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Note that the ounces of gold needed to buy a barrel of oil (0.11 ounces) has not changed since 2001, even though the number of dollars needed to buy an ounce of gold or a barrel of oil has almost tripled since 2001 (2.8 times more dollars needed now). (See more in table below.)
The US dollar continues to loose
value, making it appear that the price of everything else
(when measured in US dollars) is going up. The eroding value
of the U.S. dollar is summarized in the table and events
|Changes in the
Value of a Dollar *
of the item in
~ Jun 2001
of the item in
Mid Oct 2007
|Value of a 2001
(Then vs Now)
|Change in the
Value of a
(Then vs Now)
Change in the
Value of a Dollar
* (Then vs Now)
|CPI-U ** (Consumer
Price Index - Urban)
|178.0||208.936||$0.85||- 15%||- 2.5%|
|DJIA (Dow Jones
|11,338||14,165||$0.80||- 20%||- 3.5%|
|Median House Price
|$0.72||- 28%||- 5.1%|
|DX index (U.S.
Index (DX, NYBOT) )
|121||78||$0.64||- 36%||- 6.7%|
|$0.84||$1.42||$0.59||- 41%||- 8.0%|
Crude Oil (LO, IPE) )
|$30.00||$84.00||$0.36||- 64%||- 15.0%|
|Gold per ounce
|$274.00||$763.00||$0.36||- 64%||- 15.0%|
** CPI-U = the US Government's acknowledged inflation rate (claimed erosion of the Dollar). As can be seen from the many other measures of Dollar erosion in this table, the CPI-U grossly underestimates the actual erosion of the Dollar (grossly underestimates the real rate of inflation).
Note that the ounces of gold needed
to buy a barrel of oil (0.11 ounces) has not changed since 2001, even
though the number of dollars needed to buy an ounce of gold or a
barrel of oil has almost tripled since 2001 (2.8 times more dollars needed now).
Historical and Recent Events affecting the Value of a US Dollar:
The euro currency has risen from $.84 in 2001 to $1.42 (Mid October 2007).
To prevent a possible 1929-style crash, as the DJIA dropped 1,154 points (from 14,000 to 12,846) during July and August of 2007 and more US subprime mortgages defaulted, the US Federal Reserve (the Fed), along with the central banks of Europe, Canada, Australia and Japan, extended a 315 billion dollar lifeline to troubled banks and investment firms.
On Friday, August 17, 2007 (8/17/07), the US Federal Reserve (the Fed) took emergency steps to mitigate the damage to the U.S. economy from the global credit market crisis, by cutting the Fed's discount rate by 1/2 % to 5.75 %. As a result of this move, which surprised the markets, stock markets around the world responded with upward moves. The DJIA increased 233 points to 13,079.
A month later on Tuesday, September 18, 2007 (9/18/07), when faced with the choice of propping up the US dollar or propping up the US consumer, the US Federal Reserve Chairman Ben Bernanke (the Fed) opted for the US consumer, by cutting the Fed's main federal funds rate by 1/2 % to 4.75 %. This was the first cut in this rate in over 4 years. This surprising and unexpected move by the Fed, resulted in the DJIA jumping up 336 points to 13,739, its biggest one-day gain in nearly five years. (Subsequently, the DJIA has reached 14,165 in mid October 2007, surpassing its July 19, 2007 high of 14,000.)
Two days later, on Thursday 9/20/07, gold broke out above its 8-month $636 to $726 (London Fix) trading range, and has reached $763 per ounce (Mid October 2007).
During September and October of 2007, oil has continued upward, reaching $84 per barrel (Brent Crude) (Mid October 2007).
^ Prophetic Events surrounding this event.
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