US Dollar
The charts below show clearly just how far the once mighty US Dollar has fallen. Until 1933, people carried gold coins in their pockets, and paper bills were exchangable for gold and silver coins at any bank. Prices were remarkably stable, and had been for a hundred years or more, except for periods of war or other calamities. In 1933, US citizen's gold was confiscated by the government, the dollar was devalued by 41%, and we entered a period in which the treasury attempted to hold the value of the dollar at 1/35 of an ounce of gold.
As you can see, this was largely successful until the late 1960s, when so much gold was required to buy up all the dollars foreign countries were selling that the US government simply gave up, and "closed the gold window" in 1971. The value of the dollar collapsed over the next 10 years, hitting bottom in 1980. By paying high rates of interest and reducing taxes, the dollar slowly recovered some of it's value over the next 20 years, but expansive money policy in the 1990s eventually caught up with the dollar in 1999.
Since 1999, the dollar has fallen in value from about 123 mg of gold to less than 21 mg today – a drop of more than 80%. Overall, from 1900 to 2010, the dollar fell from 1500 mg to 25 mg, losing over 98% of it's purchasing power. Penny candy now costs 50 cents. The "Five and Dime" is now the Dollar Store.
The future, however, looks even bleaker. Recent comments from the Federal Reserve indicate that near-zero interest rates and "quantitative easing" (Fed-speak for money printing) can be expected to continue "for an extended period".
The US Dollar since 1787:
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The US Dollar over the last 13 years:
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The US Dollar since 1900:
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The US Dollar since 2006:
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Comments on US Dollar
I heard you and website name on Tellman's training audio. Your site is great. I am going to market to approximately 95% of those approaching retirement who are totally unprepared financially and get them to look at web-based marketing as a way to build their asset base.
I will definitely provide a link to your site once I am up.
Best wishes to you.
Ron Cooper
Wow! I remember learning in school that FDR and WWII saved the economy. Looks like that was a bunch of blank. In the first chart, it looks like the value of the dollar leveled off after the crash of '29, and was holding steady, then fell off during and after WWII.
What's really frightening is that today's dollar is rapidly becoming worthless.
Glenn
Oops, I meant the SECOND chart.
For my introductary free chart I asked for a chart showing gold vs the Canadian dollar. I never received it. Why? Bill
I agree 100% with your comments. Could you give me the address of a serious gold coin dealer in New york City ? Thanks
Convincing data, I'll have to look into my future investments with care.
I fell upon your website by accident and I am awestruck by the horrendous consequences of our 100 years or so of monetary interventionism. The only thing that comes to my mind is 2 words: Wealth transfer! Inflation is nothing else by monetary plundering! And we are taught to fear deflation! In what kind of Orwellian paradigm are living in nowadays?
Thank you for your work; I will try to spread it around as much as I can.
I have been following economic data very closely for the last year and loosely a few years before. I have been losing confidence in the dollar for well over 4 years now and have been warning people of the outcome. The only reason the dollar remains in circulation and has been devalued so slowly is because it is the worlds reserve currency and is backed mainly by the Chinese Yuan. Right now gold is 1,563.17 per ounce and climbing fast. Our currency devaluation is hurting Chinese investments in the US bond market and they announced on April 25 2011 they will begin a sell off of treasury bonds. With QE 2 officially ending on June 30 2011 we will start seeing bank failure rates on a massive scale if congress does nothing to raise the debt ceiling on May 16 2011. The 2008 run on the banks will seem like a minor event compared to the catastrophic dollar value collapse in which all the world currency markets rely on. The US credit line with the federal reserve will be maxed out and with no more ability to borrow money from the fed, the treasury will have to default on its debtor obligations on interest payments and we all know what default means. For the majority it is too large of a credit crunch that most can comprehend. Keep in mind that treasury bonds are basically IOU's to the federal reserve and we all know what extents the Fed is willing to go to if we can't pay them back. The bottom line is QE 2 is the iceburg that sunk the titanic. It is a sad reality but it is happening. The point is if you invest in gold using US dollars and the dollar does collapse, the Fed will reposess all of americans monetary assets to include silver and gold. To me, gold is no better than a car or a house payment that has defaulted, it will be reposessed and possibly using force to do so. Remember, we don't own anything if we by products using federal reserve notes. It is merely borrowed from the Fed. The financial trap is set and when triggered, they gotcha. If we fail to learn the lessons of history (I.E. 1930-1940's Germany) we are doomed to repeat it. The real strategy for ending financial entrapment is to end the fed. Do the math and the research for your self and it will be self evident. I am not a very smart person or a financial pro, however, I did learn math in school and I am guessing you did too. Just do the math.
