I've been watching the dollar die all my life. I sometimes think I
will outlast it.
When I was a young man, gold was $35 an ounce. Today one ounce gold
bullion coins, such as the Canadian Maple Leaf, cost more than
$1,000.
Our coinage was silver. Our dimes, quarters, and half dollars had
purchasing power. Even the nickel could purchase a candy bar, ice
cream cone or soft drink, and a penny could purchase bubble gum or
hard candy. If a kid could collect 5 discarded soft drink bottles
from a construction site, the 2 cents deposit on the returnable
bottles was enough for the Saturday afternoon movie. Gasoline was 32
cents a gallon. A dollar's worth was enough for a Saturday night
date.
Our silver coinage was 90 per cent silver. People sometimes melted
coins in order to make silver spoons, known as coin silver, which can
still be found in antique shops. Except for the reduced silver (40
per cent) Kennedy half dollar which continued until 1970, 1964 was the
last year of America's silver coinage. The copper penny departed in
1982. As Assistant Secretary of the Treasury, I opposed the demise of
America's last commodity money, but I couldn't prevent the copper
penny's death.
During World War II (1941-1945), nickel was diverted from coinage to
war, and the US mint issued a wartime silver (35 per cent) nickel.
It is not easy to find items to purchase with today's US coins, but
the silver coins of the same face value still have purchasing power.
The 10 cent piece of my youth contains $1.42 worth of silver at
today's silver price. The quarter is worth $3.55, and the half dollar
contains $7.10 of silver. The silver dollar is worth 15.2 times its
face value. These are just the silver values of coins that might be
worth far more depending on condition and rarity. The silver in the
wartime nickel is worth $1.10, which is 22 times the coin's face
value. Even the copper penny is worth 2.5 cents.
When I was a young man enjoying travels in Europe, the German mark or
Swiss franc traded four to one US dollar. The euro, which is today's
equivalent to the mark, costs $1.55.
People who haven't ac***ulated much age have little idea of the
corrosive power of "acceptable" inflation. Unlike gold and silver,
fiat money has no intrinsic value. When money is created faster than
goods and services it drives up prices, thus driving down the value of
the money. If freely traded currencies are excessively printed or if
inflation, budget deficits, and trade deficits drive currencies off
their fixed exchange rates, prices of im****ts rise as the foreign
exchange value of the currency falls.
Today the US, heavily dependent on im****ts, is subject to double-
barrel inflation from both domestic money creation and decline in the
dollar's foreign exchange value.
The US inflation rate is about twice as high as the government's
inflation measures re****t. In order to hold down Social Security
payments, the government changed the way it measures inflation. In
the old measure, inflation measured the nominal cost of a defined
standard of living. If the price of steak rose, up went the inflation
rate. Today if the price of steak rises, the government assumes that
people switch to hamburger. Inflation doesn't go up. Instead, the
standard of living it measures goes down.
This is just one of the many ways that the government pulls the wool
over our eyes.
With the dollar value of the euro rising through the roof, today a
vacation in Europe is far more costly than in the past. Thanks to
China, so far Americans have been sheltered from the greatest effects
of the dollar's declining value. Our greatest trade deficit is with
China. The prices of the goods from China have not risen, because
China keeps its currency pegged to the dollar. As the dollar goes
down, China's currency goes with it, thus holding down price rises.
The resignation of Admiral William Fallon as US military commander in
the Middle East probably signals a Bush Regime attack on Iran. Fallon
said that there would be no US attack on Iran on his watch. As there
was no reason for Fallon to resign, it is not farfetched to conclude
that Bush has removed an obstacle to war with Iran.
The US is already over stretched both militarily and economically. An
attack on Iran is likely to be the straw that breaks the camel'sback.
-------------------------------------------------------
Paul Craig Roberts was Assistant Secretary of the Treasury in the
Reagan administration. He was Associate Editor of the Wall Street
Journal editorial page and Contributing Editor of National Review. He
is coauthor of The Tyranny of Good Intentions.He can be reached at:
PaulCraigRoberts@[EMAIL PROTECTED]
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