Excerpt by Nathan Lewis
For most of US history — 1789 to 1971, a period of 182 years — the United States embraced the idea of a currency that is stable, reliable, and definite.
The result was that the US became the wealthiest country in the world, the US dollar became the world’s leading currency, and New York became the world’s financial center.
As long as the US stuck to this principle, there was never an “inflation” problem. As we explained in our new book Inflation (2022), when currency values go down, prices rise to compensate. It’s funny that, in all the talk about “inflation” in every major outlet over the past year, this idea almost never comes up. In the book, we make the example of the Mexican peso. It used to trade around 3/dollar in the early 1990s. Today, it is around 20/dollar. Guess what — the CPI in Mexico has risen about 10x over that time. This surprises exactly nobody, especially Mexicans, who have lived all their lives with this kind of corrosive nonsense.
Central bankers and ministers of finance make all kinds of promises that they will not allow “inflation.” It just happens anyway.
During the Kennedy Administration, the dollar was worth 1/35th of an ounce of gold — or 889 milligrams of gold, if you like that notation. This was usually expressed as “$35/oz.” Today, it takes about 50 times as many dollars ($35 * 50 = $1750) to buy an ounce of gold. Imagine if it took 50 times more Mexican pesos to buy a dollar. Or, 20 * 50 = 1000 pesos per dollar. What do you think would happen to prices in Mexico? Everybody knows the answer to this. (Ask a Mexican.)
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