I don’t know why this is my most vivid childhood memory regarding the price of gas. Brains are funny devices that way.
It was a summer evening, I think, early in my career as a driver, and I had a dollar in my pocket. I pulled into Serbe’s gas station in my then-hometown of Chester, New Jersey, and realized that at 33.9 cents a gallon, maybe 25 miles per gallon, I could drive all over northern New Jersey for that buck if I wanted that night. Ah, the freedom of youth.
I come back to that memory from time to time, along with the memory of how the gold standard was explained to me somewhere, sometime. By tying the dollar to the value of gold, prices remained relatively stable. And the person did some math to show that based on the face value of a dollar gold coin, comparing it to the actual value of an ounce of gold, gas was still around 10 cents a gallon.
By releasing the dollar from its chains of gold, and printing however many dollars it needed, the government caused runaway inflation, the economist explained. Because while gasoline was still worth pennies per gallon, the price of those pennies was no longer one cent apiece.
Those two memories came back to me a year or so ago when the government created $2 trillion out of whole cloth to “stimulate the economy.” And they returned again the other day when another $1.2 trillion was printed to “repair our infrastructure.”
The inevitable result of such dabbling is a jump in inflation. The intrinsic value of things hasn’t changed, but the value of the dollar is being reduced with each new buck that comes off the printing press.
Let me show you the math with the help of my trusty calculator app.
The price of gold Tuesday was $1,862 an ounce.
A 1907 solid gold coin with a $2.50 face value weighs .12094 ounces.
.12094 of $1,862 is $225.19.
$225.19 divided by 2.5 is $90.08.
Thus a gold coin with a $1 face value would be worth $90.08 in today’s “dollars.”
A gallon of gas was $3.14 at a handful of local gas stations on Tuesday.
$3.14 divided by $90.08 is .0348579.
Therefore, using the gold coin as our base, the price of gasoline is still 34.9 cents a gallon.
When you visit the grocery store and are looking for someone to blame for the rising prices, don’t blame the farmers or the grocers, who are charging what they need to cover their own costs and a little more to feed their families. Nope, the culprits you’re looking for cloak their crimes with hopeful names like the American Rescue Plan or the Infrastructure Investment and Jobs Act.
Serbe’s gas station isn’t there anymore. And, thanks to the purveyors of inflation, neither is the freedom a buck could bring.