We Need A Little Inflation, Media Pundits Say

I say we've had more than enough inflation over the past 100 years.

The Bureau of Labor Statistics (BLS) has a cute little java application called "CPI Inflation Calculator".

We've been assured by the Federal Reserve chairmen (both Alan and Ben) and by the government statisticians in the Bureau that price inflation in the US is very mild; that there's no reason to worry about runaway price inflation; that it is price deflation we should fear. Obliging MSM says what we need is a little inflation and it's a good thing for a debtor country like the US.

Students of Austrian economics say that price inflation is the inevitable result of monetary inflation. Under Chairman Bernanke, the Federal Reserve doubled the monetary base in the process of supporting the financial market. This elevated monetary base hasn't resulted in elevated money supply, as banks continue to hoard, not lend. Not yet, and not unless they are forced to.

So, all is well then?

Not really. Let's now use the BLS's nifty java app to see how much today's $1000 is worth in different years past...

$1000 in 2010 is worth:

• $989.83 in 2009 dollars;
• $901.08 in 2005 dollars;
• $794.50 in 2000 dollars;
• $703.14 in 1995 dollars;
• $603.02 in 1990 dollars;
• $380.18 in 1980 dollars;
• $186.86 in 1971 dollar, when Nixon unilaterally abolished dollar-gold convertibility (Nixon Shock);
• $45.68 in 1913 dollar, the year the Federal Reserve was born.

US dollar has lost over 95% of purchasing power in 100 years; the bulk of that loss has occurred after the Nixon Shock.

For more on different inflation rates and their impact on the purchasing power of the dollar, check out my post from last year.

Tweet