Figure 1: U.S. Price Levels from 1665 to 2001[12].
Sahr also notes that “[e]ven relatively low levels of inflation produce, cumulatively, large changes over time.”[13] Sahr also shows that Gross Domestic Product, GDP, has steadily increased since 1830, and accelerated during the latter part of the Industrial Revolution. The only significant drops occurred during increased government intervention, specifically the 1930s and 1970s.[14] “The composition of the national government budget has changed sharply during the second half of the twentieth century.[15] This, of course, has dramatically increased federal spending as a percent of GDP, which is economically foolish and wealth destructive.[16] Dr. George Selgin, of the University of Georgia writes, “As productivity grew, prices would fall. If past estimates of aggregate productivity growth rates are any guide, a secular decline in prices of between one and three per cent per year (depending on how productivity is measured) could be expected in ‘normal’ times.”[17]
[1] Congressional Budget Office, July 2010, “Historical Data on Federal Debt Held by the Public,” (Washington DC: Congress of the United States), Graph, Federal Debt Held by the Public, 1790 to 2000, [http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/117xx/doc11766/2010_08_05_federaldebt.pdf].
[2] John J. McCusker, 2001, How Much is that in Real Money? A Historical Commodity Price Index for Use as a Deflator of Money Values in the Economy of the United States,” (Worcester, MA: American Antiquarian Society), pp. 49-60, Table A-1, A Historical Price Index.
[3] For an in-depth discussion of the value, development, and use of the commodity prices index see John J. McCusker, 2001, How Much is that in Real Money? A Historical Commodity Price Index for Use as a Deflator of Money Values in the Economy of the United States,” (Worcester, MA: American Antiquarian Society), pp. 13-40.
[4] John J. McCusker, 2001, How Much is that in Real Money? A Historical Commodity Price Index for Use as a Deflator of Money Values in the Economy of the United States,” (Worcester, MA: American Antiquarian Society), p. 16.
[5] Carmen M. Reinhart and Kenneth S. Rogoff, 2013, “Shifting Mandates: The Federal Reserve’s First Centennial,” American Economic Review: Papers & proceedings 2013, Vol. 103, No. 3, pp. 48-54, see Figure 1 on page 48.
[6] Carmen M. Reinhart and Kenneth S. Rogoff, 2013, “Shifting Mandates: The Federal Reserve’s First Centennial,” American Economic Review: Papers & proceedings 2013, Vol. 103, No. 3, p. 48.
[7] Carmen M. Reinhart and Kenneth S. Rogoff, 2013, “Shifting Mandates: The Federal Reserve’s First Centennial,” American Economic Review: Papers & proceedings 2013, Vol. 103, No. 3, p. 48.
[8] Carmen M. Reinhart and Kenneth S. Rogoff, 2013, “Shifting Mandates: The Federal Reserve’s First Centennial,” American Economic Review: Papers & proceedings 2013, Vol. 103, No. 3, p. 49.
[9] Murray N. Rothbard, 2010 (originally published in 1963), What Has Government Done to Our Money? (Auburn, AL: Ludwig von Mises Institute), p. 31, (emphasis added).
[10] Robert Sahr is an Associate Professor of Political Communications, Presidents and Policy at Oregon State University.
[11] Robert Sahr, 2003, “US Price Levels 1665 to estimated 2013, with 2002 = 100,” Summary of US Price Level and Inflation Data, 1665-estimated 2013, (Corvallis, OR: Political Science Department, Oregon State University), [http://oregonstate.edu/cla/polisci/sites/default/files/faculty-research/sahr/inflation-conversion/pdf/sumprice.pdf]. Dr. Sahr adapts McCusker’s data from How Much is that in Real Money? and CPI data from the Bureau of Labor Statistics, and sets 2002 as the baseline equal to 100. His price level index from 1665 to 1913 ranges approximately between 4 and 6 (other than the war periods) and after 1913 raises to approximately 127 by 2013 – a 24.4 times increase.
[12] Adapted from John J. McCusker, 2001, How Much is that in Real Money? A Historical Commodity Price Index for Use as a Deflator of Money Values in the Economy of the United States,” (Worcester, MA: American Antiquarian Society), pp. 49-60, Table A-1, A Historical Price Index.
[13] Robert Sahr, April 2004, “Using Inflation-Adjusted Dollars in Analyzing political Developments,” PSOnline, Vol. 37, Issue 2, (Washington D.C.: The American Political Science Association), p. 273, [http://journals.cambridge.org/action/displayAbstract?fromPage=online&aid=214764&fulltextType=RA&fileId=S1049096504004226].
[14] Robert Sahr, April 2004, “Using Inflation-Adjusted Dollars in Analyzing political Developments,” PSOnline, Vol. 37, Issue 2, (Washington D.C.: The American Political Science Association), p. 275, [http://journals.cambridge.org/action/displayAbstract?fromPage=online&aid=214764&fulltextType=RA&fileId=S1049096504004226].
[15] Robert Sahr, April 2004, “Using Inflation-Adjusted Dollars in Analyzing political Developments,” PSOnline, Vol. 37, Issue 2, (Washington D.C.: The American Political Science Association), p. 276, [http://journals.cambridge.org/action/displayAbstract?fromPage=online&aid=214764&fulltextType=RA&fileId=S1049096504004226].
[16] While the United States has not experienced hyperinflation, there are concerns with the combination of the current levels of spending, non-market driven interest rates, the massive influx of currency and credit (Quantitative Easing (QE)) 1, 2 and 3 as of the end of the year 2012), and levels of debt and long-term liabilities, which could lead to hyperinflation. For a detailed analysis of historical episodes of hyperinflation see Steve H. Hanke and Nicholas Krus, Working Paper: August 15, 2012, “World Hyperinflations,” (Washington, D.C.: Cato Institute), [http://www.cato.org/sites/cato.org/files/pubs/pdf/WorkingPaper-8.pdf].
[17] George Selgin, 1997, Less Than Zero: The Case for a Falling Price Level in a Growing Economy, “Hobart Paper 132,” (London, England: The Institute of Economic Affairs), p. 64.
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