Kerby Anderson

Although prices have been going up for years and have been increasing even faster this last year, the reason for most of this price inflation is due to a declining dollar. The US was on a gold standard until 1971. The value of the dollar has been eroding each year.

A new book by Steve Forbes and others on inflation provides some ways to measure our declining dollar. According to the Bureau of Labor Statistics, the dollar’s purchasing power has decreased by 86 percent since 1970. That estimate is based merely on the official cost-of-living measure taken from the consumer price index.

Another way to measure the dollar’s decline is to compare it to the price of gold. In 1970, it took $35 to buy an ounce of gold. Today the price is more than $1,800. That is a 98 percent drop in value.

Oil would be another measure. In 1970 oil cost a bit more than $3 a barrel, and oil companies were profitable. They remind us that last year when oil cost $75 a barrel, oil companies could barely get by.

One last example of the declining dollar is the cost of food at McDonalds. Back in 1970, a 12-ounce can of Coke cost a dime. A Big Mac cost just 65 cents. Fifty years later, the price of the burger has increased eightfold to around $4.95.

Why the cost increase? The products haven’t really changed. The real reason for the cost increase is a shrinking dollar.

These dollar figures are a reminder that the dollar declining nearly every year. The inflation rate may have only been a few percent each year and is up to more than eight percent this year. But every year prices rise because the dollar is declining.