Our Federal Reserve Note Loses Purchasing Power Over Time

The United States transitioned to a central banking system with the creation of the Federal Reserve System in 1913. The Panic of 1907, a severe financial crisis, highlighted the need for a more stable banking system and a lender of last resort. The Federal Reserve Act was signed into law by President Woodrow Wilson on December 23, creating the Federal Reserve System as the central bank of the United States. This was the start of our Federal Reserve Notes that we use today disguised as the US dollar.

The US has transitioned into a full fiat monetary system

The United States transitioned to a full fiat monetary system in stages during the 20th century. The Federal Reserve Act established the Federal Reserve System in 1913, which began issuing Federal Reserve Notes (paper money) backed by gold. President Franklin D. Roosevelt issued Executive Order 6102, which prohibited the private ownership of gold coins, bullion, and certificates, effectively ending the gold standard for American citizens in 1933. The Gold Reserve Act nationalized all gold by ordering the Federal Reserve banks to transfer their gold to the US Treasury in 1934. The act also set the value of the dollar at $35 per ounce of gold.

In 1944 The Bretton Woods Agreement established an international monetary system with the US dollar as the world’s reserve currency, backed by gold at a fixed rate of $35 per ounce. On August 15, 1971, President Richard Nixon announced the Nixon Shock, which included the suspension of the direct convertibility of the US dollar into gold, effectively ending the Bretton Woods system and transitioning the US to a full fiat monetary system. After 1971, the value of the US dollar was no longer tied to gold or any other commodity, and its value was determined by supply and demand in foreign exchange markets. This marked the complete transition of the United States to a fiat currency system, where the value of money is backed by the government’s authority and the faith of the people using it. That faith is eroding today at an exponential pace.

It takes $29.63 to buy what $1 bought in 1913

To determine the value of $1 from 1913 in today’s dollars, we need to account for inflation. Inflation is the increase in the price level of goods and services over time, which consequently decreases the purchasing power of a currency. According to the CPI inflation calculator, $1 in 1913 is equivalent to approximately $29.63 in 2023, assuming an average annual inflation rate of 3.12% between 1913 and 2023. This means that the purchasing power of $1 in 1913 is equivalent to the purchasing power of $29.63 in 2023. In other words, an item that cost $1 in 1913 would cost around $29.63 in 2023, assuming the item’s value increased at the same rate as the overall inflation rate. One ounce of gold in 1913 was $20.67. That same ounce of gold today is worth well over $2,300.

$100 in 1971 would have the same purchasing power as approximately $745 in 2023

According to the CPI inflation calculator, $1 in 1971 is equivalent to approximately $7.45 in 2023, assuming an average annual inflation rate of 3.95% between 1971 and 2023. This means that the purchasing power of $1 in 1971 is equivalent to the purchasing power of $7.45 in 2023. In other words, an item that cost $1 in 1971 would cost around $7.45 in 2023, assuming the item’s value increased at the same rate as the overall inflation rate. To put this in perspective, if you had $100 in 1971, it would have the same purchasing power as approximately $745 in 2023. One ounce of gold in 1971 was $35 per ounce. One ounce of gold today is worth over 70× that amount compared to 1971.

Claude AI says our Federal Reserve Note has lost 43% of its value since 2000

According to the CPI inflation calculator, $1 in January 2000 is equivalent to approximately $1.76 in March 2023 (the latest available data as of April 2023), assuming an average annual inflation rate of 2.53% between January 2000 and March 2023. To calculate the percentage of value lost, we can use the following formula:

Percentage of value lost = (1 (1 / (1 + Cumulative Inflation Rate))) × 100%
Plugging in the values:
Percentage of value lost = (1 (1 / 1.76)) × 100%
= (1 0.568) × 100%
= 0.432 × 100%
= 43.2%

This means that the US Federal Reserve Note has lost approximately 43.2% of its value since January 2000 due to inflation. In other words, a dollar in January 2000 had the same purchasing power as $1.76 in March 2023, indicating a significant decline in the currency’s purchasing power over the past 23 years. According to this author’s research, our Federal Reserve Note has lost 55% of its value since 1999 as we all know CPI inflation numbers don’t tell the real story. Just ask any American consumer who shops regularly.

$1 in June 2019 is equivalent to approximately $1.30 in March 2024

According to the CPI inflation calculator, $1 in June 2019 is equivalent to approximately $1.22 in March 2024, assuming an average annual inflation rate of 4.12% between June 2019 and March 2024. This means that the purchasing power of $1 in June 2019 is equivalent to the purchasing power of $1.22 today. In other words, an item that cost $1 in June 2019 would cost around $1.22 in March 2024, assuming the item’s value increased at the same rate as the overall inflation rate. To put this in perspective, if you had $100 in June 2019, it would have the same purchasing power as approximately $122 in March 2024. One ounce of gold in June of 2019 was approximately $1,350 per ounce. Gold has appreciated by 70% since June 2019 while our dollar has depreciated by more than 20% during the same period.

Fiat money has a strong tendency to lose purchasing power over time

Fiat money has a strong tendency to lose purchasing power over time due to factors like inflation, lack of intrinsic value, monetary policy decisions, economic instability, and long-term economic growth. When the money supply increases faster than the growth of goods and services in an economy, it leads to a general rise in prices, which reduces the purchasing power of each unit of currency. Fiat money is not backed by a physical commodity like gold or silver. Its value is derived from the trust placed in the issuing government and its ability to manage the economy effectively.

Central banks can print more money or adjust interest rates to influence economic growth, which can lead to inflation if not managed carefully. Economic crises, political instability, or loss of confidence in a government can lead to a rapid decline in the value of fiat money. As economies grow and become more productive over time, the prices of goods and services tend to rise, contributing to the gradual erosion of purchasing power. It is pretty obvious that our central bank and government have not managed policy carefully over time. It has been outright outrageous and continues to fester on itself in the most sinister of ways.

Gold historically holds and builds purchasing power over time

Gold has historically been seen as a store of value and a hedge against inflation, with its purchasing power remaining relatively stable or even increasing over long periods. Gold is a finite resource, and its supply grows slowly through mining. This scarcity helps to maintain its value over time, as the supply growth is often outpaced by the growth in demand. Gold does not corrode or tarnish, making it a durable store of value. This physical property has contributed to its use as a currency and store of wealth for thousands of years. Gold is recognized and valued worldwide, with a well-established global market. This universal acceptance contributes to its liquidity and stability.

During periods of high inflation or economic uncertainty, investors often turn to gold as a safe-haven asset. As the purchasing power of fiat currencies declines, the value of gold tends to rise, helping to preserve wealth. Gold has a low correlation with other financial assets like stocks and bonds, making it a valuable tool for portfolio diversification and risk management. Gold has long been associated with wealth, prestige, and beauty, which contributes to its enduring value and global demand. When central banks pursue loose monetary policies, such as keeping interest rates low or engaging in quantitative easing, it can lead to currency devaluation and inflation. In such scenarios, gold often appreciates as investors seek to protect their wealth.

Protection of wealth and diversification of wealth today is more important than ever as the mental patients in government have taken over the asylum. The deficit spending and borrowing have created a point of no return for our currency and our financial system. It would be very unwise to have all of your assets in a fake, rigged, manipulated, dying system supported by fake leaders and more debt created out of thin air. This system leads directly to more lost purchasing power and possibly a total collapse of the entire financial system. This is not a fact and is our humble opinion of what is to come. Do you have enough protection from this unfortunate financial outcome?

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