The Mighty Dollar?

Lets look at the US dollar. Since the Federal Reserve was created in 1913, the US Dollar has lost 90% of its ablility to buy actual goods and services. Dollar losing its purchasing power is ignored in mainstream economic circles. Looking at the price of US Dollar versus Euro, Yen and Pound. The dollar had a good run versus its major trading currencies between 1980 and 1985. It fell between 1985 and 1995, only to rise between 1995 to  2000. Since September 11 2001, the dollar has  collapsed over 30% versus the major trading currencies. Maybe a conclusion is currencies are volatile. However during this period the dollar has been able to buy less and less. Yen, Euro and Pound are also buying less, but they can by more than the dollar.

A more revealing observation is the trend of US Dollar versus Gold.  The US Dollar is losing its value versus gold. In  October 2009 it cost US Dollars 950 to buy an ounce of gold. Today it costs over US Dollars 1800 to buy that same  ounce of gold.

What does all this mean? It means the US Dollar is losing its value. In fact, it has been since the Vietnam War. Each round of war brings about the further weakening of the US Dollar. The US Dollar buys less and less, as military expenditures mount. Why? Wars cost money-to pay for military expenditures more dollars are printed, this is at the expense of American productive capacity. Versus the major currencies dollar seems strong, this is an illusion. Major currencies artificially prop up the dollar, they do this by buying more dollars than they spend. The price of gold tells us the truth about what the dollar is worth. Dollar is not a good store of wealth, buy gold instead.