Dollar Devaluation since 1913

To devalue a currency, like the dollar, means that the value of the currency decreases. In the case of the dollar, we call this dollar devaluation.  The value of a currency is also referred to as purchasing power.  The more a currency is devalued, the less you can buy with it because the purchasing power decreases.

How much has the dollar devalued since 1913

The graph below shows the purchasing power of the US dollar since 1913. 1913 is when the Federal Reserve, which is actually a privately-owned central bank, took over the US banking system. As you can see, it’s been pretty much downhill since the Fed took over.  In fact, the dollar has lost over 96% of its value.  That means today’s dollar would be worth less than 4 cents back in 1913. How much longer will the dollar maintain its reserve-currency status at this rate?

Dollar Devaluation Chart 1913-2013
Dollar Devaluation 1913-2013

How does the Federal Reserve devalue the dollar? By printing more money.  Printing more money causes monetary inflation.  That means there are more dollars in circulation, but just because there is more paper money floating around, that doesn’t mean value has been created.  All you really get is price inflation.  Here’s an extreme example: Let’s say the Federal Reserve just gave everyone in America $1 million.  Wouldn’t that be great if everyone in America became a millionaire overnight?  Unfortunately, nothing would change, except prices would increase. Think about it.  How much would you have to pay the plumber to come to your house, if he’s already a millionaire?

Fighting inflation

Unlike paper money dollars, which can be printed out of thin air, gold does not lose value.  In fact, gold doesn’t really go up or down.  When gold goes up, it really means the dollar is going down and when gold goes down, it’s actually the dollar getting stronger (increasing its purchasing power).  So by keeping a portion of your savings in gold, you offset the losses of your dollar being devalued by the Federal Reserve and reckless government spending.  When you buy gold, silver or other commodities that resist inflation, it’s called a hedge against inflation.

20 Replies to “Dollar Devaluation since 1913”

  1. “Unlike paper money dollars, which can be printed out of thin air, gold does not lose value. In fact, gold doesn’t really go up or down.”

    Except when other countries open up their gold reserves, and the value of gold plummets. Know how America pays Africa to control the release of diamonds, so that the value of them remains high? Sorta the same thing goin on with gold. Other countries have a lot of it, and if they flood the market with gold – the value with drop drastically. Your best bet is to have your investments in a variety of stable currencies. So that if the value of one falls, you still have others that are holding their value – so your loss is minimized.

    1. What do you do when all currencies are racing to the bottom as they have since 2008? All fiat currencies eventually return to their real value: zero. Has gold ever been worth nothing?

      1. gold and silver are gods money gold will never go down to zero gold will always go up or down because the us dollar is going up or down gold and silver will be here after everything is gone there will still be gold and silver that’s the real money

  2. The SA diamond producers don’t need to be ‘paid’ by America to control the release of diamonds. They control the release of diamonds on their own, in order to keep the price high. After all they have little competition.

  3. From the St Louis Federal Reserve
    Title: Board of Governors Monetary Base, Not Adjusted for Changes in Reserve Requirements
    Series ID: BOGUMBNS
    Source: Board of Governors of the Federal Reserve System
    Release: H.3 Aggregate Reserves of Depository Institutions and the Monetary Base
    Last Updated: 2012-08-10 9:17 AM CDT

    2008……. $847,641,000,000

    gold price/oz:

    2008 $913.90
    2009 $953.70
    2010 $1181.70
    2011 $1628.30
    2012 $1610.50

    MB dollars per ounce of gold:
    2008 $2,952.12
    2009 $5,827.05
    2010 $6,944.94
    2011 $9,346.99
    2012 $9,224.55

  4. Too many factual errors on this page. The page is worthless as information — devalued, you might say.

    The first Big Mistake is in the first paragraph, which gives a completely incorrect definition of ‘purchasing power.’

    Purchasing power is NOT the value of the currency. Purchasing power is the relationship between the value of the currency AND how much things cost.

