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## Ethanol Weighs More Than Gas

I’ve seen comments about an inverse relationship between gas mileage and gas prices – as the price goes up, folks comment that mileage is dropping.  It is political – someone pushed the idea that alcohol was a renewable resource, Congress voted, and now nearly all of our regular gasoline has ethanol added.

Like most things in life, mathematics explains what’s going on, how to figure out how much ethanol is in your gas, how far gasoline will put you down the road, and what ethanol will do to your gas mileage.  You don’t need to fasten your seatbelt – the research is complete and available online.  So, let’s look at the two substances.  My little chart is in gallons – though we could change to liters as we cross the 49th parallel, and I’m just pencil-whipping regular.  (everything is standardized at 68 degrees Fahrenheit.)

Weight                        Energy

Gasoline (regular)        6.1 lbs                          114,100 BTUs

Ethanol (E100)            6.58 lbs                          76,100 BTUs

Methanol (M100)        6.60 lbs                          56,800 BTUs

Obviously, with a quality scale, I can weigh a gallon and figure out how much is gas and how much is alcohol.  It’s going to be harder to figure out whether the alcohol is ethanol or methanol – the weight of each is fairly similar.  It gets a bit more complex when we notice that different grades of gas can vary from 5.9 lbs per gallon to a high of 6.5 lbs per gallon.  We’ll use the normal 6.1 for our calculations.

Still, we can figure out that 9 gallons of gas will weigh 61 lbs, and when we add a gallon of ethanol, the total weight will be 67.58 lbs . . . or 6.758 lbs per gallon of E10 blend.  Still, in order to keep gas prices down, our President has ordered that the 10% alcohol can be raised to 15%.

Now here are the critical calculations:

9 gallons of gasoline provide 1,026,900 BTUs.  A gallon of ethanol provides 76,100 . . . so a gallon that is 10% ethanol yields 110,300 BTUs – which is 3.33% less energy than the 114,100 BTUs that a gallon of pure gas produces.  We’d expect that reduced energy to yield an equivalent drop in gas mileage.

If we go to 15% ethanol – which Joe Biden has approved (to end the high prices I guess) the math works easily – 8.5 gallons of gasoline provide 969,850 BTUs, 1.5 gallons of ethanol provide 114,150, for a total of 1,084,000 BTUs.  Divide that by 10, and we’re looking at 108,400 BTUs – a full 5% drop in energy potential, and probably a similar result on gas mileage.

You can work the values of ethanol blend gasoline prices at the pump when you know what the blend is – my old Talon likes premium . . . \$5.52 today and 93 octane.  Octane measures how stable the fuel is as it burns – I pay more, but I don’t really get any BTU increase.  But the ethanol blend just doesn’t let the high compression engine run well.  E15 fits in at 88 octane, so I won’t be using it if I can help it.

## Thoughts on Inflation

I’ve been watching monetary inflation since 1976 when I voted for Jimmy Carter.  I still don’t give Jimmy full credit for that spate of inflation – Nixon made the call that the US dollar would no longer be backed by gold in August of 1971.

1968 had been an interesting election – I recall the unhappy observation “Nixon, Humphrey, Wallace – three strikes and you’re out.”  The picture below brought back memories of a happier time, when I would add a million dollar Zimbabwe bill to a retirement card, so that my retiring colleagues would be millionaires as they left the university.  Ten bucks bought all the Zim million dollar notes I needed for a slew of retirement receptions.

Now the thing about inflation is that it taxes savers, and can move into being a tax on investors.  If we look at the value of gold during the California Gold Rush – 1849 – it was \$18.93 per ounce.  That same value held through the Virginia City days, and basically took Montana from wilderness to statehood.  In 1920, gold finally topped \$20 per ounce.  When Franklin Roosevelt was elected President, gold was at \$20.69 per ounce – the next year, 1933, it was \$26.33.  In 1934, it went to \$34.69.

