America: 1977 vs. 2012

The Voyager 1 spacecraft blasted off into space 35 years ago, and it's still hurtling away from the sun at over 38,000 miles per hour toward the border of our solar system and beyond. It is the farthest a man-made object has ever traveled, and on the way it took stunning pictures of Jupiter and Saturn. How does the America that launched such an amazing object compare to the America that will see it off into interstellar space?

Inflation
Inflation was much worse in 1977, with the blame for the "Great Inflation" cast on politics, poor analysis, and supply shocks. The Federal Reserve has been relatively successful since then at keeping inflation in check. However, the threat of a return to high inflation makes many nervous, including Berkshire Hathaway's (NYSE: BRK-A  ) (NYSE: BRK-B  ) Warren Buffett, who in 2010 said, "We are following policies that unless changed will eventually lead to lots of inflation down the road." In a 1977 Fortune article, Buffett described the issues of high inflation that hurt real growth, and while the inflation rate isn't the same today, it doesn't seem like politics have changed much, especially as we talk about the fiscal cliff. As Buffett lamented 35 years ago:

But many signs seem negative for stable prices: ... the propensity of major groups in our society to utilize their electoral muscle to shift, rather than solve economic problems; the demonstrated unwillingness to tackle even the most vital problems ... if they can be postponed; and a political system that rewards legislators with reelection if their actions appear to produce short-term benefits even though their ultimate imprint will be to compound long-term pain.

Unemployment
When Voyager 1 left, the unemployment rate was 6.8%, on its way down from the high of 9% in 1975. Today, it's 8.3%, on its way down from a peak of 10% in 2009. Even with the higher unemployment rate today, the employment population ratio is fairly equal, around 58%. Obviously, a greater portion of the population is looking to work today, especially women, of which about 49% participated in the labor force in 1977 versus 58% today.

Personal savings
Voyager now communicates with a country that saves less than half of the proportion of income that it did when it launched. The current rate of 4.2% is also less than the average since 1977 of 5.9%. While this means consumers are spending more, which is good news for corporate revenues, it also means that less is going toward preparing for the future. As many people fail to take advantage of compound interest and the benefit of reinvested dividends early in life, many might be looking at an unattainable retirement.

NASA budget
The year that Voyager 1 took off, NASA received about 1% of the federal budget versus the 0.5% it receives today. The government now will depend more on private companies like Elon Musk's SpaceX, which just won a $440 million government contract to develop spacecraft and became the first private company to supply the International Space Station. Musk hopes to take SpaceX public next year, but recently suggested that he could also create a holding company for both Tesla (Nasdaq: TSLA  ) and SpaceX.

A year to remember
Voyager 1 also left Earth behind the year that Apple (Nasdaq: AAPL  ) and Oracle were founded. At that time, ExxonMobil (NYSE: XOM  ) , General Motors, and Ford were at the top of the Fortune 500. Today, ExxonMobil still reigns at the top, now followed by Wal-Mart and Chevron. The staying power of Exxon highlights the sustained and greater demand for energy, and Exxon looks to stick around with its diversified portfolio so that even if it's hurt by rock-bottom natural gas prices, it can still benefit from its petroleum, and vice versa.

Apple, on the other hand, aims to be the first company to reach a trillion-dollar market cap. In the time it took Voyager 1 to reach the end of the solar system, about 11 billion miles away from Earth, it has grown to over $600 billion. That works out to Apple generating $56 in value for every mile Voyager 1 traveled. Voyager's power supply is expected to last until around 2025, but Apple's growth could stutter well before then, for example, if carriers stop subsidizing iPhones.

Eyes to the sky
This year, America landed another rover on Mars, and while it's no trip across the solar system, it should keep us optimistic for the future. America in 1977 had problems but spawned important tech companies like Apple and Oracle. America today has problems, but entrepreneurs in 2012 might have already created a future market leader.

Can Apple's growth outlast Voyager 1? Read the Fool's premium report on Apple to get the latest on the growth leader's future prospects.

Fool contributor Dan Newman thinks we should send a spacecraft to the edge of the solar system every year with the latest Now That's What I Call Music! album. He owns shares of ExxonMobil, but does not hold shares of any of the other above companies. Follow him @TMFHelloNewman.

The Motley Fool owns shares of Tesla Motors, Oracle, Ford Motor, Berkshire Hathaway, ExxonMobil, and Apple. Motley Fool newsletter services have recommended buying shares of Ford, Berkshire Hathaway, General Motors, Apple, Tesla Motors, and Chevron, as well as creating a bull call spread position on Apple and a synthetic long position in Ford. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (2) | Recommend This Article (14)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 06, 2012, at 6:15 PM, xetn wrote:

    Two big differences between 1977 and 2012:

    Debt 1977 718 billion, debt 2012 16 trillion.

    money supply (M1) 1977 300 billion, 2012 1.7 trillion.

    $100.00 in 1977 now takes at least $378.00

    All of the above does not include and estimated 220 trillion of unfunded liabilities. ~ Larry Kotlikoff

  • Report this Comment On September 06, 2012, at 11:42 PM, Kauaicat wrote:

    Unemployment and inflation are calculated differently today, compared to 1977. According to John Williams "Shadowstats", using the old standards, unemployment is roughly 23% (or 16% without partially employed workers - U3 plus discouraged workers) and inflation is 5%.

    Also, again based on the above figures, the "misery index" (inflation plus unemployment) is actually 21% instead of less than 10%.

    It is hardly surprising that the official government numbers have been altered to portray a better economic picture than what is actually occurring.

    http://www.shadowstats.com/

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2008421, ~/Articles/ArticleHandler.aspx, 12/22/2014 6:35:00 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 17,959.44 154.64 0.87%
S&P 500 2,078.54 7.89 0.38%
NASD 4,781.42 16.04 0.34%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/22/2014 4:00 PM
AAPL $112.94 Up +1.16 +1.04%
Apple CAPS Rating: ****
BRK-A $227720.00 Down -166.00 -0.07%
Berkshire Hathaway… CAPS Rating: *****
BRK-B $151.90 Up +0.34 +0.22%
Berkshire Hathaway CAPS Rating: *****
TSLA $222.60 Up +3.31 +1.51%
Tesla Motors CAPS Rating: **
XOM $93.33 Down -0.31 -0.33%
ExxonMobil Corp CAPS Rating: ****

Advertisement