Saturday, April 24, 2010

On devalued currency

Here's an old one dollar bill from the 1920's.  It's a "silver certificate", meaning that you could swap it for one dollar's worth of silver.  The current one dollar bills couldn't be swapped for enough silver to fill a gnat's rear end.  Our government has printed too many of them. 

See this picture of Andrew Jackson?  In 1905, a $20.00 bill could be swapped for $20.00 worth of stuff, including gold. 
If you made the foolish decision to save a $20.00 bill from that era, it will now only purchase 5% of what it could in 1905.

This hundred dollar bill will only do the job once done by a $5.00 bill.  The Federal Reserve system, created in the early 1900's to stabilize our currency, has succeeded in destroying 95% of our currency's value. 

And if you've got any of these, you might want to spend them now.  If current trends continue, they're going to have to print enough of them for all of us. 

This is a variation of a chain email sent to me by The Whited Mama. 


Hot Sam said...

Uh, no.

First of all, the Federal Reserve wasn't founded until 1913 so tracking the inflation from 1905 is cheating a little.

The compound annual growth rate in prices in the US since 1913 is 3.1% which is less than the average growth rate of our GDP. 3.1% is pretty reasonable inflation.

What about quality differences? Would you care to compare the quality of a Nissan Versa to a Model T?

The real price of gasoline is lower for you than it was for your grandfather, and that is after enormous taxes. Moreover, you can travel further on a gallon of gas than he could and there is more to do and see and buy within the range of a gallon of gas.

How much was a Blu-Ray disk player in 1905?

How much was an MRI?


You can criticize the Fed for excessively low interest rates which contributed to the housing and financial crisis. You can criticize government for excessive entitlement programs and spending. But the criticism that the Fed has not done it's job controlling inflation is baseless. Compare our inflation rate to other countries! What's important for a functioning economy is to have stable and predictable inflation, not necessarily low inflation.

BTW, a $20 bill saved from 1905 will still buy you $20 worth of stuff. If you were to try spending $20 in San Francisco in 1850, it wouldn't go very far.

thisclose said...

Food stamps don't have President Obamas' picture on them. Tell your friend white mama it's Reagan and Bush. She's so white, she's racist white. That might be why she doesn't want to show a white person on the food stamp. You think?