Looking for input on dollar value

[DocHolliday]

Here are two things that I very frequently hear coming from people on this forum.

1) The dollar has lost 95 percent of its value since 1913, when the federal reserve was created. I hear this from Ron Paul as well.

2) The dollar is way overvalued, and in order to retain jobs and stop foreign flight, we need to drop the artificially high value of the dollar.

How can you reconcile these?

 

[hugolp]

Here are two things that I very frequently hear coming from people on this forum.

1) The dollar has lost 95 percent of its value since 1913, when the federal reserve was created. I hear this from Ron Paul as well.

2) The dollar is way overvalued, and in order to retain jobs and stop foreign flight, we need to drop the artificially high value of the dollar.

How can you reconcile these?

Both are true. Whats the problem you see?

Rising prices because of inflation (money creation) is not something that happens instantly. In normal conditions it can take 1 year for a monetary injection to be fully processed by the market and prices to be rised "accordingly". So the Fed has droped the value of the dollar by that amount, but has alredy taken the actions so it will drop more in the future. This actions are alredy done, but they have not taken effect yet (but they will).

 

[tmosley]

The dollar is currently worth 1/25th of what it was in 1913, yet we have 384 times as many dollars in circulation.

One might assume that the dollars are supported by a stronger economy, but our manufacturing base is weaker now than it was in 1913. By these numbers, the dollar is currently overvalued by a factor of about 1500%. This excess money is held offshore in the foreign reserves of other countries, in banks, and in mattresses (especially criminal mattresses ie drug money).

Once faith is lost abroad, all that money will come crashing back, and we'll all wake up impoverished one day. That is, unless you're holding precious metals....

 

[MoneyWhereMyMouthIs2]

Here are two things that I very frequently hear coming from people on this forum.

1) The dollar has lost 95 percent of its value since 1913, when the federal reserve was created. I hear this from Ron Paul as well.

2) The dollar is way overvalued, and in order to retain jobs and stop foreign flight, we need to drop the artificially high value of the dollar.

How can you reconcile these?

#1 is a comparison of dollar value now to dollar value in 1913. What would a dollar buy in 1913 versus what will a dollar buy now?

#2 is a comparison of dollar value now (what will a dollar buy now) to dollar value if it weren't propped up by things like artificial demand, enforced by the military around the world. (oil markets in dollars, and demand for dollars because it was once seen as the most stable currency for securing energy by places like China) Usually, when people talk about the dollar being overvalued, they are talking in relation to gold or other commodities now. It is expected that the dollar will lose more value than it already has, and that's not at all inconsistent with your number 1.

 

[DocHolliday]

Thanks for your responses. Question answered.

 

[Dr.3D]

An illustration of the government reported CPI value of the dollar.

There are two way to look at the data.
If one were to believe the government reported 'Consumers Price Index', these charts would be helpful to illustrate what has happened since 1913.

The first chart shows the history of how many dollars are needed to equal one 1913 U.S. dollar.

This second chart shows the history of what has happened to the value of the dollar since 1913.