notice that it is worth less than the 1959 quarter.  How come?  Well, because the U.S. Mint changed the half dollar silver content to 40% from 90%.  This is currency debasement working its magic.

It is of my opinion, that inflation or devaluing of currency is one of the main reason why the rich get richer, and the poor get poorer.  It puts certain individuals who understand the rules of money on a vastly different level than everyone else.  Back when the gold standard existed, it was acceptable not to like or care about money.  Today if you don't understand, then you lose.  Let me leave you with a few famous currency quotes.

“At the end fiat money returns to its inner value—zero.” - Voltaire

“The problem with fiat money is that it rewards the minority that can handle money, but fools the generation that has worked and saved money.” - Adam Smith

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation […] Deficit spending is simply a scheme for the “hidden” confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.” - Alan Greenspan, Gold and Economic Freedom (1968)


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