Is this graph accurate? How was there inflation before 1913, other than during the civil war?
http://en.wikipedia.org/wiki/Image:US_Historical_Inflation_Ancient.svg
http://en.wikipedia.org/wiki/Image:US_Historical_Inflation_Ancient.svg
US inflation rates prior to 1913
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Truth Warrior
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Two prior central banks? 
Zippyjuan
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Inflation has been a part of human history. There is not extended period anywhere in the world without it. It is caused by many things including people wanting more. People making things want to get more for their work. People sellign things want to make more. People buying things want to be able to get more things which means more demand for items. Mandated prices are the only way to avoid inflation but that leads to scarcity as producers have no incentive to make more. The only way they can earn more is to cut their costs which means to reduce labor which means fewer jobs and less money for people to spend.
They do concede that accurate figures on prices prior to 1913 are difficult to come by since statistics were not kept so they have to look at things like advertised prices. You also had people producing more of their own foods so how do you accurately measure what it cost them to live?
Here are some numbers from the US Department of Labor: http://minneapolisfed.org/Research/data/us/calc/hist1800.cfm
They do concede that accurate figures on prices prior to 1913 are difficult to come by since statistics were not kept so they have to look at things like advertised prices. You also had people producing more of their own foods so how do you accurately measure what it cost them to live?
Here are some numbers from the US Department of Labor: http://minneapolisfed.org/Research/data/us/calc/hist1800.cfm
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Truth Warrior
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Governments have been a part of human history. Governments inflate, whenever they can get away with it! 
Ron Paul gave a speech before congress in either 81 or 83 pushing the gold standard, and he basically used figures showing that from 1833 to 1913 there was practically 0 inflation (like .09%), but from 1913 to the present (at that time) there was something like 600% inflation. He also used a commodities price index to show a similar figure.
Basically he was saying the inflation when we had a gold standard was extremely small, but that graph is showing periods of something like 30-40% inflation.
I'm not sure if I'm looking at the graph wrong, or if the graph itself is just wrong, or if Ron Paul was wrong? I doubt its Dr. Paul.
Basically he was saying the inflation when we had a gold standard was extremely small, but that graph is showing periods of something like 30-40% inflation.
I'm not sure if I'm looking at the graph wrong, or if the graph itself is just wrong, or if Ron Paul was wrong? I doubt its Dr. Paul.
Truth Warrior
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Is this maybe what you are looking for and wanting?
http://www.ronpaulforums.com/showthread.php?t=125903
Zippyjuan
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You also have to look at what wages did during that time to get a more complete picture. If they went up the same rate as prices, then people were not worse off. If prices grew faster than wages then they were worse off.
If we froze everybody's wages then they would not have more money to spend so prices could not rise.
If we froze everybody's wages then they would not have more money to spend so prices could not rise.
tmosley
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The inflation shown in that chart was year-to year variability. Money would inflate one year and deflate the next, according to how the economy was doing, and perhaps variability in gold or silver supplies.
You'll notice that after about 1900, there were only two periods of real deflation, meaning that on the whole, prices went up up up after that. A variability of 10% isn't that big a deal, but when it goes up 10% EVERY YEAR, then it's a problem.
I wonder if that graph uses the same measures for the whole time period, or if it is using official government numbers.
You'll notice that after about 1900, there were only two periods of real deflation, meaning that on the whole, prices went up up up after that. A variability of 10% isn't that big a deal, but when it goes up 10% EVERY YEAR, then it's a problem.
I wonder if that graph uses the same measures for the whole time period, or if it is using official government numbers.
Zippyjuan
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Can you use the price of gold as a mearure of inflation during a time when the price of gold was set by the government?
Truth Warrior
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Nope, but what else do we have? BTW, it's much more preferable to using the government set FRN price.
The last time that I checked an ounce of gold in 1776 is still an ounce of gold in 2008.
Are you a Keynesian? Just curious.
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Zippyjuan
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You have the prices of other goods which are allowed to change according to the market. I have always believed that the true value is how long do you have to work for what you need to buy- not how many pieces of paper or metal you need to trade your time and effort for and then exchange for the items.
Truth Warrior
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Sure sounds like Keynesian mumbo jumbo to me.
Zippyjuan
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How do you compare prices and measure wealth? The value of money changes. Both prices and wages change over time. It is my own theory, but I feel that time is the best comparison. If you had to work 15 hours a week to buy food in 1900 and now have to work five hours a week to feed yourself- even though the price of food is up 500 times (made up numbers just for an example) are you worse off because it costs 500 times more- or are you better off because you do not have to work as long to put enough food on your table- allowing you to aquire other things? Just looking at the inflation rate does not tell you very much useful information. If there is real inflation, then you have to work more to get the same things.
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Truth Warrior
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I ain't talking wealth, I'm talking money.
Again, last time that I checked an ounce of gold in 1776 is still an ounce of gold in 2008.
BTW, your non-responsiveness to the questions asked, just really screams the answers.
