Breaking Down America's Worst Long-Term Challenges: #3- Destruction Of The Currency

Authored by Simon Black via Sovereign Man,

Read #1- Debt here...

Read #2- The Looming Retirement Crisis here...

On April 2, 1792, George Washington signed into law what’s commonly referred to as the Mint and Coinage Act.

It was one of the first major pieces of legislation in the young country’s history… and it was an important one, because it formally created the United States dollar.

Under the Act, the US dollar was defined as a particular amount of copper, silver, or gold. It wasn’t just a piece of paper.

A $10 “eagle” coin, for example, was 16.04 grams of pure gold, whereas a 1 cent coin was 17.1 grams of copper.

The ratios between gold, silver, and copper were all fixed back then.

But if we apply today’s gold price of $1292 per troy ounce, we can see that the current value of the original dollar as defined by the Mint and Coinage Act of 1792 is roughly $66.75.

In other words, the dollar has lost 98.5% of its value since 1792.

What’s incredible about this constant, steady destruction of the currency is how subtle it is.

Few people seem to notice, because modern day central bankers try to “manage” inflation between 2% to 3% per year.

2% to 3% per year is pretty trivial. But it happens again the next year. And the year after that. And the year after that.

After a decade or so, it really starts to add up.

But there’s an important, other side of the equation: income.

Costs are clearly rising. And it’s fair to say that incomes have been rising too. But which one has risen more?

In 1982, back when I was a toddler, the price of a Ford Mustang was $6,572. Today the cheapest Mustang starts at $25,680 according to Ford’s website.

So a Mustang today is around 4x as expensive as it was 36 years ago.

US Labor Department data from 1982 shows that average earnings were $309 per week, or $16,086 per year. That was enough to buy 2.45 Mustangs.

Today’s earnings are $881 per week, or $45,812 per year. That’s only enough to buy 1.78 Mustangs.

So when denominated in Ford Mustangs, people’s incomes have fallen 27.3% since 1982.

More recently than that, say, back in 2005, an entry level Mustang cost $19,215 at a time when average wages were $40,664 per year– or 2.12 Mustangs per year.

So even since 2005, average income levels have fallen 16%.

Obviously this trend doesn’t just apply to Ford Mustangs.

If we look at housing in the United States, we can see that the median home price in 2003 was $186,000 (according to Federal Reserve data) at a time when the Labor Department reported average weekly wages of $620.

So that was roughly 0.173 houses per person per year.

Today the median home price is $328,000, with average wages of $881, or 0.139 houses per person per year.

That’s a decline in income of 19.6% over the last 15 years.

Again, it’s a slow, subtle destruction. But over time, inflation REALLY adds up. Over the long-term, the average person becomes poorer.

We can view this trend anecdotally as well. Back in the 1950s and 1960s, it was common for a man to go out into the work force and support his entire family.

On a single salary, the average American family could afford a home, a car, modern technology at the time, savings, and even a summer vacation.

Today it’s normal for both spouses in a family to have full-time jobs, just to make ends meet.

Data from Pew Research shows that 70% of American households (married couples with children) back in 1960 were single income, i.e. only the father worked.

Today, 60% of households have BOTH spouses working.

And given the other statistics we routinely see about how the average US household has very little savings and is loaded down with debt, they’re barely making it even with TWO incomes.

That’s because inflation has slowly robbed people’s livelihoods.

What’s truly bizarre is that this exact same inflation is actually OFFICIAL POLICY.

Both central bankers and politicians deliberately try to engineer inflation, and they formally disclose this to the public.

The Fed announces its “inflation targets”, and economists panic if inflation is too low… or even worse, if there’s “deflation” and prices fall.

The government actually has a vested interest in inflation. They like rising prices because the national debt is so obscenely large.

The idea is that, if the government borrows $10 billion today on a 30-year term, they want the value of that $10 billion to be as little as possible three decades from now.

So a slow, steady destruction of the currency is actually to their benefit; the government wants to be able to inflate the debt away.

But as consumers, we prefer falling (or at least stable) prices. Price stability ensures that people’s purchasing power remains the same.

Rising prices are destructive, rewarding those who go into debt (like the government) at the expense of anyone who has been responsibly saving.

Think about it– if you put $100 in a savings account 10 years ago, you wouldn’t be able to buy as much with it today as you could have back then. Saving money actually COSTS you purchasing power.

