A Million Bucks Ain't What It Used to Be 9 comments
-
Font Size:
-
Print
- TweetThis
It's tough being a millionaire in the United States today. After all, a million bucks doesn't buy as much as it used to. Our famous millionaire forefathers like J.P. Morgan, H.L. Hunt, and J. Paul Getty had it so much better. They lived in the best of times for the U.S. dollar.
For example, in 1916 J. Paul Getty made his first $1 million running his own oil company in Tulsa. Back then, Getty confidently knew his $1 million would hold its value in the future thanks to the financial terra firma of the times: Congress fulfilled its mandate under Article 1, Section 8 of the U.S. Constitution to peg the value of the dollar to a fixed weight and measure. Getty knew $100 would always equal 4.84 troy ounces of 99.9% pure gold by U.S. federal law. Oh, to be such a confident millionaire!
Sadly, in 1934 Congress double-crossed Getty and the other millionaires of his day, kicking off an immoral pattern of dollar devaluation that continues to increasingly impoverish millionaires – not to mention the hundreds of millions of less fortunate Americans – to this day. The table below reveals Congress' shameful track record over the past 100 years. Feel free to blame Congress and its unconstitutional monetary policy for the uncertainty that you, your family, your income, and your net worth face today.
Related Articles
|
-
The Seeking Alpha 100
See allThe top 100 stock
market authors
selected for publication
Seeking Alpha 100 » -
Fastest Climbers
Authors with the largestSee all
increase in followers
in the last 7 days
Fastest Climbers » -
Top Commenters
Top commenters,See all
as ranked by their peers
Top Commenters » -
Top Instabloggers
The 100 most activeSee all
Instabloggers.
Top Instabloggers » -
Top StockTalkers
TopSee all
StockTalkers.
Top StockTalkers »
This article has 9 comments:
a good video on the CPI and GDP deflator calculations...
You almost have it right. The dollar needs to be pegged to something, but it isn't a physical item. It needs to be pegged to energy. Let a dollar equal 10 Kwh, and be redeemable for such. Still not perfect, but at least any inflation or deflation is real and related to energy which is the lifeblood of the economy. It is no accident that developed economies have high per capita energy expenditure, and undeveloped don't. The implementation is more complex than this but this gives the basic idea. The complexity has to do with consumption and losses to entropy. Productivity is measured as true thermodynamic efficiency instead of the mickey mouse number now used.
Whatever you may think about the gold standard, I think you missed the point of the article. He's trying to make the point that the gold standard was a way to set the value of a dollar -- we wouldn't need to produce 15 trillion dollars today, since the dollar would be more valuable in real terms if it was calibrated to something.
The problem (and I'm no economist, just me thinking on these matters) is that any commodity you choose to use as a dollar index is going to introduce strange unintended consequences. If you set the dollar rate at $1.00 = 10 kilowatt hours, what happens when companies can't buy supplies at a cost that will meet that pricing goal? They close up shop and stop producing electricity until Congress sets a new threshold?
This will mean one thing, free falling dollar. Buy Gold, and Silver cheap now since the central banks and shorts have manipulated the price to "relative" historic lows - or buy euros -another fiat currency and let the terrorist countries control that next!
...
Whatever you may think about the gold standard, I think you missed the point of the article. He's trying to make the point that the gold standard was a way to set the value of a dollar -- we wouldn't need to produce 15 trillion dollars today, since the dollar would be more valuable in real terms if it was calibrated to something.
...
There is truth in what you say. And I agree with the concept of pegging the dollar to something. But I'm saying why pick something completely irrelevant from an economic production perspective as the peg. How does the difficulty in extracting and refining a rare metal relate to economic production? Gold output in the world is falling. Economic output in the world is rising. This means built in deflation. Here is a link to a page with gold statistics. www.goldsheetlinks.com... This will only get worse as economic output continues to increase while gold production declines. So next year, your house is worth say 10% less than it is this year because of this deflation, and so on throughout the economy.
RickRussellTX said
...
The problem (and I'm no economist, just me thinking on these matters) is that any commodity you choose to use as a dollar index is going to introduce strange unintended consequences. If you set the dollar rate at $1.00 = 10 kilowatt hours, what happens when companies can't buy supplies at a cost that will meet that pricing goal? They close up shop and stop producing electricity until Congress sets a new threshold?
...
Good question. No, the dollar is *defined* as 10Kwh. Of course, we do something like pick a coal fired power plant in Missouri with specific technology, and that is the standard. If you're using diesel generators in Alaska, the price of a Kwh will be much higher. But the reference Kwh will remain constant. If someone comes up with a cheap portable fusion reactor that has thermodynamic cost 10% of the reference Kwh, that means economic output in dollar terms goes way up. Maybe it becomes the new reference.
The big benefit to this way of pegging the dollar is that there is a direct correlation between energy and economic output. And it means that a dollar is a constant - 10 Kwh of output from a plant in Missouri. The price that others charge will be constant relative to that plant, depending on their efficiency of generating electricity relative to that plant. And everything else in the economy will move in tandem with that cost. Of course, the entire money creation process has to be revisited (the fed and the banks). All those pigs with their snouts in the trough will fight that tooth and nail.
This is still simplifying considerably. It would take too much space to describe the entire scenario here. I'm just trying to convey the concept.
Thanks for your questions.
Please also note that gold was chosen here for two very important reasons: 1) gold was used by the government itself to value (and, in 1934, to devalue) its currency historically, and 2) human beings have chosen gold over all other alternative currencies for over 5,000 years (i.e., way before you, I -- and today's economic intellectuals and pseudo-intellectuals -- were born).
Just because gold is not "en vogue" currently (or, at least, since the early 1970s) does not change the fact that gold has historically been the global currency of choice among human beings far longer than any single government-backed currency has been the global currency of choice among human beings. Sure, yes, today, it's the fiat U.S. Dollar. But, before that, it was the British Pound (the 1800s). And, before that, it was....gold. Today, gold is so out of style that even Switzerland -- the gold-hoarding, ultraconservative Swiss Central Bank that doles out the Swiss Franc -- sold off all its gold reserves in 2005. Now, THAT must be the watershed event of gold's rejection as currency in modern times. However, the U.S. government, mysteriously, still holds the largest store -- over 8,000 tons -- of gold in Fort Knox and in the basement of the Federal Reserve building in New York (Ever wonder why this is so given that gold is so unfashionable today?).
It seems the human acceptance of currency by government decree is all the rage these days. But, just because gold feels old fashioned to you in 2008, doesn't change the past 5,000 years. It all depends on your view of whether or not human acceptance of currency by government decree is an evolution of human behavior or a devolution of human behavior. I suggest that if you are not educated in these matters, you should educate yourself and then come to your own conclusion about human evolution or devolution in monetary policy matters. I for one think it better to err on the side of devolution at this time.