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72% of the dollar's purchasing power was destroyed in just four episodes

72% of the dollar's purchasing power was destroyed in just four episodes

latentframe

Comments (226)

  • probablypower
    This study doesn't correct for baseline exponential decay due to inflation, to better highlight the meaningful variations. By comparing based on 1914 dollars it also causes old variations to be relatively more extreme and newer inflationary events to look less extreme. You must compare apples to apples.Finally the events are quite cherry-picked. It is a conclusion looking for a result, when the statistical reason for choosing those 4 events simply isn't evident when you look at the data itself. There is no mathematical rule you could apply to your dataset that would distinctly highlight those 4 periods.
  • znnajdla
    This supports my hunch that the current Iran war creates a lethal trifecta that could potentially cause a dollar collapse. 1. Massive military overspend. 2. Petrodollar squeeze (Strait of Hormuz). 3. Allies pulling out: Europe and the Gulf diversifying both their investments and defense purchases.#1 creates oversupply of dollars and #2 and #3 lower demand. This study supports the idea that wars can indeed destroy purchasing power.
  • Booktrope
    Whoever wrote this article seems to think a strong dollar is fundamental to a strong economy. But, notice where it is on this timeline the only prolonged strengthening of the dollar that shows up. Yep, you've got it, the depth of the great depression. And, notice where the WWII and postwar weakening of the dollar led -- that's right, to in many ways the most prosperous economy the world has ever seen.Because we try to figure out how things like "strengthening" and "weakening" of the dollar fit in, and we actually have policies much more intelligent than, weaking of the dollar! Collapse is imminent!
  • cperciva
    Note that most of this period falls before the modern inflation target was established in 1995. In the past 30 years we've had 75% accumulated annual inflation (aka prices have increased be a factor of exp(0.75) = 2.1) of which 16% (aka 21% of the total) took place during an inflation excursion (which lasted 2.5 years aka 8% of the total time period).If anything the data points at "inflation targeting works and is producing slow and steady inflation" rather than "inflation comes in concentrated bursts".
  • readthenotes1
    We are so much better off than in 1914 that it's ridiculous to even worry about the comparative value of an arbitrary unit of value exchange.
  • tracker1
    - Shift back to exchange based taxes away from income taxes.- Spin down the federal reserve, establish a US bank and adjust the self-loans against the future into a solid repayment plan at a minimal interest rate.- Reestablished precious metal backing to core currencies (gold, silver, etc.)- Establish constitutional amendment establishing non-living entities and restricting speech rights as such. If a CEO wants to donate personal funds, cool, no corporate backing to political organizations full-stop.- Strong protections and some spending in favor of domestic security and production.- Drop subsidy spending for GMO commodity foods and byproducts. Eliminate GRAS protections against any "food" that didn't exist in the US food supply before 1880. FDA acknowledgement when more than one region considers an engineered food product as unsafe, minimally processed animal and plant products excluded.
  • milesskorpen
    1950-1985 and 1985-now are pretty steady. Decreased inflation volatility over time.I think your chart shows the "that inflation slowly erodes purchasing power over time." That doesn't mean there aren't periods of change - if you study economic history at all you know about the Great Depression and stagflation - but for ~50 years it's been pretty well managed.
  • alright2565
    This article over and over describes inflation as a tax or destruction, without backing those claims up. It would be a much stronger article if it focused on the main point rather than having it interspersed with the author's personal opinion of changes in the denominator of a fraction.
  • gwbas1c
    > Instead, $100 in 1914 is worth $3.05 today.Doesn't that mean $3.05 in 1914 us worth $100 today?
  • bloppe
    The graph should really use a log scale. At this point, a 50% drop in value would look tiny on that graph with the linear scale.
  • WarmWash
    The value of the dollar over time is largely meaningless unless you are a dollar investor (i.e. sit on lots of cash in consumer tier bank accounts). Generally once you have enough cash that this would meaningfully impact you, you are already beyond sitting on cash.At the end of the day, the dollar or any other currency, is just a conversion tool for [value created] to [goods/services received]. A ratio of 3/1 is equivalent to a ratio of 300/100, even if 3 and 1 are 99% smaller than 300 and 100. The numerator and denominator can move out of sync, creating periods of strain and arbitrage while they equilibrate, but what really matters is how much xyz you get per hour of work at job abc. And overwhelmingly we are leagues beyond 1914 in that regard.
  • arkensaw
