Purchasing Power of the Dollar: Who's Really in Control?

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posted on Jul, 29 2013 @ 04:56 PM
Purchasing Power

is the dollar's value in terms of the quantity of goods and services it can purchase. Thus, if a person could buy two loaves of bread for a dollar a year ago but can only purchase one loaf of bread for a dollar today, the purchasing power of a dollar has decreased.
That's extremely important to understand. Prices don't go up. The purchasing power (value) of the dollar goes down. Thanks to those that print the dollar. That's also why it seems like the current POTUS is spending more than the POTUS' before him. He's not spending more, the value of the dollar is dropping.

The house that was sold for for $50,000 in 1975, is now selling for a whopping: $217,011.15, at 334% cumulative rate of inflation. Calculate it HERE

The amount of money in circulation affects the dollar's purchasing power. If the money supply of dollars increases because the U.S. prints more money or a country sells its large holdings of the dollar on the market, the flush of dollars in circulation causes the currency to be worth less.

Investors analyze the purchasing power of the dollar to determine if the currency is appreciating or depreciating in value. If the dollar appreciates, the U.S. imports more goods but exports less because now goods produced in America are more expensive overseas. Like stocks, if the strength of the dollar is high, investors may be tempted to buy more to buffer their portfolio, or they may sell dollars and collect a return.

The money supply also increases or decreases based on the interest rate set by the Federal Reserve. If the interest rate is high, borrowing money is discouraged and the money supply contracts. In turn, this contraction increases the purchasing power of the dollar.
The Federal Reserve System

Also known as the Federal Reserve, and informally as the Fed, is the central banking system of the United States. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, largely in response to a series of financial panics, particularly a severe Panic in 1907

The Panic of 1907, also known as the 1907 Bankers' Panic or Knickerbocker Crisis, was a financial crisis that occurred in the United States when the New York Stock Exchange fell almost 50% from its peak the previous year.

The panic was triggered by the failed attempt in October 1907 to corner the market on stock of the United Copper Company. When this bid failed, banks that had lent money to the cornering scheme suffered runs that later spread to affiliated banks and trusts, leading a week later to the downfall of the Knickerbocker Trust Company—New York City's third-largest trust.

The panic might have deepened if not for the intervention of financier J. P. Morgan, who pledged large sums of his own money, and convinced other New York bankers to do the same, to shore up the banking system
JP Morgan

Morgan went into banking in 1857 at his father's London branch, moving to New York City in 1858 where he worked at the banking house of Duncan, Sherman & Company, the American representatives of George Peabody & Company. From 1860 to 1864, as J. Pierpont Morgan & Company, he acted as agent in New York for his father's firm. By 1864–1872, he was a member of the firm of Dabney, Morgan, and Company. In 1871, he partnered with the Drexels of Philadelphia to form the New York firm of Drexel, Morgan & Company. Anthony J. Drexel became Pierpont's mentor at the request of Junius Morgan.

In 1895, at the depths of the Panic of 1893, the Federal Treasury was nearly out of gold. President Grover Cleveland accepted Morgan's offer to join with the Rothschilds and supply the U.S. Treasury with 3.5 million ounces of gold to restore the treasury surplus in exchange for a 30-year bond issue. The episode saved the Treasury but hurt Cleveland with the agrarian wing of the Democratic Party and became an issue in the election of 1896, when banks came under a withering attack from William Jennings Bryan. Morgan and Wall Street bankers donated heavily to Republican William McKinley, who was elected in 1896 and reelected in 1900.
New York Stock Exchange

The origin of the NYSE can be traced to May 17, 1792, when the Buttonwood Agreement was signed by 24 stockbrokers outside of 68 Wall Street in New York under a buttonwood tree on Wall Street. On March 8, 1817, the organization drafted a constitution and renamed itself the "New York Stock & Exchange Board." Anthony Stockholm was elected the Exchange's first president. The Buttonwood Agreement

In brief, the agreement had two provisions: 1) the brokers were to deal only with each other, thereby eliminating the auctioneers, and 2) the commissions were to be 0.25%. It reads as follows:

"We the Subscribers, Brokers for the Purchase and Sale of the Public Stock, do hereby solemnly promise and pledge ourselves to each other, that we will not buy or sell from this day for any person whatsoever, any kind of Public Stock, at a less rate than one quarter percent Commission on the Specie value and that we will give preference to each other in our Negotiations. In Testimony whereof we have set our hands this 17th day of May at New York, 1792.
Historically, The colonial government decided to finance the war by selling bonds, government notes promising to pay out at profit at a later date. Around the same time private banks began to raise money by issuing stocks, or shares of the company to raise their own money. This was a new market, and a new form of investing money, and a great scheme for the rich to get richer
Who started the 1st bank, in the U.S.?

