Datastream

Purchasing Power of the U.S. Dollar Over Time

Published

10 months ago

April 6, 2021

Govind Bhutada

purchasing power of the dollar

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The Briefing

The purchasing power of the U.S. dollar has fallen over time, as money supply has grown
In fact, $1 in 1913 had the same purchasing power as $26 in 2020

What is Purchasing Power?

The purchasing power of a currency is the amount of goods and services that can be bought with one unit of the currency.

For example, one U.S. dollar could buy 10 bottles of beer in 1933. Today, it’s the cost of a small McDonald’s coffee. In other words, the purchasing power of the dollar—its value in terms of what it can buy—has decreased over time as price levels have risen.

Tracking the Purchasing Power of the Dollar

In 1913, the Federal Reserve Act granted Federal Reserve banks the ability to manage the money supply in order to ensure economic stability. Back then, a dollar could buy 30 Hershey’s chocolate bars.

As more dollars came into circulation, average prices of goods and services increased while the purchasing power of the dollar fell. By 1929, the value of the Consumer Price Index (CPI) was 73% higher than in 1913, but a dollar was now enough only for 10 rolls of toilet paper.

Year	Event	Purchasing Power of $1	What a Dollar Buys
1913	Creation of the Federal Reserve System	$26.14	30 Hershey’s chocolate bars
1929	Stock market crash	$15.14	10 rolls of toilet paper
1933	Gold possession criminalized	$19.91	10 bottles of beer
1944	Bretton Woods agreement	$14.71	20 bottles of Coca-Cola
1953	End of the Korean War	$9.69	10 bags of pretzels
1964	Escalation of the Vietnam War	$8.35	1 drive-in movie ticket
1971	End of the gold standard	$6.39	17 oranges
1987	"Black Monday" stock market crash	$2.28	2 boxes of crayons
1997	Asian financial crisis	$1.61	4 grapefruits
2008	Global Financial crisis	$1.20	2 lemons
2020	COVID-19 pandemic	$1.00	1 McDonald’s coffee

Between 1929-1933, the purchasing power of the dollar actually increased due to deflation and a 31% contraction in money supply before eventually declining again. Fast forward to 1944 and the U.S. dollar, fixed to gold at a rate of $35/oz, became the world’s reserve currency under the Bretton Woods agreement.

Meanwhile, the U.S. increased its money supply in order to finance the deficits of World War II followed by the Korean war and the Vietnam war. Hence, the buying power of the dollar reduced from 20 bottles of Coca-Cola in 1944 to a drive-in movie ticket in 1964.

By the late 1960s, the number of dollars in circulation was too high to be backed by U.S. gold reserves. President Nixon ceased direct convertibility of U.S. dollars to gold in 1971. This ended both the gold standard and the limit on the amount of currency that could be printed.

More Dollars in the System

Money supply (M2) in the U.S. has skyrocketed over the last two decades, up from $4.6 trillion in 2000 to $19.5 trillion in 2021.

The effects of the rise in money supply were amplified by the financial crisis of 2008 and more recently by the COVID-19 pandemic. In fact, around 20% of all U.S. dollars in the money supply, $3.4 trillion, were created in 2020 alone.

How will the purchasing power of the dollar evolve going forward?

Where does this data come from?

Source: Bureau of Labor Statistics – Consumer Price Index, Morris County Library of Historic Prices
Details: Purchasing power is based on average annual CPI values from 1913-2020 (not seasonally adjusted). Reference base for the CPI is 1982-84 = 100.

Related Topics:currency inflation us dollar purchasing power economy buying power money supply

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Seeing Red: Is the Heydey of Pandemic Stocks Over?

Worries over post-COVID demand and rising interest rates have fueled a market selloff, with pandemic stocks hit particularly hard.

Published

2 days ago

January 21, 2022

Jenna Ross

The Briefing

Global equities are in a downward spiral, and experienced their worst week in more than a year.
Worries about slowing post-COVID demand and rising rates fueled the selloff.
Pandemic stocks were some of the hardest hit, with Shopify and Netflix dropping 35.3% and 33.5% respectively.

Seeing Red: Is the Heydey of Pandemic Stocks Over?

The stock market, and the stocks that flourished during the COVID-19 pandemic in particular, are off to a rough start in 2022. If you’ve been watching your investment accounts, chances are you’ve been seeing a lot of red. Shaken by the uncertainty of a pandemic recovery and future interest rate hikes, investors have been selling off their stocks.

This market selloff—which occurs when investors sell a large volume of securities in a short period of time, leading to a rapid decline in price—has investors concerned. In fact, search interest for the term “selloff” recently reached peak interest of 100.

Which stocks were the hardest hit, and how much are their prices down so far this year?

The Lackluster Returns of Pandemic Stocks

Pandemic stocks and tech-centric companies have suffered the most. Here’s a closer look at the year-to-date price returns for select stocks.

Company	Year-to-Date Price Return
Shopify	-35.3%
Roblox	-30.2%
Block	-28.0%
Moderna	-31.9%
Zoom	-19.9%
Netflix	-33.5%
Snapchat	-31.1%
Peloton	-23.1%
Coinbase	-23.5%
DocuSign	-26.0%
Amazon	-16.3%
Robinhood	-29.6%

Price returns are in U.S. dollars based on data from January 3, 2022 to January 21, 2022.

