Inflation since 1775 and Its move since the Fed


Declaration of Independence

Yesterday at the American Economic Association’s 2013 Annual Meeting, Carmen Reinhart and Ken Rogoff offered a paper titled Shifting Mandates: The Federal Reserve’s First Centennial.

The paper included a cool chart of inflation since 1775. The authors argue that inflation didn’t take off until the U.S. went off the gold standard in 1933.

From the paper:

It is probable that in 1913, while financial panics were not uncommon, high inflation was still largely seen by the founders of the Fed as a relatively rare phenomenon associated with wars and their immediate aftermath. Figure 1 plots the US price level from 1775 (set equal to one) until 2012. In 1913 prices were only about 20 percent higher than in 1775 and around 40 percent lower than in 1813, during the War of 1812. Whatever the mandates of the Federal Reserve, it is clear that the evolution of the price level in the United States is dominated by the abandonment of the gold standard in 1933 and the adoption of fiat money subsequently. One hundred years after its creation, consumer prices are about 30 times higher than what they were in 1913. This pattern, in varying orders of magnitudes, repeats itself across nearly all countries.

inflation 1775

Inflation chart

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Published in: on January 7, 2013 at 8:59 am  Leave a Comment  

Anatomy of a Most Peculiar Institution


Blog Note: Thanks to Dr. Benjamin Price, Instructor at Southeastern Louisiana University, for originally posting this article by Victor Hanson.  Our universities are one of two extremely important battle fronts, the other being the public school system.  Both may be beyond recovery but alas solutions are emerging.  Enjoy!

An Anatomy of a Most Peculiar Institution
by Victor Davis Hanson,  PJ Media, 12/28/2012

A Campus Full of Contradictions

Almost everything about the modern university is a paradox. It has become a sort of industry gone rogue that embraces practices that a Wal-Mart or Halliburton would never get away with. It is exempt from scrutiny in the fashion that the Left ceased talking about renditions or Guantanamo Bay once Barack Obama was elected, or a Code Pink goes after a NRA official in the way it would never disrupt a hearing on Fast and Furious. In other words, the university is one of the great foundations of the Left, and so is immune from the sort of criticism that otherwise is daily leveled against other institutions.

So let’s take a 10-minute stroll through the campus and learn why costs soar even as students are ever more poorly educated.

The Curriculum

A student’s life on campus is a zero-sum game. For each elective like “The Modern Comic Book,” or “Chicana Feminisms” or “Queering the Text,” students have no time (or desire to) take more difficult and instructive classes on the British Enlightenment or a history of World War I or Classical English Grammar. (Yes, despite the relativist, anti-hierarchical university, concepts really do exist like “more instructive.”) The former are mostly therapeutic classes, entirely deductive, in which the point is not to explore an intellectual topic by presenting the relevant facts and outlining the major controversies, while sharpening students’ inductive reasoning and empirical objectivity, as well as improving their English prose style and mastering grammar and syntax in their written work.

The result is perhaps a fourth of the liberal arts courses — many would judge more like 50% — would never have been allowed in the curriculum just 40 years ago. They tend to foster the two most regrettable traits in a young mind — ignorance of the uninformed[1] combined with the arrogance of the zealot[2]. All too often students in these courses become revved up over a particular writ — solar power, gay marriage, the war on women, multiculturalism — without the skills to present their views [3] logically and persuasively in response to criticism. Heat, not light, is the objective of these classes.

Why are these courses, then, taught?

For a variety of practical reasons: 1) often the professors are rehashing their doctoral theses or narrow journal articles and are not capable of mastering a wider subject (e.g., teaching a class in “The Other in Advertising” is a lot easier than a systematic history of California); 2) the quality of today’s students is so questionable that the social sciences have stepped up to service the under-qualified, in the sense of providing courses, grades, and graduation possibilities; 3) the university does not see itself as a disinterested nexus of ideas, where for a brief four years students are trained how to think, given a corpus of fact-based knowledge about their nation and world, and expected to develop an aesthetic sense of art, music, and literature. Instead college is intended as a sort of boot camp for the progressive army, where recruits are trained and do not question their commissars.

So the new curriculum in the social sciences and humanities fills a need of sorts, and the result is that today’s graduating English major probably cannot name six Shakespearean plays; the history major cannot distinguish Verdun from Shiloh; the philosophy major has not read Aristotle’s Poetics or Plato’s Laws; and the political science major knows very little of Machiavelli or Tocqueville — but all of the above do know that the planet is heating up due to capitalist greed, the history of the United States[4] is largely a story of oppression[5], the UN and the EU offer a superior paradigm to the US Constitution, and there are some scary gun-owning, carbon-fuel burning, heterosexual-marrying nuts outside the campus.

