Truckin’, like the do-dah man
Once told me “You’ve got to play your hand”
Sometimes your cards ain’t worth a dime
If you don’t lay ‘em down.
– Truckin’, by Grateful Dead
YOUGHAL, IRELAND – In the year we were born – 1948 – the Ford F-Series pickup truck also made its debut.
The Ford F-Series pickup truck introduced in 1948 (Source: Car and Driver)
The old stove kept on trucking – with incremental improvements – over the next 72 years. The improvements were the natural consequence of technological innovations, which were incorporated into the truck design as they came along.
Electric windows, power brakes, power steering, automatic transmissions, big, comfy, power-adjusted seats – these upgrades are now the source of sterile argument in the economics profession.
There are those who believe that the real price of a new truck should be adjusted downward because it is a better truck today than it was in 1948. “You get more for your money,” they say. “So inflation is not as bad as it looks.”
And there are those who think a price is a price. (More on that in a future Diary.)
What people care about is not their absolute wealth (how rich they are compared to a savage 10,000 years ago… or an F-Series buyer in 1948), but how rich they are compared to other groups around them, or to their own brothers-in-law.
It is galling to see others get richer than you are… especially when you think they might be up to something.
It is even more annoying to see yourself getting poorer, as prices rise faster than your income.
And it is alarming to see your country driven into the ditch by the doo-dah diddleheads in Washington.
The recent numbers, for example, show food prices rising. As colleague Dan Denning reports in the next edition of the Bonner-Denning Letter… due out tomorrow (click here to sign up now):
The price of bacon rose 87 cents per pound in the last year, or 16.3%, according to Porkbusiness.com. At $6.22 per pound, bacon is just below its 2017 all-time high of $6.36. Retail pork prices set an all-time high of $4.32 per pound in April (up 11% on the year).
And then there’s beef. Retail prices for choice beef hit $6.76 per pound in April. Except for the period between May and July of last year – when everyone was stocking up on beef for lockdowns – that’s the highest price on record, according to Steiner Consulting. Boneless choice sirloin steaks are now at least $9.34 per pound in some American grocery stores (8.7% higher than a year ago).
Housing prices are rising even faster. Here’s more from Dan:
And let’s not forget the year-over-year increase of 19.1% in median U.S. house prices for existing homes. That median price is now $341,600, an all-time high. And the 19.1% increase was the biggest year-over-year price gain on record. The previous year-over-year record was 16.6% in 2005 – two years before the housing bubble burst and triggered a Global Financial Crisis.
The Bureau of Labor Statistics tells us that wages for private industry workers increased 2.8% in 2020. So housing is going up nearly seven times faster than incomes.
And the Wall Street Journal adds more detail:
Home prices in the U.S. have shot up in the past year, driven by limited supply, record-low interest rates and buyer demand. Bidding wars have spread from such high-profile locations as Palm Beach, Fla., and the suburbs outside New York City to smaller cities and towns, including long-neglected locales where properties typically sat on the market for months.
The median listed price for a house jumped 24% in January from a year earlier in the metropolitan area surrounding Allentown, [PA] the Rust-Belt city whose decline was memorialized in a 1982 Billy Joel song, according to data from Realtor.com. It was the same in such spots as Martin, Tenn., a small city 150 miles from Nashville, where the median asking price went up 159% over the same period; in Kendallville, Ind., about 30 miles outside Fort Wayne, it climbed 56%.
These prices were no accident. They were caused by the Federal Reserve. It pushed down interest rates (just as it did before the housing bubble of 2005-2007), thus making housing speculation attractive.
Many of the buyers are large corporations. They can borrow money at near-negative rates. Then, they can rent the houses out for a huge return on capital.
Or they can sell them. If they borrow at 3%… and housing goes up at 19% – they enjoy a 16% win… and an almost infinite gain on real investment.
Houses today are bigger, with air-conditioning and indoor plumbing. But in terms of price and time (the ultimate… and immutable… “money”), housing is once again becoming unaffordable.
In 1971, when the fake-money system began, you could buy the typical American house for about $25,000. Today, it’s almost 14 times as much.
In 1971, the average American worker earned around $3.60 per hour. So it would have taken him 173 weeks (at 40 hours per week) to buy the average house.
Today, the average wage is about $25 per hour. At that rate, he’ll have to work 341 weeks to buy the house.
Yes, the new house may be “better”… but so what? Existing houses – including those built before 1971 – are also expensive. And maybe – with their solid wood doors… hardwood floors… and brass fittings – even better.
More Expensive Wheels
So let’s turn to transportation.
Last Wednesday, Ford unveiled its radical new F-150 Lightning. It’s all electric, with a 300-mile range on the “extended” battery version. It also allows you to work power saws and other machinery directly from the pickup, without needing a generator.
It looks like a nice truck. And with the tax credits, the basic model can be cheaper than a gasoline-powered model. Ford took more than 44,000 orders for the new truck within 48 hours of the launch.
The list price is “around $40,000,” we were told. So let’s look at that in terms of time.
At today’s $25-per-hour wage, it will take a working man 40 weeks to buy his new electric wheels.
Back in 1971, the old-fashioned, carbon-burning, “fifth generation” F-100 cost about $2,300.
Divide that by the $3.60 wage… and you get 639 hours… or just under 16 weeks!
Is the new electric model really worth nearly three times as much time? It’s got plenty of “electronics.” But our experience is that the electronics are often time wasters. They make things hard to figure out… and impossible to fix.
And charging a big battery takes time. Should that be added to the cost?
And if the cost of food, shelter, and transportation is going up – in terms of the time it takes to get them – aren’t we getting absolutely poorer, not richer?
And if that is so, how come?
The U.S. empire is the richest in history. But that doesn’t make it immune to the traps and temptations that have bedeviled all previous empires – including the obvious one, fake money.
And even with technological progress continuing to make most things absolutely cheaper, and more abundant… man – aided and guided by his jackass elites – can still make a terrible mess of things.
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