The Golden Age of the Mighty Dollar

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January 5, 2015 by JImbo

Dollars Ends Best Year in More Than a Decade (Wall Street Journal)

I see dumb  headlines like this, then realize that people don’t truly comprehend that there were times BEFORE they were alive. They sort of vaguely accept dinosaurs and such in an abstract way, but they don’t give any great importance to it. Not really.

Such it is with the “Biggest California Earthquake in History” last year (which wasn’t by a long shot) or “The Warmest Year on Record” (it wasn’t)

Now there’s the “Dollar Worth More Than It Has Been In Over a Decade!”

Sadly… not really true. Oh they’ll say that it’s “worth more against other currrencies” but that’s a pointless “fact.” (And arguably also not true…. but set that aside for now)

What IS true without a doubt is that the dollar is worth LESS than in most of American History. It has in fact NEVER been lower than in the past 5 years. Your shopping cart is empty because the dollar is near worthless!

Comparing it to other worthless currencies doesn’t buy you more groceries.

This shows the value of the US Dollar since 1997.

As you can see, 11 years ago was 2004. The US Dollar was worth 75 mg of gold. Today it’s worth 25 mg of gold.

It had dropped to ONE THIRD of what it was 11 years ago.

The headline is simply false.

But it gets worse.

Here’s the value of a US Dollar since 1900. See how flat the line normally is? That’s when we are on the “gold standard” and the government isn’t trying to artificially inflate the dollar to go into debt.

Before all this tampering in the last century, you rarely if ever had large scale inflation without a specific reason. (For example when the Spanish imported boatloads of gold from America into Europe, flooding the gold market)

However, in MOST cases gold is rock solid as an indicator of value.

Check out the historical record of this country and the US Dollar’s value.

The Civil War was a decent sized blip. Understandable. Also the War of 1812 is a tiny nudge.

The dollar tracked with gold as a rock-solid investment because you could ALWAYS go to a bank and ask for payment in gold. Paper money and gold were interchangeable. A dollar of paper money wasn’t just worth something because the President said so. It was literally traded FOR physical gold. You could go turn in a $20 bill and get an ounce of gold. The paper dollars HAD to be worth the same as gold, so people knew that there WAS NO INFLATION.

Basically no big movement until FDR and the “Great Depression.” Specifically, AFTER the start of the Depression when President Roosevelt TOOK peoples’ gold by force and gave them paper dollars instead. The sharp drop in 1933 reflects that loss of confidence in the system and the value of gold. After all, you can’t really INVEST in gold when it’s technically illegal to own it.

However, after the war started he relented it flattened out again. Banks were still prevented from really trading in gold to any great extent and it was highly regulated so gold never went back to its previous “normal” level, but it was at least stable until 1971.

That’s when President Nixon unhooked the US Dollar from gold value entirely. Now there was NO link between gold and the dollar. Now the dollar was worth whatever the US Gov’t pretended it was worth…. well that and what people overseas were willing to trade for it.

That started the plummet in true value of the US Dollar. And, that started inflation. People just ASSUME that “inflation has to happen” but it doesn’t. Inflation happens when you screw with the money supply.

That’s why it rose in the last 1980s and up to 2001. The government was screwing with it less and the value was rising to a more historical level…slowly. However, it still wasn’t tied to gold.

Then 2001 hit and all confidence in the US Dollar plummeted again. As you can see in the first chart, it has been falling until 2013. It finally bottomed out (for now.) So, compared to TWO years ago… yes the dollar’s value is up. You can buy more gold with it… which means you can buy more groceries with it.

However, it’s nowhere near where it was even ten years ago. People who want to tell you otherwise are full of crap. They are making things up.

You feel poorer today because you ARE poorer today. It has nothing to do with some “evil corporation” oppressing you. It has to do with the US Government printing money at the rate of a TRILLION dollars a year ($1,000,000,000,000…. a million millions) and spending money we don’t have to the tune of $18 trillion ($18,000,000,000,000) in debt.

New York State is trying the same idiocy. Governor Cuomo is crowing about how we “have a budget surplus!” Alright… two things.

One, the billions of dollars he claims is a “surplus” is supposed to go towards paying off existing debts and is a one-time cash legal settlement payment. It won’t happen again.

Two, the only reason we’re not visibly in debt on top of that is because he’s authorized BILLIONS of dollars in additional loans and debt to “free up” money to spend.

For example, instead of finding the money in the budget to pay for the Tappan Zee Bridge is estimated to cost $5 billion dollars. They’re first illegally raiding another Federal fund for it. Then they already stole money from the Thruway Authority so that people on the Thruway get to pay higher tolls in order to pay for a bridge that’s NOT on the Thruway and they’ll likely never use. Plus, they’re looking to “finance” (ie borrow at high interest) the rest of the billions to finish the TZB.

BORROWING a few billion dollars so you have money “in your pocket” to spend is not a “surplus.” It’s illegal and immoral.

Much like claiming that the value of the dollar is up, when clearly it’s not.

The nice graphs here showing the actual value of a dollar over time from: www.priceingold.com

 

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