Reply #57: Inflation Measures & Wages [View All]

A poster at another forum made an interesting point about the price of silver vs. the price of a gallon of gas. He noted that back when gasoline was only 25-cents a gallon, an ounce of silver would buy a certain amount of gasoline. (Actually, around 5 gallons of gasoline at that time.) Today, an ounce of silver will buy the same amount of gasoline, about 5 gallons worth.


So I thought it would be interesting to do a measure of inflation using the precious metals gold, silver, and platinum, and then compare them with the price of gasoline, the Consumer Price Index, and hourly wages.

I don't remember when gas was 25-cents a gallon, but I do remember when it was 30-cents a gallon. And gold was fixed at $35/ounce. Which means 1 oz. of gold would buy 116 gallons of gas. At today's gold prices gold prices, 1 oz. would buy about 258 gallons of gas. Just measuring the price in gold, it would suggest today's gas prices (in the U.S.) might be artificially low. Which, of course, is exactly what the Japanese and Europeans say about the price Americans pay for gas. In contrast, using silver indicates prices are just about right compared to gas prices in the mid-60's

There's no question there's been marked inflation. And the man in the street knows full well that it's much higher than what the government is claiming. But through a lot of devious and well orchestrated inflation-measuring concoctions, such as by use of "hedonics" and "owners' equivalent rent," they've been able to invent an inflation number that is much lower than real inflation actually is.

There are some interesting comparisons between the average hourly wage changes from 1965 to the present. Average hourly wages (current dollar) have increased 6.6-fold since January of 1965 (from $2.58/hour to $16.94/hour). Meanwhile, since 1965, previous silver prices have increased 10-fold, from $1.293/oz. to $12.53/oz.,(See older prices from chart below.)

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Previous gold prices have increased 18-fold, from $35/oz. to $620/oz(See older prices in chart below.)

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Previous platinum prices have increased 11-fold, from $98/oz. to $1119/oz, (See older prices in chart below.)

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Meanwhile, the Consumer Price Index has only increased 6.5%.

(For reference, current gold prices are $619/oz., current silver prices are $12.53/oz., and current platinum prices are $1119/oz.)

Interesting that the government-concocted Consumer Price Index has increased much less than the prices of gold, silver, and platinum. It's also interesting that even using the current Consumer Price Index, that average wages (when adjusted for inflation) are no higher than they were in 1965, and considerably lower than they were in 1973.

American workers are no better off now than they were in 1965, based just on "average" wages. However, even the "average" is deceptive, because wages have increased far more in the highest income brackets. Which means the average "real" wages of the lower 80% of workers is less than it was in 1965.

unlawflcombatnt

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