Tuesday, November 19, 2013

Why Business Insider Needs to Pay Joe Weisenthal Only About $2.30 an Hour

Joe Weisenthal is out with the absurd claim that the dollar hasn't lost 90% of its value over the last several decades. Weisenthal summarizes his view that there has been no collapse in the value of the dollar this way:
You've probably heard the line about how inflation has destroyed 90% of the dollar's value over the last several decades. 
It gets repeated ad nauseum by inflation truthers, gold bugs, Fed haters, and all of their fellow travelers.
The problem is that it's almost entirely BS.
So if there has been no decline in the value of the dollar since 1948 (the baseline he uses). why doesn't Weisenthal put his pay check where his mouth is and walk over to Business Insider co-founder Henry Blodget and explain that he wants to get paid the hourly wage of what a journalist would get paid in 1948? Probably less than $2.30 per hour.

The fact that Weisenthal isn't going to do this is because by now (this far into this post) he should realize there is a big difference between a 1948 dollar and a dollar of 2013.

Indeed, the US inflation calculator, based on government CPI numbers, tells us that a 1948 dollar had the equivalent of $9.72 in current purchasing power, which means the dollar has fallen in value by approximately 87.1% (note typo correction made: decimal added).

Weisnethal got off on his harebrained idea that the dollar hasn't lost value because of a chart prepared by  Matt Busigin.

Busigin is of the belief that one needs to calculate into the determination of the purchasing power of the dollar, over a particular length of time, the interest rate over that period. Busigin thus ignores the essential fact that the most important element of an interest rate is that it is about paying an individual to refrain from immediate use of the funds. That is, the interest paid is, most importantly, about a reward for loaning funds out. It's about a reward for extending time preference. According to Busigin, we apparently should ignore this fact and think lenders lend money only to get the same amount of purchasing power back, without payment for loaning the money out.

To be sure, a part of an interest rate can also include a premium for expected price inflation, but this doesn't signal that there is no drop in the value of the dollar but that lenders want to be compensated for the decline in the value of the dollar that they expect.

Even if we grant  Busigin the bizarre proposition that all lenders correctly anticipate every price inflation move over decades, this is in no way implies that a dollar decline in value has not occurred and it certainly does not imply that others, such as those on fixed incomes, are not hurt by a decline in the value of the dollar. And for that matter, it doesn't mean that the non-interest bearing holders of physical cash, and most demand deposits, don't lose purchasing power---currently around $2 trillion, which is just over 20% of the entire money supply.

Bottom line: Weisenthal and Busigin are totally clueless about how the value of the dollar changes, its relation to interest rates and the overall economy.  But,Weisenthal could prove me wrong and show me that he is on to something, if he cuts his wage to $2.30 an hour.

(ht Bob Murphy and Bionic Mosquito)


  1. This person is either just a plain liar, is mentally ill, or possesses the IQ of a carrot.

    Where do you find these morons/nutcases RW? Maybe it's a parody. It just seems so incredibly idiotic it must be some kind of joke. Either that or someone needs to stay away from the hardcore drugs.

  2. JW will be along shortly to tell RW how and why he is wrong.

  3. I think the "word" has gone out, they aren't the only ones chanting this talking point.

    I'm thinking the establishment is genuinely worried about the Federal Reserve, bankers, their power, etc.

    Regardless of anyone's feeling towards Bitcoin it is also having an impact on the debate around money in general. There was posted on a forum I read by a left today:


    He arguing there were business cycle before the Fed in 1913 with this chart.

    Of course, the troughs/peaks have no criteria attached to them, nor do they even show the depth(or lack thereof) and they also don't account for the influx of silver from the west in the late 1800's....but that didn't stop him from trying to establish that the Fed isn't causing the business cycle.

    I'm thinking this is a coordinated response/counter attack to us. One on hand it's good that they are starting to fear, on the other hand we now have to respond and beat back their bullshit.

  4. Weisenthal is a socialist lefty who believes in Paul Krugmans BS. That should clear up any questions.

    He is doing endzone dances at the moment. His day is coming. Pitiful website is Business Insider. Supported by VC and that crook Blodget. Hopefully in the next clean-out it will cease to exist.

  5. This is just another pathetic admission by another lying defender of the fascist regime that the entire pitiful anti-Austrian crowd knows that it dare not directly engage Austrian analysis.

    Weaselthal admits:

    So yes, if someone had a bunch of cash in 1959 and literally put it in a shoebox, they'd have lost a lot of money over the last several decades.

    And, of course, smart investors have been able to take advantage of the Cantillon Effects that result from the system to make millions and billions of dollars or may have invested in "inflation hedges". But the purpose of the system is to allow continuous stealing of purchasing power by the first receivers of the endless funny money injections which distort the price, debt, investment and capital structure all to solve a problem that does not exist and which cause the problems that do exist.

    Of course, no Austrian has ever pointed that out before, right? So how would Weaselthal know that?

  6. You've probably heard the line about how inflation [hasn't] destroyed 90% of the dollar's value over the last several decades.
    It gets repeated ad nauseum by inflation [deniers], [paper] bugs, Fed [apologists], and all of their fellow travelers.
    The problem is that it's... entirely BS.