If we ask why vocational and tech schools sprout up around the traditional university campus, it is because they are upfront about their nuts-and-bolts, get-a-job education: no need to worry about “liberal arts” or “the humanities” — especially given that the universities’ General Education core is not very general and not very educational any more. Yes, I am worried that the University of Phoenix graduate has not read Dante, but more worried that the CSU Fresno graduate has not either, and the former is far more intellectually honest about that lapse than the latter.

Note here the illiberal nature of allowing highly paid faculty to indulge their curricular fantasies at the expense of indebted students who pay a great deal for a great deal of nothing. Is there a provost or a dean in America that can say to faculty, “That is not a real course, and so won’t be taught at our real university”? Does the shop foreman let the welder choose his own project?


The original idea was to encourage free thinking by ensuring faculty that after a probationary period of six years, they were given lifetime employment (with very little post-tenure review) without worry of political repercussions. That way, outspoken, even eccentric professors would be protected from ideological conformists and administrative bully-boys. But those roles were switched, and the theory was entirely perverted in the 1960s, when faculty felt the degree of the nation’s social change was too slow and opposition to the Vietnam War too feeble, and thus the remedies for both trumped the fossilized notion of disinterested teaching. If the family, community, government, religion and traditions were all warped (i.e., the course of American history had logically led to Vietnam or homophobia), then the university itself must in lockstep offer balance — by itself becoming entirely unbalanced.

Today’s academic senate votes on social issues are about as unnecessary as they are lopsided, with margins resembling Saddam Hussein’s old plebiscites [6]. Faculty committees have created speech and behavior codes that surpass those of the federal government’s in the 1950s and target particular ideologies while leaving others exempt: say something untoward about Mormonism is being frank, something considered impolite about Islam is grounds for punishment. How odd that tenure ensured a monolithic faculty, as well as undesirable traits in matters of work habits and comportment. In my own experience, I would say that about 30% of the faculty simply stop most research and scholarship in their seventh year. In all of America, there is no one more untouchable than the tenured liberal-minded full professor, top step. He is simply sacrosanct in the fashion of a Medieval bishop, in the sense that his teaching, scholarship, work ethic, and schedule are not so much poorly monitored as rarely monitored at all. Does the 7-Eleven employee after six years tell the boss, “I am here to stay for the next 30 years”?

Part-time Exploitation

Amid the academic utopianism is a level of exploitation rarely seen at K-Mart or Target. The graduate student teaches Latin 1A at a fraction of the cost of the full-professor. And while you cannot fire the PhD after six years, you most certainly can fire the part-time PhD anytime for the next thirty — someone who gets paid $4,000 a class (few benefits and few office, phone, and faculty privileges), while his tenured “comrade” is paid $20,000 for the same course. You object: “Oh, but we pay for the expertise of the full-professor, his sober and judicious in-class wisdom, his substantial publication record he draws on by the minute, his marquee name that entices capital to the university, his weighty committee work that runs the university.”

Perhaps, but in my experience all the above is true in about 20% of the cases, and there is instead a 50/50 chance that the scrambling itinerant and exploited part-timer is a better teacher than the complacent grandee. The greatest challenge in academia is not the risk of not being tenured, or not being promoted, but rather simply jumping from part-time helot status, to tenure-track Spartan overlord. Most never make it, or make it only when they are middle-aged with decades of a lost career.

Does Safeway have one check-out clerk that makes $40,000 and another who earns $20,000 in side-by-side aisles, each about the same age, with the same education, experience, and amount of time on the job — the part-time clerk with a solid record while the “tenured” Safeway clerk is a no better employee?

Student Loans

Imagine the concept of student loans transferred to the car industry (or, perhaps, just think Freddie and Fannie). The government would guarantee billions of dollars for our youth to buy their first union-built Malibu and Escape — and the auto industry could then hike prices at double the rate of inflation as loans grew to match the inflating prices. (Would we soon have a sales “diversity” czar on the lot? Or a special assistant to the head salesman?). Is this a blueprint[7] for smart and economical buying of efficient automobiles?

The tenured faculty is well-paid and established and often leftist; the student consumers who take out $50,000 plus in loans are often middle-class, without money, and without much political ideology. The result is that the well-off lecture about -isms and -ologies to the less well-off, who pay in borrowed money for the former, as the US government underwrites the entire exercise on the premise of investing in a well-educated, informed, and productive electorate. And because students are poor risks and because loans are paid back slowly (and sometimes not at all), rates are often well over 6-7% at a time when most mortgages are about 3.5%. I have had some students who are still paying only the interest after 7-8 years since graduation.

