No inflation here: US dollars down 72% vs. the price of bananas

Dateline: Wroclaw, Poland

I took the several-hour train back from Poznan this morning. To be honest, I almost missed the early morning train that got me back in time for a midday meeting in Wroclaw.

As I ran through the train station, I made a quick stop at a convenience store to pick up a morning snack: two bananas.

The moral of the story is not that I like bananas; all one must do is looking at the potassium levels on my most recent physical – the one I did for mere peanuts in Bangkok – to see that.

However, the price of bananas here in Poland is quite high. I’ve seen them going for as much as 11 Polish zloty per kilogram (about US$1.64/pound). And it got me to thinking just how expensive the central bankers here in Europe and the US have made everyday consumer goods.

When I was born in 1984, the price of bananas was $269 per metric ton. That means that, before paying the supply chain costs of getting the bananas to your local grocery store, the price was about 12 cents per pound.

Last month, the price of bananas was $967 per metric ton. So expensive that many supermarkets now sell them as a loss leader.

If people had to pay the true price of bananas at your local supermarket, they might acknowledge just how low the US dollar has sunk.

Whether the average banana buyer knows it or not, the value of the US dollar – as priced in bananas – has actually declined 72% in the last nearly thirty years.

Of course, the history of the banana is a true story in crony capitalism and American imperialism. Only after banana merchants convinced the public to adopt the tropical fruit as a convenient snack in the late 19th century did they begin to tighten their grip on the countries where the fruit is grown.

Hence the term “banana republic”. Whenever some Central American dictator got uppity, the American military came in and engineered a coup to help their business friends out.

However, back to the story…

I still remember shopping with my mother when I was seven or eight years old. And I still remember reading the store flyer as I followed her through the aisles bored to tears.

As a young kid, the one thing that always stood out to me was the price of soda (or in Ohio, “pop”). 24-packs of tooth-decaying Pepsi or Coke would alternate being on sale for $1.99.

But I also recall the price of bananas – all of 19 cents per pound.

Today, you would only get one, or maybe one a half, bananas for the same amount of money that used to buy you four.

It may sound odd, but when you consider that the US dollar has declined 72% versus the price of bananas in less than half a lifetime, you start to get an idea of just how destructive the modern system of inflation is.

Consider that central banks in the bankrupt western world love to tell you what a wonderful job they’re doing by keeping inflation to 3% a year. They issue breathless reports saying how they’re targeting 2% inflation, as if everything will be rosy if they ever get there.

In fact, this system of monetary destruction is so enshrined in our society that we’re taught in school that “a little inflation is good.”

However, you may remember another lesson from school regarding the power of compound interest. A common example taught to children is that a penny doubled each day for thirty days is worth a staggering $5.3 million thanks to the power of compound interest – Albert Einstein’s “eighth wonder of the world”.

But no one in the propagandizing school systems bothered to tell you that the same compound interest strategy also works against you.

Just add up 2% inflation – and the negative pricing power that comes with it – up over an average lifetime and the result is that we’ll all suffer a nearly 80% erosion in purchasing power from cradle to grave.

Is that “monetary stability”?

Of course not. And when you understand that central bankers often miss their rosy inflation estimates, their ability to wipe out your savings is even worse.

Consider that even relatively well-managed economies like Hong Kong and Singapore had respective inflation rates of 3.7% and 4.4% in a recent survey. The picture in countries like Brazil is worse.

Meanwhile, it’s a good thing workers in bankrupt countries aren’t being paid in bananas. Because if they were, wages would be through the floor.

While the price of bananas has risen nearly four-fold since I was a kid, wages have less than doubled in their attempt to keep up. That means that if all your money went to bananas, you’d be one unhappy monkey.

This is what happens when you keep all of your money in one fiat currency – or any fiat currency. The United States is now commemorating 101 years of the Federal Reserve and their devaluation of your money.

The truly shameful part of all of this is that politicians desperate to cling to power in the last days are using these very numbers against you. While it is the political elite that has caused all of us to suffer from a greatly devalued money supply, they are the ones blaming “greedy business owners” for not paying people enough bananas as they used to.

In reality, it’s not you and I that are the victims, but rather a century of monetary destruction by those in power.