Wednesday, January 05, 2011

Inflation - Making You Poorer, Day by Day

Below is a chart that I lifted (with slight formatting changes) from Bill Downey's article The Day the Dollar Died - And the Day Gold was Reborn. The chart demonstrates the massive ongoing impoverishment of US taxpayers via the deliberate actions of the Federal Reserve, since it is the Federal Reserve itself that is the root of all inflation.

How Much things cost On Aug 15th,1971 Today
Dow Jones Industrial Average 890 or 25 oz gold 9000 or 10 oz gold
Average Cost of new house $25,250 or 721 oz gold 250k or 277 oz gold
Average Income per year $10,600 or 302 oz gold 70K or 77 oz gold
Average Monthly Rent $150.00 or 4.3 oz of gold $824 or 1 oz of gold
Datsun 1200 Sports Coupe $1,866 or 53 oz gold $28,400 or 31 oz gold  

Conclusion: If your money is dollars, you live in an inflationary world. If your money is denominated in gold, you live in a deflationary world. In other words if your purchasing power is dollar denominated, costs have exploded upward. But if you maintained your purchasing power in gold, costs have decreased by almost 2/3rds of their original price from 1971 !!!!!!!!!!!! Check out the table below. Using the price data from above lets construct a table measuring cost in percentage terms from 1971 to 2009.

ITEM Dollar Inflation Gold Deflation
Dow Jones 1000% increase 40% decrease
New House 1000% increase 26% decrease
Ave Income 660% increase 75% decrease
Ave Rent 475% increase 78% decrease
Dow Jones 1000% increase 40% decrease
Total gold needed 1105 oz to buy all 1971 vs 2009 oz's - 396 oz to buy all

Over time prices (denominated in a real asset, like gold) should go down due to advances in technology and productivity. And indeed, if we measure in terms of gold, the world has become a cheaper place. But we live in a world where fiat money is the backdrop, not gold, so everything costs more. What that chart screams is how much poorer we all are today than our parents and grandparents were. And it's not an accident. The Federal Reserve did this deliberately. You and your children are slowly being sold into eternal debt slavery.

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