How can you predict the value of a dollar? It's not pegged to anything either.
Although in fact the decline of the value of the dollar is relatively predictable because of the Federal Reserve's policy goal of keeping inflation relatively low and the law of large numbers as applied to the generation of the real rate of inflation.
At my local deli a dollar used to buy a bagel with the works; and now buys less than half of a plain bagel. That's over the course of 20 years. Any unit of exchange is valued anew in each transaction; the persistence and trends in value exist mostly due to social pressure and the cost of bargaining. I don't make offers and counter offers on each bagel I buy; I just look at the sign and accept the price or leave without a bagel.
> Although in fact the decline of the value of the dollar is relatively predictable because of the Federal Reserve's policy goal of keeping inflation relatively low and the law of large numbers as applied to the generation of the real rate of inflation.
That's a crucial point. If the Fed didn't pledge to keep inflation under control, the dollar wouldn't be such a great store of value or medium of exchange. It's the stability promised by central banks that allow you to "predict the value of a dollar" in the immediate future.
Although in fact the decline of the value of the dollar is relatively predictable because of the Federal Reserve's policy goal of keeping inflation relatively low and the law of large numbers as applied to the generation of the real rate of inflation.
At my local deli a dollar used to buy a bagel with the works; and now buys less than half of a plain bagel. That's over the course of 20 years. Any unit of exchange is valued anew in each transaction; the persistence and trends in value exist mostly due to social pressure and the cost of bargaining. I don't make offers and counter offers on each bagel I buy; I just look at the sign and accept the price or leave without a bagel.