Thursday, October 23, 2008

The shrinking value of our money

"Historically, the United States has been a hard money country. Only [since 1913] has the United States operated on a fiat money system. During this period, paper money has depreciated over 87%. During the preceding 140 year period, the hard currency of the United States had actually maintained its value. Wholesale prices in 1913... were the same as in 1787."
-- Kenneth Gerbino, former chairman of the American Economic Council
http://quotes.liberty-tree.ca/quote_blog/Kenneth.Gerbino.Quote.B243


From "Gold and Liberty" by Richard Salsman, Economic Education Bulletin, vol XXXV no. 4:

Jastrum (1977) analyzed more than 4 centuries of gold and price data from Great Britain and the United States in order to measure gold's real purchasing power.... Remarkably, Jastrum found that gold's purchasing power was relatively constant through more than 4 centuries.
Refers to Jastrum, Roy W., The Golden Constant: the English and american experience 1560-1976, New york: John Wiley 7 Sons, 1977

To see just how much money the government has created, here's a graph from St. Louis Federal Reserve. The ways in which government is able to create money from nothing are numerous, but the effect is the same: each dollar in circulation is worth less. (NB: Beginning in 1971, the US dollar was no longer on the gold standard.)


The cause of generally rising prices is an increase in the quantity of money. More specifically…the cause is an increase in the quantity of money at a rate more rapid than the increase in the supply of gold and silver... [S]ince government intervention into the monetary system is what has been responsible for the quantity of money being able to increase more rapidly than the increase in the supply of gold and silver...what is responsible for the problem of a persistent significant rise in prices is an increase in the quantity of money caused by the government.
--George Resiman, Capitalism: A Treatise on Economics, pg 895

(If you are curious about how prices today compare to another time in the past, check out the inflation calculator. )

More on the value of a gold standard:

"For more than two thousand years gold's natural qualities made it man's universal medium of exchange. In contrast to political money, gold is honest money that survived the ages and will live on long after the political fiats of today have gone the way of all paper."
--Hans F. Sennholz


"The great merit of gold is precisely that it is scarce; that its quantity is limited by nature; that it is costly to discover, to mine, and to process; and that it cannot be created by political fiat or caprice."
--Henry Hazlitt


"The gold standard makes the money's purchasing power independent of the changing, ambitions and doctrines of political parties and pressure groups. This is not a defect of the gold standard; it is its main excellence."
--Ludwig von Mises


In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. ... This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."
-- Alan Greenspan, former Chairman, US Federal Reserve from Capitalism, the Unknown Ideal
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3 comments:

Darin said...

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. ... This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."
-- Alan Greenspan, former Chairman, US Federal Reserve from Capitalism, the Unknown Ideal"

It's almost funny looking back at the things Greespan has stated, including what he told Milton Freidman, as in hindsight it doesn't appear that he practiced much free-market economic principals (i.e. artifical (non-market) interest rates and fiat money pumping - inflationary policies).

Oh, and I like what he had to say when blame was shifted his way.

economicsfreedommatters.blogspot.com

Beth said...

Greenspan has not been for a free market for years. Instead, he has strongly advocated for government intervention through the actions of the Fed. What prompted him is completely unkown to me. But back in the '60s he did write some good stuff which is worth remembering.

Beth

Darin said...

That maybe true, however, apparently so has Paul Krugman but we can't overlook what he has been writing for the past 10 years or so.

In a free market, banking and money are separate from a government.....the existence of a Fed seems to be diametrically opposed to capitalism.

economicsfreedommatters.blogspot.com