Fed to Devalue Dollar by 33% Over Next 20 Years
But, an increase of 2% a year over a period of 20 years will lead to a 50% increase in the price level. It will take 150 (2032) dollars to purchase the same basket of goods 100 (2012) dollars can buy today. What will be called the “dollar” in 2032 will be worth one-third less (100/150) than what we call a dollar today.
The best the Fed can do — an average debauch in the dollar’s value of 2% a year while producing recurring financial crises and a more cyclical economy — is demonstrably inferior to the results produced by the classical gold standard. Here’s just one example. The largest gold discovery of modern times set off the 1849 California gold rush and increased the supply of gold in the world faster than the increase in the output of goods and services. The price level in the U.S. did increase by12.4 percent over the next 8 years. That translates into an average of just 1.5% a year. The gold standard at its worst was better than the best the Fed now promises to do with the paper dollar.
The Fed’s best is hardly good enough. The time has arrived for the American people to demand something far better — a dollar as good as gold.