Remember 1984? The negative effects of inflation 30 years later

Written by Andrew Henderson
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Dateline: George Town, Malaysia

Earlier this year, I spent three days in the United States, a place I now avoid, even if only to transfer at an airport. What got me there was too good to pass up.

A friend of mine had a two-bedroom suite, complete with a butler, at the St. Regis in Southern California and invited me to come. As I was already scouting investment opportunities in Nicaragua and on my way to Mexico to scout hotels for Passport to Freedom, I decided to take the opportunity to spend a few days with my friend, keeping my fingers crossed that the California tax gestapo wouldn’t count my three days of sun and fun as some “meaningful presence” and subject my entire income to their grasp.

Earlier this week, I noticed that the St. Regis chain is discounting suites at select hotels, including the one on Monarch Beach, to a mere $4 in commemoration of their first hotel opening its doors in 1904.

On a similar note, Shell petrol stations in Alberta shocked the public last week with a rather welcome announcement. After thirty years of refining oil in the Canadian province, Shell stations decided to celebrate the occasion by selling fuel for 1984 prices – a mere C$0.39 per liter (US$1.35 per gallon for US persons).

So it got me thinking…

While businesses love to run cute promotions heralding how “cheap” things used to be years ago, you and I know these prices reflect two things:

1. Radical fiscal mismanagement and wonton disregard for the value of personal wealth by Big Government and their banker pals, and

2. The growing demand for products like oil by emerging economies.

Tomorrow, I’ll celebrate my thirtieth birthday. Jonathan Swift would suggest that no wise man would wish to be younger, but we know that is often ambitious. Nevertheless, I thought it would be interested to go back to when I was born in 1984 and see how much prices have changed since then.

Here is a sample:

First class stamp: $0.20

Gallon of gas: $1.21

Loaf of bread: $0.71

Apples: $0.43 a pound

Bananas: $0.19 a pound

Movie ticket: $2.50

Average four-year university tuition: $1,985

Average new car: $6,294

Porsche 911 Carrerra: $32,000

New game show record: $110,237 (such a sum caused CBS a lot of embarrassment, apparently)

Cost of a new home: $92,200 (this one hasn’t gone up as much as it should have because US real estate is a bad investment)

Of course, a few things are difficult to compare. A new Apple II computer cost a few grand, while Motorola’s exciting DynaTAC cellular phone cost $3,995 and weighed more than a gold bar. These are interesting reminders that only the free market, not government, can cause quality to increase and prices to decrease over time.

The scary part about all of this isn’t that prices are going up, or even that wages aren’t anywhere near keeping pace.

The scary reminder from 1984 is that stock markets and investments can be fueled by easy credit and bad monetary policy more than they are by an real growth. In 1984, the Dow was around 1250, seven times lower than today’s nosebleed levels.

Just as I recently shared how real estate prices are often flat over many centuries after applying inflation, today’s rigged stock market sits at levels far higher than in 1984 largely because world governments decided to engage in currency wars to cover up their horrible economic track records.

That’s what makes silver one of my favorite investments now. In 1984, it was in the $11 range. Like the average American salary, it has increased a mere 50% while many prices have increase four-fold or even more.

I happened to catch a few minutes of National Public Radio recently and heard them saying that “a little inflation can be a good thing” mainly, they said, because it reduces the cost of debt.

Perhaps rather than using central planning and fiat currency voodoo to eliminate debt, perhaps it would be a sound strategy to – oh, I don’t know – avoid debt in the first place.

In their grand desire to control every aspect of your life, western governments have bitten off more than they can chew 100 times over. The result is a huge bill and the trickle down effect of a culture of debt where forbidding credit card companies from giving away free T-shirts actually hurts economic growth.

Just as shopping addicts will find a way to get their fix, so will your government. In Poland, the answer was the confiscate private retirement funds not to pay off the country’s mounting debt, but to re-fill the coffers in order to take on MORE debt.

It’s maddening. And if you have assets, it’s downright scary.

Not only must you contend with the ever-increasing risk of outright wealth confiscation with a friendly labeled (“stability levy“, “pension reform“, etc.) slapped on it, you must also contend with the realization that the entire western economic model has evolved into one where no real fundamental growth is achieved, but by which hope, faith, and $40 million valuations on apps developed in a men’s room are the new norm.

I’ll be the first to admit I’m not a reliable player for the “live in Asia for $497 a month” team. I spend as much and often more here on things here in Malaysia and elsewhere than I would in the United States.

So I’m not exactly complaining about the rising cost of eggs or that chicken livers aren’t as cheap as they once were.

What I am complaining about is how a monetary system entirely out of my control has force-fed its values onto the entire global financial system and forced me to see the purchasing power creating by my entrepreneurial efforts devalued substantially in just thirty years of life.

That is why I’m constantly on the go seeking out new opportunities to put my money. I discovered years ago that no matter how much money I made selling radio consulting services or investing in car dealers that, if I didn’t find a safe haven, that money would slowly vaporize over time.

In just thirty years, as much as 75% of our purchasing power has been lost, while assets in the “new safe havens” have gone up in value. If your plan is to continue earning in declining western currencies and saving in insolvent western banks, you probably won’t have much left when it comes time to stop working.

Andrew Henderson
Last updated: Dec 29, 2019 at 12:58AM

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