There can be no doubt that the existence of the ‘fiat dollar’ allows a lot of policy flexibility to those in power in Washington. As Fed Governor Bernanke has pointed out, the printing press is a mighty thing, and the Federal Reserve is not afraid to use it

The dollar devaluation going on today is far less obvious to the average American than it was in FDR’s time, to the point of virtual invisibility. Today we haven’t experienced any ‘banking holidays,’ nor have we heard any Presidential fireside chats bolstering the case for a weaker dollar to get the economy moving again.

In 1933, gold was ‘confiscated’ from the American people in order to devalue the dollar. Today’s confiscation is different in type, but not in character. The wealth of the asset-owning class in this country (a smaller minority than you might think in this era of enormous household debt) is being confiscated through that timeless mechanism known as fiat manipulation by government.

As Alan Greenspan himself wrote in 1967 in his famous essay, “Gold and Economic Freedom,"

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation…This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the "hidden" confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.”

There was a time when the dollar was strong compared the world’s currencies. In the 1920s Americans found their strong, gold-backed currency made extended vacations in Europe possible. With few dollars in their pockets, even struggling artists and authors found the easy life in French bistros and pensions quite affordable. As recently as the 1960's, one popular travel book even promised Europe on $5 a Day.

As the saying goes, that was then, and this is now.

Sophie Kinsella, author of the popular novel, Confessions of a Shopaholic gives us a look at how tables have turned. Her book Shopaholic Takes Manhattan was brought to my attention by my fiction-savvy wife, who pointed out this take on our beleaguered dollar from the Introduction:

“Somewhere in my head I know that dollars are proper money, with a real value. But I mean, look at them. I’ve got a whole wodge of them in my purse, and I feel as though I’m carrying around the bank from Monopoly. Yesterday I went and bought some magazines from a newsstand, and as I hand over a twenty-dollar bill, it was just like playing shop. It’s like some weird form of jet lag – you move into another currency and suddenly feel as though you’re spending nothing.”

“So as I walk around the handbag department, trying out gorgeous bag after gorgeous bag, I’m not taking too much notice of the prices. Because this is America, and everyone knows that the prices in America are really low. It’s common knowledge. So basically, I’m working on the principle that everything’s a bargain.”

“Eventually I choose a beautiful Kate Spade bag in tan leather. It cost five hundred dollars, which sounds quite a lot - but then “a million lira” sounds a lot too, doesn’t it? And it’s only about fifty pence.”

- from Shopaholic Takes Manhattan, by Sophie Kinsella, c. 2002, published by Dell Publishing, a division of Random House, Inc.