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Countercurrents
reports about watching the dollar die.
(emphasis mine) [my
comment]
Watching
The Dollar Die
By
Paul Craig Roberts
14 March, 2008
Countercurrents.org
I've been watching the dollar die all my life. I sometimes think I will
outlast it.
When I was a young man, gold was $35 an ounce.
Today one ounce gold bullion coins, such as the Canadian Maple Leaf, cost more than $1,000.
Our coinage was silver. Our
dimes, quarters, and half dollars had purchasing power. Even
the nickel could purchase a candy bar, ice cream cone or soft drink, and a
penny could purchase bubble gum or hard candy. If a kid could collect 5
discarded soft drink bottles from a construction site, the 2 cents deposit on
the returnable bottles was enough for the Saturday afternoon movie. Gasoline
was 32 cents a gallon. A dollar’s worth was enough for a Saturday night
date.
Our silver coinage was 90% silver. People sometimes melted coins in order to
make silver spoons, known as coin silver, which can still be found in antique
shops. Except for the reduced silver (40%) Kennedy half dollar which
continued until 1970, 1964 was the last year of America’s silver
coinage. The copper penny departed in 1982. As Assistant Secretary of the
Treasury, I opposed the demise of America’s last commodity money, but I
couldn’t prevent the copper penny’s death.
During World War II (1941-1945), nickel was diverted from coinage to war, and
the US mint issued a wartime silver (35%) nickel.
It is not easy to find items to purchase with today’s US coins, but
the silver coins of the same face value still have purchasing power. The 10
cent piece of my youth contains $1.42 worth of silver at today’s silver
price. The quarter is worth $3.55, and the half dollar contains $7.10 of
silver. The silver dollar is worth 15.2 times its face value. These
are just the silver values of coins that might be worth far more depending on
condition and rarity. The silver in the wartime nickel is worth $1.10, which
is 22 times the coin’s face value. Even the copper penny is worth 2.5
cents.
When I was a young man enjoying travels in Europe, the German mark or Swiss
franc traded four to one US dollar. The euro, which is today’s
equivalent to the mark or franc, costs $1.55.
People who haven’t accumulated much age have little idea of the
corrosive power of “acceptable” inflation. Unlike gold and
silver, fiat money has no intrinsic value. When money is created faster than
goods and services it drives up prices, thus driving down the value of the
money. If freely traded currencies are excessively printed or if inflation,
budget deficits, and trade deficits drive currencies off their fixed exchange
rates, prices of imports rise as the foreign exchange value of the currency
falls.
Today the US, heavily dependent on imports, is subject to double-barrel
inflation from both domestic money creation and decline in the dollar’s
foreign exchange value.
The US inflation rate is about twice as high as the government’s
inflation measures report. In order to hold down Social Security payments, the
government changed the way it measures inflation. In the old measure,
inflation measured the nominal cost of a defined standard of living. If the
price of steak rose, up went the inflation rate. Today if the price of
steak rises, the government assumes that people switch to hamburger. Inflation
doesn’t go up. Instead, the standard of living it measures goes
down.
This is just one of the many ways that the government pulls the wool over our
eyes.
With the dollar value of the euro rising through the roof, today a vacation
in Europe is far more costly than in the past. Thanks to China,
so far Americans have been sheltered from the greatest effects of the
dollar’s declining value. Our greatest trade deficit is with
China. The prices of the goods from China have not risen, because
China keeps its currency pegged to the dollar. As the dollar goes down,
China’s currency goes with it, thus holding down price rises.
…
Paul
Craig Roberts was Assistant Secretary of the Treasury
during President Reagan’s first term. He was Associate Editor of the
Wall Street Journal. He has held numerous academic appointments, including
the William E. Simon Chair, Center for Strategic and International Studies,
Georgetown University, and Senior Research Fellow, Hoover Institution,
Stanford University. He was awarded the Legion of Honor by French President
Francois Mitterrand.
Quick reaction:
1) Unlike gold and silver, fiat money has no intrinsic value.
2) The US inflation rate is about twice as high as the government's inflation
measures report.
In order to hold down Social Security payments, the government changed the
way it measures inflation. In the old measure, inflation measured the nominal
cost of a defined standard of living. If the price of steak rose, up went the
inflation rate. Today if the price of steak rises, the government assumes
that people switch to hamburger. Inflation doesn't go up. Instead, the
standard of living it measures goes down.
3) Americans have been sheltered from the greatest effects of the dollar's
declining value thanks to China.
Our greatest trade deficit is with China. The prices of the goods from China
have not risen, because China keeps its currency pegged to the dollar. As the
dollar goes down, China's currency goes with it, thus holding down price
rises.
Eric
de Carbonnel
Market Skeptics
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