Value of the Dollar

The U.S. dollar has been debased over the past 100 years by Federal Reserve money printing.  In 1913, a dollar was a day’s wage and the cost of a loaf of bread was 2 cents.

The value of the dollar has declined about 4% per year ever since the Federal Reserve was created.  I am amused when the news reports that the economy grew by 4% last year as if that was a good thing.  I think they are merely confessing how much money they printed to shove your prices up.

Whenever the value of the dollar goes down, prices rise, first on commodities and then on everything else.  Inflation refers to the rise in prices.

If we have increases in productivity, like machines and methods that allow us to increase the speed of production and decrease our cost, we will be able to sell these products for less. 

Supply and demand also affect prices.  If nobody buys a product or service and the seller can lower the cost, it might get the buyer to buy. 

The price of gasoline just went down to $80 /barrel, because we produced more oil than we could sell and it’s sitting there in storage. We also know that we can get oil out of the ground for less than $100 /barrel and we know we will not run out of oil.  Oil went over $100 / barrel because oil was under attack by environmentalists and our government refused to allow drilling.

Deflation is when prices go down.  Our gasoline prices deflated and that’s a good thing, but when our home prices dropped after 2008, owners with homes to sell found themselves with no buyers and those whose mortgages were then higher than their house values were “under water”.

Our home prices dropped after 2008 for several reasons.   US Federal anti-discrimination laws forced banks to give mortgages to unqualified buyers.  These homes were in default and foreclosure because these buyers didn’t make enough to pay their mortgage payments.  Banks had resold these mortgages as securities to investors.  They didn’t know which mortgages were in these bundles and the value of these securities dropped substantially. But, lower property taxes was a good thing.

Cash infusions create price increases.  Many towns worked hard to attract Military bases, employing thousands of people to be established in their towns.  When they moved in, all their prices went up.  Apartments that were $300 / month went to $600 / month overnight. Some town businesses had more customers and made more money, but renters who were already there had to move to cheaper apartments.

Prior to 1913, we had no central bank or Federal Reserve.  Congress was told how many dollars had been printed, how many were in circulation and how many were in the bank vaults.  There were times when increases in productivity enabled lower prices and the value of the dollar went up.  Banks had no government backing and accounts were not government insured, so folks were on their own.  At times they would panic over some event and have a run on the bank and they couldn’t sell their property and investments fast enough to give their depositors their money.  After that, folks would keep some cash hidden in a can somewhere in the house.  Over the first 120 years, the dollar held its value.

After 1913, the federal reserve printed 4% more dollars than the economy needed and inflation was born.  In 1960, a comfortable household income was $10,000 / year.  By 2000, it was $100,000 / year. If we keep going, by 2040 it could take $1,000,000 / year.   

Close the Fed.

Norb Leahy , Dunwoody GA Tea Party Leader