Why The Value of The US Dollar Isn’t What It Used To Be

[00:00:04] You're listening to Casual Talk Radio, where common sense is still the norm. Whether you're a new or long-time listener, we appreciate you joining us today. Visit us at casualtalkradio.net. And now, here's your host, Leister.

[00:00:21] What is the value of a dollar? What is the value of money? We're getting close, I hope, to the demise of the penny. The penny, which takes roughly three cents to create each one, so we're losing money to make something that has very much no value. And most of the younger folks who don't listen to the show, but you can share the message, pass it along, they don't understand what's going on.

[00:00:50] They understand the history of the penny because they came around at a point when the penny was no longer in kind of use. They understand it from a numbers perspective, but our United States education system is failing our young folks. Thus, I was inspired to share what I thought, being somebody who at one point had, you know, experience using the penny and actually transacting with it as a youngin'.

[00:01:16] I remember, I have a conversation with my brother, the one that passed away in 2023, one time. And we were talking about currency in general. And I remember there was, you know, it was always like, pick a penny up off the sidewalk and there's value in it. And hey, it means something to somebody and you can do the piggy bank and you can save money. These were things that were instilled at a young age.

[00:01:43] And I remember at a time we were discussing this type of currency and remember him specifically saying, quote, I throw pennies at cars because in his mind at the time he saw no value in the penny compared to how much money he made otherwise, which was, you know, he made money his own way.

[00:02:07] And this is at a time, mind you, very long time ago when inflation was nowhere near as damaging as it is now. So you think of times when inflation was lower and yet at that time there was very little value seen of the penny. What was the purpose of the penny? When we do math and I blame, arguably, I blame, you know, commercial, I blame big business.

[00:02:34] There was a time when we priced things, you know, even it's a, it's a dollar, it's 15 cents, it's 20 cents, it's, you know, 50 cents. It's, it was based on these rounded numbers. At some point, someone had the bright idea of using odd numbers to give the illusion that something was cheaper.

[00:02:58] So instead of just saying, we're going to charge you 60 bucks for that game, somebody said, well, if it's 59 99, that looks cheaper to you. When it's not cheaper, in fact, it's more money. So that's number one is whenever we decided to try to do this 99 nonsense, it just made stuff worse. Then you take taxes. There are taxes applied to different levels depending on where you live.

[00:03:24] If you live in a state that charges sales tax, the number is going to almost always be some oddball something, not a multiplier of five. So I looked at pricing over years and saw the decline of logic in how we priced things, where we simply made it harder to price it out.

[00:03:48] And I speculated once that the, this is intentional to get away from actual physical fiat currency. I believed that it was because of a rush towards at the time debit cards for those that are not old enough to recall. There was a time that most people distrusted debit cards issued by banks because it was not holding your cash.

[00:04:12] It wasn't until later that we started to adopt, you know, the visa and mastercard systems, but some banks at the time, earliest time issued a card. That was a pin debit card. And that's all you could do is do a pin based transaction. There was no swipe to visa mastercard and instant. It was a debit. It was like writing a check without the check. There are some banks, but not a lot that still offer the pin based card.

[00:04:40] The point though, is that with the rise of the debit cards and the decline of carrying around fiat, we lost sight of the importance of why prices are stupid and why they should be fixed and the impact of taxes on the prices, which created this chaos. So it's not necessarily that we don't need something that is one sense because we do simply that we don't need something that is a physical currency.

[00:05:10] That is one sense as opposed to what other countries did 10 years ago, which is to get rid of the penny because there's no real value. And that's why I think businesses don't want to do that. The reason why I think businesses don't want to do that is because rounding up to the nearest puts a burden on their accounting because they have to account for things in and their prices.

[00:05:39] They have to adjust prices. They have to do this. And sometimes in the supply chain, they cannot control what they have to spend to provide that product, which leads to the second part of this conversation.

[00:05:51] There were some people that didn't understand when we talk about tariffs, when we talk about inflation, somebody on out there in the web was trying to simplify and understand when we say the value of your money since the 1910s has declined and declined and declined. And there's charts out here about this.

[00:06:42] Take a swag. Given what I just said about this demise of the penny that's out in the media and the news right now and take a swag at trying to help you understand how it is that the value of your money isn't what the face value should be. You've got to think first about supply chain. And we'll use a simple product because I don't want to overcomplicate how this works.