Dr.3D
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That is all fine and dandy if you are not on a fixed income. (pension) Try taking the same income and using it for a long period of time. Some people are stuck with getting the same income for the next 20 or so years. It's not like they are going to get a raise.
Zippyjuan
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That is true. Incomes do not change the same for all people at any point in time. Some may go up, some may go down while others are unchanged. What does change is how much each of them will have to work to aquire the same amount of stuff as before. If your wage went up more than prices did, then you can work less for the same amount of things. If your wages go up more slowly (or stay the same while other prices rise) then you have to work more for the same quantities of things. For me, the amount of time you have to work is a better measure of being better or worse off than looking at inflation numbers or how many dollars you get for your work.
Money is just a medium of exchange- not a store of value.
If you want to use gold as a measure of inflation then let's start with 1980. Price hit $850 an ounce. That price was not reached until this year. Does that mean that we have not had any inflation over the last 27 years? It was down to $264 an ounce in 2000- did prices drop by nearly 70% as the price of gold did?
Money is just a medium of exchange- not a store of value.
A pound of meat or flour is still a pound of meat or flour in 1776 or 2008 as well. But they were not at a fixed price relative to the dollar so they are a better choice for looking at inflation prior to 1913 than the price of gold which was fixed and unable to change relative to the dollar. It was unable to inflate or deflate by definition.
If you want to use gold as a measure of inflation then let's start with 1980. Price hit $850 an ounce. That price was not reached until this year. Does that mean that we have not had any inflation over the last 27 years? It was down to $264 an ounce in 2000- did prices drop by nearly 70% as the price of gold did?
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Acala
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Labor theory of value
Zippy,
The labor theory of value has been totally discredited and along with it Marxism which was based on that theory.
The labor theory of value produces absurd results. For example, if I take a month of feverish work to produce a painting, is it of the same value as a painting that took Van Gogh a month of feverish work to create? Of course not.
The value of goods and services is subjective. Not only is the value of any particular good or service different from one person to another, it is different from one time to another for the same person. In fact, the same person at the same moment will value two examples of the same good differently. For example, if you have two identical cows and you use the milk from one cow to feed your family and the milk from the other cow to sell to the neighbors, you will be willing to sell the cow that does the less important job for less than the cow that feeds your family. So value is purely subjective and changes at the margin as stocks of goods change.
There can be no objective measure of absolute value. The market will produce a price at which, in any given moment, the greatest number of people will be able to exchange the greatest supply of a particular good at a price that benefits them, but that price will not necessarily represent the value of that good to anyone who is not actually buying or selling at that time.
Zippy,
The labor theory of value has been totally discredited and along with it Marxism which was based on that theory.
The labor theory of value produces absurd results. For example, if I take a month of feverish work to produce a painting, is it of the same value as a painting that took Van Gogh a month of feverish work to create? Of course not.
The value of goods and services is subjective. Not only is the value of any particular good or service different from one person to another, it is different from one time to another for the same person. In fact, the same person at the same moment will value two examples of the same good differently. For example, if you have two identical cows and you use the milk from one cow to feed your family and the milk from the other cow to sell to the neighbors, you will be willing to sell the cow that does the less important job for less than the cow that feeds your family. So value is purely subjective and changes at the margin as stocks of goods change.
There can be no objective measure of absolute value. The market will produce a price at which, in any given moment, the greatest number of people will be able to exchange the greatest supply of a particular good at a price that benefits them, but that price will not necessarily represent the value of that good to anyone who is not actually buying or selling at that time.
WRellim
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Depends on what they are calculating it on as a basis... I surmised it would be some type of "consumer goods" (CPI) only thing I could find on where the data was apparently sourced was this:
"CPI data from Department of Labor / Bureau of Labor Statistics"
That's a pretty "generic/vague" description. We are left to "surmise" what it really means (increase/decrease in foods? other "essentials"?).
But what is really important is to look at the years from say 1865 thru 1918.(1865 was approx. end of the Civil War, that's the big BLUE spike just to the right of the 1850 mark -- and -- 1918 being the WWI inflation, the big BLUE spike just to the right of 1900). This was the "gilded age" the period of the "gold standard" when there was NO central bank, no big government "borrowing" (aka War Bonds & the like) etc.
In that era, there was a stable, SOLID currency, and so little "price inflation" that it was essentially a non-issue -- the biggest "spikes" (if they can even be called that) reaching at most 5% and that only temporarily (like around the "Panic of 1907" etc) and then typically followed by a similar % deflation meaning a return to previous pricing -- the rest of the up down spikes (both minor 0-3% inflation and deflation) being cyclical because of varying crop harvests, etc).
Main thing is to compare that to the MAJOR spikes during the OTHER era's both prior to Civil War, and post 1913. Central Banks and Government "deficit funded" wars wreak utter havoc on economies. Only an idiot (or a "modern" Keynesian economist... but I'm being redundant) would not be able to see and understand that.
