Not Cheaper by the Dozen

Post-1971, America’s money has been unreliable. You could buy a dozen eggs in 1971… and a dozen today. Same eggs. Not noticeably better or worse. But the price has changed.

Source: Getty Images

Thursday, February 20th, 2025

Bill Bonner, writing from Baltimore, Maryland

“I will very quickly deflate. We are going to take inflation, and we are going to deflate it. We are going to deflate inflation. We are going to defeat inflation. We’re going to knock the hell out of inflation.”

—Donald Trump, on the campaign trail

“Inflation is back…I had nothing to do with it.”

—Donald Trump, yesterday.

Today’s inflation weather report:

Three percent CPI… feels like 10%.

On the radio, a call-in show:

“I went to the grocery store to buy eggs. I couldn’t believe it; they were $8 a dozen.”

“That was cheap,” answered another caller. “I had to pay $12… that was a dollar an egg.“

“Heck,” began a third, “I couldn’t find any eggs. The store was out of them.”

Eggs have become precious. Our chickens still produce them. But now they are all golden.

This morning, we took a bag with three dozen eggs to our son who lives in the city. Street value: as much as $36 dollars.

“Psst… here they are,” we said in hushed tones, opening the bag so he could see the cartons.

“Not too loud, Dad… I don’t want to get robbed on the way back to the office.”

Eggs are shooting up in price because of a ‘supply shortage.’ The bird flu has cut output. The price (at $5/doz.) has gone up 238% over the last four years.

Inflation is on the march. We saw last week that the feds’ inflation calculation substantially understates the real impact of inflation on household budgets. Everyday items — such as eggs — cost more than the official CPI suggests. This means that ordinary families, buying ordinary things, are getting ordinarily poorer.

And the Producer Price Index is rising at a 3.5% rate — the fastest in two years.

Even by the feds’ own figures, prices are edging up more quickly. Last Wednesday’s report showed the CPI rising at a 3% rate. Take out the outliers, in what economists call the ‘trimmed mean,’ and you get a more accurate picture. It shows inflation rising at a 5% rate.

Or if you used the statistical methods of the 1980s (before the BLS changed the formula) you’d get an inflation reading of about 10%.

‘Sticky’ inflation, which excludes rising food and energy costs, is stuck at around 3.6% growth, year-over-year, according to the Atlanta Fed

These ‘inflation’ figures — whichever ones you choose — clock the decline of the US dollar. Post-1971, America’s money has been unreliable. You could buy a dozen eggs in 1971… and a dozen today. Same eggs. Not noticeably better or worse. But the price has changed. They were 45 cents a dozen back then. Today, given all the innovations, tech improvements, etc… they should be much cheaper; instead, they’re at least ten times as much — in dollars.

Gold has historically been a more reliable measure of wealth. But it too is giving us a very different reading today, as opposed to 50 years ago. In 1971, an ounce of gold would have bought 44 dozen eggs. Today, it buys about 550 – if you can find them.

Naturally, if people have a choice, they will spend the depreciating currency (the dollar) and hold onto the appreciating one (gold). And once this notion gains traction, gold rises even more (meaning, other things go down faster).

Reuters:

Goldman Sachs raises year-end gold price forecast to $3,100

Goldman Sachs on Monday raised its year-end 2025 gold price forecast to $3,100 per ounce, up from $2,890, citing sustained central bank demand.

The bank estimates that "structurally higher central bank demand will add 9% to the gold price by year-end, which combined with a gradual boost to ETF holdings as the funds rate declines."

However, if policy uncertainty, including tariff concerns, remains high, Goldman sees the potential for gold to surge to $3,300 per ounce by year-end due to prolonged speculative positioning.

Policy uncertainty seems like a certainty.

So does more inflation.

More tomorrow… why the price of eggs, in terms of gold, shouldn’t change. Neither should the price of stocks.

Regards,

Bill Bonner

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Research Note, By Dan Denning

Speaking of gold! On Tuesday, I did a live video chat on major changes to the world’s monetary system involving gold. It’s been called ‘The Mar-a-Lago Accords,’ in reference to the 1985 Plaza Accords (in which the US dollar was devalued). Joining me was Matt Smith from Doug Casey’s Crisis Investing. If you missed it, you’ll find the video at the link below (a transcript for paid subscribers will be published on Sunday).