You may have you heard the expression: “As sound as a dollar.”
A sound dollar is the kind of dollar our grandparents had. A sound dollar is a dollar that holds a fixed value. A sound dollar is a dollar people can have faith in--both here and abroad.
Anyone who has been around a while knows that a new car costing $3,000 forty years ago may now cost as much as $30,000. Granted, auto workers earn more today, but on the other hand, cars are constructed of cheaper materials. Moreover, cost-efficient robotic machines do much of the work. So what’s up here?
The fact is, a U.S. dollar simply is not worth as much as it was forty years ago. Therefore, it takes many more of them to purchase a new car. Or anything else, for that matter.
Now let’s view this from another angle, the working person’s angle. There was a time when a man earned $3.00 an hour and could barely support his family. Now a man must earn $20.00 an hour and his wife $10.00 an hour, or vice versa, to make ends meet. That’s how we maintain some semblance of economic stability in our lives. We dicker and fight with our employer for a pay raise. And when it comes, if it comes, it comes in the form of devalued dollars. So the long-awaited pay raise turns out not to be a pay raise after all.
Some things have intrinsic value; that is, by their very nature they possess value. This is because people just seem to want those things. And that’s the key, people have to want something in order for it to have value.
Gold and silver, for example, have intrinsic value. Since the beginning of time human beings have wanted to possess gold and silver. When U.S. dollars contained gold and silver they had intrinsic value, value that went beyond that which was established by the government.
Even when the dollar was merely anchored to gold and silver, it retained its value. It still possessed intrinsic value because it was associated in people’s minds with gold and silver. In those days, a paper dollar could be exchanged for a silver one because a paper dollar was a “Silver Certificate,” not a “Federal Reserve Note” as it is today.
Now, due to poor leadership at the highest levels of our government, our country is deep in debt--so far in debt that some in the world wonder if we have the resolve to correct the situation. Even so, and with disaster looming, our government recklessly continues on with its shortsighted borrowing and spending rampage.
You see, now that our dollars aren’t anchored to anything of genuine value, when our government thinks it needs more money, it simply prints some. Where do you suppose all that “stimulus” money came from?
Unfortunately, printing more money is a little like watering down booze. The watered down booze just doesn’t possess the same kick as the 100 proof stuff. And neither do dollars watered down daily with a steady stream of newly printed ones.
That is why a “Federal Reserve Note” is no longer held in high esteem, at home or abroad. That is why merchants the world over demand ten times as many dollars for an item now than they did forty years ago. There’s just too many dollars out there in relation to the number of goods and services that currently are available.
Returning to the booze analogy, our money is no longer 100 proof money; it is now 10 proof money. Could it be put any more simply or graphically?
But what is worse than our perpetual inflation problem--which primarily is fueled by too much money being in circulation--is that now a growing number of the world’s central banks don’t want our dollars. They simply don’t want them. They have no faith in them. Instead they are favoring yens and euros as their reserve currency. This is alarming news because since the end of World War II, the American dollar has been the preferred reserve currency of most central banks.
Now remember, for a thing to possess value, someone has to want it. So when foreign countries refuse to accept U.S. dollars, and demand instead yens or euros, where do you suppose that puts us in the world marketplace?
Well, I’m not an economist, but I’m almost certain it won’t make our lives any easier.
My advice: Begin sending strong and repeated messages to Washington to put our economic house in order, or start learning to say: “As sound as a euro.”
