The above chart shows the inflation-adjusted (2006 legal tender dollars) average annual historical price of a barrel of oil over the past 50-plus years. We can calculate that the average price over this span of years is about $31.50 a barrel. Before the jump in price that began in the '70s, the average price was slightly less than $20.00 (when it was equal to Freedom’s gold dollar), so we see that on average over the last 35-plus years, Americans outside of Freedom have paid some 60% more per barrel of oil than their counterparts within.
And keep in mind that the CPI index used to calculate these inflation-adjusted prices excludes energy and food costs. When you consider, even as you read these words, the costs of energy and food are rising at a rate that far outpaces the items used to calculate the CPI index, and you consider that most families spend a considerable percentage of their income on food and energy, then you can see that calling the inflation-adjusted pricing based on the CPI index conservative is being quite charitable.
But you know what? Even if every single person in the population is able to keep pace with inflation, inflation still robs them of their savings. Every dollar set aside as savings erodes into a fraction of its original value as time passes. It is nothing less than a theft of each and every person’s property.
Now I must address one more point before wrapping this up. The fact of the matter is that in the 1970s, there were long lines at gas stations and at times the stations ran out of gasoline. Contrary to the above proposition, that prices rose due to an increase in the money supply, this evidence tends to support the idea that a shortage of gasoline caused the increase in prices, and this is the popular belief.
But the shortages were in fact artificial and were caused by government intervention in the form of price controls. There were minor supply cutbacks by OPEC, but these events were not allowed to naturally cause a gradual rise in prices, which would have encouraged oil companies to produce more and would have encouraged consumers to buy less.
Instead, price controls were instituted, keeping the prices artificially low. Producers had no incentive to produce more, and consumers flooded the market to buy as much as they could of the below-market cost product, fearing that the highly-publicized shortage might leave them without a means of transportation.
Gas stations often only had to stay open a few hours a day to empty out their tanks, and because they could not raise prices, they closed down after selling out their gasoline in order to hold down labor and operating costs.
So by not allowing prices to rise in order to reach the proper market-clearing price, the government’s artificially-created low prices caused consumers to buy more gasoline than they would have without the intervention. Then to make matters worse, the gasoline product- and service-providers had no motivation to increase the supply to meet the demand.
If the government capped the price of cars at $1,000, there would soon be a “car shortage.” After all, why wouldn’t consumers buy a few extra cars since they are so cheap and are going fast and if you don’t buy one soon, they will all be sold out? Should the car manufacturers be blamed in such a scenario? Why would manufacturers ramp up production to meet the demand? I hope the answers are obvious enough.
So now let’s return to the question posed earlier: How was the State of Freedom able to avoid the oil price shocks that the rest of the country suffered through?
The simple answer is that they have a superior monetary system that is beyond the reach of government intervention. Their money remains stable and holds its value. G$.19 set aside 50 years ago still buys a loaf of bread today in Freedom. The commodity known as gold, as it always has, provides an unmatched ability to store value over time and space. That is why gold (and silver) has been elected to serve as money by the markets of the world for centuries. It is by far the best tool for the job.
Oh well, enough daydreaming. If the State of Freedom doesn’t exist, then why waste time thinking about it?