The month-to-month and year-to-year variations on inflation will be all over the board. But the long-term trend is pretty clear: prices continue to rise.

And it’s fair to say that no nation or empire in history has ever been able to prosper by slowly destroying the value of its currency.

And to continue learning how to ensure you thrive no matter what happens next in the world, I encourage you to download our free Perfect Plan B Guide.


GeezerGeek TBT or not TBT Tue, 05/22/2018 - 20:33 Permalink

Horsepower "didn't work for shit" in the 1982 Mustang either. Even the GT version with the 5 liter engine was a slug (the Camaro was no better) and cost a lot more than the price listed in the article. And it got crappy fuel economy too.

This article sorely needs some hedonic adjustments. I suspect the grins-per-dollar of a recent, pricey Roush Mustang far exceeds that of any 1982 Mustang.

In reply to by TBT or not TBT

vato poco GeezerGeek Tue, 05/22/2018 - 20:40 Permalink

comparing the worth of a buck across decades is tough. like improvements in ABS, or a frickin Hyundai SUV having more horsepower now than mustangs/camaros did then ... it's hard. Hell, IIRC, a XL pizza ran $17 back then & a big mac-fries-coke was ... close to? ... $4.25?? or on today's $$, about $125 and $35 respectively. hard to know where to draw the line.

and though I'm at least as unhappy as the next guy over the degradation of the currency, I couldn't help but notice ol' simon neglected to mention a viable currency that didn't also inflate like a mofo. 

c'mon, son! if all you can do is whine "the dollar sucks!" without telling us about an alternative; something *better* than the yankee dolla - and don't waste my time with idiot "someday" talk of gold silver crude bitcoin - then what the fuck is the point of the article? just to bitch & moan? is simon secretly a woman? 

In reply to by GeezerGeek

secretargentman . . . _ _ _ . . . Tue, 05/22/2018 - 22:07 Permalink

Fixing the price ratios of the metals was the first mistake. Times change... mines succeed and fail. Supply and demand fluctuates. By fixing the ratios they made a system that was doomed to fail. 

Let everything float. Mint gold, silver, and copper coins with their weight and purity stamped, and call it good. No more trying to manipulate everything.

In reply to by . . . _ _ _ . . .

koh1moh2 Yellow_Snow Tue, 05/22/2018 - 21:37 Permalink

The author does acknowledge your point, if you reflect, that a Mustang is not necessarily a good comparator. But it`s not a bad one, either. The ABS and all that the petrolheads are on about are all true, but nearly all of the gadgets are unnecessary for safe transportation purposes and the point is - you can`t buy a vehicle without all these christmas tree ornaments and so you are priced out of the market. In my opinion, and with respect to the author and to you, I think this is a very provocative and interesting article.

In reply to by Yellow_Snow

HedgeJunkie Yellow_Snow Tue, 05/22/2018 - 22:47 Permalink

I remember how things were in the 60's, but the inflation started kicking in after 1972.  Here's some common grocery items circa 1970:

