Quality guitars, amps and microphones are vastly cheaper, because of the astonishing improvements in automation and far-eastern manufacturing. A $400 Squier Vintage Vibe strat is 95% as good as an American Fender strat from 1990, at about 20% of the cost in real terms. Budget condenser microphones simply didn't exist before the mid-80s, so you'd need to spend about $2,000 for a decent LDC mic; today you can get a very good LDC from Rode, SE or Aston for about $300. The same goes for headphones, monitors, outboard and all sorts of other gear - it's just ludicrously cheap in historical terms. A grand piano is still an expensive item, but you can get a beautifully detailed and utterly convincing multisampled piano plugin for under $100.

Good microphones were almost prohibitively expensive in the old days. Today you can buy something like an SM57 for €100, and that's normal retail price, no special offers or anything. Second-hand, they're usually less than half that.

Decent acoustic guitars can be had for less than €200, brand new. Sure that won't be a fancy name-brand guitar, but it'll sound good and play well.

All kinds of great outboard gear like the FMR Really Nice Compressor is €200, and it's one hell of a piece of gear, even at twice that price. Combine with an inexpensive mixer with decent preamps, and you're already well on your way. Yes, even Behringer is decent these days.

And you can run a pro-grade DAW like Reaper on an ordinary run-of-the-mill PC. An audio interface with a good amount of input channels is going to cost a bit, but if you're OK recording one or two tracks at a time, a Focusrite Scarlett 2i2 is €120. And even inexpensive studio monitors have astoundingly good sound quality, compared to what people used to swear by.

You can get really far on a budget nowadays.

Also cheap electronics makes diy solutions more affordable. One could mike a drum set using cheapo low end Behringer dynamic mics paired with a self built preamp to get very good results for the money.