What Happened to the Price of a Gallon of Gas?

By johnnygeneric, California Swan Song.

I had a conversation with another engineer.  And with engineers, it’s all in the numbers.  I like to say we must let the numbers “speak” and that is what leads us in our decisions.

I had just bought some junk silver; several roles of mercury dimes. I don’t like buying Eisenhower dimes since the dead prez is still on the 10 cent piece and people may not initially accept the silver Eisenhower ones. I took three of the dimes to work and got into a conversation with a friend of mine. He was my age, but is not from the USA, so he has no reference point like you and I have.

I told him, “Back in the early 70s, gas was incredibly cheap.”

Using my middle three fingers hiding the coins, I slid the three dimes toward him on his desk and explained to him what happened.  “This was the price of a gallon of gas before we went off the gold standard.” In actuality, gas could be had for even cheaper, but I had to pick a point for discussion.

At the time of my conversation with my friend, silver prices were higher than they are now and gasoline prices were much higher.  “Here we are, 40 years later. These dimes are special in that they contain silver.” He nodded.

“Do you know what the price of gasoline is now?” I said. I could hear the gears in his brain whirring.

I took one of the dimes away. “THIS is what gas costs now.” In relation to the price of silver, gasoline would be only 20 cents.

He was absolutely stunned. He couldn’t believe it. How was this possible?  Right now, gasoline prices in Houston are just about on par with what they cost in 1970 in terms of the price silver! Today I would just leave the three silver dimes on the desk!

This is a very significant story to tell. And the implications are absolutely enormous. Even in the 1960s and 70s, the price of gasoline was considered cheap. It was not expensive. The poor would buy gas and not complain. Everyone had a “gas guzzler” because gas was cheap, cheap, cheap.

And what about now? Do we consider the price of gas to be expensive? Or do we consider the price of gas to be cheap?

The answer is obvious.  We consider gas to be expensive, when in reality…it never changed. We keep saying that the poor can’t afford the cost of operating a car because the price is too high. But in actuality, if we had stayed on the gold standard, the price of gas would have remained the same. Absolutely no one would be talking about the price of gasoline being too high. No one.

And that is the problem.  Our frame of reference in a post gold-standard world has completely changed and not for the better. It is abundantly clear we are nowhere near the standard of living we enjoyed back in the 60s and 70s.

Thanks Nixon! By johnnygeneric, California Swan Song.

And homes? Something has to give. And it’s not going to be the maxed-out American middle class. Read…. But Who the Heck Is Going to Buy all these ‘Overpriced’ Homes?

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  9 comments for “What Happened to the Price of a Gallon of Gas?

  1. Jungle Jim says:

    For once, Nixon was not at fault. He closed it because too many countries were using it and our gold reserves were being rapidly drained. The drain began long before 1971. As far back as 1958, under Eisenhower, we were losing bullion to conversion in a steady stream. It was an open secret too. You could find articles in the newspapers on a regular basis, but most Americans couldn’t relate to the information because from 1934 to 1974 Americans were forbidden to own gold except in dental work or numismatic coins. So, they ignored the information. As a matter of fact, almost as soon as he was inaugurated in 1961, JFK gave a speech to a joint session of Congress about the bullion outflow. There are still transcripts of the speech on the Net.

    The outflow got worse during the Vietnam War because a number of countries especially France were very angry at us over the war and LBJ’s money printing. They used gold conversion as weapon. DeGaulle went so far as to remove France from NATO, they only re-entered a couple of years ago. Nixon was finally faced with a choice of either admitting that we were nearly out of gold, or simply closing the facility and taking the heat. That is what he did.

    • Matt R. says:

      Vietnam and the Great Society definitely hastened the gold outflows. Good comment.

    • Robert says:

      “The outflow got worse during the Vietnam War because a number of countries especially France were very angry at us over the war and LBJ’s money printing”
      Having run Vietnam as a colony themselves, the French were not “angry”, but they certainly did realize that there was no way, with massive unfunded spending on a Vietnam War PLUS the so-called Great Society, that the U.S. could provide an ounce of gold for every $35 dollars of foreign reserves held, so they were simply the first to end the game of musical chairs. And as long as nations allow central banks to exist, as opposed to a functioning Treasury Department, prices are going up and up.

    • I’ve read various reasons for us going off the gold standard. The one that makes the most sense is us spending more dollars than we had gold to back them bringing about the massive conversions from dollars to gold.

      So, your solution is not to use precious metals to back your currency? (I don’t think you’re saying that… just curious what your alternate solution might be)

      As you can see, it hasn’t solved anything. And we’re the poorer for it.

    • If this were the only thing he did, maybe I would give him a small bit of leeway. But he also froze prices. The affects were disastrous.

      I still remember going with my mom from grocery store to grocery store looking for beef. It was terrible. I was a young teenager at the time, but everything looked like crap. It was a HUGE blunder.

      “Ranchers stopped shipping their cattle to the market, farmers drowned their chickens, and consumers emptied the shelves of supermarkets.” http://www.cato.org/publications/commentary/remembering-nixons-wage-price-controls

      He was trying to have his cake and eat it, too.

      • Jungle Jim says:

        I never said that Nixon was smart, only that he didn’t have any real options on gold conversion.

        The problem with presidents of any political stripe is that they are politicians. They usually don’t know much about economics or military matters, and Tricky Dicky was no exception. So when we elect someone, we are at the mercy of his advisers. Nixon selected his for political credentials more than demonstrated competence. I well remember the period and you are right, it was no fun at all.

  2. VegasBob says:

    Eisenhower dimes????? There’s no such thing!

    Perhaps the writer would be interested to know that Franklin D. Roosevelt’s image has been on the dime since 1946. Roosevelt dimes were made of 90% silver from 1946 to 1964, and have been made of a clad copper alloy from 1965 to 2014.

  3. williamwilliam says:

    “10% in precious metals” used to be included in investment advice decades ago. Now, it’s never mentioned in popular press. Today’s message is send all your wealth to Wall Street and tell yourself that you’re diversified.

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