The First Bank of the United States, a brainchild of then-Secretary of the Treasury Alexander Hamilton, was implemented by President George Washington on February 1791. Alexander conceived the bank as a way for the United States to handle its Revolutionary War debt and to create a standard form of currency. The bank was headquartered in Philadelphia, Pennsylvania, then the nation's capital.
to be continued...

posted on Jul, 29 2013 @ 04:57 PM
The History of Banking

The history of banking depends on the history of money—and on grain-money and food cattle-money used from at least 9000 BC, two of the earliest things understood as available to barter (Davies), Anatolian obsidian as a raw material for stone-age tools being distributed as early as 12,500 B.C., with organized trade occurring in the 9th millennia.(Cauvin;Chataigner 1998) In Sardinia one of the four main sites for sourcing the material deposits of obsidian within the Mediterranean, trade of this were replaced in the 3rd millennia by trade in copper and silver. The society adapted from relating from one fixed material as valued deposits available for trade to another
Emergence of Merchant Banks

The original banks were "Merchant Banks"

A merchant bank is a financial institution which provides capital to companies in the form of share ownership instead of loans
that Italian grain merchants first invented in the Middle Ages. As Lombardy merchants and bankers grew in stature based on the strength of the Lombard plains cereal crops, many displaced Jews fleeing Spanish persecution were attracted to the trade. They brought with them ancient practices from the Middle and Far East silk routes. Originally intended to finance long trading journeys, they applied these methods to finance grain production and trading.

Jews could not hold land in Italy, so they entered the great trading piazzas and halls of Lombardy, alongside local traders, and set up their benches to trade in crops. They had one great advantage over the locals. Christians were strictly forbidden the sin of usury, defined as lending at interest (Islam makes similar condemnations of usury). The Jewish newcomers, on the other hand, could lend to farmers against crops in the field, a high-risk loan at what would have been considered usurious rates by the Church; but the Jews were not subject to the Church's dictates.

In this way they could secure the grain-sale rights against the eventual harvest. They then began to advance payment against the future delivery of grain shipped to distant ports. In both cases they made their profit from the present discount against the future price. This two-handed trade was time-consuming and soon there arose a class of merchants who were trading grain debt instead of grain.
Emergence of the Court Jew

Court Jews were Jewish bankers or businessmen who lent money and handled the finances of some of the Christian European noble houses, primarily in the 17th and 18th centuries.
Court Jews were precursors to the modern financier or Secretary of the Treasury. Their jobs included raising revenues by tax farming, negotiating loans, master of the mint, creating new sources for revenue,floating debentures, devising new taxes. and supplying the military. In addition, the Court Jew acted as personal bankers for nobility: he raised money to cover the noble's personal diplomacy and his extravagances.

Court Jews were skilled administrators and businessmen who received privileges in return for their services. They were most commonly found in Germany, Holland, and Austria, but also in Denmark, England, Hungary, Italy, Poland, Lithuania, Portugal, and Spain. According to Dimont, virtually every duchy, principality, and palatinate in the Holy Roman Empire had a Court Jew.
17th and 18th Century

By the end of the 16th century and during the 17th, the traditional banking functions of accepting deposits, moneylending, money changing, and transferring funds were combined with the issuance of bank debt that served as a substitute for gold and silver coins. New banking practices promoted commercial and industrial growth by providing a safe and convenient means of payment and a money supply more responsive to commercial needs, as well as by "discounting" business debt.

By the end of the 17th century, banking was also becoming important for the funding requirements of the relatively new and combative European states. This would lead on to government regulations and the first central banks. The success of the new banking techniques and practices in Amsterdam and also the thriving trade city of Antwerp help spread the concepts and ideas to London and helped the developments elsewhere in Europe.
19th Century

In the 19th century, the rise of trade and industry in the US led to powerful new private merchant banks, culminating in J.P. Morgan & Co. During the 20th century, however, the financial world began to outgrow the resources of family-owned and other forms of private-equity banking. Corpor

posted on Jul, 29 2013 @ 05:00 PM
Debt as a new kind of money

These practices created a new kind of "money" that was actually debt, that is, goldsmiths' debt rather than silver or gold coin, a commodity that had been regulated and controlled by the monarchy. This development required the acceptance in trade of the goldsmiths' promissory notes, payable on demand.

