What Is Inflation — and Will It Happen Again?
A hundred dollars in 1967 would have the purchasing power of $723.74 today (2016) according to the US Bureau of Labor. They have a handy calculator on the web.
This is technically how we measure inflation. In other words, we have had nearly 725% inflation since 1967.
To keep you from having a heart attack, the USBL decided to change their basis for inflation. The current standard reference base period was changed to the 36-month period encompassing 1982, 1983, and 1984.
By that measure, $100 in 1984 would have the purchasing power of $232.66 — and inflation rate of 232 2/3%
What is all this economic voodoo? It is called “monetizing the debt.”
The term applies to the process of the Federal Reserve buying debt, which increases the money supply, which usually leads to inflation.
For an explanation of how this works, you can read a good, lucid description.
Why did we start counting inflation at 1967? According to one economist’s blog:
“In the 60’s and 70’s the Fed increased the money supply to help finance the Viet Nam War and to pay for the “Great Society” programs of Lyndon Johnson. The money created went directly into spending. Spending increased in both the defense sector and as welfare given directly to the poor. The money was then immediately spent on goods and services which led to an inflationary spiral that took inflation from about 2% to over 14% at its peak. All prices rose, including wages.”
Why was it reset at 1982-1984? This was peacetime in the USA.
Of course, that officially ended in 1990-91 with Gulf War I.
Please note that “peace-time” is a relative concept. Unofficially, after we evacuated the last marines and civilians from Viet Nam in 1975 there were still some clean-up operations in SE Asia.
And in the 80s there was Lebanon and Libya and Grenada and Nicaragua and ….
Well, I can see your eyes glazing over. Just to summarize this concept of “peacetime” you can read this article.
America Has Been At War 93% of the Time – 222 Out of 239 Years – Since 1776
Wars are expensive. And debt must be paid — so it is usually “monetized.”
The profiteers are happy to see this happen — even if it causes inflation. So the profiteers profit and the public suffers. As the economy declines, we get fewer services at home — schools, libraries, parks, recreational facilities, law enforcement and fire-fighting services are all cut or curtailed.
Our infrastructure can’t be maintained — highways and streets, water systems and supplies, and the country decays and declines.
All of this is very complicated and the explanation here is quite simplified. In fact, the reason we have so much of this war and inflation and such is that people are overwhelmed by the complexities.
However, we must do something. Without the wars, our economy would be strong enough to give people medical care and pay for education (including college) and to make our cities livable and clean and safe.
Politics is not the answer. Politics is a game and a means to the end (which is power).
We need to find answers and provide a channel for solutions.
Anyone who can provide these will be a national hero.