Dollar Devaluation

This is spoken like someone with his ears/eyes closed. Married to a business owner (until my husband died 6 years ago), (4 businesses actually)(successfull)(over 50 employees, and in business for many years) and personally working in that business myself for 24 years, I can say that FOR US in our business, we NEVER offered a job to an employee at a rate that was calculated to cover our portion of the medicare and social security tax. YOU might do that, but then that might make you one of the 'rich' people being talked about here. Those taxes are a cost of doing business these days, and if you have an employee that the going rate is $15.00 for and you offer him $13.85 (to use your example), then shame on you. As an employer, you are already the one making profit; why would you offer an employee any less than they (their job) are worth? Don't answer that, because it really doesn't matter. There are some who could see that as greed.
AND that is why I say not all rich people are the same.
Aaaaargh!

 

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My example is intended to show that the so-called "employer contribution" is of course factored into the process of determining an employee's pay. There's no treachery involved in such calculations, and it's absurd for you to claim otherwise.

In the example, the employer has determined the value of the labor is $15 an hour. That's how much he will pay for it. But because of the tax code, he must pay $1.15 of that amount to the government, in the form of his "contribution". So he pays the employee only $13.85. There's no chicanery involved, just math.

 

Those with wealth require security and protection of it, hence our large military. I have read that 40% of every dollar goes directly to military expenses with and addition 10% to pay debt on money borrowed for military funding. So that's half the nation's expenses. Other demands are placed for services by the general population. Unfortunately, there is no "they". "They" are "Us". Taxes could lower dramatically, but what are we willing to give up ? Health care ? Roads ? Schools ? Border Security, National Parks, etc. It has grown to a long list of things felt needed for public benefit. I mean we gave up research funding to Universities for the most part, so now medical and other research is done abroad. Those people will find the cures, etc and hold the patents. I sure don't like taxes, but the problem is too complex for my small mind to comprehend. I do believe that our elected officials do everything the can to scramble for enough money to keep things going. I still believe it was better before the changes made during the Reagan reign. Tax rates went through the roof, but nearly every cent spent here in the US was deductible. So, people spent money and there were jobs. Today, the shift in taxation doesn't seem to encourage that. IMHO

 

America spends more on "defense" than the next sixteen countries combined. Bases abroad in dozens of countries, enough nuclear firepower to kill every human on the planet twenty times.

Does it buy us security? Try to get on a commercial airliner and the answer will be as embarrassingly obvious as your genitals are to the TSA.

 

The U.S. Department of Defense budget accounted in fiscal year 2010 for about 19% of the United States federal budgeted expenditures and 28% of estimated tax revenues. For FY 2010, Department of Defense spending amounts to 4.7% of GDP.
The 2009 U.S. military budget accounts for approximately 40% of global arms spending and is over six times larger than the military budget of China (compared at the nominal US dollar / Renminbi rate, not the PPP rate). The United States and its close allies are responsible for two-thirds to three-quarters of the world's military spending (of which, in turn, the U.S. is responsible for the majority).[25][26][27]
In 2005, the United States spent 4.06% of its GDP on its military (considering only basic Department of Defense budget spending), more than France's 2.6% and less than Saudi Arabia's 10%.[28] This is historically low for the United States since it peaked in 1944 at 37.8% of GDP (it reached the lowest point of 3.0% in 1999–2001). Even during the peak of the Vietnam War the percentage reached a high of 9.4% in 1968
As a whole the US spends more money then most of the world per capita - now look at countries like NK or Saudi Arabia, where it's 33% and 13% of it's GDP, respectively...of the top 50 countries, the US is 46th. Freedom ain't free! (unless one lives in a dictatorship, then slavery ain't free).

At the peak of the cold war, it was estimated that Russia spent up to 90% of it's GDP on it's military - and look where it got them!

 

Now you make me doubt what you said about yourself above.

...and the rest I'll just edit out. Good luck to you.