Acceptance in turn required a general belief that coin would be available; and a fractional reserve normally served this purpose. Acceptance also required that the holders of debt be able legally to enforce an unconditional right to payment; it required that the notes (as well as drafts) be negotiable instruments. The concept of negotiability had emerged in fits and starts in European money markets, but it was well developed by the 17th century. Nevertheless, an act of Parliament was required in the early 18th century (1704) to overrule court decisions holding that the gold smiths notes, despite the "customs of merchants", were not negotiable.
Central Banking in North America

The administration of the government of the State of Massachusetts issued the first bill of credit in the history of America in 1690. In 1784 John Colman proposed the idea of bank that would issue paper but this is as far as the "Colman bank" concept went. The Bank of North America was established in 1784 and started developments that led to a national banking system

Rothschild Family banking businesses pioneered international high finance during the industrialisation of Europe and were instrumental in supporting railway systems across the world and in complex government financing for projects such as the Suez Canal.
The Great Depression

During the Crash of 1929 preceding the Great Depression, margin requirements were only 10%.[18] Brokerage firms, in other words, would lend $9 for every $1 an investor had deposited. When the market fell, brokers called in these loans, which could not be paid back

Outstanding debts became heavier, because prices and incomes fell by 20–50% but the debts remained at the same dollar amount. After the panic of 1929, and during the first 10 months of 1930, 744 US banks failed. (In all, 9,000 banks failed during the 1930s). By April 1933, around $7 billion in deposits had been frozen in failed banks or those left unlicensed after the March Bank Holiday

The Emergency Banking Act (the official title of which was the Emergency Banking Relief Act) was an act of the United States Congress spearheaded by President Franklin D. Roosevelt during the Great Depression. It was passed on March 9, 1933. This act allows only Federal Reserve-approved banks to operate in the United States of America.
The Gold Standard

The gold standard is a monetary system in which the standard economic unit of account is based on a fixed quantity of gold
Some economic studies have indicated that just as the downturn was spread worldwide by the rigidities of the Gold Standard, it was suspending gold convertibility (or devaluing the currency in gold terms) that did the most to make recovery possible. On the other hand, economists such as Friedrich Hayek and Murray Rothbard point out that the 19th century panics each had a shorter duration while also having occurred under the international gold standard, and that policies countries followed after casting off the gold standard, and what results followed, varied widely.

With the passage of the Independent Treasury Act of 1848 the U.S. was put on a strict hard-money standard. This meant that doing business with the American government required gold or silver coins
With the onset of the US Civil War in 1861 the U.S. government had many fiscal challenges. Due to the inflationary finance measures undertaken to help pay for the war, the government found it difficult to pay obligations of the U.S. treasury in gold or silver and suspended payments of obligations not legally specified in specie (gold bonds); this led to banks suspending the conversion of bank liabilities (bank notes and deposits) into specie.

In 1862, to finance the war, government paper money was issued and given legal tender status. It was a fiat money (not convertible on demand at a fixed rate into specie). These notes came to be called "greenbacks"; the United States had abandoned a commodity (gold) standard.

After the Civil War ended, Congress wanted to go back to the metallic standard at the same rates that prevailed before the war.
to be continued....
edit on 29-7-2013 by WonderBoi because: (no reason given)

posted on Jul, 29 2013 @ 05:00 PM
The Great Recession (2008)

The Late-2000s financial crisis caused significant stress on banks around the world. The failure of a large number of major banks resulted in government bail-outs. The collapse and fire sale of Bear Stearns to JP Morgan Chase in March 2008 and the collapse of Lehman Brothers in September that same year led to a credit crunch and global banking crises. In response governments around the world bailed-out, nationalized or arranged fire sales for a large number of major banks. Starting with the Irish government on 29 September 2008, governments around the world provided wholesale guarantees to underwriting banks to avoid panic of systemic failure to the whole banking system. These events spawned the term 'too big to fail' and resulted in a lot of discussion about the moral hazard of these actions.

