I can't remember how many times my grandpa told me; when he was a kid, the price of a loaf of bread was a nickel and how he worked in the oil fields for 50 cents a day. When I graduated from high school in 1964 gold was at $35 per ounce and our coinage was silver. At the age of 17, inflation had no real meaning. I had no past to compare it to. When I went shopping, I had no idea of what was a fair price for hamburger per pound. By the time I was 30, my perceived values of what things should cost were well rounded. Inflation was still not an issue. When I got to be 50, I started to take notice of the price my father paid for our house when I was a kid, $28,000. Then I remembered back to my first car in 1969, a brand new Lemans’ convertible, only $3,000. With the comparison, inflation seems rather obvious.
If you talk to the average guy on the street, inflation might as well be nuclear physics. The idea that government spending without matching taxes creates inflation, makes the listeners eyes glaze over. The general public takes price increases for granted; prices and wages always go up (just like housing). The worker’s wages increase each year and this gives everyone the feeling that they are making more money (it’s the carrot on the stick). The government doesn’t even have to raise taxes, inflation does it for them.
The milestones for government induced inflation are rather subtle if not embarrassing. In 1964 it cost the mint $1.29 to purchase the silver to make 5 quarters. Needless to say, that 4 cent loss was eliminated. In 1965, the government reduced the silver content in the coinage from 90% to 0% silver, and no one blinked an eye (the half dollar and dollar went to 40% silver up to 1969). In the next 5 years, the bad money chased out the good. Silver disappeared from circulation.
At that point, you’d think the story is over. Well, in 1982 our government had another “mark to reality moment.” It was now costing them 2 cents to buy the copper for a one cent coin. They then introduced this new copper cladded zinc cent.
Our currency is no longer backed by anything except the “full faith and credit of our government.” The churches in this country work on the same principle—a lot of faith and prayer. In government, it’s called “Winging it!” (It involves a lot more prayer than the religious model).
We have traveled from the gold backed currency’s of 1930’s to the Silver backed currency’s of the 1950’s to the Copper currency’s of the 1970’s. It kind of makes you wonder what has really happened to our monetary system since the last conversion 28 years ago, when we went off the “copper standard” onto the zinc.
Today’s generation of high school grads is no different from ours forty years ago. At the checkout counter the other day, a young girl (21) in front of me bought a pack of cigarettes for $6.50. They have always been that price for her (I can remember paying a quarter a pack). I now understand my grandfather’s irritation over the price of bread increasing. It's not hard to catch on to what the government is doing, it just takes time. Inflation is a little like sawing a quarter inch off of grandpa's favorite walking cane each week. It's good for a few laughs until he catches on.