[00:07:09] But a supply chain simply means there are multiple different companies and people involved in the manufacture and distribution of a product as well as making it available to you in stores. This applies whether it's farming, whether it's technology, whether it's medical, it doesn't matter what vertical market. There are multiple hands in play. Each of those has to get paid. There's profit they have to consider.

[00:07:38] They have to pay their bills. They got to pay their employees and they got to pay the regulations and in some cases tariffs for importing other goods and services that they depend on. So let's use a simplified example. Let's take a physical calculator. And obviously some of you don't know what I'm talking about. And I understand if you went to college, you were forced to use a physical calculator, not your phone.

[00:08:02] A physical calculator is, of course, a device that lets you do math according to math rules and spit out a result. The physical calculator has a screen, although small. The physical calculator has different circuits inside of it. The physical calculator has buttons. The physical calculator has a shell. Then you think the packaging. You think the instruction materials. You think all of the different inspection requirements for technology.

[00:08:32] Emissions. You have to consider if there are parts that are imported. Let's say you can only get certain ships from China. You're going to pay a fee to be able to get that done in China. And then another fee to get it imported. Then you have to consider distribution. You have to figure out how to get your product into stores so that you can actually sell the darn thing. That costs you money usually. You have to manage your inventory. You have to weigh how much do you manufacture versus how much you're actually selling.

[00:09:01] Keep up with demand. But you also have to advance technology as technology goes forward. And there's less expensive ways of doing the same thing. You have to keep up with that as well. That costs money. All of this costs money. Math rules don't change. So the software itself does not need to change. But everything else is going to change. Given everything I just described.

[00:09:30] The ones that protect them US immediately. the ones that manufacture the batteries, that's a company usually, the ones that manufacture the chips, that's a battery, you know, associated company, because normally it's all one component together. So they'll sell it to you as one joint thing.

[00:09:59] To save you, I'd have to go to separate different pieces to put it together because you know you did it together. If you choose to do the separated component, you're now, let's say you might be dealing with 15 different providers. Each of those providers has staff, they got to pay. Each of those providers has regs, they got to follow. Each of those providers has buildings they need to pay for. Each of those providers has taxes they need to pay. Each of those providers has to pay for training.

[00:10:27] Each of those providers might have regulatory oversight in their country as well as the ones they distribute to. So they're passing the cost down to you to get the parts you need to make your calculator and then you are subject to regulatory and staff and all these other things. So that chip, where it normally might only cost them, let's say $5 to really make it, automatically swells to $25 per

[00:10:56] because they're bulking in all these other things they've got to recoup. The regulatory then, I'm just targeting regulatory, spin is usually staff, but it's also the legal team, the legal interpreters, the ones who write it, the ones who interpret it, the ones who enforce it. Each of them has a salary. Then you talk taxes. There are salaries for the people who collect the taxes.

[00:11:24] Everything I'm describing increases over time. As you need to get more people to do something or the complexity of the work increases, the amount of money you've got to pay them increases. As that increases and we get more complex with the technology stack and all the different things we manufacture, all that does is add burden downstream to you, try to get your calculator at the door. So your cost, your effective cost to get all this stuff goes up.

[00:11:53] You're going to then hit a point. Okay. They're willing to offer me a little bit of a deal if I were to bulk order, as in I only expected to sell 100 calculators, but in order for me to get any kind of deal to make it make sense, I got to start at 1,000 calculators. So now you're having to spend more money to get to the amount you really need and then now you're overstocked. If you're overstocked,

[00:12:22] it creates pressure on you to sell more units because you didn't plan on 1,000, you planned on 100. Now you have to figure out distribution. How do I find stores that are going to eat up all this supply? What about demand? If you did the numbers and you determined, I know I can sell 100 calculators because it's school season. Can you guarantee you can sell 1,000 calculators? Probably not. Now you got to work harder. That's staff time. That's technology. That's licensing.

