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Purchasing Power of the U.S. Dollar Over Time

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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 EventPurchasing Power of $1What a Dollar Buys
1913Creation of the Federal Reserve System$26.1430 Hershey’s chocolate bars
1929Stock market crash$15.1410 rolls of toilet paper
1933Gold possession criminalized$19.9110 bottles of beer
1944Bretton Woods agreement$14.7120 bottles of Coca-Cola
1953End of the Korean War$9.6910 bags of pretzels
1964Escalation of the Vietnam War$8.351 drive-in movie ticket
1971End of the gold standard$6.3917 oranges
1987"Black Monday" stock market crash$2.282 boxes of crayons
1997Asian financial crisis$1.614 grapefruits
2008Global Financial crisis$1.202 lemons
2020COVID-19 pandemic$1.001 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.

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The Link Between Entrepreneurship and Mental Health Conditions

Research explores the link between entrepreneurship and mental health conditions such as ADHD and bipolar disorder

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The Briefing

  • Prevalence of ADHD, substance use disorders, and mood disorders appears to be higher in entrepreneurs than in the general public
  • One-third of entrepreneurs reported two or more co-occurring mental health conditions

The Link Between Entrepreneurship and Mental Health Conditions

Entrepreneurship has long been associated with traits like risk-taking, persistence, and creativity. It’s no surprise, then, many of the world’s most successful companies were brought to life by neurodivergent founders.

Neurodivergence refers to natural differences in brain function among individuals with conditions such as autism, ADHD, dyslexia, and bipolar disorder. As this 2019 study demonstrates, entrepreneurs appear to experience mental health and addiction issues more frequently than the general public, and tend to have families with these illnesses at a higher rate.

Nearly half of entrepreneurs included in the study have one or more mental health conditions. Below the are the numbers for four of the conditions studied.

EntrepreneursGeneral Sample Group
ADHD29%5%
Depression30%15%
Bipolar11%1%
Addiction12%4%

The research also looked at anxiety, but found that levels were similar between entrepreneurs and the sample group.

Obsessive-compulsive disorder (OCD), dyslexia, and Asperger’s Syndrome, which are not included in this research, are other noteworthy conditions that are sometimes connected with entrepreneurship.

Asperger’s, in particular, is present in a number of successful founders, including Elon Musk and Bill Gates. Peter Thiel, billionaire investor and serial entrepreneur, has argued that this mild version of autism could be an asset in founding successful companies.

An Open Question

There are two competing ideas around the link between entrepreneurship and mental health conditions.

First, some posit that traits associated with mental health conditions (e.g. hyperfocus for ADHD, or attention to detail for Asperger’s) are assets in the startup world.

Secondly, it is also thought that because neurodivergent individuals have more trouble succeeding in conventional frameworks in academia and business, they are more likely to forge their own path by founding companies and pursuing self-employment.

It’s entirely possible that both these ideas are true. The more research that is published around mental health and entrepreneurship, the clearer view we have on the traits associated with creating successful businesses.

The more open the conversation is around mental health, the more we can create conditions in the workplace that empower neurodivergent individuals.

Source: Freeman, M.A., Staudenmaier, P.J., Zisser, M.R. et al. The prevalence and co-occurrence of psychiatric conditions among entrepreneurs and their families. Small Bus Econ 53, 323–342 (2019).

Data notes: Data was analyzed from 76 MBA student and faculty pool participants, 149 psychology students, and 110 entrepreneurs not affiliated with the university. Participants from either recruitment group who reported a history of self-employment or founding or co-founding a for-profit or non-profit business were categorized as entrepreneurs (n = 242).

Hat tip: We discovered this research via The Generalist who published a fantastic post on who becomes an entrepreneur.

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