Netflix fueled the selloff after it reported disappointing subscriber growth. The company added 8.28 million subscribers in the fourth quarter, which is less than the 8.5 million it added in the fourth quarter of 2020. It also projects to have slower year-over-year subscriber growth in the near term, citing competition from other streaming companies.

Meanwhile, Coinbase stock lost nearly a quarter of its value so far this year. As the price of cryptocurrencies such as Bitcoin have plummeted, investors worry Coinbase will see lower trading volume and therefore lower fees.

The contagion also spread to other pandemic stocks, such as Zoom and DocuSign, as investors began to doubt the staying power of stay-at-home stocks.

Following the Herd

While investor exuberance drove many of these stocks up last year, 2022 is beginning to paint a different picture.

Investors are worried that rising rates will negatively impact high-growth stocks, because it means it’s more expensive to borrow money. Not only that, but they also may see Netflix’s growth as harbinger of things to come for other pandemic stocks.

The psychology of the market cycle also plays a role—amid these fears, investors have adopted a herd mentality and begun selling their shares in droves.

Where does this data come from?

Source: Google Finance

Datastream

How People Around the World Feel About Their Economic Prospects

In many of the world’s largest economies, including the U.S., Germany, and China, optimism around economic prospects sits at an all-time low.

Published

3 days ago

January 20, 2022

Nick Routley

economic prospects of people around the world

The Briefing

Economic prospects are at an all-time low in nine countries, including the U.S., Canada, Germany, Japan, and China
China and the U.S. experienced the biggest year-over-year drops, at -8 p.p. and -6 p.p., respectively

How Countries Feel About Their Economic Prospects

Each year, the Edelman Trust Barometer report helps gauge the level of trust people place in various systems of power.

The report is also a useful tool to gauge the general mood in countries around the world—and when it comes to how people in developed economies feel about the near future, there’s a very clear answer: pessimistic. In fact, optimism about respondents’ economic prospects fell in the majority of countries surveyed.

Here’s a full look how many respondents in 28 countries feel they and their families will be doing better over the next five years. Or, put more simply, what percentage of people are optimistic about their economic circumstances?

Country	% who are optimistic	All-time low?	Change from 2021 (p.p.)
🇯🇵 Japan	15%	✅	-1
🇫🇷 France	18%	✅	-1
🇩🇪 Germany	22%	✅	-2
🇮🇹 Italy	27%	✅	0
🇳🇱 Netherlands	29%	✅	-1
🇬🇧 UK	30%		+2
🇷🇺 Russia	31%		+1
🇨🇦 Canada	34%	✅	-1
🇪🇸 Spain	36%		+1
🇰🇷 South Korea	39%		+6
🇺🇸 U.S.	40%	✅	-6
🇦🇺 Australia	41%		-2
🇮🇪 Ireland	42%		-1
🇸🇬 Singapore	43%		-1
🌐 Global	51%		0
🇲🇾 Malaysia	55%	✅	0
🇦🇷 Argentina	60%		-2
🇹🇭 Thailand	60%		-2
🇨🇳 China	64%	✅	-8
🇿🇦 South Africa	66%		-2
🇲🇽 Mexico	68%		-1
🇧🇷 Brazil	73%		0
🇸🇦 Saudi Arabia	73%		0
🇦🇪 UAE	78%		+6
🇮🇳 India	80%		0
🇮🇩 Indonesia	81%		+11
🇨🇴 Colombia	83%		-1
🇳🇬 Nigeria	87%		n/a
🇰🇪 Kenya	91%		-2

Interestingly, nine countries (those with checkmarks above) are polling at all-time lows for economic optimism in survey history.

Whose Glass is Half Empty?

Japanese respondents were the most pessimistic, with only 15% seeing positive economic prospects in the near term. Only 18% of French respondents were economically optimistic.

While most developed economies were slightly more optimistic than Japan and France, all are still well below the global average.

As tensions between China and the U.S. continue to heat up in 2022, there is one thing that can unite citizens in the two countries—a general feeling that economic prospects are souring. As the U.S. heads into midterm elections and China’s 20th National Party Congress takes place, leaders in both countries will surely have the economy on their minds.

Whose Glass is Half Full?

Of course, the mood isn’t all doom and gloom everywhere. The United Arab Emirates saw a 6 percentage point (p.p.) jump in their population’s economic prospects.

Indonesia saw an 11 p.p. increase, and in big developing economies like Brazil and India, the general level of optimism is still quite high.

In some ways, it’s no surprise that people in developing economies are more optimistic about their economic prospects. Living standards are generally rising in many of these countries, and more opportunities open up as the economy grows. Even in the most pessimistic African country surveyed, South Africa, the majority of people still see improving circumstances in their near future. In Kenya and Nigeria, an overwhelming majority are optimistic.

Diverging Outcomes

One major prediction that experts agreed on for the year ahead is that economic outcomes will begin to diverge between countries with differing levels of vaccine access.

While this doesn’t seem to have affected attitudes towards economic optimism yet, it remains to be seen how this will play out as the year progresses.

Where does this data come from?

Source: 2022 Edelman Trust Barometer

Data notes: This data is derived from Edelman’s annual Trust Barometer survey, which includes 30,000+ respondents in countries around the world.