Stranger still is the tsk-tsking of senior faculty about “grade-grubbing” undergraduates who are caricatured as poorly educated (you think?) and not interested in real knowledge, but only in the BA brand — and thus they cynically avoid Professor X’s path-breaking class on transgendered renaissance females. But does the computer programming major at DeVry take an elective like “The Poetics of Masculinity” to enrich his approach to programing? Does the two-year JC course on nursing include an enhanced class like “Constructing the Doctor: the Hierarchies of Male Privilege”?

The Value of a BA Degree

As a young professor, I used to believe in the value of a universal BA that would teach truth and beauty to the masses. I still do, but mostly as instruction apart from the university that now has very little to do with either beauty or truth. Right now the university has two more pressing problems. Does the BA, MA, or PhD — the signature degrees in the humanities — increase the graduate’s earning potential over the next thirty years enough to justify the $200,000-plus investment? Most studies still suggest yes, but the lifelong income gap between the BA certified in the humanities and the non-certified is narrowing. I am reluctant to make the argument for the humanities on the basis of financial planning, but then the humanities are not quite the humanities of 50 years ago.

More importantly, why not have a national BA test in the way we have bar exams? Simply put, every graduating college senior would take a basic 4-hour exam in math, verbal skills, and simple facts (e.g., “What is the 1st Amendment? What is a non sequitur? Who was James Madison? What is the Parthenon? etc.).

The Harvard and CSU Stanislaus graduates would alike have to pass the same rigorous test to ensure that American colleges were turning out students with a minimum level of competence — in the manner that the consumer assumes that widely different but UL approved appliances all have the same safe and standard cords and plugs.

We might also allow credit-by-examination: if one chose not to attend college, then he might take a beefed-up, longer version of the BA exam, say an 8-hour test. At this point, I would suggest that the percentage of those passing the 8-hour version without four years of college might exceed those with four years of college passing an earlier 4-hour version. And the former might well be more open-minded and empirical than the latter on the politics of the day.


There is no diversity of thought on the vast majority of university campuses. The classes, the administration, the campus culture, the professors — all accept the man-made destructive heating of the planet, the rape of the environment, the toxicity of free market-capitalism, the racist-sexist-homophobic narrative of the US past, the need for unquestioned abortion on demand, gay marriage, legalization of drugs, etc.

As for racial diversity, affirmative action, etc., there is no need to rehash the old tired fault lines. Suffice it to say that at a Princeton, Cornel West is thought to be an intellectual, that at Harvard Elizabeth Warren was the first Native-American law professor, that at Colorado Ward Churchill was a tenured, full-professor and Native-American luminary, and that once-fugitive Angela Davis was a distinguished professor at UC Santa Cruz.

Will all this continue? Probably, though with intermarriage and integration, the racial identity industry is becoming ossified, and cases like Warren and Churchill will become more common. The truth is that the careerist liberal white male has always had a Madame Pompadour sort of après moi le déluge[8] attitude: once he reached a point of influence and power, he always insisted on affirmative action for all his surrounding positions as a sort of castle-and-moat protection for his own paradoxical privilege. One thing I never understood about affirmative action: its biggest supporters in the 1980s and 1990s were always tenured, full-professor white males, and its victims were always part-time or entry-level struggling white males. Why did not the grandee class simply confess, “We came of age at a time of white male privilege; therefore, we now resign our positions after reaping unfair advantage to ensure a level playing field for all who follow”? Instead, they pontificated from tenured perches and applied racial litmus tests only to others more vulnerable.

When we read of the world’s great centers of learning, American — and Californian — universities are always at the top: Caltech, Stanford, Berkeley, Harvard, Yale, etc. But almost always, on closer examination, this is because of our superior medical schools, business schools, engineering schools, and science and math departments. The liberal arts have piggybacked on the reputation of American professionalism and science, and therefore have not come under the scrutiny that they so richly deserve.

It is time to rethink the entire idea of a university[9], even as the free market and internet are devouring it.


URLs in this post:

[1] ignorance of the uninformed:
[2] the arrogance of the zealot:
[3] without the skills to present their views:
[4] the history of the United States:
[5] a story of oppression:
[6] Saddam Hussein’s old plebiscites:
[7] Is this a blueprint:
[8] après moi le déluge:
[9] the entire idea of a university:

©2012 Victor Davis Hanson

Published in: on January 1, 2013 at 3:04 pm  Leave a Comment