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Inflation, money's value, past to present

So I am un-able to find any good data on what the cost of goods were from the 1960's compared to today's standards or even 2007 standards

I am curious on the difference between the price of a chocolate bar from 1960 to 2007, and 2009

Also what $10,000 in 2009 is equivalent to in 1960

The price of gold

you catch my drift

I figure somebody in the PDD forum will be able to get some numbers/information going

Consumer Price Index

1968 CPI = 34.80
2008 CPI = 215.30

((215.30-34.80)/34.80)*100 = 518.7

Prices have risen 518.7% since 1968.

Gold was pegged at varying prices until the gold standard (pegged $35/gold ounce) was gotten rid of in the 1970's and gold's value floated on the market.

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There ya go. Bear in mind it is based on government stats though.

I've been struggling with this for a while.

Value is a really hard thing to peg down and inflation claims to represent a decrease in the value of money.

One of the biggest problems is that value is always tied to perception which has a massive influence on demand.

This isn't a new problem either, it's just one that has been forgoten for years. I looked into doing graduate work in political economics and was told simply that no one was doing it by a number of economics professors. I decided to simply study on my own. So far, in my round about way, I've come on both Adam Smith and David Ricardo as people who've discussed 'value'. They were both extremely interested in finding some notional base unit with which to measure value which was constant over time. Unfortunately it really looks like value is always a relative term.

Ricardo, who I've been working on most recently, tries to argue that value can always be expressed in the base units of labour. Unfortunately he stumbles with the idea of fluctuating wages and pretty much falls down with the notion of productivity differences. A big part of the difficulty in reading the older stuff (Ricardo is circa 1800) is that they are making up the vocabulary on the fly. Some of the terms stick, likely because these guys were the ones to coin them, but other terms are used in odd ways or even inconsistent ways.

Something that I found extremely interesting, bah, maybe revealing is a better word, is that Ricardo differentiates value into two classes, value in use and value in exchange. I think this is probably one of the most useful observations for right now that I've seen in ages. All of the mark to market crap that is currently hidden under new accounting rules debates how much a companies holdings should be 'worth', inevitably these highly liquid holdings only have value in exchange.

It's also worth mentioning that Ricardo had three publications of his work. The editor of the book I've got felt that the differences between the publications was substantial enough to merit putting in a complete copy of Ricardo's first edition in the book as an appendix.

If your looking at CPI it would probably be a good idea to become familiar with what the basket of goods they use to compare between time periods is. Especially when food and energy are so frequently excluded from reported data.

As much as it might be tempting to say something like gold has always held value I'm not certain that's always been the case. A better store of value, if that's what you're looking for, is hard alcohol and gas, both physical comodities. These are things that will not drop in value in even the worst of circumstances, the case I'm thinking of in particular is the collapse of the Russian economy in the 90s. The POW experiences of WWII might lead one to beleive that cigarettes are also a good example of something that holds value.

NOTE: All three of those things are valuble because they can be used and exchanged.

quote:

Originally posted by atbell

omg, a serious response!

As for things that hold their value..it might be true for alcohol and gas, but these things are difficult to store and transport, which is why precious metals are preferable. PMs have held their value pretty well over time because they are rare and also very easy to store and transport. A silver quarter in 1960 would have bought you a gallon of gasoline. A a silver quarter today is worth about $3, which will buy a little more than a gallon.

quote:

Originally posted by ******** The things that make metals technically valuable is their demand. Rare elements that are used in industry are gobbled up faster than they can be produced. Elements like gold are hugely consumed (but there are still huge stockpiles) Elements like platinum are even rare. Of course when an easy way to make atoms in mass production occures (that whole making gold from thin air) by messing around with protons and neutrons safely then the whole market collapses.. not likely to happen tomorrow but they can already alter atoms. So while it is a good short strategy. What tends to be most lucrative is business investments - that are solid. Oil is highly volatile, but if you can buy at a low point it should be alright - there is huge demand for oil regularly that drives prices up. Overall a safe bet would probably be the Yuan or Euro imo. As they are not weakening currencies such as the USD. Oil is somewhat safe but volatile. Gold is considered classic safe. Personally though I think investments should be diversified. Eg. ownership of a business / sustaining rental properties / managable agriculture / agroforestry retreat / core commodities / stock in monopolisitic companies (eg. utility companies, or banks in stable countries such as canada - or insurance companies or hospitals), private loans (to solid loanees) - look at what the banks are doing and that is a model of what the individual should be doing.

I like you last paragraph a lot! Far to many of the 'investors' who are kicking around seem to forget that things like realestate, small businesses, and even power tools can be considered investments.

I've been trying to explain to my friends in finance why 'productive assets' would be good things to own but it doesn't really take and I haven't had enough time to explain. Here's a stab at it: when inflation is going on if you own a lawn mower you can easily adjust your price to reflect market changes in things like currency because the demand for the service of either lawn cutting or lawn mower rental will still be there, the price will just be adjusted.

Currencies are dangerous investments if you're not ready for it. I had an international business prof. point out that the most he'd ever do was about 1000$ in any direction with currencies and he studied the stuff. A substantial amount of people were caught with currency fluctuations in Eastern Europe as the crisis unfolded, the same type of thing happened in Argentina cira 2001. I've been working on a rule of thumb which is to try and stay away from currencies you can't easily spend. That's a good way to hedge against problems because if the local currency bottoms out at least you are in the same boat as the rest of your community.

Commodities are decent all around, getting to know more about them isn't hard either because there are such a small number of mines in the world, or at least ones big enough to make markets. Zn and Ni have been fairly active from what I remember, same with iron ore / steel. Lead and Cu haven't caught my attention as much (doesn't mean they aren't moving, just not getting press I read.)

The financial times has daily commodity price charts which I find extremely interesting and have been actively watching for a bit more than a year. (I haven't updated for a while though)

Capitalizt - This is an area I've been concerned about for a while now. Inflation, value, bonds, and currency seem to be some of the roots of all the problems and there seem to be few people who actually understand this stuff. So my reasoning goes, if I can understand it, or at least come up with a good working knowledge, my skills will be worth more.

Another set of things I've seen an opertunity in figuring out are political risk, conflict, and international relations. The world seems way to tense right now and sparks could become fires fast. I've been watching Pakistan on the edge of my seat for the past weeks. This is the first nuclear armed state that has seen such a serious risk to be plunged into chaos.

quote:

Originally posted by Capitalizt omg, a serious response! As for things that hold their value..it might be true for alcohol and gas, but these things are difficult to store and transport, which is why precious metals are preferable. PMs have held their value pretty well over time because they are rare and also very easy to store and transport. A silver quarter in 1960 would have bought you a gallon of gasoline. A a silver quarter today is worth about $3, which will buy a little more than a gallon.

Meanwhile the stock market has risen over 1000% which could buy you a lot more than a gallon of gas.

There is nothing special about gold or silver. They are subject to the same market fluctuations that affect all commodities.

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