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Letter Re: One Way to Visualize Inflation and Dollar Devaluation

Sir,
Let’s look at a way to visualize inflation. Let’s say you had a $1,000 bill in 1900. At that time, this would be the equivalent of letting the government safeguard [about] 50 ounces of gold for you.

In 1933, Franklin D Roosevelt devalued the dollar, and as a result gold’s price rose from $20/ounce to $35/ounce. Equivalently, you could also say the 50 ounces of gold the government held for you now became 28.57 ounces of gold. The government stole 21.43 ounces of gold from you overnight!

In 1971, Richard Nixon ended the Bretton-Woods gold standard for good, and by 1974, gold had risen to $200/ounce. You now had 5 ounces of gold. Thus, between 1971 and 1974, the government stole 16.43 ounces of gold from you.

In 1999, gold bottomed out at $250/ounce. You now had 4 ounces.

With gold nearing $1,000/ounce today, you are down to 1 ounce. Over the last 10 years, the government has stolen roughly 3 ounces of what little gold you have left.

Now instead of paper money, visualize that you did indeed have 50 ounces of gold in your safe in 1900 and that year after year the government broke into your home and stole gold from your safe at this rate. Would you find that acceptable? – CRW