Just an idle thought: from 1900 to 1933, US dollar was worth roughly a pennyweight (1/20 troy ounce or 1.556 gram) of gold. As of today, gold trades for just under $43/gram. A dollar today buys about 67 times less gold than it did in 1925. Do we earn 67 times more? A more meaningful comparison would be to the wages and prices of the day.
In 1924, a typical farm wage was a little less than $50/month, or a little over $44K annually in today’s money. Skilled trades (numbers for unionized workers in NYC, therefore not typical of the rest of the country) were four to six times higher. Another source listed average income under $100/month — I am sure that these numbers varied greatly with location and other factors. I am not sure how the linked site came up with the 1:12.48 ratio — for that to be accurate, the purchasing power of gold had to be 5.3 times lower than today.
For new technologies, like radios, that was more than true. A good radio with a speaker approached $100 — imagine how much technology $6700 buy us today! Cars were still a luxury, but an entry level vehicle (Ford Model T) could be had for about $260 — the gold equivalent of $17420 in today’s money. Alcohol was almost unobtainable by legal channels due to the prohibition. Meat, dairy, most fruit were far more expensive once transported — but became very cheap in season or near the producers. The FDA had not choked the local food production quite as badly back then.
Imported goods were far fewer back then and heavily taxed. Tariffs could reach 40-60%, making quality European products unaffordable for many. Income tax wasn’t even a concern for most people, but property taxes were a problem for many, especially later in the decade.
The sum of this comparison is that the 1920s were a fairly prosperous decade even by today’s standards, a bit like 1990s from the perspective of today. Technological advances make direct comparisons difficult, but it’s my impression that government “cures” of economic downturns , now and in the 1930s, were extremely counter-productive and also detrimental to economic and social freedoms. The censorship and intimidation practiced by the FDR administration are again in vogue today. A 1920s American did face certain problems that are minimized today (such as government discrimination by race) but was also able to buy a machine gun or dynamite unimpeded. Certain freedoms, such as almost unrestricted travel, did go out with World War One, but many others have been lost since.
“…but was also able to buy a machine gun … unimpeded.”
Well, yeah, if you had $250 for that Thompson SMG, but who had $250 to spare? That’s almost the price of a car!
I find that price amazing, in fact unbelievable, so I googled it – the price of a Thompson SMG did range between $175 and $200 in the twenties. Why this amazes me is that I recall seeing semi-auto Thompsons advertised for (US)$ 125 when I was 19 – a little over thirty years ago. I think that this is a better price analysis than gold – in the Twenties a Tommie cost a few months pay, now it costs less than half a day’s pay, ergo we are wealthier.
I don’t think you can convert 1920’s dollars to 2013 ones through gold – it varies a lot in price, depending on how scared or traditionalist people are, the amount for sale available and so on.
Also, I believe the site you linked to is suspect – the real wages have been sort of stagnant since 1970 or so..
Also note that Chinese and Indians who both don’t trust fiat currency were far less wealthy.
These days, they’re buying a lot of gold..
http://www.bloomberg.com/news/2013-05-07/china-s-gold-purchases-from-hong-kong-expand-to-record-in-march.html
India buys even more, apparently..
http://www.reuters.com/article/2013/08/29/us-india-economy-gold-idUSBRE97S0IW20130829
The sum of this comparison is that the 1920s were a fairly prosperous decade even by todayâs standards, a bit like 1990s from the perspective of today.
Well – there was an economic bubble ongoing in the later part of the 1920’s.
Also had something like 30% of world GDP in the 1920’s, I believe. It rose to 50% right after WWII. And had no need unlike continental countries to invest heavily in defense spending.
The censorship and intimidation practiced by the FDR administration are again in vogue today
It’s almost certain that the future only hold more regulation, bureaucracy and red tape. Central banks can effectively tax everyone by printing money. US even manages to tax everyone who uses the silly dollars.
Because productivity in agriculture and industry has risen so dramatically*, there’s likely a surplus of labour, but no productive way of employing them. Gov’t with it’s endless amount of fiat money can employ any number of people in it’s bureaucracies and security organs..
Exactly, on that first paragraph – though real wages expressed in total compensation are not nearly as flat as the Left keeps wanting to tell us .
Some people have the idea that “Gold has a fixed value“, as if it was some magic thing. (Oleg sort of implies it in the fact of using it as if it were that way, and I’ve heard others state it in essentially the terms I just used.)
It isn’t, and it doesn’t.
It’s subject to speculation and to use as a hedge against inflation (even if it’s sometimes a lousy one, people often think it isn’t, and what they think is what matters), and where non-capital-invested wealth looking for relatively safe investment goes when nobody’s real happy with US bonds, or confident in the Stock Market.
That’s why everyone trying the impossible* job of doing purchasing power/”real wealth” comparisons uses goods-baskets, not precious metals**.
Arguably gold’s slowly coming out of a serious bubble – and should pop entirely if/when the US economy finally stops sucking, i.e. when the State stops mucking it up. Silver was in one, but seems to have fallen back to near-sanity.
(* See Hayek and Rothbard et al. for why baskets never work very exactly.
** Gold? Why not silver? They’ve both been used for currency worldwide. Of course, thinking about it like that reveals the core problem in the idea of “fixed value” metals – the exchange rates between the two vary wildly over time.
Today gold’s at $1290 and silver’s at $21.50 – about 60:1. Respectively in 1993 those were $330-390 and $3.7-5 ; between 89:1 and 78:1.
The biggest disconnect I recall recently was late April 2011, when silver hit $48 or so, and gold was at $1500 – 31.25:1.
So within the past two and a half years the exchange ratio has nearly doubled – because the bottom fell out of silver, back closer to where it really belongs. This tells me that at least one of the two must not be of “fixed value” – and realistically since there’s no good argument why either one must be, I infer that neither one is.)
Exactly, on that first paragraph – though real wages expressed in total compensation are not nearly as flat as the Left keeps wanting to tell us .
They’ve grown somewhat, but you can’t say how much because you need inflation data to compute it, and as we all know US gov’t has been doing unspeakable, perverse things to the data for decades..
i.e. when the State stops mucking it up.
I have no response to that. Except this video clip (from 0:15 on)
http://www.youtube.com/watch?feature=player_detailpage&v=l0tKVOJaAKI#t=14