When the author of this blog was growing up, a 6 oz. bottle of Coke cost only 5 cents. 50 years later, the same 6 oz. bottle would sell for 50 cents, if that bottle were still available. (The 12 oz. can usually sells for $1.00 in many outlets, so I use that for my comparison.) Even if my prices are off a little, the price of most optional consumables has gone up by a factor of 10 since I was a child.
Inflation is the thief that robs us all without immediate pain. Governments tend to spend more money than they take in via taxes, and quietly run the printing press to repay creditors with inflated currency. America has done this several times in our history, most notably during the Great Depression, when we changed the price of an ounce of gold from $20 to $35, and then confiscated the gold in American citizens' hands.
The second time America raped its currency was during the Vietnam war. Instead of taxing the public, and openly dealing with the costs of this unneeded war, we issued debt that would be paid off with cheaper currency. And our government got into the habit of printing money, inflating the currency, until we had short term interest rates approaching 18%. When credit card debt isn't expensive, the economy has serious problems. And we did have them in the late 1970's and early 1980's, where Jimmy Carter had to slam the brakes on the economy to prevent hyperinflation from kicking in. (Of course, Ronald Reagan got the credit here, as actions of one president often show results in the next president's term.)
Today, we're seeing a great distraction taking place. Our president has decided that the public wants a stronger military (rah, rah, rah for our team - yeah, right!) and is willing to spend money that we don't have. During his campaign, he posed a question which is very dangerous for the issuer of the world's settlement currency - why doesn't America renegotiate its debt, and settle for pennies on the dollar? Many people have forgotten that question, but I haven't. What will happen if he decides to pay back creditors with cheaper dollars?
70 years after World War 2, the world now has several decent options for a settlement currency of choice, the dollar being only one of them. The other two possibilities of note are the Euro and the Chinese Yuan. Any nation or zone that issues the dominant settlement currency has a distinct advantage, as its businesses have an easier time dealing with currency risk. And that results in lower costs for the nation/zone, resulting in a higher standard of living for people within that nation/zone.
Can we afford another round of inflation? No. But based on historical trends, we will likely see one with disastrous effects. Hopefully, I am wrong, as there are a lot more people living on fixed incomes now than when I was a child, and they are much less able to afford the risks of inflation.
The Cuba Libre - a drink that has both political and social meanings.
As I write this, President Obama is about to visit Cuba - the first American President to visit in approximately 90 years. Much has changed in both countries, and in the drink since then, As a result, many angry words have separated these two countries - countries that should have been friends for most of the past 60 years.
One can not say for sure that the original drink was made with Coca Cola according to the linked article. But by the 1940's, a Rum and Coke was what was understood to be a Cuba Libre. During this time, Ernest Hemingway was becoming a native of both Florida and Cuba, being well known for being a patron of El Floridita. Fast forward a few years, and we have the Cuban Revolution - where Castro threw out the corrupt Batista regime (as well as the American mob), and sided with the Soviets in the time of the Cold War. As a result, the American public became brainwashed to see Cuba as an enemy nation.
During the early stages of Castro's rule, he nationalized virtually all of Cuba's industry, and did not compensate their owners (mostly American) for the taking of their property. (Bacardi's holdings were affected. Luckily, they had enough resources to relocate their brand and production to Puerto Rico.) A large wave of people fled Cuba, coming to the US, and many of them settled in Florida - distorting the politics of the state for generations to come. Not only did we have an important group of business leaders who had a bug up their collective ass regarding Cuba, but we had a vocal group of people making sure that we couldn't easily make peace with the Castro regime.
Let's look at some complications that caused us problems:
- Bay of Pigs fiasco
- Cuban Missile Crisis
- Cuban Trade Embargo
- Kennedy Assassination
Each issue on its own wouldn't be that bad. But when the net effect of all of them are put together, it's easy to see how we'd be unable to have official relationships between our countries for 50+ years. The Bay of Pigs fiasco made it possible for Castro to use his revolution as a potent symbol to encourage support for his regime against the will of the USA. The Cuban Missile Crisis allowed the US and USSR to deescalate tensions, preventing a war (that Castro wanted). The Cuban Embargo which prevented commerce between the two nations didn't help but to further separate the two nations from each other. Most people don't know this, but Kennedy was working on ways to get rid of the embargo before he was killed. Sadly, the one person who could have reversed this pattern of animosity between nations wasn't around to fix things - and as a result, we had an extra 50+ years of separation.
It's amazing how much flak Obama received for starting the process of normalizing relations between our two countries. Unlike North Korea, Cuba has not developed nuclear weapons, nor has it developed intercontinental ballistic missiles. Yet, until recently, I could legally spend money in the DPRK, and not in Cuba. This is ludicrous! I'm glad that I'm seeing positive changes occur in my lifetime....
But I will close out with a thought I had about 20 years ago, and wish I could have made true. When my dad was cleaning out my grandmother's apartment, he found a bottle of Bacardi Rum that was labeled "Product of Cuba". (I wish I could have saved that bottle and its contents.) A few years later, the CEO of Coca Cola was a Cuban emigre. A couple of my co-workers were Cuban exiles. A perfect thing to do would have been to bring in this bottle of rum, have a fresh bottle of Coke near my desk, and bring these two men over on New Years Eve to wish them a Happy New Year, and a free Cuba, all with true Cuba Libres in our hands.....
