Why Can’t We Party Like It’s 1905?

When writing historical things, I try to include perspective from people who actually lived through the events. And for money issues in the US, I’m able to do that back to about 1905.

So, do you think life was nasty, brutish, and short in 1905? That there were poor and starving people falling dead on every street corner?

Hardly.

The Wright brothers were flying for 30 minutes at a crack; Einstein was upgrading the laws of physics; telephones and electric lights were being installed all across America; Henry Ford was getting the final pieces in place for his moving assembly line and Model T; radio was being developed; art was flourishing; and the world was more or less at peace.

Sure, we have far more tech and better medicine now, but mostly because the people of earlier times (like the 1905 era) gifted it to us.

People in 1905 lived in heated homes, refrigerated their food, had access to professional physicians, traveled the world (mostly on trains and ships), read daily newspapers (there were many more of them in those days), watched movies, and ate just about the same foods we eat.

So, was it really that bad a time?

No, it wasn’t. In fact, it was better in important ways.

Money Issues in the US: The Facts Don’t Lie

Consider this:

The working person of 1905 kept his or her money. They ended up saving somewhere between a quarter and a half of everything they made – after living expenses.

It’s hard to be completely precise when reconstructing the budgets of average people in 1905 (records are hard to find), but we do have enough for a good, close guess.

Here’s how finance worked for a working family man of 1905:

Annual income:           $700.00
Annual expenses:      ($350.00)
Annual savings:           $350.00

If you’re thinking that I’m taking liberties with these numbers, let me assure you that I’m not – I’m being conservative. For example:

  • The income figure should probably be higher. I’ve found figures of well over $800 for construction workers.
  • As for expenses, I rounded up from a New York Times article, dated 29 September, 1907. It specified $325 per year.
  • Added to that is the fact that many people grew their own food during that time, which would skew the figures further.
  • As noted initially, I compared these numbers with stories I heard from relatives who lived through the time. My uncle Dave, for example, used to tell me how he got a job paying $390 per year sweeping floors as an unskilled immigrant (who spoke almost no English) in 1903.

The next time you drive through an old part of town and see the grand old houses, remember that people were able to build and buy them because their paychecks weren’t stripped bare. There were no income taxes in 1905, no sales taxes, no state taxes, and not much in the way of property taxes.

There was also no such thing as a military-industrial complex in those days, and – miracle of miracles – the rest of the world survived!

And Now…

Today, the situation is much, much different. The average working family pays about half their income in combined taxes: income taxes (to the state and the Feds), payroll taxes, property taxes, gas taxes, utility bill taxes, sales tax, local taxes, and on and on.

So, figuring an average income of just over $50,000 (the 2011 figure). And combined taxes of about $25,000, the average American family is left to pay bills like these:

Mortgage                     11,000
Car payments              6,000
Gas, repairs, etc.         2,500
Property taxes             2,500
Food                              3,000
Total                          $25,000

That leaves people zeroed-out. And again, I’m being conservative, and I haven’t included a number of smaller expenses.

Great Grandpa Did It, So Why Not Us?

Your great grandfathers faced very few of the taxes that we face. (The government survived on tariffs.) There was no social security either, and – believe it or not – the streets were never full of starving old people. Families were able to take care of their own – it’s not that hard when you’re saving half of your income!

We have forgotten that it was once possible for an average person to accumulate money. The truth is that productive people should be comfortable. Well-off, as they used to say.

So, why can’t we live like it’s 1905?

You might want to think about that question.

**

Paul Rosenberg
FreemansPerspective.com

3 thoughts on “Why Can’t We Party Like It’s 1905?”

  1. The money worked quite differently back then, too. That was before the Federal Reserve, and the Internal Revenue Service were incorporated. The dollars they had then could actually have been called “money”, I think, with a straight face. Our modern federal reserve notes are counterfeits of money and fraudulent substitutes for currency, and I think it’s important for people to begin to recognize this. These financial instruments we’ve been tricked into calling money are **not** money. Nor are they currency. They are debt which has been packaged into a financial instrument that is traded in a fashion not very similar to how currency is traded at all.

    The evil genius of that scheme is that to the layman, it seems like an insignificant detail: they use it the same way they used money, back when that was a thing… but it’s not money. It doesn’t work like money does, and it doesn’t do the things in an economy that money does. Consider savings, for instance. Nowadays, people all put their “savings” into banks, which then do some kind of perverse accounting shell game to “lend” out ten times the amount deposited, and we’ve all been programmed to laugh at and ridicule the hypothetical fool who saves by storing cash… but consider that very different things happen if you store money for savings, than if you store debt.

    If you store money under your bed, you decrease the overall supply moving through the economy. Money becomes more scarce relative to goods, so prices drop. In other words, by putting money under your bed, you cause it to appreciate in value! Especially if this is a widespread practice. Of course, this means that those savings gain more and more purchasing power as (1) people save, and (2) economies optimize and prices fall naturally, creating further and further incentive to take that money out of storage. This increases the supply of currency, causing prices to rise again, which encourages saving again because the benefits of spending are reduced. So there’s a natural ebb and flow, and it’s self-balancing.

    Now, debt… that’s a different thing entirely. (Disclaimer: this is based upon my own research, and my understanding probably isn’t perfectly accurate, but this is what I believe is going on.) When you swipe your credit card at the cash register, the bank doesn’t lend you dollars out of their accounts; they print new dollars out of thin air (legally, you did it, I think) and put those into the merchant’s account. When you pay your card at the end of the month, the dollars you pay are destroyed (I’m not sure whether the interest is or not…). Now consider that *all* federal reserve notes (the “dollars” we’re familiar with today) are made this way, at least officially. This means that the total supply of dollars in existence is equal to the principal of the debt within the economy… But the total debt is the principal plus the accumulated interest, which in turn means that it is mathematically impossible to pay off all the debt… So we’re all in a game of musical chairs trying to scrape together enough central bank notes to pay off our debt (sit in a chair) but it’s impossible for us all to do it (there’s more people than chairs). Now to the original point: what happens when someone saves central bank notes by putting them under their mattress? They decrease the total supply of bank notes moving in the economy, which doesn’t really affect prices very clearly, but it does reduce the number of chairs in the musical chairs game: there’s fewer notes available to scrape together enough to pay your credit card bills. This is probably why the system is so insistent that you must always save by depositing in a bank, not by storing cash: because they’ve created a system so perverse that storing cash actually damages the economy. This system is degenerate and self-destructive. By mathematical necessity, debt increases infinitely and the possibility of paying debt off is, in the aggregate, guaranteed impossible.

    So yeah, I’d like to go back to a system with honest money in it, where if I store it, it appreciates in value even though the number stayed the same.

  2. So shocking to see these numbers and life before taxes. I’m also surprised the madness has gone on as long as it has. Thanks for writing and sharing!

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