 

I was not sure if the book reference was just a MESSAGE - which I got, or also a referral to a good piece on reading. Does the book touch on coins at all?

 

Does anyone here think that we will actually ever hear the words "dollar devalued" muttered from Federal Reserve President or our President? I think we might, but it will be when a bridge is described to help promote a new currency, or to blame an outside source for our troubles. I don't see the expression "dollar devaluation" making main stream TV any time soon - not as long as there is a0" controlled" falling of this crisis.

 

I am not sure what everyone is using as a comparison of the "devaluation" of the USD. Generally it would be comparison of the USD with other currencies such as the Euro and the "currency basket". But if you look back on a 10 year chart of the EURO/USD ratio, it would be hard to decide which a person would want for the future if they had a choice. There is no clear cut winner, as both have had peaks and valleys, IMO, the Euro much more in 2002 and 2006, and currently, I see it getting worse before better compared to the USD.

I had my doubts also, as the idea of "USD Devaluation" started hard when the US was trying to get us out of the financial difficulty, and we assumed everyone else was better off, especially in Europe. I do not buy that any longer. I doubt we even have 5% of an idea what China's financial situation is, and that is the "bomb" I fear in the next few years along with the European problems.

I would instead wonder what a stronger dollar will do to precious metals, interest rates, and inflation. Not hyper inflation, but in gasoline, other energy, food, base metals, etc.

Maybe I am one of the few who thinks the Government and the Fed Res. hit it as correctly as possible, considering all of the unknowns

Jim

 

I think it's a mistake to measure devaluation by comparing one unbacked (fiat) currency with another unbacked currency. My theory has always been that all the unbacked currencies are slowly devaluing over time (since world governments just print as much paper currency as they see fit).

I think it's better to compare the value of currency against a fixed commodity like gold or silver

In 2001 it took 240 U.S paper dollars to buy an ounce of gold ... and 4 U.S. paper dollars to buy an ounce of silver

Today it takes 1380 U.S. paper dollars to buy an ounce of gold ... and nearly 29 U.S. paper dollars to buy an ounce of silver

That is how i measure dollar devaluation.


(Saying that the dollar is strong as compared to the Euro ... to me just means the Euro is going down faster than the dollar ... so the dollar seems relatively stronger when compared directly with the Euro. )
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But, gold and silver no longer is mined or is mineable in the same way as years ago, with the use of mercury and higher cyanide solutions than today, and the mandatory safety and environmental regulations. Food crops are becoming more resistant to pesticides and herbicides, as well as the loss of powerful pesticides due to environmental damage. At one time we had the most use for petroleum products compared to most other countries, but now the demand from developing countries is overwhelming the supply. Except for war and natural disasters, the population of the earth continues to grow, not so much by an increased birthrate, but by increased survival rates.
Things are not the same as then and IMO, never will be again,and to value the dollar or any currency over time based on how things used to be is false, IMO.

An iPad taken back just 20 years would probably be deemed an artifact from an alien civilization and would sell for multimillions of then USD.

Jim
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Good point, inregard to other currency and handling things considering the unknowns. Who knows, there may be even worse unknowns that I could not imagine.

 

so you think the dollar is strong and stable in value?
that a dollar today is worth the same or more than a dollar in say 1960 ?

also do you think that silver going from $4 to $29 (and gold from $240 to $1380) in the past 9 years is just a random thing having nothing at all to do with the dollar?

 

"A fixed commodity"? Really?

Between 2001 and now, the price of gold in dollars has gone up 5.75 times, and the price of silver in dollars has gone up 7.25 times. So, has the dollar decreased in value 5.75 times, or 7.25 times?

From what I've seen, between 2001 and now, the price of bread at the store has gone up perhaps 25%. So, by your reckoning, has the "real value" of a loaf of bread decreased by 4 or 5 or 6 times?

