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At a recent press conference President Barack Obama touted the current strength of U.S. dollar, which he said has come about “…because investors consider the United States the strongest economy in the world with the most stable political system in the world.”
The dollar has done fairly well since December 2007 – the official start date of the current recession. (See Chart 1 below). What President Obama failed to mention is that the dollar is well below where it was in 2002. 
Source: Board of Governors of the Federal Reserve System Fiat currencies sometimes are said to fare well relative to each other, but strong and weak are purely relative terms. All the currencies of the world today are fiat currencies—currencies that promise to pay nothing except more of the same currency. These world currencies have lost value over the years, as shown in Chart 2. Like elevators on the Titanic, some currencies are going up and some are going down, but all are sinking. Click here to view chart.
(Source: 2009 AIER Chart Book, Page 5)
The major factor that led to this situation is officially sponsored inflating as a means of restoring and perpetuating prosperity. In the U.S., the dollar has lost almost 95 percent of its purchasing power since officially sponsored inflation began over 70 years ago. The inflating continues unabated. Contrary to these currency trends, the purchasing power of gold has remained stable over the long-term (see Chart 2). Its value may fluctuate, but such fluctuations will tend to be self-correcting—low prices and a high purchasing power of gold increase the rewards of mine production and vice versa. Fiat currencies lack any of these self-correcting mechanisms. Paper money can be printed as fast as officials can run the presses, leading to inflation, or even hyperinflation. In Zimbabwe, for example, hyperinflation of 231 million percent has driven many to panning and digging for gold in order to survive. We’re not there yet—but we need to remember that third world policies lead to third world outcomes. The 2009 AIER Chart Book contains charts tracking the value of gold in comparison to major currencies and many other interesting visuals. The AIER Bookstore also sells posters that illustrate historical trends in the purchasing power of gold and the purchasing power of the dollar.
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