Prolongation of the 1930s depression
Adherence to the gold standard prevented the Federal Reserve from expanding the money supply in order to stimulate the economy, fund insolvent banks and fund government deficits which could "prime the pump" for an expansion. Once the US went off the gold standard, it became free to engage in such money creation. The gold standard limited the flexibility of the central banks' monetary policy by limiting their ability to expand the money supply, and thus their ability to lower interest rates.
While Greenspan's role as Chairman of the Federal Reserve has been widely discussed (the main point of controversy remains the lowering of the Federal funds rate to 1% for more than a year which, according to Austrian theorists, allowed huge amounts of "easy" credit-based money to be injected into the financial system and thus create an unsustainable economic boom), there is also the argument that Greenspan's actions in the years 2002–2004 were actually motivated by the need to take the U.S. economy out of the early 2000s recession caused by the bursting of the dot-com bubble—although by doing so he did not help avert the crisis, but only postpone it.

During 2008, three of the largest U.S. investment banks either went bankrupt (Lehman Brothers) or were sold at fire sale prices to other banks (Bear Stearns and Merrill Lynch). The investment banks were not subject to the more stringent regulations applied to depository banks. These failures augmented the instability in the global financial system. The remaining two investment banks, Morgan Stanley and Goldman Sachs, potentially facing failure, opted to become a Commercial Bank

Commercial bank can also refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses, as opposed to individual members of the public (retail banking)
thereby subjecting themselves to more stringent regulation but receiving access to credit via the Federal Reserve.

On March 2009, U.S. Fed Chairman Ben Bernanke said in an interview that he felt that if banks began lending more freely, allowing the financial markets to return to normal, the recession could end during 2009
War on Terror

In 1984, the Reagan Administration used the term "war against terrorism" as part of an effort to pass legislation that was designed to freeze assets of terrorist groups and marshal the forces of government against them.

The phrase 'War on Terror' was first used by U.S. President George W. Bush on 20 September 2001
Bush Family

Prescott Sheldon Bush was an American banker and politician. He was a Wall Street executive banker and a United States Senator, representing Connecticut from 1952 until January 1963. He was the father of George H. W. Bush (41st President of the United States) and the grandfather of George W. Bush (43rd President of the United States) and Jeb Bush (43rd Governor of Florida).

Bush was born in Columbus, Ohio, to Samuel Prescott Bush and Flora Sheldon Bush. Samuel Bush was a railroad executive, then a steel company president and, during World War I, also a federal government official in charge of coordination of and assistance to major weapons contractors.

Bush was one of seven directors of the Union Banking Corporation, an investment bank that operated as a clearing house for many assets and enterprises held by German steel magnate Fritz Thyssen. In July 1942, the bank was suspected of holding gold on behalf of Nazi leaders. In October 1942 the United States seized the bank under the Trading with the Enemy Act and held the assets for the duration of World War II.

He was involved with the American Birth Control League as early as 1942, and served as the treasurer of the first national capital campaign of Planned Parenthood in 1947. He was also an early supporter of the United Negro College Fund, serving as chairman of the Connecticut branch in 1951.

Bush, Sr (41st U.S. President)
His father's business connections proved useful when he ventured into the oil business, starting as a sales clerk with Dresser Industries, a subsidiary of Brown Brothers Harriman. His father had served on the board of directors there for 22 years. Bush started the Bush-Overbey Oil Development company in 1951 and co-founded the Zapata Petroleum Corporation, an oil company which drilled in the Permian Basin in Texas, two years later. He was named president of the Zapata Offshore Company, a subsidiary which specialized in offshore drilling, in 1954. The subsidiary became independent in 1958, so Bush moved the company from Midland, Texas to Houston.

After a Democratic administration took power in 1977, Bush became chairman on the Executive Committee of the First International Bank in Houston.

On August 2, 1990, Iraq, led by Saddam Hussein, invaded its oil-rich neighbor to the south, Kuwait; Bush condemned the invasion and began rallying opposition to Iraq in the US and among European, Asian, and Middle Eastern allies.

Bush, Jr. (43rd U.S. President)
Eight months into Bush's first term as president, the September 11, 2001 terrorist attacks occurred. In response, Bush announced the War on Terror.

Why Germany Wants it's Gold Back
W all Street's trading commodoties under fire
Traders are Talking About Gold Conspiracy Theory

[color=limegreen]THE END
edit on 29-7-2013 by WonderBoi because: (no reason given)

posted on Jul, 29 2013 @ 06:31 PM
You got some things wrong in the OP.

