12¢ Hamburgers and $600 Cars - Mises Institute

Wednesday, October 25, 2006
12¢ Hamburgers and $600 Cars - Mises Institute: "Let's put this in everyday terms. Suppose these estimates represent the changes in the prices of goods such as hamburgers, cars, and housing. According to these numbers, a hamburger that cost 60¢ in 1959 would have cost $4 in 2005. If the money supply had been fixed, however, that hamburger would only cost 12¢ today. Similarly, a $20,000 car in 2005 would have cost slightly less than $3,000 in 1959. Again, without the monetary effect on prices, that car would only cost $600 today. The price of a $45,000 house in 1959 would have increased to $300,000 in 2005. With a fixed money supply, that house would cost $9,000 today.

Currently, price inflation is thought of as an increase in the price level above some previous level. However, if we think of price inflation as the increase in the price level over and above what the price level would have been in the absence of the expansionary monetary policies, then this gives us a more accurate picture of the effects of government policies. The estimations provided here show that the price level effects due to government manipulation of the money supply are much larger than indicated by standard price indices.

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1 comments:

2164th said...

Let me see if I am getting this.

"The price of a $45,000 house in 1959 would have increased to $300,000 in 2005. With a fixed money supply, that house would cost $9,000 today."

That implies a five fold decrease in fixed dollars.

Since 1959, I have increased in age to 60, in today's dollars. So with a fixed money supply I would be 12. Damn, I could start all over!