Posted on 05/10/2009 6:39:42 AM PDT by FromLori
This is the chart they don't want you to see: the purchasing power of the dollar over the past 76 years has declined by 94%. And based on current monetary and fiscal policy, we have at least another 94% to go. The only question is whether this will be achieved in 76 months this time. (Click chart to enlarge.)
(Excerpt) Read more at seekingalpha.com ...
Governments REQUIRE inflation so that they can pay off their debts and hide their inefficiencies.
“purchasing power of the dollar over the past 76 years has declined by 94%”
but the purchasing power of each American over the past 76 years has increased by ????%? 1000%?
I’m not convinced by anti-fiat people. It would seem to be a conservative point, but I’m convinced there’s a more interesting and pragmatic point to be had there somewhere. If America had been on the gold standard, the Nazis would currently own Europe. There’s a lot of interestinfg points to be made. Of course, people who have all their savings in gold don’t like people saying things like that
As soon as Obummer won the election was inaugurated and started speechifying and following through with his far left ultraliberal agenda and policies I knew it was only a matter of time for the dollar to go the way of the dodo. I still can’t believe the American people voted for this clown after all, all the warning signs were there, big red flashing lights and the American people just ignored them. Well now you’ve got your consequences America and if our country somehow manages to survive to the 2010 elections I will consider it a matter of sheer luck.
Charts like these are dramatic, but omit the whole story. The “purchase power erosion” is actually inflation, and doing the math presented visually, inputes a little less than a 4% annual rate of inflation.
Inflation is, simply put, too much money chasing after too few goods and services. Pinning all of that on the federal reserve or some organized conspiracy by (_____ fill in your paranoid delusion here) is not justified. Inflation has multiple sources; everytime you ask for a raise, everytime OPEC cuts oil production, evrytime a tax is raised, or some one borrows to get that (whatever) they have to have now instead of saving for it — all of these things cause more money to chase after the same (or less) stuff.
The chart is really not profound and anyone with a basic understanding of mainstream economics is not all that alarmed at seeing it, again... The only reason no one would want you to see the chart is due to most people not having enough economic literacy to put it in perspective.
I’m not a gold bug either, but it is wise to seek investments that compensate for inflation. Right now I see energy and developing countries as that path. OIH and FXI are good vehicles. EWZ also.
If America had been on the gold standard, the Nazis would currently own Europe.
Why do you say that? We were on the gold standard (back then) Explain to me please.
It’s more complicated then this. The mere loss of purchasing power of the dollar is less important then the context. The time frame is what matters. What value is lost in a space of time vs the ability of the economy to adjust in the same period.
Ten years ago when Bill Gates fortune hit $100 billion, somebody did the calculations that JD Rockefeller’s original One Billion dollar fortune a century ago was the equivalent of over $200 billion in current terms. A 200 to 1 devaluation sounds catastrophic, but spread over time the effect in macroeconomic terms is almost irrelevant.
If Hitler didn't print money, backed by printed bonds, he wouldn't of been able buy off the German citizens, unions and large manufacturers and maintain political support( sound familiar? )
However by 1938, American and other bond holders were not accepting repayment in Nazi fiat money because of massive printing and devaluation, and Hitler was coming up to a repayment disaster which would of followed by massive German financial collapse. So, he started the war a good 3-5 years earlier than he or his Generals wanted.
Prove it...
There are two things going on, increased productivity and other efficiencies, driving down real, fixed costs, and the devaluation of the dollar.
Both can occur at the same time.
But, people don’t just buy things, they invest. This is why the thrift/savings banks, and as a means of increasing wealth has been destroyed.
This is why people have been pushed to look for even more riskier investments and schemes, because simple, understandable, supposedly bedrock and age old methods of wealth, i.e., ‘saving up’ are laughable in a constant inflationary regime.
I dont agree that WWII required a dollar not based on gold. We are talking the value of money. Creating fiat currency doesnt magically make money. It simply makes it easier for the government to take it through devaluing inflation. Taxes could have accomplished anything that inflation did.
Futhermore, say you are correct and im wrong. Couldnt it still have been done as a war emergency? Even if it was the only way to win WWII, why on earth was it required to continue forever?
A high end Colt 1911 .45 cost a little less than 20 dollars in 1912. Today the same pattern gun, Kimber or Colt, will be around 8-900 bucks. The old story is that a 20 dollar gold piece would still buy either. A 20 dollar bill from 1912? You need enough of em to come up with the 8 or 900 bucks requierd today. Heres the point of gold. The pistol still costs the same, the money is losing value.
What will a colt cost in 2112? 50,000 dollars??? Where does this stop? Will we get a Zimbabwean dollar to go with our Kenyan president?
The whole purpose, and sold bill of goods of the Federal Reserve was that it would keep the value and supply of money steady, and there would be no wild swings in the economy.
Kind of a capitalist, scientific Marxist money management.
Well, how’s it worked so far?
During WWI Wilson and the then new Fed printed money. I forget what it was called, something like Emergency war script.
“why on earth was it required to continue forever?”
true, but what about the other point, about the increase in the standard of living?
“We are talking the value of money”
Exactly right, and having gold as the basis of money is inadequate because you are forcing a commodity to an unnatural value. It has a high value per unit mass __as a commodity__ but once you start artificially inflating that value above the real market price, you’ve got a house of cards, because it’s JUST AS MUCH FIAT - you’ve arbitrarily said “this has x value”, which is not really different from paper. To support the current economy you’d have to arbitrarily say “gold is worth $500,000 an ounce”, beyond the commodity value, which is just the same as saying paper is arbitrarily worth something.
America is a lot richer now than it was, so I’m just not convinced that things would have been better, and I can see many reasons why they would have been worse.
Uh, how 'bout a translation for those of us who don't speak "acronym-ism".
True, but here is the rest of the story...
In 1912 people earned about a dollar a day. That gun cost 20 days labor.
Not many people today are working for 20 days to earn $850.
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