First, prices go up. They do so as a reflection of many things, most notably supply and demand, and inflation. Inflation is what happens when the printing press runs faster than the perceived demand. So it's basically just the biggest supply and demand out there. Supply of monies in circulation vs demand for our debt. Normally, if less people decide to buy our debt OR if we decide to print more monies, then there is an imbalance and the perception (value) changes. My main point is that you can't simply separate the rise in prices from the increase in supply, and decrease in value. They're all relative to each other.

Another thing you seem to have gotten wrong is that Obama isn't spending more than other presidents. Even when we account for inflation, he's spending more than almost every other president out there. The easiest way to look at this is the yearly budget increase vs GDP. That is independent of inflation.

posted on Jul, 29 2013 @ 07:00 PM
reply to post by WonderBoi

Right Now , I figure the Purchasing Power of the U.S. Dollar is about 36 Cents . Do the Math , and try to Figure out how many Dollars you need each week to Buy Gas , Buy Food , Buy Clothing, Pay The Rent . Pay Your Taxes , and give little Johnny and Susie their Allowance . The Figures Don't Add Up ...........It's SAD........

posted on Jul, 29 2013 @ 07:03 PM

Originally posted by Zanti Misfit
reply to post by WonderBoi

Right Now , I figure the Purchasing Power of the U.S. Dollar is about 36 Cents

Compared to when? As is, it's a meaningless statement. Are you saying that 100 cents from ??? is now equivalent to 36 cents today?

Well, since 1913, the USD has lost over 96% of it's purchasing power. So it's more like 4 cents. Or do you mean since some other arbitrary point? If so, when?

posted on Jul, 29 2013 @ 07:29 PM
To try and understand what Fiat currency is, as yourself this question (hell ask anyone you know): When has a country, or group, invaded another country for its fiat currency? For example, what did the US do with Iraq's fiat currency after it invaded, was the currency all they were after?

When you look at your "dollar bill" you will note that is says: "Federal Reserve NOTE" which, if you look up the meaning of "note" in the legal dictionary you will find it is a "debt," in this case an "iou."

So, ask yourself this question, "should china invade the US and take all of their IOU's?"

posted on Jul, 29 2013 @ 07:39 PM
reply to post by QuantriQueptidez

Oh , since about the Year 2000 . BEFORE QE 1 .....

posted on Jul, 29 2013 @ 08:50 PM
reply to post by Zanti Misfit

Okay, but I'm pretty sure QE1 happened towards the end of Bush's last term. We gave out a small credit card to millions at the end of 2007 when the markets first started to lose steam. QE1 happened late in 2008, I believe.

posted on Aug, 1 2013 @ 01:19 PM

Originally posted by crankyoldman
To try and understand what Fiat currency is, as yourself this question (hell ask anyone you know): When has a country, or group, invaded another country for its fiat currency? For example, what did the US do with Iraq's fiat currency after it invaded, was the currency all they were after?

When you look at your "dollar bill" you will note that is says: "Federal Reserve NOTE" which, if you look up the meaning of "note" in the legal dictionary you will find it is a "debt," in this case an "iou."

So, ask yourself this question, "should china invade the US and take all of their IOU's?"

The petro dollar is the motivation for most of the past several decades of wars and sanctions!
When some nation that exports oil starts selling that oil for gold or euros the US will need to put an end to this!
This will be the same reason why the US puts sanctions on countries like Iraq, Iran, Syria, Libya, etc. etc.
It has nothing to do with terrorists! The fact is the US is the biggest terrorist nation in the world!
Our government would rather let woman and children starve then to give up on manipulating the world through
the petro dollar! This is evil at the highest level! I believe someday this kind of foreign policy will end up costing
many ignorant people in the US dearly!
As for China invading the USA I as well as anyone with common sense should realize this would not be caused
by monetary reasons! We should well know, that no nation has ever invaded another that has nuclear capabilities! Though I don't expect this to continue in our future when resources become scarce! Hopefully this will not be for at least another five to ten years!
edit on 1-8-2013 by nosacrificenofreedom because:

posted on Aug, 1 2013 @ 01:43 PM
richest club,,,,hands down,,Peter's Pence.
i like what his holiness is doing
.3 million people,,wow,,
"theres ur battalions" Kruschive??,,)
i see a great flood of wealth eminating from some circles,,,
so i ask,,who is in control?
remember ,,the Chair is empty,,,

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