Proof of dollar devaluation?

[Guest Republican]

Arent high gold and silver prices proof of the devaluation of the current dollar? My point is, why is a silver dollar worth $25 even though it has the same monetary value as a dollar bill? Because it is silver and not paper of course. At that rate, the current dollar is worth 1/25th (4%) of what a dollar coin produced prior to 1964 is worth. This seems to be proof enough for me, regardless of what anyone in Washington tells me. I understand some devaluation, but that just seems extreme to me over the course of 50 years. Any thoughts?

[Jonnin]

not really. If everyone in the country is PO'ed that their stocks have lost 80% value over the past 10 years, everyone sells their stocks and buys gold. This generates much demand, which increases prices. The people that bought that gold are successful: the price went up and so the next wave decides to buy gold too. It spirals up and up and up as people get on the bandwagon, until it becomes high enough that people decided that buying it is going to be a loss when it goes back down.

That only accounts for some of it, of course. You also have fears and concerns that the dollar will go down even more --- generating a demand for gold and silver again.

The only real way you can value our money is relative to what it can buy. In 1960, the min wage was what, a buck an hour? You earned a LOT less but each dollar could buy MORE stuff. So your $150 a week went a long, long way while today that is what you give your kid for a weekend trip -- heck it takes a good chunk of that just for a tank of gas and 3 not too expensive meals out. There is more money in the system as more is printed, people make more, things cost more.... inflation happens.

[Guest Republican]

Sure, I agree that everything is relative when it comes to currency, but isnt inflation relative to the devalued dollar? A dollar buys more or less depending on what its worth. A fiat money system is dependent the country issuing it having healthy economy, whereas gold is gold no matter where you go. Currency exchange rates around the world are also good indicators, although they have improved alot in the past year or so.

[Jonnin]

right, its just what you can buy with it. And you cannot look at just gold or silver --- it would be across the board. Demand for silver/gold is up and so is the price, but if you look at all products, what then? You also have to take into account various products being up for other reasons, gas/oil/anything made of or corn/meat/anything tied to corn etc.

[Guest Lester Weevils]

Yep, during the real estate bubble, dollars became increasingly worthless in relation to real estate, but then after the bubble burst, suddenly dollars near-overnight got a lot more valuable in relation to real estate. During the bubble pump-up, there was inflation in the real estate market and then after the bubble burst there was deflation.

Similarly, up till the 2008 bubble bursting, gasoline was real spensive, dollars weren't worth much versus gasoline. Then after the bubble burst nobody had much money to spend on gas, so gas dropped down and the value of dollars were worth a lot more versus gas. And now that world demand is picking up, dollars are losing value again versus gas.

Traditional inflation measurements use a "standardized basket of goods" to attempt to measure the overall value of a dollar. But some folks think the gov inflation stats are not useful for valid long-term comparison because the gov keeps changing the standardized basket of goods. Then again, other not-insane folks who pay attention to it, think the gov modifications to the standard basket of goods make perfect sense. Here is a site which makes a reasonable-sounding case that gov stats underestimate recent inflation, but as with most stuff the deeper you delve the mushier and more confusing it gets-- http://www.shadowsta...nflation-charts

Though the dollar has lost big-time if you want to buy bread and butter with dollars, the dollar has kept getting more valuable in terms of computing power for a long time, but of course all good things must eventually end. Computing power just keeps getting cheaper versus the dollar, but for some reason nobody complains about deflation in the computer goods markets. If there is drastic deflation in corn, people quit growing corn. If there is drastic deflation in oil, people quit drilling oil. If there is drastic deflation in houses, people quit building houses. But there is perpetual drastic deflation in computer gear but people keep making more and better computer gear. Odd.

The approx value of an item in the past can be evaluated in current dollars, or vice-versa, with this official bls.gov online calculator-- http://www.bls.gov/d..._calculator.htm

For instance a 25 cent Krystal burger in 1965 ought to cost about $1.82 today, according to the gov stats. A $10,000 house in 1950 ought to cost about $95,064 today. In one way even the gov stats are kinda horrifying, but OTOH it does seem likely that the gov stats at least somewhat underestimate inflation. I gave near $1,000 for a commodore 64 complete setup circa 1982-- CPU, crappy drives, crappy monitor, crappy printer, etc. That would be $2374 in today's dollars. $2374 won't buy the world's finest puter setup, but will buy a lot more than a C64 rig.