Ajax Cleaner 15 cents California 1970 

Alka Selzer 39 cents Ohio 1971 

Apples 59 cents for 4 pounds California 1970 

Baby Lotion $1.59 Illinois 1978 

Bananas 12 cents per pound California 1970 

Bathroom Tissue 13 cents California 1970 

Birds Eye Cool whip 38 cents Ohio 1971 

Boneless Hams $2.29 per pound Nebraska 1976 

Campbells Tomato Soup 10 cents California 1970 

cantaloupe 89 cents for 3 California 1970 

Celery 38 cents Ohio 1971 

Clorox bleach 38 cents California 1970 

Cranberries 29 cents per pound Ohio 1971 

Crest Toothpaste 77 cents California 1970 

Deans French Onion Dip 50 cents Illinois 1978 

Dogs Food $1.00 for 12 cans California 1970 

Folgers Coffee $1.90 per pound Illinois 1978 

Fresh Beef Liver 49 Cents per pound California 1970 

Fresh Grapes 69 cents per pound Illinois 1978 

Fresh Strawberries 29 cents per pound California 1970 

Fresh Turkey 43 cents per pound Ohio 1971 

Frozen french Fries 69 cents for 5 pounds Ohio 1971 

Frozen Pumpkin Pies 79 cents Ohio 1971 

Frozen Vegetables 25 cents for 2 pks California 1970 

Frozen vegetables 29 cents per pound California 1970 

Frozen Vegetables 79 cents Illinois 1978 

Fruit Cocktail 20 cents per can Ohio 1971 

Grape jelly 25 cents California 1970 

Grapefruit 99 cents for 10 California 1970 

Ground beef 98 cents per pound Illinois 1978 

ground Beef 99 cents per pound Illinois 1978 

Ground Round 79 Cents per pound Missouri 1970 

Head and Shoulder Shampoo 79 cents California 1970 

Heinz ketchup 19 cents California 1970 

Hellmanns Mayonnaise $1.39 Illinois 1978 

Idaho Potatoes 98 cents for 10 pounds Ohio 1971 

jersey Maid Yogurt 19 cents California 1970 

Jiffy Peanut Butter 59 cents Ohio 1971 

Joy Liquid detergent 49 cents Ohio 1971 

Land O lakes Butter $1.33 per pound Illinois 1978 

Large AA Eggs 59 cents per dozen California 1970 

Lettuce 10 cents each California 1970 

Lifebouy Soup 19 cents per bar California 1970 

margarine 59 cents per pound Illinois 1978 

Medium Eggs 25 cents per dozen Ohio 1971 

Miracle Whip $1.09 Illinois 1978 

Mortons Frozen Dinners $1.00 for 3 California 1970 

Mortons TV Dinners 36 cents Ohio 1971 

NY Strip Steaks $2.39 per pound Illinois 1978 

Onions 9 cents per pound California 1970 

Oranges 7 cents per pound California 1970 

Oscar Meyer Bacon 88 cents per pound California 1970 

Pineapples 29 cents per pound Illinois 1978 

Polish Sausage $1.98 per pound Illinois 1978 

Pork Chops 59 cents per pound California 1970 

Pork Roast $1.33 per pound Illinois 1978 

Pork Roast 59 cents per pound California 1970 

Pot Roast 79 cents per pound Illinois 1978 

Potatoes 9 cents per pound California 1970 

Potatoes Chips 89 cents 24 oz bag Ohio 1971 

Roasting Chickens 98 cents per pound Illinois 1978 

Rump Roast $1.69 per pound $1.69 per pound Illinois 1978 

Sirloin Steak $1.19 per pound California 1970 

Sliced Bacon $1.29 per pound $1.29 per pound Illinois 1978 

Sliced Boiled Ham $1.39 per pound California 1970 

Sliced bread 25 cents per loaf California 1970 

Sliced Loaf Bread 16 cents Ohio 1971 

Star Kist Tuna 29 cents per can California 1970 

Sugar 39 cents for 5 pounds California 1970 

Sweet Corn 79 cents for 10 California 1970 

Sweet Potatoes 14 cents per pound Illinois 1978 

Tomatoes 19 cents per pound California 1970 

Tomatoes 49 cents per pound Illinois 1978 

Tomatoes 99 cents for 4 pounds California 1970 

Turkey 68 cents per pound Illinois 1978 

Turkeys 58 cents per pound California 1970 

Watermelon 10 cents per pound California 1970 

Wieners 69 cents per pound California 1970 

In reply to by Yellow_Snow

paulbain Stu Elsample Tue, 05/22/2018 - 22:44 Permalink





Stu Elsample  wrote:

Ammo will soon become a currency....


Agreed.  And that's why it is likely a good idea to own a small ammunition factory that produces ammo for which there is likely to be the highest demand.  In five-to-ten years, ammo shan't be merely a bartering tool, it shall be as good as silver coin or crypto-currency (e.g., ether or Zcash).








In reply to by Stu Elsample

ted41776 Tue, 05/22/2018 - 20:18 Permalink

currency is what most people get in exchange for their time. time they could be spending with their friends and family. time they could be spending doing what they love. their time is their life. when government devalues currency, it's really saying that your life means nothing to them. this could become a problem, because if your life means nothing to them, why should their lives mean anything to you?

Let it Go Tue, 05/22/2018 - 21:52 Permalink

Many of us see the introduction of a single "World Currency" as a major part of the economic endgame. This is something that will be forced on us as part of a "needed reset" to a global economy that has gone off track.

The new world order and globalization which has been pushed by many world leaders and the rich elite touting that "larger, more cooperative governments under one financial unit will benefit us all” plays into the world currency scenario. The article below delves into how this might unfold.

 http://World Currency Will Be Part Of The Financial Endgame.html