    I'm trying to read this and not feel like an idiot.Can someone explain to me how post-covid is considered one of the 4 episodes?it looks to me that the dips at 1933-1936 or 1956-1958 are much more significant - are these just "regular" inflation? Are we ignoring these because we can't tie them to some specific current event?
  • latentframe
    I compiled 1,357 monthly CPI observations from 1913 to 2026 (BLS data via FRED). The common narrative is that inflation slowly erodes purchasing power over time. The data tells a different story. Four concentrated episodes — WWI, WWII/post-war, the Great Inflation (1968–82), and post-COVID — account for 72% of total cumulative price increase, despite spanning only 29% of the time period. The dataset includes regime classification, episode tagging, and a decomposition analysis. Full CSV available for download.
  • danesparza
    Why don't they refer to the 3rd 'episode' as Vietnam - since the timeline lines up pretty nicely with that downward slope (and it's more than just the 70's as is highlighted in the article)?If seeing this graph has taught me anything it's that war is hell on many levels - including economically.This article also doesn't seem to account for the median price of a single family home.
  • jawns
    Another way to frame this is that during inflationary episodes, debt became easier to repay.My parents bought a house in the 1970s. Because of the inflation that occurred during that time, incomes and expenses rose, yet long-term debt obligations such as fixed mortgages remained unchanged; their mortgage payment was the same in year 30 as in year 1.I guess another way to say it is that during an inflationary period, the people who HAVE money suffer the loss of its purchasing power. But the people who OWE money benefit from the dollar not being what it used to be.
  • tasuki
    Shouldn't the first chart have a logarithmic scale on the vertical? I don't trust anything using linear scales where they're a bad fit...
  • kilroy123
  • latenode
    The scary part is not the number. It is that most people living through it barely noticed while it was happening.
  • anon
    undefined
  • aglavine
    Fiscal deficit. That is the main reason by far of Dollar's destruction. Everything else is wrong or over-thinking.
  • anonymous_sorry
    The cumulative duration of these four episodes looks to be about 30 years, so about a quarter of the total time period looked atInteresting, but not quite as dramatic as I assumed from the title.
  • twodave
    The only thing sadder than AI-generated comments on human articles is human comments on AI-generated articles.
  • tines
    Why do wars tend to devalue the dollar?
  • bubbleRefuge
    so long and income exceeds or keeps up with inflation growth, it doesn't matter
  • hackthemack
    "By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens." -- John Maynard Keynes
  • renewiltord
    You can pick arbitrary points and stick them on the graph. It appears that my family are the inflation stoppers. Calm periods correspond to weddings and childbirths in my family. As the first in the line to marry a Chinese person, I have broken the rule and my daughter’s arrival has triggered a dollar collapse.The moon gods have spoken in the tea leaves and we have lost the Mandate of Heaven.
  • mkagenius
    Has to be taken in light of median income too right?
  • skywhopper
    This is a bizarre framing that totally misunderstands inflation, money, and macroeconomics.
  • LogicFailsMe
    And yet the feels surrounding $1M net worth have not been and likely will never be adjusted for this.
  • p1esk
    How about other currencies?
  • mothballed
    The most notable anomalous event if you zoom back to more like 1814 instead of 1914 is that ever since the US completely decoupled from the gold standard, it switched into purely inflationary mode rather than often bouncing back. From the 1800-1900 pretty much the entire time was spent at worst 1/2 to 2x the average value. Far less variance than after the introduction of federal reserve and taking off the gold standard, where purchasing power was destroyed to something like <1/10th of the century average.
  • d--b
    They make it sound like it’s a bad thing.
  • AndrewKemendo
    > The Great Inflation of 1968–1982 alone accounts for 30.2% of all cumulative purchasing power destruction since 1914 — more than WWI and WWII combined. During this 15-year period, the CPI rose from 34.1 to 97.7, nearly tripling the price level.In 1971, the United States ended the convertibility of the US dollar to gold, effectively bringing the Bretton Woods system to an end and rendering the dollar a fiat currency.This allowed for the global reserve currency to float which allowed for global credit expansion at the cost of the dollar value but with the benefit of more overall dollars (monetary velocity increasing)This is what politicians want because it makes the dollar printing machine the most powerful thing, hence why everyone hung on the fedchair words every few months.So the USD is already hyperinflated but the price relative to other currencies is still high.Once that price collapses (and it eventually will and increasingly soon) the entire US will look like the rust belt.
  • chistev
    What inspired Trump to do this? The Epstein files?
  • 3yr-i-frew-up
    [dead]