Value of a 2005 $100 Dollar, 1800 - 2005

Inflation is one of the most insidious forms of wealth confiscation used by governments and central banks. In simple terms, inflation is the over issuance of money in relation to available goods and services, implying that more money is "chasing after" a similar quantity of goods and services. The value of each monetary unit is thus reduced accordingly. Since most of the population are unaware of the true source of inflation, governments have effectively relied on inflation to stealthily confiscate the wealth of their constituents. The above graph clearly indicates the systematic debasement of the US dollar that took place in the 20th century, particularly after the establishment of the Federal Reserve in 1913. Prior to this event, the value of the US dollar was kept relatively constant through the 19th century. Wars were the major inflationary events, such as 1812 and 1860, but afterwards the dollar quickly gained back its value, an indication of a remarkable period of prosperity in the American economy where the population was benefiting of the multiplying effects of higher incomes as well as the higher purchasing power of the dollar. This cycle was broken after World War I, so instead of having the US dollar resume its former value, the Federal Reserve went on into a period of over issuance of money. The dislocations and misallocations this created led to the stock market crash of 1929 and the issuing Great Depression (most people are unaware that the cycles of booms and busts are the outcome of monetary policies of central banks). The deflation of the 1930s was thus the outcome of the Great Depression. After World War II, inflation became systematic and officially part of government policies of "deficit spending". The final restrain on the US dollar was broken in 1971 when its convertibility to gold was stopped. It lead to one of the most inflationary period in US history. This means that $100 in 2005 was worth the equivalent of $500 of purchasing power in 1970. Today, the world economy is under a regime of fiat currencies that are only backed by the confidence and faith people may have in their value. Inflation thus goes on unabated until the fiat US dollar (and all other fiat currencies) will reach its intrinsic value, which is zero, in a period of hyperinflationary collapse.