Has the Dollar Really Lost 97% of Its Value? (No)



One of the favorite tropes of the “End the Fed” crowd is the “falling purchasing power of the U.S. dollar.” Google that phrase, and you will be rewarded with 91,100,000 results. (drop the “U.S.” and it doubles to 187,000,000 results).

The problem is, nearly all of these arguments are wrong.

As Matt Busigin of Macrofugue points out (echoed by Joe Wiesenthal of Business Insider), measuring the buying power of cash by functionally burying it in Mason Jars in the backyard is a misleading and inappropriate metric.

Continued here

This piece is cross-posted from The Big Picture with permission.

One Response to "Has the Dollar Really Lost 97% of Its Value? (No)"

  1. OldNerdGuy   November 26, 2013 at 5:19 am

    It's interesting when people say that the changing purchasing power of the dollar doesn't matter, but then, if the dollar's purchasing power goes up, suddenly many of those same people have a problem.

    Economic policy is largely an exercise in choosing winners and losers. It is well-established that inflation is a transfer of wealth from savers and retirees to borrowers (individuals, businesses, bankers, governments, etc.). Perhaps it should be no surprise that, in a democracy, when the majority are not savers, they will gang up against the savers to raid their assets and make all kinds of clever arguments to justify it, either because they are desperate (due to over-indebtedness, etc.) or just plain greedy (they want to find ways to get more money other than by hard work). That is the moral of the story.