A couple of old Winchester catalogs, from 1900 and 1916, suggest that my Grandfather paid about \$19.50 or a little more for his 1894 32 special rifle.  A glance online suggests somewhere close to \$1,200 dollars today.  As I write this, gold is going for \$1890.35 – roughly 100 times higher than when the rifle was made in 1902 along with the new, more powerful 32 special.  The cost of the rifle hasn’t kept up with gold.  Inflation or not, it’s kind of nice to look off the front porch and see the spot where my grandmother got a four-point in 1922.

At that turn of the century, land here was still available for homesteading – land here in Trego had little value.  Thirty dollars per acre was still a norm for accessible land in the 1950’s.  It’s another basis for calculating inflation – and if memory serves, Lee Harvey Oswald was paid 85 cents per hour in 1963.

Median family incomes were somewhere around \$500 per year in 1900, and had risen to about \$3,300 by 1950.  Still, that half century was a time of many new developments and a greatly improved living standard.  Part of the change was that people could buy more – much like during our more recent inflationary times – along with the inflation of the eighties came the personal computer, the compact discs, video players etc.  Technical advances reduced the impact of inflation.

There is a certain irony in Putin’s decision to tie the Russian ruble to the value of gold.  Since that decision the ruble has gone up 6% compared to the US dollar.  He’s kind of the anti-Nixon, creating a stronger currency instead of a weaker one.  I guess that inflation often boils down to a handful of government officials making the decision to print more money.  I have a hunch inflation helps the folks who get the new dollars a lot more than it helps those who are trying to hang on to the existing dollars.

## Two bits on inflation.

Recently a friend explained the meaning of the phrase “two bits” to me.
It means “25 cents”. He recalls hearing a song on the radio when he was young that went “two bits, four bits, six bits, a dollar”. While I was unable to find this song (the closest I came was a Florida state sports cheer), I did stumble on some more of the history behind the expression.

Back when the Age of Discovery was still underway, many countries were basing their currency on the Spanish silver dollar. Spanish silver dollars were often cut into eight pieces (like the slices of a pie). These smaller pieces were used as coins worth fractions of a dollar. Thus the Spanish silver dollar coin was also sometimes called “a piece of eight”, as it could be cut into eight “reales” or “bits”.

Many fledgling governments based their currency on the Spanish silver dollar. In 1792 the US government created a standardized currency for itself. The newly-founded U.S. Mint fixed the value of the American dollar to that of the Spanish silver dollar. When the first American quarter-dollars were minted, each was worth two 1/8 bits of a Spanish silver dollar.

Of course, inflation happened, as it usually does, and the Spanish pieces of eight (or “pesos”) were made with less silver than older ones, and their size kept dropping. The same could be said of Mexican Pesos, which started out based on the Spanish silver dollar as well. Eventually America went off the gold standard as well.

This brought the tune of “shave and a haircut (two bits)” to mind… Those words accompanying the tune date back to the 1930s… and provide us with an inkling of prices then.

It’s hard for the younger of us to imagine that a quarter used to be worth that much.
Nowadays I understand that a haircut tends to cost about \$25.00 – one hundred times as much, in less than a hundred years.

It’ll be interesting to see how much one costs five years from now.

## Inflation Since 1914

Looking at our nation’s deficit spending, I got thinking back to the Carter years, the high inflation and the high interest.  Then I decided to grab a table or a chart to see how things looked from a historical perspective.  This chart give inflation figures from 1914:

It turns out that our highest inflation was under Woodrow Wilson.  20.44% in 1918 – 18.1% in 1917, and 12.62% in 1916.  Back then we were on the gold standard – yet the price of gold remained at \$20.67 from 1910 through the twenties.  During the worst years of the great depression, inflation (deflation?) was about -10%.

Carter’s highest year – 1979 – saw 13.29% inflation . . . and to be fair, Carter inherited a good portion of his challenges from Nixon – whose highest (and final) year was 1974 at 12.34% inflation.  Trump’s last year, 2020, had only 1.34% inflation.  Biden’s at 4.31% on this chart, and we’re not through 2021 yet.  Still, it will be a challenge to top Woodrow Wilson.