    So, it is possible to have greater purchasing power if prices fall, even if the currency is not as ‘valuable.’ This is particularly true when incomes rise — which explains how the chart presented is completely and INCORRECTLY interpreted.

    By 1955, Americans were MAKING A WHOLE LOT MORE MONEY for their work than in 1913, even with the supposed ‘devaluation’ suggested by this error-packed page.

    Thus, Americans in 1955 has FAR GREATER PURCHASING POWER than they did in 1955. Common sense tells you this — Phones and Cars were far more plentiful in 1955 than in 1913, yet both cost money to buy.

    Why? Because PURCHASING POWER had ACTUALLY INCREASED — why?, because incomes has grown (even with ‘devalued’ dollars) and the price of phones and cars in real dollars had fallen as demand created by those higher incomes and supply from improved production techniques had both increased substantially.

    If you want to make big personal finance decisions based on a one-line chart on a sales website, go ahead, but don’t expect to be rewarded for listening to sharpsters and charlatans who put out such wrong information.

    1. It seems like you’ve forgotten a huge segment of the population whose income no longer grows: pensioners, elderly and other people living on fixed incomes. If you’re retired, your income is not growing, and your savings are being eaten by inflation.

      The fact that we can buy more stuff nowadays is a byproduct of technological advances (you got that part right) as well the exportation of dollar inflation to rest of the world, as the dollar is the world’s reserve currency.

      If American incomes have grown so much, and purchasing power has increased as you seem to think, why does a modern household require two full-time incomes to achieve the same standard of living we had in the 60s? Why does the government exclude food and energy from the core CPI numbers? Why does the government use substitution and hedonics to hide real inflation numbers?

      Furthermore, just because we have more stuff, that doesn’t mean purchasing power has increased. Houses that were once filled with hand-made furniture that lasted for centuries are now full of DIY IKEA crap. Appliances that once lasted a lifetime now break days after the warranty expires. Fresh, pure milk used to delivered to our doorsteps daily; now we eat chicken instead of steak and milk saturated with hormones.

      You also need to study history. All fiat currencies always return to their natural value of nothing; whereas gold has been a store of wealth for thousands of years. World reserve currencies–fiat or otherwise–also have an expiration date as noted here: The Lifespan of Reserve Currency Status. As you can see, the USD isn’t far from expiration. What do you think will happen to the dollar’s purchasing power when it’s no longer used as the world’s reserve currency?

      If gold is a bad store of value, why do all the world’s governments and central banks hoard it?

      Lastly, this is not a sales website. I coded the the pricing tables for my own benefit years ago, and now I share them with everyone and post pertinent information when I have time. What is your agenda?

      1. “why does a modern household require two full-time incomes to achieve the same standard of living we had in the 60s?”

        The “standard of living”? Now you’re getting all technical.

      2. This guy Ego Nemo strains out the gnat and gulps down the camel. When will they learn? Gold and silver reigns supreme as non inflatable money. End of story.

    2. This comment is not correct. You equate salary to purchasing power which you define by the vaule of currency applied to purchasing price of goods & services. That’s not right. All of these things: Salaries, Goods and Services are all based on “The Market”. (Supply and Demand) If the cost of building a car in 1913 was more than “what the market could bear”, then Ford would have never built it. The same goes for 1955 and today. Salaries were higher in 1955 than in 1913 because the cost of living (The valuation of the dollar compared to the price of standard goods and services in that particular area) was far greater. It’s also realated to supply and demand of skilled workers. With the boom of technology there was a greater need for highly skilled/trained/educated people. This means that salaries had to be commensurate with the skill level/requirements of the personnel.

