Submitted by Don Stacey
Feb. 16, 2005
Richard Russell is 80 years old and has been publishing the extremely popular Dow Theory Letter since 1958. I consider him a wise man. I hope you will read these comments from his latest letter: +++
The entire history of the Federal Reserve in the United States is really a tragic, almost unbelievable story. And when I say "tragic" I mean tragic for you and I and all other US citizens. With the help of the Fed, the government has eroded away our savings over the years. And on top of that they have raised our taxes. This vicious combination has people working their fannies off just to bring in enough money to live on. But wait, at the same time, US consumers run up trillions in credit card debt and mortgage debt. The US public saves nothing. And the beat goes on.
The long-run path of the dollar (once "as good as gold") is a tragedy and almost a crime. I'm indebted to the American Institute for Economic Research (Great Barrington, Mass. 01230) for these statistics.
We'll start with the 1945 dollar, which we'll put at 100 or at par. Ah yes, I well remember the 1945 dollar. In 1945, as an Air Force officer, I was receiving overseas pay plus combat pay. That amounted to exactly $220 a month.
World War II ended, and I was leaving the Army Air Force. After great effort, I found a choice, price-fixed apartment at 125 East 93 Street (between Park and Lexington Avenue) which cost me $125 a month. A year later I got a three-bedroom apartment in the same building for $165 a month. In 1946 a buddy of mine bought a new Buick for $1,800. A good dinner in a nice restaurant cost about a dollar at the time. Lunch in a Chinese restaurant at Columbus Circle was 65 cents. A healthful lunch in the Automat on 43 Street at Broadway cost about 35 to 50 cents. A new movie along with a show (Tommy Dorsey and Frankie) at the famous Paramount Theater cost 85 cents before 12 noon. A ride on the subway to anyplace from Manhattan to the Bronx to Riverdale to Coney Island cost a nickel. A ferry ride to Staten Island or New Jersey cost a nickel.
In 1945 it costs three cents to mail a first class letter, and for 16 cents I could buy a stamp that sent my letter first class plus special delivery. Finally, for a nickel I could buy a hamburger at White Tower or a chocolate malted at the subway stop at Times Square. One more -- at the Alden Theater on Broadway at 66th Street I could see a double-feature (two movies) for fifteen cents, and if I wanted to, I could sleep in the theater all night (which a lot of people did).
So that was the 1945 dollar. It bought a lot. Let's jump 15 years to 1960. The dollar was now worth 61.1 cents in purchasing power. On to 1970 and the dollar was worth 45.7 cents. On to 1980 and the dollar will purchase 21.1 cents worth of 1945 merchandise. Next, 1990 and the purchasing power of the dollar has sunk to 13.6 cents. And here comes 2000 and the dollar was worth 10.5 cents in 1945 purchasing power. The latest figure I have is 2003 and the purchasing power of the 1945 dollar was worth, I hesitate to tell you this -- 9.9 cents.
That's what the Federal Reserve and the fiat dollar has done for us. And here in California, federal and state taxes knock off nearly half of every dollar I earn. So first the Fed together with the US government destroy the purchasing power of my savings. And as if that isn't enough, today between the government and the state -- they tax away almost half of my yearly earnings.
And what have I got for all this financial thievery? You know something, I'm just not sure. But wait -- I do have a bigger and more intrusive government than ever. I have a government that has saddled me and future generations with trillions of dollars of debt and more trillions in unfunded liabilities that will come due in the years ahead (when my kids will have to face the economic-music)
And you say I'm supposed to worry about the daily price of real money -- gold? Forget it, I've got other worries, real worries You see, I know that no government has ever successfully handled unbacked or fiat paper money. It has to do with greed and emotions. Politicians want to give the voters what they want, because that's what it takes to keep politicians in office.
Furthermore, the pols know that the people have the lottery psychology. They always want something for nothing, or at least at the expense of "the other guy."
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