dollar purchasing power

Update: I will be posting soon to answer a reader’s question, “How much research is required before making an investment.” In other words, what is the marginal return on my research efforts?

A reader asked in the comments section about what I thought the dollar will do?  Perhaps another way to think about the future of the dollar is what would change its 100-year trend? The graph above needs no explanation. I won’t buy the dip. As the Two-Penny Philosopher said, “The dollar has lost 96% of its purchasing power since the birth of the Fed in 1913, but the last 4% will be brutal.”


Let me leave you with a few words of wisdom from Henry Hazlitt, the great financial journalist of the 20th Century: “In order for inflation, once begun, to continue having any stimulative effect, its pace must be constantly accelerated. Prices and purchases must turn out to be higher than expected. The only course for a government that has begun inflation, if it hopes to avoid hyper-inflation and a final “crack-up boom”, is to stop inflating completely, to balance its budget without delay, and to make sure its citizens understand that this is what it is doing.  This would, of course, bring a crisis, but much less net damage than a policy of gradualism.

by Bill Bonner, Chairman, Bonner & Partners

Yesterday, we took the train from Paris to Zurich, passing through the valley of the Rhone… past castles… medieval churches… lazy, picturesque rivers… quaint villages… to Lyon… Basel… and then skirting the Alps and lakes to Zurich.

The scenery was remarkably beautiful. But the most remarkable thing we saw wasn’t outside the train car; it was in it.

A family of Americans boarded the train in Gare de Lyon in Paris. They took their seats, parents and two children. Tanned. Dressed in baggy shorts and polo shirts with little alligators on them. Even before the train left the station, the parents had given each of the children an iPad. Then mom and dad each got out their own iPad… and plugged in ear phones.

From our vantage point, we could see that Dad was watching some sort of action movie, apparently with super-heroes involved. Mom’s iPad viewing was never revealed. But from Paris to the Swiss border – three hours of some of the most scenic countryside in Europe –none of them even looked out the window. Nor did they say a single word to one another.

“There’s so much electronic entertainment,” said a Swiss friend when we told him this morning. “People are losing touch with the real world. It’s like a drug. It keeps away reality.

“Of course, it gives those of us who aren’t drugged-up a big advantage!”

2 responses to “UPDATE

  1. John (and other readers), would you mind sharing the specifics of how you all go about doing your research?

    For me, it’s annual reports first. I then draw a mind map to get an overview of the structure of the company. Next I look at the operations of the company. For instance retailing mode, i will google supply chain and retail operations to understand how this business works. I guess that’s what Warren Buffett means by thinking like a business owner. The thing is, due to my inexperience, i overlook the tiny details of a business.

  2. John,

    It’s weird, if you turn the dollar chart upside down it looks like a parabolic movement. We just don’t recognize it because it’s going down.

    All fiat currencies go to zero over time, that’s the built in incentive-structure of them and the political systems that breed them. Violence isn’t long-run sustainable (though the “short-run” can be quite long seeming indeed!).

    I’m a dollar bear over the long run.

    That being said, wouldn’t it be ironic if the dollar mean reverted, a lot or a little?

    What if the next move in the dollar was strongly upward for some period of time, before the final capitulation and collapse?

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