      So goods (cars and phones) were more plentyful (because of increases in technology) and they cost more (because of inflation/(devaluation of the dollar). Their initial pricing and adjustments were based on “what the market will bear.” The federal government puts out a report on the cost of living adjustment every year based on inflation (the devaluation of the US Dollar).
      The original author of this article is correct in saying that the devaluation of the dollar is based on its purchasing power of gold as a universal commodity. This is standard for all currency. Interdispersal of gold into your net worth isn’t really meant to “increase wealth”, but more to maintain current “wealth levels” as the value of other currency changes over time.

      1. In 1955, the dollar was fully convertible into gold, so the dollar, until Nixon defaulted on it really was as good as gold. Let the words… FULLY CONVERTIBLE, sink in for a moment. So in 1955, all price discovery of all markets was real and honest and continued as such, save and except for the temporary boosts to aggregate demand from money printing after WW2. After Nixon’s default, all markets have been skewed and confused by much more massive money printing (devaluation or dilution of the currency unit) and real price discovery is no longer possible and market results are no longer trustworthy, especially when viewed from the hockey-stick moment in 2008 when money printing took on new meaning. Accordingly, the only market that has any real meaning, is that of gold and silver that will soon have their own hockey-stick moment as the world uses US dollars as toilet paper and dumps US Treasuries. The US dollar is in its very last last days and will soon find out to the chagrin of the plunge protection team and insane NIRP and ZIRP policies to “stimulate” (manipulate) the economy, that the market is much more powerful than any feeble attempts by the Fed to reverse the effects of way back when they printed their first counterfeit dollar and violated the foundation of economics… that it is impossible to get something for nothing. These mad scientists love part one of Maynard Keynes theory of using printed money to shift the aggregate demand curve to the right in recessions because it used to work but they forgot part two, which was that when the economy recovered and tax revenues went back to normal, it was time to pay off the deficit from the stimulus. Now all they do is print massive and increasing amounts of money and accumulate fantasy levels of debt which can never be repaid, and wonder why nobody is buying more and more. It’s because the aggregate demand curve has shifted all the way to the right where no further demand can be stimulated (because the stimulative effects of debasing the currency no longer work and disposable income is tapped out) and is now climbing the inflation portion of the aggregate supply curve. Their only hope to an end to the coming massive collapse of the US dollar, is to immediately raise interest rates to about 25% and stem the exodus of capital. Either that, or do the right thing and massively devalue the dollar against gold and revalue gold (a la FDR in 1933) to about $10,000, which would be a good start because the $2.6 trillion of US Treasuries owned by the Fed would then be backed by gold. It’s just that I don’t really believe that there is 8133.5 tons of gold in Fort Knox anymore. Tsk tsk! What a mess! And to think that the only way out is for the gold-haters and evil bankers to capitulate and reinvent the gold standard, which was never actually repealed. It has been alive and well ever since Nixon’s default and if you want to argue, just look at a gold chart since 1999. I could continue but it’s already getting kind of wordy, so I will leave you with one final thought… gold and silver reigns supreme as non inflatable money.

    3. Absolutely correct. Devaluation means loss of purchasing power. No one cares about currency fluctuations but everyone cares about how much they can actually buy with their dollars.

    4. The dollar’s devaluation did not really begin until after the Vietnam War and creation of the Petrodollar.

      Wages only go up because currency is being devalued. In spite of this, wages have in no way kept up with real inflation and taxes, particularly since the 70s. Most people are living on credit and cheap imports. Debt-based monetary systems are not tracks to prosperity.

      Also, falling prices could signal deflation, which means you buy that dream house at a super discounted price and a month later you or your spouse gets laid off.

    5. If you believe that then you are as dumb as a rock.
      And if you base your financial decisions on equities, bonds and dollars, you are slow.
      It is not 2009 anymore and we are no longer trading at near zero interest rates.
      The Fed increase it almost every quarter.
      Land and Gold . .

    6. As incomes rise consumers costs rise thereby reducing the purchasing power of our dollar. If you held gold purchsed with $100 back in 1913. It’s value or purchasing power today would be much greater than the value or purchasing power of that $100 today.

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