Danger Will Robinson! Just like internet stocks and real estate, precious metals can go down. Sometimes way down. Fast too. Ain't no sure thangs except death, taxes, hydrogen and stupidity!

Edited August 26, 2012 by Lester Weevils

[Guest 6.8 AR]

Hell, I thought Krystal's were 12 cents in 1965. Those things were a delicacy, back then. The first tank of gas I bought for my 68 Torino GT was 24.9 cents a gallon. I drove the whole weekend for 4.00 bucks.

Relatively speaking, since gold was fixed at $35.00/ounce back then, and is decoupled from the dollar nowadays, and comparing it at this time to the dollar, barring these bubbles caused by the Fed's manipulation and gold's still quite high value, you could easily draw a conclusion that our dollar has been gradually been devalued throughout time.

Never had to happen.

Lester's explaining economies of scale when something like computer components cost less with time, since cost of the product goes down with advancement of the technology and manufacturing costs are streamlined, getting to the real cost of the product. Profits are recouped at a faster rate on the head end of a product, and that stimulates further advancements in the product line. That happens with most consumer driven goods, especially those with relatively low fixed costs.

Back to that 12 cent hamburger, Krystal had more stores and labor and food costs were much cheaper back then, a lot due to inflation, transportation costs and government restrictions constantly building up the price.

I quit buying their burgers when MacDonalds came out and competed with their 29 cent hamburger, which was twice as big and the fries were better. Back then they made the fries from scratch in the store and were awesome. Same thing happened at MacDonalds and I moved on from them, also.

My first PC was 2200 bucks and it had 64k memory, a green screen and ms-dos, I bought a 1200 baud Hayes modem and played on bbs's in Chattanooga. It somehow seemed cool doing something ten times

as slow, compared to picking up the phone and talking. I did do my taxes with a database program

in 83. Made the forms and everything else way before TurboTax was anyone's dream. That was cool.

Edited August 26, 2012 by 6.8 AR

[runco]

When the U.S. came off the gold standard on August 15, 1971 is when the US dollar began free floating, and has never been right sense, see a brief history here: http://en.wikipedia....i/Gold_standard.

The U.S. dollar really has significantly gone south in the past 5 years (not due to supply/demand of gold, but due to national debt). This can be proven by simply ploting in a line bar type graph using another stable country's currency that has not increased its national debt, say a strong economony like Japan. Take Yen and compare it to the past 5 to 10 years of selling price of gold (in Yen), and see for yourself. The Yen shows a tremendous differt type curve than the US Dollar. It does have slight creep of gold cost, but nothing like the US or say Euro charts. If supply and demand is the main driver of gold prices, and gold is a global commodity, then this debunks that explanation. Don't get me wrong, there is some supply and demand influences, but its not the key driver, countries economies are, mainly its debt.

The U.S. dollar problem is highly tied to U.S. Debt, and to some small degree negative trade balances. If there was no debt, and the trillions of printed money could be called back in say what has printed since 1971, in theory the $30 per ounce of gold could return. However, who else in the world could afford U.S. goods though?

I am no economonist, but I am hollar born east tennessean mountain common sense guy who can read sumtimes

Edited August 26, 2012 by Runco

[1gewehr]

The only reason that the US dollar has ANY value is due to it's status as the world's reserve currency. The government no longer actually publishes any figures on how many dollars are in circulation worldwide. When a currency is created in such large amounts, it's called 'inflation'. But since much of that money is tied up in debt, it isn't visible. And since a lot of that debt is held by overseas governments as a hedge against THEIR inflation, those governments are willing to hold that debt rather than try to call it in and have the dollar lose value. That won't last forever. The latest tactic is that the government creates debt and sells it to itself, thus creating money out of thin air that pretends to be backed by an asset.

As for gold and silver, I'll buy all of your silver dollars for $25 each! Metals are not an 'investment', but a store of wealth. The old example is that an ounce of gold would buy a good quality tailored men's suit with shoes in 1600, 1650, 1700, 1750, 1800, 1850, 1900, 1950, and today. Not 'Men's Wearhouse' cheap stuff, but quality similar to Brooks Brothers.

You should also be diversified. I've got gold, silver, steel, brass, lead, and wood. The Mormons also have it right in requiring each family to maintain a year's supply of food. With planning, it's not expensive, but could prove 'worth it's weight in gold' in an emergency.