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Dear Nostriches. Please help to share your knowledge and wisdom to me

I'm trying to understand this chart.

I understand that paper money value should go down as more of it is being printed. simply more money chasing the same amount of good

-so I understand if dollar value decreased post 1971 because it became fiat and can be printed freely

-I kinda understand its value goes down after bretton woods agreement, as it may actually being printed more than the amount of gold reserve the fed have

-but I don't understand what is causing the sharp drop soon after the fed is created? does anyone know what happen there? link to sources of the history lesson will be really appreciated. will send some zap, not much but its a zap :D

https://void.cat/d/N869ZauJnom3hafwni2ZWD.webp

Huey 2y ago

It's a good question and I don't really know the answer but I think that the creation of the Fed was a major step forward in the adoption of fiat currency which (in my opinion) is fundamentally flawed because it essentially weaponizes inflation. There were positive benefits to fiat currency in winning the WW's and redistributing wealth during the New Deal but more often it is used to fund agressive warmongoring or (as it evolved) to transfer wealth from wage earners to asset holders.

Related: Found this interesting chart of the dollar's value going back to the 17th century.

https://www.statista.com/statistics/1032048/value-us-dollar-since-1640/

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Discussion

Huey 2y ago

The other thing is that when the Fed was created the British Empire was in it's final throes as the dominamt world power, and the world was then upended by WW1. Revolutions were happening everywhere. Things were pretty wild until after WWII. It's hard to compare postwar America with its previous self.

Pleb⚡ 2y ago

Yea maybe it's because fed creation in 1913 and soon after is WW1 in 1914

So perhaps inflation went up like crazy during WW1

Huey 2y ago

Yes I think that's the big influence in the era, culminating in the hyperinflation in Germany in 1922. I think the implication of the chart you posted that the Fed is directly responsible for all devaluation of the dollar is quite disingenuous--the two big policy changes regarding gold in 1933 and 1971 are more direct causes.

If you haven't seen it yet, this is a great site: https://wtfhappenedin1971.com/

Pleb⚡ 2y ago

Thanks Huey