The Value of Money / by kevin murray

I love reading books, especially American historical books and inevitably within those books there will be a discussion of money.  The worst of these books will simply state that so-and-so was paid $10 for something and won't reference what that $10 was worth back in the day.  Then there are many books that will attempt to equate with minimal success what the equivalent of $10 was into today's dollars.  I find this to be the most irritating because I believe that this is the absolute wrong yardstick to use and the distortions thereof are huge.


It's difficult, really chimerical, to even attempt to compare a dollar from, let's say, 1870 to today's dollar.  Although their names may be the same their value and the way to value the dollar by using today's monetary amount, simply won't add up, for a lot of reasons; and certainly one of them is that it's hard to compare the life and value of someone in 1870 to someone and something of today.


A far more meaningful way to evaluate currency from previous epochs is to go back in time to that year and through research find out what the dollar really could buy.  You should then create a foreword with a list of various goods that we can relate to, such as a home, acreage, and material goods that serve as a touchstone with your best attempted effort on how much that probably cost back in that particular time period.


Too often, while reading, the uninitiated will get the misimpression that someone that was worth $100,000 back in 1908, was rich but wasn't all that rich.  That's plain wrong. According to the average house in 1908 would set you back $5,541.  Also, in 1908, Sears issued its first specialty catalog for houses, Book of Modern Homes and Building Plans, featuring 22 styles ranging in price from US $650–$2,500 (  Information like this helps to give us a very good impression of the worth of a dollar back then and is invaluable.


Why is any of this important?  Because of inflation, in general, people will get the value of money from early historical periods wrong (they will underestimate its' true worth) and because their comparison is wrong, their conclusion will be wrong.  And well, that's wrong.


I mean, it's not life shattering, but I just love it when I see an old movie and the price of gasoline is under $.50/gallon or someone goes in to buy a soda and hands the man at the counter a nickel, or gets a newspaper for a dime.  Stuff like that brings a smile to my face, because you're watching it, but you do not really believe it. 


It was essentially after President Nixon took us off the gold standard that inflation reared its ugly head in America in 1971.  Since, that time the value of a dollar has really plummeted and consequently the ability to judge or ascertain the value of money compared to early historical periods has become much more problematic and troublesome.


Thanks Dick!