During peacetime, commodity standards (silver or gold) worked through market forces to achieve price stability, and thus safeguarded the purchasing power of money.
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If the Fed chooses to reduce the real burden of the debt via inflation, the purchasing power of money will fall along with the foreign exchange value of the dollar, and those who trusted in U.S. public debt will suffer.
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The inflation-adjusted value of the prize has fluctuated over the years, so the two researchers were able to see if the purchasing power of the money was correlated with longevity.
After the credit crisis set in and the healing aspects of deflation began to take hold, central banks rapidly expanded the supply of base money in an effort to quickly erode the purchasing power of their currencies and bring real estate prices higher.
This price increase reduces the combined purchasing power of citizens by an amount equal to the new money created.
Libertarians tend to be sticky about principles and the last time I looked robbing savers of purchasing power by creating money out of thin air was theft no matter how Dr. Friedman or the Keynesians would like to justify the practice.
But the Fed expands the money supply (creates inflation), which lowers the purchasing power of the currency.
Of course, we talked previously, you might lose money in terms of purchasing power, in terms of what you can actually buy with that money at the end of the day.
Yet, in the last seventy-five years, the U.S. dollar has lost 92 percent of its purchasing power, according to money manager Chris Davis of Davis Advisors.
By trying to use easy money to lower unemployment, the Fed risks further eroding the purchasing power of the dollar.
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Similarly, even with inflation slipping below 3 percent for the past year, that is still enough to cause a loss of 2 percent or more in purchasing power for savings and money market accounts.
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