[00:12:51] That's registration. That's distribution. Your cost has now gone up because I had to do it. I had to buy in this amount and now I got to figure out how to sell that amount. When you get to the point, you say, okay, I was able to sell the 1,000. Cool. You would have had to add profit over top of what you wanted to charge in order to recoup what you spent just to get it done. The profit that you add has to be slim

[00:13:21] because you have to compete with everybody else manufacturing calculators, including China. This is where the tariffs come into play. The thought, and unfortunately some news are swaying it improperly. The thought is, you have to compete not only with your United States peers getting your calculator in front of customers, but also other countries where for them, the manufacturing is local, they're getting it cheaper, the quality is lower,

[00:13:51] and so they're able to sell theirs essentially for pennies on the dollar compared to what you have to spend. It's not a fair playing ground. The tariff is designed to try to level the playing field to make it to where it's going to be a little bit more expensive for them to do it. It doesn't stop them from doing it. It's going to be a little bit more expensive for them to do it. The downside is it forces you to make a decision. You can continue importing like you were doing and you're going to be eating those tariffs because you got to eat the tariff

[00:14:21] to get the stuff here at a higher cost or it's manufactured in America and if you do that, you're avoiding the tariff. Doing it here might mean you have to do it yourself as opposed to using outsource parts. There's what's referred to as the conservation of energy theory and it amazes me how many managers in companies don't understand the simplicity

[00:14:49] of the conservation of energy theory. I challenge you to look it up. The simple definition is that energy cannot be lost or destroyed. It only changes form or location, meaning no matter what you do, there's a level of effort, there's a level of cost, there's a level of energy, there's a level of spend, there's a level of something. You cannot eliminate it. You're just sending it somewhere. You're putting it somewhere. It's either you're outsourcing so you're giving them the energy,

[00:15:20] your cost goes up or you do it yourself, your cost goes up, you own the energy but you also can control the quality, you can control the distribution, you can control the timing and you can control the reliability. During COVID, the semiconductor crisis that was is a byproduct of so many companies that in their rush to keep the prices low, outsourced all their different manufacturing stuffs and then got trapped when everything was locked down

[00:15:50] because many of them didn't have the balls to take it in-house and do it themselves so that they can control the supply chain start to finish. When you don't control the supply chain start to finish, you're creating a high risk that something goes south and you are not prepared for it. This is not to say that it's the right answer for everybody. I'm suggesting that when you evaluate how things affect you and how things affect your customer

[00:16:19] and how things affect your suppliers, you have to make smart decisions about where you place things. However, because of the way money works, if you do it all yourself, I'm talking start to finish, you're spending more money, you're investing more money, and because of that, you have to command a higher price, which requires you better show up with a product that is largely fail-proof. It's largely insulated from disruption.

[00:16:48] The earliest iPhones had the advantage of being largely self-controlled in the supply chain, but they came at a time when smartphones were not the standard. Smartphones were the exception. Flip phones were the standard. Your Motorola's and the Razor's and StarTax and so on. They were the standard at that time, and so the Apple comes and disrupts and forces smartphone. Now everybody's got a smartphone.

[00:17:17] Now Apple's struggling to compete. That's the cycle of it, and that's the breaks. All of which is to say, when somebody says, your money doesn't go as far as the face value, it's because you need more of it than you would have needed in an older time when there were less cooks in the kitchen, less hands in the pot, less along the supply chain, and lower costs

[00:17:45] for parts and supplies, and less outsourcing, less offshoring, less terraces, less everything. When things were done in a simple form, if you talk about building up a regular roller pin, right, for your kitchen, for dough, what are you talking about? You're talking about wood and a little bit of metal. You know, and so the manufacturer is cheap, but now everybody's manufacturing roller pins and you can't compete. That rhymes. Summary. You cannot get away,

[00:18:14] you cannot get away from the fact that money, the devaluation of money is directly correlated to the advancement in manufacturing and things being more complex and harder to compete as well as outsourcing and international and all this that's happened, which makes it harder for your money to have any real value. We're never going to go back to a world where that $100 bill takes you as far as it should. What we can do is try to minimize disruption from international shores

[00:18:44] to try to give United States manufacturers a fair chance, provided they're willing to take it in-house. They're still going to have the level of work. They're still going to have to pay for salaries. They're still going to have to compete within the nation, but it's better to compete within the nation than it is to have to compete with the world. That's the truth. We might welcome all these Timu and all these garbage products that just break every two years. That's not good for us. It's not good for our landfills and it certainly isn't good for our kids. That's my stance on that.

[00:19:15] Ultimately, though, your money doesn't go as far because it's not designed to go that far when you have more and more people, resources, time, locations, buildings, technologies necessary to do things. It's just the way it is. The more that's involved, the more regs involved, the more legality in place, the more issues, planes crashing and whatnot. All of these are going to increase the amount of money necessary and when you have

[00:19:45] printing of money to solve that problem, you're not going to get out of that hole and we never will. All we can do is try to make it a level playing field as best we can.