I used to follow Shadow Stats back in the day but became a bit disillusioned when digging deeper into his methodology. There is endless debate on both sides but when challenged in the past Mr. Williams has hard pressed to bring forth specific examples pertaining to his claims.
Gold and the S& P pretty much run neck and neck as per inflation in your premise.
However as an investment the S&P 500 with dividends reinvested absolutely train lengthed gold from 1970 to 2024. So if one is concerned solely on keeping up with OR beating "inflation" a total ROI on the choice of investment might be a better barometer of that.
The default protection that gold offers vs stocks is definitely a factor also. But a time frame of 1970 to 2024 which is a longer time frame that 95% of careers or "investment/saving years" for a person is a pretty good predictor. Also a 54 year time frame that included multiple seminal events ... Black Friday, Savings and Loan debacle, Dotcom crash, 9/11, 08/09, and so forth. Not exactly a time of the market going straight up which it never does anyway.
Williams not changing his methodology to account for a vastly different economy and society with ever changing habits and needs that are key to "inflation" is the issue here. It's a good debate I suppose.
- S&P 500:
A $100 investment in the S&P 500 in 1970, with dividends reinvested, would have grown to over $26,700 by 2024, according to one source. This represents an annualized return of approximately 10.84% per year, according to another source.
- Gold:
The same $100 invested in gold in 1970 would have been worth around $7,000 in 2024, according to Investopedia.
- Outperformance:
The S&P 500's performance, including dividend reinvestment, significantly outpaced gold's growth over this period.
- Volatility:
While gold has shown periods of higher volatility, the S&P 500 has also experienced periods of significant price swings, particularly during economic downturns.
- Diversification:
Gold can offer diversification benefits to a portfolio due to its low correlation with stocks during certain periods, but its lower long-term returns should be considered.
- Default Risk:
A key advantage of gold is that it does not default or go to zero, unlike stocks, which can experience bankruptcy.
Agreed. He didn't account for things like hedonic adjustments which, IMO, are crucial for understanding all this.
Yeah, so the price of beef has ballooned; I switch to pork and chicken, and my life, other than not having a steak, isn't really changed.
Same with other things. Further, prices increasing isn't the real definition of "inflation," which is an increase in the money supply. Beef is up because the herds have shrunk, and that's a supply and demand issue, NOT inflation.
I have utility bills from back in 2002; back then, I paid about 7 cents per kilowatt hour. Today, it's about 15.9 cents per kilowatt hour. So the increase has been about 127 percent in those 23 years.
While that's not nothing, and it actually suggests a utility price increase rate of about 3.6 percent, it's not as much as he suggests.
Same thing goes for a lot of other items and services.
You're right, what we buy today is not the same as what it used to be. Cellphones, for instance. Streaming services. Satellite or cable TV. I grew up during a time when television came over the airwaves and was free if you had a TV and rabbit-ears antennae.
And cars--the first car I ever owned, a used 1964 Dodge Polara, had an AM radio, a heater, and automatic transmission. That was it.
Interval wipers were accomplished by turning them on...then off. No air conditioning. No rear-window defogger (I installed one). No FM radio (I added a tuner for that). No cruise control. No backup camera. No satellite radio. No GPS on the car's screen run from my cellphone. No moonroof, no power windows, no traction control, no lane-keeping assist, no computer telling you real-time your mileage...and the list goes on.
So, yeah, cars are more expensive but are they worth it?
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As an aside, just because I'm on a roll, does it cost more in gasoline to drive a mile today than it did 50 years ago? If you take into account the improved mileage of cars today,
control for something like minimum wage as a baseline income, you'll find it's as cheap or cheaper to drive a mile today, in terms of gasoline expended, than compared to 50 years ago.
My Dodge Polara got 15 mpg on the highway. Today my Ford Escape will get in the middle 30s, more than double the mileage. Fifty years ago minimum wage was $2.20/hour; today it's $7.75. Gas back then cost 50 cents a gallon; today, about $3 (depending where you live, of course).
Back then, you could buy 4.4 gallons of gas with an hour of minimum wage; that would take you (4.4 x 15mpg) about 66 miles. That is, an hour's minimum wage would let you drive, in terms of gasoline cost, 66 miles.
Today, the min wage of $7.75 will allow you to buy 2.58 gallons of gas. Multiplied by what my Escape gets today for mpg (35mpg), you can drive 90.3 miles.
I'm not saying that's all that's involved, but it's an interesting illustration of just how hard it is to figure out how much prices have increased.
And yes, you can manipulate the assumptions until the cows come home, but things are not just as John Williams suggests.
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And because I always like to look at both sides of the issue, we recently had our roof replaced due to storm damage. Cost? About $25,000.
Back in 2009, 16 years ago, we had it replaced for the same reason; cost back then? $7,300.
Some things have gone up a LOT more.
