Bay Bridge Sue wrote:There is another issue going on here... the devaluation of the US dollar.
The almighty buck is worth a fraction of what it was even a few years ago. Look at against the one benchmark we've always used.
That benchmark (gold) is a poor choice of benchmark, and does not correlate well with dollar values. The consumer price index (what money purchases) is what determines the value of the dollar and what you could've bought for what you have now.
$100 today is worth about $78.40 in 2000, $8.03 in 1800 (inflation calculator
). After the US left the gold standard, inflation has been positive, but so has growth (to a great extent). That's why despite the dollar losing over half its value from 1981 to 2009, we haven't seen real major problems like you'd expect with that kind of currency devaluation.
A few years ago, Gold was $750 an ounce. Now it's twice that much.
Did gold somehow become worth intrinsicly more? Or did the dollar lose half its value?
Gold's value does not track the value of currency; it tracks economic conditions. People buy gold as a hedge against loss, because it doesn't "change" in value. Therefore gold's value is high during economic slowdowns, and low in good times. In good times, gold is a bad investment because gold does not increase in any intrinsic value. You don't gain interest on a lump of metal. At the same time, you don't lose metal when the economy tanks.
I'm watching other currencies slowly creep up on the dollar - look at the Lowly Ruble. It was running at, what 32 to the dollar, now it's 28. Means either the Ruble is becomeing more and more valuable, or the dollar less and less. And that's only one example.
You're tracking very short term and insignificant changes. The ruble has been hovering around 29:1 all throughout the 21st century with small variations like the one you've just described. There's no serious trend.
A currency's value is determined mostly by the country in question (i.e. a fiat currency which (nearly?) all modern currencies are). Most countries do not want to see a major change in their currency's value; certainly not a major increase in value. The higher the value, the more harmful to imports. So countries will seek to dilute the value of their currency in order to stay competitive. Japan is doing that now with the Yen especially after their nuclear disaster. China has been locking their currency to artificially low values to stay artificially competitive in exports, which has included buying US debt to keep the the US dollar high against the yuan.
The debt? If you look at the debt 8 years ago (2 years into GWB's presidency, in 2011 dollars VS today's debt - how does it stack up?
It's far beyond what inflation can account for. The dollar has been devalued about 20% from 2000's value; however, the debt has nearly doubled. It's not really the wars that have caused that either (they didn't help), but the global recession. Remember how times were "good" even after the initial tech bubble burst and 9/11 all up until the housing bubble? I'd say the debt and economic woes facing this country have roots far beyond these past 2.5 presidencies, mostly due to a series of economic bubbles bursting, and the policies that enabled such bubbles.
If we set the value of the dollar at a fixed amount against a metal - say Gold in Ft. Knox, so a dollar was always worth, say, 1/1000th of an ounce of gold, then HELD IT at that, instead of printing labor and goods promissary notes backed by the Roman Dinarius (eg air), then maybe the dollar would stabilize.
But then you'd be paid very little right? It's all relative because the money supply is supposed to increase according to economic "growth." The problem is that growth has been stagnant this past decade, so the effects of inflation hurt. Ironically, deflation reflects poor economic times, and it is better to grow faster than your debt than to pay down the debt at the expense of growth. Nobody was wishing for the gold standard in the mid-nineties, but there was a nice tech bubble growing and times were good. I don't think it would've helped either, because debt can be bought and sold regardless of whether it is backed by gold or not. I don't want to see runs on currency like those in the Great Depression.