The Swiss franc is an extremely strong currency, and it isn't falling.

Yet when I moved here a year and a half ago, gas was one franc 63, and now it's one franc 79 (roughly, varies from station to station).

So I'd say gas prices are rising.

An example of this is that a pre-1964 quarter is now worth about $8.50 as pure silver. For that amount, you could get a decent spaghetti dinner. A $1 gold coin minted in the early 1900's just on the gold content is now worth about $1,900. So if you have a dollar from 1975 -- could you still buy a full bag of candy? Or would you maybe get a 1/4 pound, if you're lucky?

As the oil shortage: Post Deepwater Horizon oil spill -- basically every single oil rig is now off the coast of Venezuela.

You have the Keystone Pipeline on indeterminate hiatus.

ANWR drilling would actually be coming on line now if it were started 10 years ago.

"You miss 100 percent of the shots you never take." - Wayne Gretzky

And none of this is Obama's fault? Why was it Bush's fault 3-11 years ago?

@NicoleK: Yes, but... The franc is currently tied to the Euro at a maximum exchange rate of 1.20. This means that the franc is also being dragged down...

That said, it's about time someone noticed that the dollar's value is collapsing. It has lost something like half its value in the past few years. It's only by excluding energy prices (which are pretty fundamental to everything) that the US government can pretend that inflation isn't a problem.

My friends back in the US tell me that they are seeing real inflation running around 6% to 7%, while the government claims it is closer to 20%. Some of this inflation is pretty well hidden - for example, lots of store products have kept the same prices, while new packaging has reduced the actual contents.

Oops, closer to 2% according to official figures (not 20%).

Absolute total nonsense by an economic illiterate.

Here's a chart showing how the US dollar is doing:
http://3.bp.blogspot.com/-ZeDGrR-KHsI/T0VCZeQSuiI/AAAAAAAAOVo/bqMDD_Ir2Ug/s400/US%2524%2BMonthly.png

As to why the price of gas is rising, how about:

1. Peak oil
2. Supply disruption in the mideast
3. Unsustainable growth in China
4. Liquidity spigots in the US, Europe, Japan, and China

The only thing saving the US dollar right now is its comparison to the Euro.

Thank you Snoopy. As I read this, my thought was "this is an epically stupid piece of analysis". I'd extend it by noting that the price of gold is exceptionally high right now because of the fear-based investors putting their dollars there.

It does not take ten year to get an oil field on line. Takes about nine weeks, but the paperwork with the EPA and such takes as long as seven years before the first road can be graded out to the prospective field. Industry is fast, government is slow: we'd be swimming in cheap oil if the socialist feds were not determined to make us stay home and hug trees.

I've corrected your 20% to 2%:

My friends back in the US tell me that they are seeing real inflation running around 6% to 7%, while the government claims it is closer to 2%.

That's because the 2% does not include energy & food costs. Additionally, the US fuel demand is down, and we'll probably be a next-exporter of oil products again this year, as we were last year.

Iran is gaming the oil market. They make a threat, the market price goes up. They don't actually carry out the threat, and make more money when they do sell their product. As long as they can manipulate the market, they'll continue on their merry way.

I've been beating on the stagflation drum for about two years now. All of the conditions seem to be in place: the government is debasing the currency, and regulations, corruption, and government-mandated inefficiency are killing productivity. The stats I've seen appear to show that wages are still rising, which would not be a condition of stagflation, but I think the reason they are showing that is because they aren't taking into account the 4 million or so people who have lost their jobs over the past four years.

"Absolute total nonsense by an economic illiterate"

Exactly.

It is not that gas prices are rising. It is that the dollar is falling. Priced in gold, gas is historically underpriced and so may have much further to go.

Nonsense on stilts. By that line of reasoning, everything is drastically under priced, and actual* inflation should be skyrocketing.

It isn't. (A couple examples I have read recently: the cost of owning and operating an automobile is down 23% over the last twenty years; furniture & clothing by something like 30%)

Also, the oil market is futures driven by expectations of supply and demand. Iran is now (like Libya last year) creating uncertainty regarding supply disruptions.

The resulting price increase is simply the market at work. When that increase ripples through the economy that is not inflation, it is the market at work. This is why Bernanke says it is not a problem, because the changes in price reflect supply & demand, not secular inflation.

This is perhaps the most idiotic bit, though:

Over the centuries, gold has been "the golden constant". Eventually, all prices equilibrate with gold. This is why gold represents the best available standard in terms of which to define the value of a monetary unit.