Above the chart is this statement “Interactive chart showing the annual rate of inflation in the United States as measured by the Consumer Price Index back to 1914. The current rate of U.S. CPI inflation as of August 2021 is 271.70.”  As I write this, the net tells me that I can buy gold for as low as \$1827 per ounce.  Dividing that by \$20.67 shows that the price of gold has only increased by a factor of 88.39.

C.P. Snow described the second law of thermodynamics as “You can’t win, you can’t break even, and you can’t quit the game.”  Who says physics can’t be applied to government?

## Welcome Back Carter

It’s time to watch the Consumer Price Index again.  The CPI is published by the Bureau of Labor Statistics(BLS) and the recent release shows an inflation level that hasn’t been seen since Obama was a president.

“The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.6 percent in May on a seasonally adjusted basis after rising 0.8 percent in April, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 5.0 percent before seasonal adjustment; this was the largest 12-month increase since a 5.4-percent increase for the period ending August 2008.”

Well, the inflation rate isn’t up to where it was in the Carter years – but it looks to me like the BLS website is going to be worth watching.

## Now That’s Inflation

A bit less than 10 years ago, my department head, Donna Hess, retired.  As a gag gift, I bought a million dollar Zimbabwe note – everyone should retire as a millionaire.  It cost me a little less than 8 dollars US on ebay.  The note, and the sentiment, circulated around at retirement events throughout the year.

Today, I noticed that Zimbabwe currency is still on the ebay market, with even more zeros added.   This time it’s ten hundred trillion dollar bills for \$4.40 US.  I think part of the reason I’m writing this is just to have an example that lets me count how many zeros there are in a trillion.

Still, ten bills represent a thousand trillion dollars.  We know that the guy who is selling a thousand trillion dollars Zim for \$4.40 US is making a profit – just like the guy who sold me the million dollar note for \$8.00 US.

In Zimbabwe, they have added eight zeros to the currency in ten years – and it only buys 1/20th as much when you measure it in yankee dollars.  Now that’s inflation.

A Science for Everyone

## Inflation

Inflation is one of the very basic, very important economic concepts. It is deceptively simple. Increase the supply of money, and it’s like inflating a balloon. The amount of air in the balloon increases, the amount of money in the system increases. This is essentially what happens whenever the government prints more money.

When the amount increases, the value of each individual unit goes down. This becomes more difficult to understand, because a dollar is still a dollar. However, a dollar doesn’t purchase as much.

Think back. Remember. How much was gasoline ten years ago? Twenty? Thirty? But it’s not always the price that increases. Sometimes, the amount goes down. Candy-bars, anyone? They’ve shrunk considerably since I was a child admiring them in the checkout isle. Of course, some things increase in efficiency and decrease in price, even while others do the opposite. Why? Developing technology can really reduce the costs of making something, sometimes enough that the price declines, even as the value of money goes down.

The federal reserve aims for an inflation rate of 2%. But that’s a number with very little meaning to most people. We care more about how much the grocery bill will increase by. For that, we look at the consumer price index. Calculating how much the value of money has changed is as simple as having two reference points. Pick an item. What does it cost today? What did it cost back then? Do a little subtraction, and then a little division.

Of course, you could also use the CPI inflation calculator provided by the government. In that case, it told me that a 100\$ in 1920 had the same purchasing power as \$1,342.65 in 2020.

Why do we care about inflation? Sure, groceries cost more, gas costs more, electricity costs more, but we’re earning more too, right? Eventually, probably. What’s really concerning is when inflation is high, when you see the kind of chance the US dollar had from 1920 to 2020 over the course of a year. Wages just can’t keep up.

Literally printing more money, while the obvious (and easiest) means of causing inflation, isn’t the only way to go about it, but the alternatives are a bit complex for this summary.