In that same troubled period, the sale price of houses in my neighborhood has gone up, then gone down, and now is probably approximately unchanged. By your reckoning, are all our houses now worth only a fifth or a seventh of what they were worth previously?

You can consider a particular commodity to be "fixed" in value, but it's not a particularly useful exercise. The price of silver and gold in relation to anything else is not constant, but variable -- wildly variable, here of late.

 

The dollar could be a strong and a real currency if Congress did not remove part of our food supply that could be sold for animal or human food. It could be stronger if the FEDS did not claim land from the states and make the off limits to everything but dope growers. High grade coal could help with synthetic jet fuel and diesel fuel.
The Congress is creating inflation and a soft currency. What we can do and produce gives us standing in the world.
Tar sands could along with coal could make us energy independent if we drilled some also.
Commodities could come down if we had direction other that being a welfare state.
People in Europe own much more in PMs than in America. They have seen two world wars in their back yards.
Gold and silver are real money in their eyes.

 

No, but neither is anything else. It is getting stronger compared to other currencies, IMO.

There is our difference. Compared to what? Gold and silver? Again if you look at the cost of mining 10 years ago ( worldwide) 1 ounce of gold it is much different ( higher) today. There are more countries and populations that can afford PM, so demand increases, the price increases, even if the dollar or euro goes sideways. My tonsillectomy cost my mother $20 in 1955, my son's in 1988 cost $3000. What is it today? There are many factors involved in the pricing of everything today , other than the value of a dollar or a euro. If we base a modern Ford focus compared to a model-T?

I hope the dollar raises slowly, over years, myself, as I do value commodities, and I do expect some inflation which I greatly prefer over deflation. No one knows how much the increase of gold is determined by fear factors or other factors besides the USD. I have seen gold track reverse to the dollar in recent weeks, on both sides of the mark....and silver of course is much worse with probably much manipulation not associated with its "real" value. AIMO. I respect your opinion, but must differ.

Jim



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Well said and needed to be said.

 

The talk of devaluation because of the recent upward movement of PM's cannot be truly justified. PM's made very good advances during the 80's, so what happened to the dollar in the interim ? A house cost more in the 90's than the 80's but gold and silver were less. What happened with that ?

It is very true that people who have seen war hold hard currency. This is insurance, plain and simple. If a war breaks out, the best way to buy your way out of the war zone is with hard money or diamonds. And diamonds are really hard to show the actual value, where a PM coin is extablished. Europeans are survivalists too. They know the value of insurance. IMHO

gary

 

It all you buy is gold and silver, then yeah, the dollar is "devalued" by the ratios you mentioned.

As noted before, a "dollar" isn't meant to be valued for itself anyway; it's a notational device, used by people to quickly inform one another how much things are worth.

If you insist on conflating dollars from the past with dollars of the present, the one thing you need to do to have a meaningful comparison is to include how much effort is required in each case to get one. Otherwise you're just presenting half the equation.

When dollars were gold, how many hours did a working man toil to earn one? How about when they were silver? Is five dollars a day a top-level industrial wage, like it was when Henry Ford introduced it in 1910? Can you buy a brand new, state-of-the-art automobile for a thousand dollars today, like you could in 1910? Does it take 200 days pay for a person who builds cars for a living to buy one today, like it did in 1910?

 

Sorry, but the car anology is comparing apples to oranges. But in reality, a $30k auto would require 200 days of a net pay of $150. I do not know the take home pay of an average worker in the US, but I do know that few people today can pay cash for a car. In fact fewer and fewer will ever own a car. Leasing one seems to be the popular method of having one today. As with housing prices, a simple comparison won't work either because of the huge differences in construction costs, size, zoning & building codes, etc.

I had thought at one time that raw land cost could measure inflation/devaluation, but since the availability and location always changes due to population growth and shifts. laws and other factors. That cannot be accurate either.

I am going to ask my son, an economist, how they measure it. But however it's done, it's guesswork. IMHO

gary