Categories: Base Metals / Energy / General Market Commentary / Precious Metals
Topics: General Base Metals / General Energy / General Market Commentary / General Precious Metals

The buying power of the U.S. dollar over the last century

The Buying Power of the U.S. Dollar Over the Last Century
The Money Project is an ongoing collaboration between Visual Capitalist and Texas Precious Metals that seeks to use intuitive visualizations to explore the origins, nature, and use of money.

The value of money is not static. In the short term, it may ebb and flow against other currencies on the market. In the long-term, a currency tends to lose buying power over time through inflation, and as more currency units are created.

Inflation is a result of too much money chasing too few goods – and it is often influenced by government policies, central banks, and other factors. In this short timeline of monetary history in the 20th century, we look at major events, the change in money supply, and the buying power of the U.S. dollar in each decade.

A Short Timeline of U.S. Monetary History

1900s
After the Panic of 1907, the National Monetary Commission is established to propose legislation to regulate banking.

U.S. Money Supply: $7 billion
What $1 Could Buy: A pair of patent leather shoes.

1910s
The Federal Reserve Act is signed in 1913 by President Woodrow Wilson.

U.S. Money Supply: $13 billion
What $1 Could Buy: A woman’s house dress.

1920s
U.S. dollar bills were reduced in size by 25%, and standardized in terms of design.

The Fed starts using open market operations as a tool for monetary policy.

U.S. Money Supply: $35 billion
What $1 Could Buy: Five pounds of sugar.

1930s
To deal with deflation during the Great Depression, the United States suspends the gold standard. President Franklin D. Roosevelt signs Executive Order 6102, which criminalizes the possession of gold.

By no longer allowing gold to be legally redeemed, this removes a major constraint on the Fed, which can now control the money supply.

U.S. Money Supply: $46 billion
What $1 Could Buy: 16 cans of Campbell’s Soup

1940s
The massive deficits of World War II are almost financed entirely by the creation of new money by the Federal Reserve.

Interest rates are pegged low at the request of the Treasury.

Under Bretton-Woods, the “gold-exchange standard” is adopted.

U.S. Money Supply: $55 billion
What $1 Could Buy: 20 bottles of Coca-Cola

1950s
The Korean War starts in 1950, and inflation is at an annualized rate of 21%.

The Fed can no longer manage such low interest rates, and tells the Treasury that it can “no longer maintain the existing situation”.

U.S. Money Supply: $151 billion
What $1 Could Buy: One Mr. Potato Head

1960s
An agreement, called the Treasury-Federal Reserve Accord, is reached to establish the central bank’s independence.

By this time, U.S. dollars in circulation around the world exceeded U.S. gold reserves. Unless the situation was rectified, the country would be vulnerable to the currency equivalent of a “bank run”.

U.S. Money Supply: $211 billion
What $1 Could Buy: Two movie tickets.

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