The Justice Department’s auditors have been getting a lot of press lately. They found that the department paid $16 each for muffins at a recent event in Washington. At another event in San Francisco, the department spent $76 per person on lunch.
According to the Hilton hotel chain, which hosted the DC muffin event, the auditors didn’t read the invoice very carefully:
Hilton Worldwide, which manages and franchises hotels including the Capital Hilton where the conference took place, says the price included not only breakfast baked goods but also fresh fruit, coffee, tea, soft drinks, tax and tips. It says the report misinterpreted its invoices, which often use shorthand and don’t reflect the full menu provided.
So it appears that part of the story has been exaggerated. The $76-per-person lunch in San Francisco, also held at a Hilton, included “slow-cooked Berkshire pork carnitas, hearts-of-romaine salad — and coffee at $8.24 a cup.” That one still looks dodgy. A bit fancy for a government conference. But the muffins do seem to have been blown out of proportion.
In related news, after an assistant told Federal Reserve Chairman Ben Bernanke that the muffins didn’t actually cost $16, he was reportedly overheard muttering to himself, “soon…”
I forget who I’m paraphrasing here, but the two iron laws of modernity are 1) things are getting better, and 2) people think they’re getting worse. The short video at the bottom of this post is one way to prove the first law to victims of the second law. It’s a rough cut adapted from a recent talk Don Boudreaux gave; I eagerly await the full version.
When I took macroeconomics in graduate school, the professor circulated a Sears catalog from 1900 or so around the classroom. Most of the prices were given in cents, not dollars. Now imagine that you could buy anything you wanted from that catalog today at those low prices. They’re still too expensive. Take these vacuum cleaners pictured below:
$12.50 for a vacuum cleaner? What a deal! And yet, given the choice, I would not buy it. Too expensive. I wouldn’t even be willing to pay $5.00 for it. Heck, I wouldn’t even want it for free.
Why is even a price of zero too expensive for that vacuum? Because it doesn’t even use electricity. It’s manually powered. No thanks. I’m better off with the $90 vacuum I bought a few years ago.
Of course, I’ve been ignoring inflation. As a useful public service, the Minneapolis Fed has an inflation calculator right on its homepage. It only goes back to 1913, and our vacuum is a 1909. But that’s close enough for the point I’m making.
If that vacuum cost $12.50 in 1913, it would cost $285.17 in 2011. This manually powered vacuum, that I wouldn’t pay a dime for, is three times as expensive in real terms as my electric vacuum.
Things are better now. Modernity is a blessing. The first law holds. Hopefully the second law won’t prove quite so rigid.
Click here if the embedded video below doesn’t work. It’s well worth 1:26 of your time to watch.
There is a lot of talk lately about the Fed’s quantitative easing policy. It is an indirect way of printing money, and also a huge mistake. It turns out the Fed can’t even print money the direct way without making mistakes. A new $100 bill that is harder to counterfeit has been rolling off the presses recently. 1.1 billion of them have been printed so far, at a cost of $120 million.
An official familiar with the situation told CNBC that 1.1 billion of the new bills have been printed, but they are unusable because of a creasing problem in which paper folds over during production, revealing a blank unlinked portion of the bill face.
A second person familiar with the situation said that at the height of the problem, as many as 30 percent of the bills rolling off the printing press included the flaw, leading to the production shut down.
The total face value of the unusable bills, $110 billion, represents more than ten percent of the entire supply of US currency on the planet, which a government source said is $930 billion in banknotes.
Coincidentally, these would be the first bills to feature Timothy Geithner’s signature.
Posted in Economics, Monetary Theory
Tagged benjamins, federal reserve, government bloopers, hundred dollar bills, inflation, monetary policy, msnbc, printing money, qe2, quantitative easing, tim geithner, timothy geithner