The beginning of the end for the dollar started in 1913 with the creation of the FED imho. That was the beginning and now we are witnessing the end. This is a sad time for America.
With regards to what Sean Blanchard said about the government taking possession of peoples gold and silver, I agree that is a real posibility. They have done it before. I'm not sure if it will make a difference but coins that have a numismatic might be a safer bet if the government does decide to take peoples gold.
I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.
Thomas Jefferson,
"The end of democracy and the defeat of the American Revolution will occur when government falls into the hands of lending institutions and moneyed incorporations."
— Thomas Jefferson
These comparisons to gold loose much of their meaning when we realize that the price of gold was fixed for much of the timeline.
This means that the United States DEFENDED its currency with gold. It made gold available no matter what. This was of course Nixon's little problem in 1971. After seeing the US pot of gold shrink from 22k tons to 8k tons he could no longer defend this assertion that the dollar was 1/35 of an ounce of gold. He finally threw in the towel and refused to allow conversion of the dollar for gold.
This implies that the true value/price of gold was actually MUCH higher even though 'for the record' the price of gold was officially $35 per ounce. If the US had let the currency fall as it went way over budget in the 50s 60s and 70s the POG would have no doubt gone way up. This would have allowed Nixon to keep more gold but it would have allowed the world to see the true value of the dollar was not really $35 but something much different perhaps $100/OZ.
When gold is used properly it balances things out in terms of international trade. The problem for politicians is that they do not want to be seen devaluing the currency so they set fixed prices which eventually always collapses.
Even now we see a POG which is certainly 'not right'. I believe the market is actively manipulated but for those who do not want to have to form opinions based on some nuts belief I will say that the mere existence of paper markets for gold is manipulation. The ability to satisfy someone's desire to own gold by selling them a piece of paper is manipulation. Only when all gold is allocated, that is it has your name on it, is the market real. Right now for every ounce of gold held for investment there are multiple claims against it. If push comes to shove many of those people will get cash settlements for their precious paper and not a quantity of physical gold. This is satisfying to many but it keeps the price of gold low and that paper won't help much if the event that precipitates the cash settlement is hyperinflation. Only physical gold in our possession is safe. Even allocated gold held at a prestigious institution is subject to criminal betrayal. Witness MFGolbal.
So for me these comparisons are amusing but mean little to predict a future in which the actual sum of physical gold meets the actual sum of printed money.
This shocking, everyone in America should see these graphs and realize they are pissing away their money investing in the us dollar.
What these charts show me is that I should go out and get as much real estate as possible fully mortgaged at a fixed rate. As the dollar free falls my mortgage will get cheaper and cheaper since the payments won't adjust to the new value of the dollar…
This is an excellent strategy! Take the cash you have left after the down payment and buy gold with it. As needed, sell some of the gold from time to time to cover payments (if the property doesn't have a positive cash flow.) Don't expect it will always go in your favor, but over time I think this strategy will pay out handsomely, leaving you with property owned free and clear, and a lot of gold left over besides.
Sorry, but these graphs do not really mean anything in the real world. Yes, the dollar has "dropped" against the price of gold, but the world does not operate on gold, it operates on currency – mostly the dollar.
The dollar, operating in a healthy economy, always has some inflation. What these graphs don't show is that inflation cuts across the economy and while it increases the price of goods it also increases wages, so that there is very little net effect. For most goods and services the real cost has been dropping for decades, if not centuries, due to productivity gains.
The reality is you can buy gold and keep it in box doing nothing, or you can use dollars to invest and get a yield by creating productivity (innovative goods and services) for society. During severe times gold can be used to store value, but as soon as the crisis passes gold value drops and the real gains go back to investors using currency to make investments in goods and services.
To suggest gold is a wise investment for people looking to grow their assets, as opposed to preserving assets during times of extreme conditions (like war, disease or famine) is just a deceitful practice by those looking to make money (paid in dollars!) from the gullible.
@J Moo:
"inflation cuts across the economy and while it increases the price of goods it also increases wages, so that there is very little net effect."
Unfortunately, this just isn't true. Abundant data is available comparing growth of price vs wages, but I found a nice, simple chart for a quick example:
http://saintpetersblog.com/2011/12/chart-the-toil-index/
Gold clearly isn't an investment for profit. It's a hedge against a greedy and traitorous government's attempts to debase the currency to the point that their debts are sustainable, (or at least kept relatively small enough to get them through one more election cycle.)
If you don't think gold is a fair measure, since it has some price fluctuations, pick anything else you like. The trend will be the same, simply because gold isn't the underlying metric, but is simply a close approximation/representation of REAL value. (just like sound currency would be)