There's a meme going around about how the federal minimum wage was $1 an hour in 1960 and how that could be paid with four quarters and how much richer someone on minimum wage was in 1960 compared to now and why Boomers are so rich...
Let's look at the official inflation numbers:
$1 in 1960 is $10.53 in today's dollars.
A 1960 quarter has 0.1808 ounces of silver in it. Silver was approximately $0.92 per ounce in 1960.
So a quarter was worth 16.6336 cents in 1960. If you paid in quarters silver, the minimum wage is 66.5344 cents an hour.
But, how much is 0.7232 ounces of silver worth today? Inflation suggests it should be $7.
Silver is $110.30 per ounce at the time of writing. So our four 1960 quarters are now worth $79.77 in bullion. The quarters are still worth $1.
The meme goes that our worker did 40 hours a week, 52 weeks a year at $1 an hour and made $2,080 and because you could get that in silver then that wage was equivalent to $165,921.60 year.
A worker making a buck an hour in 1960 did NOT have as much money as middle management does today.
The official inflation number is closer. $21,902.40 is about right.
Gold was $35.50 an ounce in 1960, our worker was making 0.028169014 ounces of gold an hour.
Gold is now $5,064.10 an ounce so our worker should be getting $296,713.46
Gold was 38.59 times the price of silver per ounce in 1960.
Today gold is 45.91 times the price of silver.
There was once a time when the value of a dollar was a fixed fraction of the value of gold. There was once a time when the value of silver was a fixed fraction of gold.
X dollars bought Y ounces of gold. Z ounces of silver bought Y ounces of gold and X dollars.
The three things are no longer tied together.
While the dollar inflated 1,053%, gold inflated 14,265% and silver 11,989%. <- See what I did there?
There's gobs of exceptions to the inflation numbers that goldbugs like to point out, but the dollar did pretty well even so. Energy, cars and housing ARE more expensive than they used to be.
BUT!
An IBM 7030 was $7,780,000 in 1961. A brand new laptop from Wal Mart for $500 will outperform it on any metric you'd care to throw at it. A $1,200 smart phone, likewise will embarrass it. Considering that I don't have $81,041,666.67 for a computer, I will accept that some things get cheaper and somethings get more expensive.
I did a gallon of gas not that long ago. Gas was $0.31 per gallon, on average, in the US in 1960. Gas is $2.91 right now ($2.78 locally). It's not the $3.25 inflation predicts. Again, I'll take it.
A Colt 1911 was $17.50 in 1960 (according to AI) and will set you back $1,049 today. Inflation says that they should cost $184.28...
Prices don't go up evenly and everything is traded separately.
"Prices don't go up evenly and everything is traded separately." That's a feature to central bankers. The prices don't need to be tied to some metal dug out of the ground; "why, that's almost as primitive as those Rai stones from Yap Island!" (https://en.wikipedia.org/wiki/Rai_stones) (Do your best Thurston Howell iii when you say that quote) (from that old TV show, Gilligan's Island)
ReplyDeleteThat's a problem when comparing the cost of living in the mid-60s to now. The thing is, that's a feature to the central bankers. It's easier to hide the damage they're doing.
I have no evidence for this, to me it's just a logical thing to ask why the Fed (and all the other central banks) try to manage the economy for (their quote) "constant, benign inflation?" Why not manage for no inflation or deflation? I think that it's done deliberately to reduce the incentive to save. If everyone knows that their car/house/computer/whatever is going to cost more next year, it's an incentive to buy now. If it's going to cost less, a constant benign deflation, that incentivizes waiting as long as possible before you have to spend that money. Inflation --> (leads to) buy it now --> makes economic growth "look better" while deflation --> save money --> makes economic growth slow down and "look worse." People borrowing money to spend now is even better to the bankers who make money off the interest.
Inflation is for borrowers, deflation is for lenders.
DeleteSee also: https://mcthag.blogspot.com/2024/11/everything-is-bad.html
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