US Dollar Inflation: $1 in 1913 Is Worth $32 Today
The US dollar inflation rate (CPI) has averaged about 3.2% per year since 1913 (when the Federal Reserve (Fed) started). That might not sound like much, but over time, it really adds up. According to this chart, $1 in 1913 is worth about $32 today – with the dollar losing about 97% of its value. A millionaire in those days was more like a billionaire today.
President Nixon officially ended the gold standard in 1971. At that point, the dollar was no longer backed by the yellow metal. That meant the Fed could effectively “print” money at will. Before 1971, the average inflation rate was about 2.4% per year. And after it, it was about 3.9%. Just saying.
What does US dollar inflation mean for your investments?
Small amounts of inflation compound massively over time. So if you hold cash, make sure it’s earning you a higher interest rate than the dollar inflation rate (or the inflation rate of your country).
But there is some good news: just like inflation compounds over time, so do investments like stocks, gold, and bitcoin. Volatility is ok, so long as the general trajectory is up.
Key takeaways
- Inflation compounds over time. Holding cash without a return can erode its value – invest in assets that outpace inflation.
- The end of the gold standard changed the game. Post-1971, inflation accelerated as the Fed gained more control over money supply.
- Investments compound too. Stocks, gold, and bitcoin may be volatile, but over the long run, they grow faster than inflation.
