Many of you are aware that the $3,000 you spent on computers
last year could be replaced by $2,000 spent today. However,
only recently have I actually purchased computer gear that I
bought with dollars that were only half as valuable as those
with which one of my drives was purchased in 1979.
Many of you are aware that the average personal computer was
$5,000 - $10,000 some 10 - 15 years ago when Apples and IBMs
first appeared on the scene, but you might not be aware of a
trend beyond the price reduction that makes today's computer
prices an even better bargain in comparison.
In fact, computers today are TWICE as good a bargain as they
appear in comparisons with those early computers, and it was
already looking as if they were bargains beyond all belief.
In earlier articles I mentioned the fact that today's cheapy
486 DX2/66 computers were 100 times as fast as the originals
from IBM, and were likely to also have 100 time as much hard
drive storage. [After all, the original PC didn't even have
hard drives, and still cost a fortune.]
Here are a few examples to jog your memory:
These are "bare bones" prices for the computer systems; when
filled out with color monitors, printers, ports, modems, and
the rest of an average computer system, these prices usually
doubled, and the prices I usually quote as modern comparison
figures include VGA, printer, modem, mouse, and software.
1979 Konan 5M External Hard Drive Kit for Apples $3,000
1981 PC-DOS CP/M 1-Floppy 128K-RAM serial-parallel $2,000
1983 PC-XT added 3 slots and 10M hard drive $3,600
1983 PC to XT Upgrade kit with 5M ST-506 Hard Drive $1,500
1984 PC-AT 1.2M Floppy 256K-RAM no ports 3x faster $4,000
1984 PC-AT Enhanced added 20M hard drive no ports $5,800
[These two Hard Drive Kits both included the ST-506 drives--
but the Apple was External while the IBM was Internal: both
were from third-party vendors.]
Back in those days extra floppy drives from Apple or IBM for
around $325 to $475 respectively [and don't forget that many
of these floppies were single sided and held around 150K but
we only tend to remember the double sided floppies. If your
memory includes "flippies" you know what I mean. (Flippies:
single sided floppy disks which were notched so you could do
a "flip-over" with the floppy, and use the other side, which
was supposed to be unusable but which in most cases was just
as good as the side you actually paid for. Don't forget the
floppy disks started at $10 each, with dollars that were the
equivalent of $2 in 1993 dollars: so, each time you punched
a notch and turned one over, you basically gained $20 in the
money we use today. You then also needed only half as much,
in terms of physical shelf space, to store as much data. It
might stagger the present day mind to actually think of that
monstrous storage problem we had when we wanted to store any
huge books, such as the Bible, on single sided floppies.
The two points I want to make here are that for the cheapest
of these machine prices back then, you can now get a machine
that is 100 times faster with 100 times the disk space: and
that the same is true for the most expensive AND that prices
today are actually half what they appear to be in comparison
to the prices listed above.
So, when you spend $3,000 on computer gear today, you are in
fact only spending half as much as was spent back in '79 for
the Konan drive. . .you are really only spending $1,500 from
1979. . .due to changes in the value of the dollar as per an
assortment of Consumer Price Index figures [none of which is
in agreement with any of the others, so you are encouraged a
bit to look up additional information on the subject. These
figures [below] are presented only to provide a continuum to
make comparisons. Actually these figures are a conservative
estimate [as most government figures seem to be [example, no
double digit inflation for any year since 1947, which was an
extremely good year, by the way.]
So, while other prices were rising to make up for weakenings
in the dollar. . .you are probably aware that your expenses,
in general, have just about exactly doubled since 1979, when
we bought that first hard drive for $3,000. Those $3,000 in
a bank account that created no real profit other than enough
interest to keep up with the Cost of Living increases, would
now be $6,000 and would buy you a computer more powerful and
with more RAM and hard drive space than most of you want. A
Pentium with 8 megabytes of RAM and adding several gigabytes
of hard drive, or a 486 with even more RAM and hard drive.
While the prices of everything else had been going up at 5%,
6%, 7%, 8%, 9% a year, the price of computers has gone down,
at about 33% per year. . .a truly astonishing rate that lets
you buy something hundreds of times better for less than the
price was just 10 or 15 years ago.
Below you will find a short index of the computers we bought
since 1979, and then a price index from 1875 to 2010 in case
you want to look up some prices mentioned in certain years a
decade or a century ago would actually be today.
For example, a teenager watching Roger Rabbit mentioned that
the $100 Bob Hoskins received for working on the case was an
extremely low figure. However, an examination of the figure
below for 1947 will reveal that prices then were about 17.5%
which would make Hoskins' fee about $600 in our 1993 dollars
we use today. . .even if the physical dollars are the same.
So, what happens to the value that was lost from our dollars
that do not buy as much by a factor of 17.5% since 1947 ?
Let's imagine for a moment that we are financial wizards and
have all the financial connections open to such wizards; the
early 1970's are a perfect example: Nixon is in office, and
he releases the dollar from the $35 per ounce price supports
the dollar has had since Roosevelt took us off the standards
of direct gold exchange to end the Depression in the 1930's.
As an example, we send a million of our dollars to somewhere
we CAN buy gold [it was illegal then for US citizens to have
gold, unless they were coin collectors or worked gold in the
professions, such as dentistry, jewelry, etc.]
So, we have bought a million dollars worth of gold at around
$35 per ounce, which was a pretty fixed price at the time.
Now, the price restrictions of $35 per ounce are removed and
the price of gold goes up to $755 per ounce, just about what
it did during the next few months after the price release.
Now our gold is worth 21 times as many dollars as it was, so
we now can sell the gold and get 21 million dollars.
When we spend this 21 million dollars, we are competing with
all the other dollars in the marketplace, and prices have to
go up as a result, because there are now more dollars but no
more anything else. . .so dollars get cheap, and all dollars
everywhere give up a percentage of their value to pay for an
increase in the number of dollars WE have. So, if all these
dollars lose 5% of their value, then we can buy a 20 million
dollar share of the future with our 21 million dollars while
everyone else loses 5% of the money they let sit in pockets,
under the mattress, or wherever.
Half of the value of every dollar disappeared from 1979-1993
[a period in which the Cost/Price Indexes rose at about 6%].
And those 1979 dollars would buy only half as much as a 1969
dollar bought, when prices were rising even more quickly.
And those 1969 dollars were buying only half of what dollars
bought in 1947.
Here are the doubling years:
2010
1993
1979
1969
1947
1916 and 1933 had similar costs, about half those of 1947;
these fluctuations were caused by WW I and Depression
1898 was also a very low point, but prices before this had
been quite stable by today's standards, with 1989 and
1899 being the only two exceptions: which happened to
cancel each other out fairly well
Thus, approximately, prices in 2010 will be double what is
the case in 1993, just as 1993 was double 1979; 1979 which
was double 1969, which was double 1947, which was double a
spread around WW I and the Depression.
With 1993 labeled as "1.00000" the value of a dollar which
is expected to be spent in 2010 will be "0.50000" or fifty
cents.
2010 $1 buys $0.50 worth of 1993 dollars
1993 $1 buys $1.00 worth of 1993 dollars
1979 $1 buys $2.00 worth of 1993 dollars
1969 $1 buys $4.00 worth of 1993 dollars
1947 $1 buys $8.00 worth of 1993 dollars
1916 and 1933 $1 buys $16.00 worth of 1993 dollars
1898 $1 buys $32.00 worth of 1993 dollars
[These are obviously gross approximations:
more exact figures are presented below.]
Here are some less conservative estimates, from other sources: