I sat down to watch the 1988 action film Die Hard recently as it’s one of my favourite Christmas films of all time. Partway through, I saw something interesting that got me thinking about gas prices.
During a scene early in the film, actor Reginald VelJohnson, who plays as a cop, is seen inside a gas station shoving a dozen packages of Twinkies into his arms; enough so, that he barely makes it to the register without losing them. This post won’t be about the recent Hostess factory closures in the US, although I was very saddened by that news.
After Mr. VelJohnson exits the gas station, he gets a call on the police car radio informing him of a distress call which came from the fictional Nakatomi Plaza in Century City. He is ordered to go check out the scene and report anything unusual. Just after this, Mr. VelJohnson walks toward an empty road and at the end of this road we see the very large skyscraper, which is Nakatomi Plaza. If you look up, they can see that gasoline was being sold for 74 cents a gallon. Die Hard was released worldwide in the summer of 1988 and was filmed in late 1987.
I actually lived in Los Angeles for 2-and-a-half years. One of my happiest memoirs was visiting the Century City Plaza, an outdoor shopping mall near in the Westwood area of Los Angeles. After going for the first time to see the outdoor mall, which the Shops of Don Mills in Toronto is modelled after, a friend of mine pointed to a large skyscraper close by. He asked if I remembered Die Hard and my heart skipped a little. It then took another skip when he told me that the film Conquest of the Planet of the Apes was filmed on location where the mall is now. Needless to say, the nerd in me freaked out a bit.
I did a little research on gas prices and as I write this post (February 8th, 2013) gas prices at the nearby city of Santa Monica today averaged about $4.20 per gallon. That’s roughly a 500% increase from 25 years ago. According to one inflation calculator, that which cost 74 cents back in 1987 should cost $1.46 as of 2011. This is an increase of $2.74 over inflation.
“I wanted to do a comparison with another product that is heavily dependent on government monopolization, which cuts down on supply and increases in price over time, and that’s Postal products. According to Answers.com, a single US postage stamp in 1988 cost 25 cents and while the cost of a stamp today on First Class mail is 46 cents, just below the rate of inflation. Despite this, the US Postal Service looses roughly $42,000 per day (http://cnsnews.com/news/
By the way, it’s obviously not just Die Hard that demonstrates how gas prices have risen several hundred percentages over the rate of inflation in recent years. Pick any film from just 5 years ago and there will be a noticeable increase if a gas station is visible on screen.
The aforementioned stamps are just one example but government forms, licensing fees, health care, college tuition, etc are on the rise and have risen beyond the rate of inflation for many years. Yet, one should ask why the price of electronics and other private-use consumer products are always falling? Early cell phones cost $4,000 (or $6,131.20 adjusted for inflation) over 20 years ago and the first Betamax recorder, the predecessor to the VCR, cost $2295 (or $12,346.76) when it first came out in 1975. Can any of you imagine paying over $6000 for a cell phone and over $12,000 for a DVD or Blu-Ray player today?
My conclusion will be a no-brainer for anyone who knows how inflation works or understands the free market in general. Without government monopolization, these now government monopolized products and services would likely decrease in price every year rather than increase.
So why does no one we elect get this?
Tags: Die Hard, gas prices, Inflation
The inflation we've seen over the past 100 years- come Christmas this year, the Federal Reserve will celebrate its 100th anniversary- is a wholly monetary phenomenon. Although it can be supply-related, as in the 70's during the Arab Oil Embargo, the past century has been marked by massive, unprecedented increases in the production, and means of production, of every good and service one can think of. That should lead to price stability. It hasn't. The reason is an even more massive increase in the money supply. The only reason why we're not experiencing outright hyperinflation is due to the forced use of dollars around the world (see the Washington Consensus, aka. WTO, IMF and World Bank), and the ubiquitous issuance of debt that has no equal in human history. But don't worry. It's coming.
Mark, thank you for cataloging examples of how purchasing power has been badly eroded over the past 25 years. I remember seeing Die Hard (illegally, of course) back then as a kid, sneaking into the theater- after shelling out $3.50 for my ticket. I guess compared to the examples you've given the $12.50-15 ticket prices today are a bargain
p.s. I didn't go into the example of oil, but worldwide demand for oil is NOT driving prices. That's one oft-repeated lie that is never borne out by the statistics. The same goes for almost all other commodities. It's all about the ETF (exchange traded fund) inflows. You can easily put your own money into these securities, as anyone can. Since 2000, hundreds of billions of dollars have been poured (pun intended) into the oil ETFs, alone. When those inflows turned into outflows for a 6 month period during 2008-09, prices collapsed from $147 to $35. It'll be even worse during the next collapse.
Inflation as declared officially is the algebraic sum of inflationary forces (printing of money) against deflationary forces (human creativity making things cheaper – even long after the research cost has been recovered).
The politicians know that inflation is a form of taxation and use it to finance the government machine.
The point of my article was to show just what I did, that prices are raising above the rate of inflation and have been going up drastically since the 1980's. Not sure where you are coming from or where you think I've gone wrong, but thank for reading and post.
What Diehard Teaches Us About Gas Prices by Mark Tordai
I am surprised and disappointed that time and space have been devoted to this article by a man who obviously does not understand “time preference” or the desire of inventors or developers of new products to recover their development costs as soon as possible. This results in higher beginning prices which are later reduced, such reductions even taking place in times of moderate inflation.
I have already referred to this situation in my article “Taxation by Stealth” published in the November, 2008 issue of MC2
I really wonder if we read the same article. It is just stated as a fact that some stuff, in this example electronics, cost more in the beginning, and then get cheaper. So, what's the problem here? As this article wasn't about why things get cheaper in a free market, there's not exactly a need to "justify" why cost is high in the beginning and why it's lower later on.
One thing that could have been mentioned is how the decreasing cost of electronics and other goods is used to mask the real inflation and rising cost of necessities, as apparent in things like gasoline, other energy, food, stamps, and whatnot.
"My conclusion will be a no-brainer for anyone who knows how inflation works or understands the free market in general. Without government monopolization, these now government monopolized products and services would likely decrease in price every year rather than increase.
So why does no one we elect get this?"
They might. If they do, they don't care; if they don't, it's most likely because they don't care.
Politicians have little actual power (figureheads for the bureaucracy), govern over a population that is ignorant and probably stupid on top of it (and thus are unlikely to make these 'obvious' conclusions or hold the politicos responsible for them) and have a lot of opportunity to selectively interpret the 'reality' they get in the form of meaningless statistics cooked up by Academic charlatans.
Voting and paying attention to politicians is basically a complete waste of time.