On April 2, 1792, George Washington signed into law what’s commonly referred to as the Mint and Coinage Act. It was one of the first major pieces of legislation in the young country’s history… and it was an important one, because it formally created the United States dollar.
Under the Act, the US dollar was defined as a particular amount of copper, silver, or gold. It wasn’t just a piece of paper. A $10 “eagle” coin, for example, was 16.04 grams of pure gold, whereas a 1 cent coin was 17.1 grams of copper. The ratios between gold, silver, and copper were all fixed back then.
But if we apply today’s gold price of $1292 per troy ounce, we can see that the current value of the original dollar as defined by the Mint and Coinage Act of 1792 is roughly $66.75.
In other words, the dollar has lost 98.5% of its value since 1792.
What’s incredible about this constant, steady destruction of the currency is how subtle it is. Few people seem to notice, because modern day central bankers try to “manage” inflation between 2% to 3% per year. 2% to 3% per year is pretty trivial. But it happens again the next year. And the year after that. And the year after that. After a decade or so, it really starts to add up.
But there’s an important, other side of the equation: income.
Costs are clearly rising. And it’s fair to say that incomes have been rising too. But which one has risen more? In 1982, back when I was a toddler, the price of a Ford Mustang was $6,572. Today the cheapest Mustang starts at $25,680 according to Ford’s website. So a Mustang today is around 4x as expensive as it was 36 years ago.
US Labor Department data from 1982 shows that average earnings were $309 per week, or $16,086 per year. That was enough to buy 2.45 Mustangs. Today’s earnings are $881 per week, or $45,812 per year. That’s only enough to buy 1.78 Mustangs. So when denominated in Ford Mustangs, people’s incomes have fallen 27.3% since 1982.
More recently than that, say, back in 2005, an entry level Mustang cost $19,215 at a time when average wages were $40,664 per year– or 2.12 Mustangs per year.
So even since 2005, average income levels have fallen 16%. Obviously this trend doesn’t just apply to Ford Mustangs. If we look at housing in the United States, we can see that the median home price in 2003 was $186,000 (according to Federal Reserve data) at a time when the Labor Department reported average weekly wages of $620.
So that was roughly 0.173 houses per person per year.
Read the rest of the article at Sovereign Man: America’s long-term challenge #3: destruction of the currency | Sovereign Man