Oh, really. In the 1970s, the price of an average new car was about $4500. Now it is roughly $20,000.

What was the rate of inflation in automobile cost over the last 30 years?

Before you answer that, you need to first answer this question: How much would it have cost in 1975 to buy the average car of today?

That question, absolutely fundamental to any discussion of inflation, is unanswerable because there wasn't enough money in the world to buy a car in 1975 that would be even remotely comparable in quality to a 2012 Ford Fusion.

Comparing prices over even a few decades is nearly impossible; doing so "over the centuries" should be termed idiotic, except that it would defame idiocy.

It is possible to get closer to a meaningful baseline by considering the only baseline that makes sense: time.

How many hours does someone have to work today to purchase a gallon of gasoline, compared to some point in the past? Then, how much value (in terms of distance traveled) is contained in that gallon of gasoline?

Comparing prices over even a few decades is nearly impossible; doing so "over the centuries" should be termed idiotic, except that it would defame idiocy. -- Jeff Guinn at March 1, 2012 6:34 PM

Using cars and gas is idiocy. But using other standards is not.

Using Wiki¹ as the source the phrase "Shave and a Haircut, two bits" was noted for the first time around 1899. Two bits meant a haircut. Figure the quarter was about 90% of a troy ounce of silver. A quarter ounce of pure silver is now about $8.82 (35.29 * .25). Can you still get a haircut and shave for <$9 in most urban/suburban centers?

In 1937, Patrick McDonald opened "The Airdrome" restaurant on Huntington Drive (Route 66) near the Monrovia Airport in Monrovia, California. Hamburgers were ten cents, and all-you-can-drink orange juice was five cents.²; add in fries at 5¢ a to make a "value meal". That was 20¢. Nowadays the hamburger are 99¢ and a large drink is about $1.59 add in fries at a to make a "value meal" and you are $3.50. The equivalent in silver would be $7.05 (35.29 * .2). But I'm guessing there is a wash in there for economies of scale.

The time was late 1948, an energetic, enthusiastic John Banchero Sr. began his dream of opening a family styled restaurant in Hayward, California. John Sr., with the help of his mother Maria and young bride Beatrice, opened Banchero’s Italian Dinners to offer a good home styled, fairly priced, family dinner establishment. The original 4 dinners were Spaghetti and Ravioli, Half Fried chicken, Grade A steak and Beef Tongue. There have been considerable changes and improvements over the years. Beef tongue popular then, has long since lost its place on the menu. Dinners included our minestra, or soup, tossed green salad, a relish dish, pasta, and dessert. Dinners were initially priced at $1.25 with an additional $0.35 for steak.² A Double Thick Rib Eye Steak dinner at the same restaurant is 33.50. Slight deflation.

But again if you look at the agribusiness boom since 1948 to now, that number would be higher. Without agribusiness -- I'd bet that price would be higher. And we are now getting to the efficiency of scale in food. The bushel rate of corn has at leas quadrupled since the 50's. But the farmers are now hitting the saturation level.

¹ -- en.wikipedia.org/wiki/Shave_and_a_Haircut

² -- en.wikipedia.org/wiki/History_of_McDonald%27s#Early_history

² -- bancherositaliandinners.com/our_history.html

How long did it take to earn two bits in 1899?

How long does it take to earn $9 today?

How long did it take to earn two bits in 1899?

Probably a day. But was room and board included in that?

How long does it take to earn $9 today?

But what was the federal minimum wage in 1899?

When buying and selling are controlled by legislation, the first things to be bought and sold are legislators. -- P. J. O'Rourke

In 1910 the average wage was 22 cents per hour.

In 2010 it was $16.27.

In 1910, it took right around an hour to earn the price of a haircut. Just like in 2010.

So, in terms of time, the cost of a haircut is unchanged over 100 years.

With regard to your hamburger example, the minimum wage is fourteen times now what it was then.

I'll bet that in terms of time, almost nothing costs more now than now than, say, 30 years ago. And many things cost substantially less. So, what is the rate of inflation?

And what does the price of silver have to do with anything?

(Coincidentally, I grew up on Huntington Drive, just a few miles west of Monrovia)

And what does the price of silver have to do with anything?

Quarters, dimes, and half dollars were made from silver until 1964. So a quarter ounce of silver was literally a quarter back then.

Using that as the standard to judge things over time is a good quick way of answering "Is there really inflation?"