The Shrinking Value of the Dollar

[WarDog]

he CPI inflation calculator uses the average Consumer Price Index for a given calendar year. This data represents changes in prices of all goods and services purchased for consumption by urban households. This index value has been calculated every year since 1913. For the current year, the latest monthly index value is used. In 2008, for example, it took $21.57 to buy what $1 bought in 1913. Note that in 1920, it cost $2.02, and declined in 1925 and through the 1930s, illustrating the effect of the Great Depression, when prices slumped. Prices did not pass $2 again until 1950.

http://www.factmonster.com/ipka/A0001519.html

[Dr.3D]

Here is a chart I made up a while back.
It reflects the value of the dollar though the years.

http://i249.photobucket.com/albums/gg202/DrThreeDee/ValueofDollar_3080_image001-1.gif

[SeanEdwards]

CPI figures are untrustworthy crap anyway. When an item in their "basket" of commodities experiences excessive price inflation, the money masters simply remove it from the basket and substitute a cheaper alternative. So steak becomes hamburger, and fresh produce becomes ramen noodles. That way they can claim to have inflation under control, even while everyone's standard of living takes a nosedive.

Sadly for them, the public is finally getting slapped by price increases so hard that their lies and manipulations don't work anymore. Anyone who has been buying their own food for the past decade knows what I'm talking about.

[Zippyjuan]

That is only one half of the facts. What happend with incomes during that time? Time is a more accurate measure of purchasing power- how long do you have to work to buy things? How many hours (or portion of an hour) work for a loaf of bread? How long to buy a house? You are trading labor for goods and money is just the exchange medium. We are no longer paid in 1913 or whatever year dollars anymore so seeing what a 1913 dollar buys today is not really that significant.

Should the "basket" of goods used to measure inflation stay the same? In 1913 a person probably spent more than 30% of their income on food. Today that is something like 15%. Should the price of food have the same weight it did 75 or whatever years ago? What about things people no longer buy? Is that an accurate way to figure out how prices have changed? It is a complicated question. In 1913, hardly anybody had a car. Now almost everybody does and they spend a large portion of income on them. Should we keep cars out of our basket of goods since it was not included then?

Keeping the identical basket of goods for measuring inflation is actually more distorting than the changes they make in it today. Buying habits change and the adjustments made to the goods which comprise the CPI attempt to capture those adjustments in buying. Is it perfect? No. There is no perfect measure since what we buy changes all the time. They use census data to try to figure out what people actually buy and the basket is updated about every ten years. It is due to be updated this year (if it has not already been done). They spend about three years shorting through data and trying to determine what to include and how much weight to give each one.

[Fox McCloud]

Hey hey...I've got this crazy idea....

How about we outlaw fractional reserve banking and go on a 100% gold-standard, that way we don't have to worry about inflation at all, and the only thing we'll see, in relation to prices going up and down is related to supply and demand (and or fads here and there).