The Real Price of Gas

A while back I had a notion about gas prices and inflation. What if gas prices really weren't going up that much? What if the value of the dollar is just dropping that rapidly? It would be an excellent ruse. The nation uses gas to transport just about everything we purchase. The price of gas goes up, so the price of food goes up, and the price of electronics goes up, even the price of books goes up. But the price of digitally delivered goods has remained somewhat stable.

If the price of gas is a ruse to cover for the devaluing of the dollar, why would the price of digitally delivered goods remain stable? Because the price of these goods should actually be going down! The increase in bandwidth and ever increasing storage capacities coupled with ever expanding electronic markets means that electronic content should be dirt cheap. But those people creating those products, generating that content, still have to buy very real goods such as food, clothing, shelter and iPods. With the cost of those items rising, the cost of electronic content has remained stable by the grace of an expansion of the online customer base.

According to this chart, I'm wrong. Charts don't lie and it says that in inflation adjusted dollars that gas prices have hit an all time high.

But inflation is only one factor. It is typically an indicator of the domestic economy's state of health. It is not always a reflection of the value of that nation's currency versus another nation's. If you look at exchange rates over time, the dollar hasn't been doing so hot. Factor that in to the data in the chart (that would never, ever lie to you) and I might just be onto something.

Gas prices aren't really going up. They are just an excuse to raise the prices for everything and blame it on them damned foreigners rather than taking responsibility for our domestic economic woes. Shut down the Federal Reserve, return to a currency based on a real good (such as gold, silver or heroin) and gas prices should stabilize.

That's my theory and I'm sticking to it until something better comes along.