An 1801 - present USDollar chart

A declining USDollar = diminishing purchasing power = price inflation. This chart tells enough.

Now we look at Siegel's calculation of the dollar's purchasing power from 1801 to 2008. It's a measure of inflation over more than 200 years.

In periods of inflation, which reduce the value of a dollar bill, the line falls. In periods of deflation, which increase the value of a dollar bill, the line rises.

This chart's message: In the 19th century, inflation and deflation alternated wildly, but the dollar remained roughly in the same range.

In the 20th century, inflation won out decisively -- except for the relatively short interlude of the Great Depression.

Because of this 20th-century experience, the value of the dollar has fallen precipitously, to a recent 6 cents. By an astonishing coincidence, the decisive move began about the same time as the Federal Reserve did.

Pension funds joining the gold party

Gold bugs have been bullish on the yellow metal for years--and have profited immensely as a result over the last decade. Hedge funds joined the party earlier this year. Sovereign funds, as well as governments from China and India are encouraging retail investors to invest in silver and gold as diversification away from paper currencies, especially the USDollar. Now, big pension funds are providing support levels as they enlist in buying "financial insurance" against dollar debasement and future inflation.

The commercial bullion banks with their permanent short positions are running against formidable foes.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aAvwe3Ed.E.Q