Above is a menu from the Metropolitan Club, a fancy private club in DC, from 1901. I was invited to an event there this week, and stumbled across this menu while researching the venue. At first I was shocked at how high the prices were — even by modern standards, $20 is ridiculous for a celery appetizer.
Then I realized: These prices are in cents, and the most expensive things on this fine dining menu cost all of $1.
60¢ for lobster salad. 20¢ for spaghetti. 40¢ for brandy peaches.
This is inflation writ in asparagus and meringues.
The extreme differences between the prices on this menu and the prices we’d pay today (between 10 and 40 times the 1901 prices — e.g. $8 for a dessert rather than 25¢), is due to a century-long trend of the Dollar’s decline into near-worthlessness.
As you can see, the value of our currency has steadily dropped over the course of the last hundred years. (It was also on the decline before then, but not so steeply.)
If you’d like to play with the numbers on a year-by-year basis, try this inflation calculator. As the results of my calculation put it, “What cost $1 in 1900 would cost $25.85 in 2010. Also, if you were to buy exactly the same products in 2010 and 1900, they would cost you $1 and $0.04 respectively.” Those results match well with our menu above (erring on the conservative side, perhaps), where entrées that today would run at least $30 depending on the restaurant location are listed for just $1.
That’s a lot of inflation, especially considering the lowering of prices which has been produced by technological advances, economies of scale, etc. So why is everything so much more expensive? Well, the rise in prices we see is a symptom of inflation rather than inflation itself. The underlying problem of the growth of our money supply, as our central bank, the Federal Reserve, creates more and more Dollars with nothing to back them.
This process raises the prices at expensive restaurants, to be sure, but it has a far graver result for those with low or fixed incomes. Corporations with close ties to the government often receive new money as soon as it is created in the form of bailouts, subsidies, or contracts, which allows them to spend it before the decline in the Dollar’s value it produces really takes effect. As Ron Paul has put it:
As government and central banks continue the cycle of spending and inflating, the purchasing power of their currencies is constantly being degraded. These currencies are what the people are working for and saving. This inflation guts the savings and earnings of the people who have very limited options for protecting themselves against these ravages….Fiat currencies trade the people’s freedom and security for the government’s freedom to squander the wealth of the nation on wasteful pet programs, wars, and corruption.