Funny how seemingly small or fleeting incidents stick in your memory throughout life. As hyper or runaway inflation is becoming a very real possibility to millions of Americans who heretofore were clinging to their weekly visits to Outback Steakhouse and the feel-good mantra of “American exceptionalism,” my memory takes me back to my teenage years.
Growing up on the east side of town, the Town House Drive-In was a real-life “American Graffiti” hangout for cool and hungry teens who loved burgers, fries and milkshakes. I thought nothing of having a midnight gorge of two double cheeseburgers, a large order of fries and an extra-large shake.
Then, one day, it happened. The Town House Drive-In raised the price of its hamburgers from 25 to 30 cents. In my teenage state of waking dreams, the thought never crossed my mind that the price of anything in my little cloistered world would ever increase. For me, not only was the universe static, but so was my hometown, my house, my life and the people I hung out with.
Shortly after the Towne House’s earthshaking announcement that it was raising the price of its burgers, one of my friends happened to mention that he preferred the Eastmoor Drive-In to the Town House Drive-In. When I inquired as to why, he responded, “Because, as matter of principle, I would never pay 30 cents for a hamburger when I can get one for 25 cents at the Eastmoor.”
I thought about my friend’s comment recently when my wife and I visited a newly opened mid-priced restaurant. I didn’t particularly like anything on the menu, so I decided to be daring and order the “gourmet” hamburger. Price: $10!
As it turned out, the $10 burger wasn’t anything special, but that’s beside the point. The question is, how in the name of obesity can the price of a hamburger go from 25 cents to $10 … or even $4 (which I hear is what the price of a Whopper is at Burger King these days) with the passage of time?
Answer: monetary inflation. In truth, the increased cost of a burger over the past 50 years is a delusion. It’s just a symptom of the real problem – a decrease in the value of the dollar. As a result of this decrease in value, it takes a lot more “money” for someone to buy what he did a year ago, 10 years ago and certainly 50 years ago.
I was first introduced to this reality by Harry Browne, through his 1970 classic “How You Can Profit from the Coming Devaluation.” Browne was a legendary teacher and master of simplifying complex issues. In his book, he predicted that then-President Nixon would be forced to devalue the dollar – at a time when he was pledging to the American public that he would never do such a thing.
But, sure enough, within a matter of months after Harry’s book came out, the most powerful man on the planet, the president of the United States, was forced to do precisely what he swore he would never do – and what a relatively unknown author had stated he would have to do – devalue the dollar and sever its ties to gold.
That made it possible for the government simply to print whatever it couldn’t borrow in the open market or steal from working Americans (through “taxation”) in order to expand its vote-buying entitlement programs and outrageously wasteful spending on politicians’ endless pet projects.
By the late ’70s, I, along with a handful of other writers who understood the inflation scam, began predicting that runaway inflation was just around the corner. After all, Jimmy Carter, probably the second-worst president in U.S. history (don’t ask), had the (admitted) inflation rate roaring at 18 percent.
The runaway inflation didn’t happen, and neither did the drastic drop in the American standard of living that many of us had predicted. Through a combination of optimism, tax-rate reductions, “controlling” the money supply, deregulating business and the economy, and reducing government spending, Ronald Reagan came to the rescue, spurred economic growth and temporarily staved off financial Armageddon.
Then, after Reagan left office, Americans felt so good about things that even those who should have known better let their guards down and forgot Thomas Paine’s warning that “Government, even in its best state, is but a necessary evil; in its worst state, an intolerable one.”
Comforted by artificial prosperity and distracted by wars, sex scandals and brain-dulling TV fare, Americans hardly noticed the gradual rise in prices. In fact, when George W. Bush took office in 2001, the dollar had lost only about a third of its value since the end of Ronald Reagan’s second term in office.
Of course, in 1980 the Bureau of Labor Statistics removed the two most frequently purchased items – food and energy – from the Consumer Price Index in an effort to delude the citizenry and prolong the inevitable. But now the day of reckoning is at hand.
With John Boehner playing love-fest rounds of golf with Barack Obama, the debt ceiling is sure to be raised again, most likely without a corresponding reduction in government spending. As a result, the misery index (unemployment rate plus inflation rate) is also sure to increase at an accelerating pace as millions of people are torn between filling their gas tanks and putting food on their tables.
I find it interesting that my introduction to inflation began so innocently with that nickel rise in the price of a hamburger at the Towne House Drive-In five decades ago. But, at the time, I was clueless – as were most Americans. After all, it had nothing to do with girls or basketball.
By the way, that friend of mine who balked at the nickel increase later became a Bobby Kennedy “social reform” groupie. I wonder what he thinks of the steak-like price of a good hamburger today and if he has any idea that the price is a direct result of those compassionate social-reform programs (read, entitlement programs) that his beloved Bobby so aggressively pursued.