by: Chip Wood
Some neighbors and I were reminiscing recently about "the good old days" when the talk turned to how cheap things were back then. I immediately concurred. I told them of the very first credit card I got for one of the gas-station chains. Back then gasoline cost less than 25 cents a gallon.
And then I said something that stopped them cold: "Do you know that you can still buy gasoline for 25 cents a gallon?" They were all certain that there was a trick to my question … and there is.
My claim is absolutely, totally, 100% true – if you pay with a quarter that was minted prior to 1965.
We've written many times before about how much we like "junk silver" coins – the dimes, quarters, and half-dollars the U.S. Mint produced prior to 1965. These coins are 90% pure silver. A $1000 face value bag of them contains 712 ounces of the metal.
With silver now at an eye-popping $48 an ounce, one of those bags will cost you around $35,000. (If you bought one … or maybe several … back when they were a fraction of that amount, congratulations. Feels pretty good to own an investment that's gone up 160% in the past year, doesn't it?)
But the point of today's column isn't to applaud you if you already own plenty of silver; or to encourage you to get some, if you don't own enough. It's to make you realize how little prices have changed in the past 50 years – or even in the past 2,000 years. It's the value of our money that has changed.
In those wonderful days of yesteryear that I was talking about, a gallon of gas cost less than 25 cents. In real money – that is, silver – that same quarter is worth around $8.70 today – or enough to get you twogallons of gas at my local station.
Remember when a loaf of bread was ten cents? Well, a "junk silver" dime is worth about $3.50 today. That will get you the fancy hand-made loaf in the deli section of our grocery store. One of the mass-produced marvels with more air than nutrients will cost half that amount.
I'm told that in Roman times, the very best toga in the market place, along with a pair of sandals and a wreath for your head, would set you back one gold Caesar, or whatever coinage you happened to have. Today, that same ounce of gold will buy the best suit of clothes you can find at your local department store – along with a shirt, tie, and other accoutrements.
Well, actually, not that same ounce of gold. If you happen to have a 2,000-year-old-gold coin in your possession, please don't sell it for its bullion value. Even if it would be graded "very circulated" by a professional numismatist, it is probably worth much more than its bullion content.
Okay, okay. Some of you are getting a bit impatient. I can hear you muttering, "These stories are all very interesting, Chip. But what's the point? Get to the bottom line, would you?"
My point is simply this: The value of the goods you buy every day hasn't changed. A loaf of bread is still a loaf of bread. Ditto a quart of milk, a gallon of gasoline, or a suit of clothes.
The reason they cost 10 or 20 or 50 times more than they did isn't that they are worth more. It is that our measuring stick, the U.S. dollar, is worth so much less. Back in our grandparents' day, the dollar was not only backed by gold, but for most of this country's existence the U.S. government promised that it could be exchanged for gold at any bank in the federal system.
The Treasury also produced something called "silver certificates" which operated the same way, except they could be exchanged for silver. And our government promised to keep enough gold and silver in its reserves to honor all of those commitments.
Today, the U.S. dollar is an "I.O.U. nothing," as a friend of mine likes to put it. Oh, it says it is backed by "the full faith and credit of the United States."
But let me ask you: When you look at the disaster that Washington has made of the budget process and our economy, how much full faith and credit do you have in the people running the show today?
And how much "full faith and credit" do you have in the pieces of fiat currency called the U.S. dollar that they are manufacturing by the trillions?
I hope the answer to both of my rhetorical questions is "very little" and "not much." Or maybe "none."