Datastream

Purchasing Power of the U.S. Dollar Over Time

Published

2 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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Datastream

Visualizing the World’s Population by Age Group

33% of the world’s population is under 20, making young people the largest demographic worldwide. But this might not be the case forever.

Published

3 days ago

June 16, 2021

Carmen Ang

The Briefing

According to the United Nations, the global median age has increased by 7 years since 1950, from 24 to 31
That said, young people accounted for 33% of the global population in 2020, making them the largest demographic across the globe

Visualizing the World’s Population, By Age Group

An aging population can have far-reaching consequences on a country’s economy.

With this in mind, today’s graphic looks at the age composition of the global population in 2020, based on the latest figures from the United Nations.

The Global Age Composition

Our global population is getting older, largely because of increasing life expectancies and declining birth rates.

In 2020, more than 147 million people around the world were between the ages of 80-99, accounting for 1.9% of the global population.

Age Group	Number of People (2020)	% of Global Population
<20 years	2.6 billion	33.2%
20-39 years	2.3 billion	29.9%
40-59 years	1.8 billion	23.1%
60-79 years	918 million	11.8%
80-99 years	147 million	1.9%
100+ years	0.6 million	0.01%

While that percentage may seem small, that particular demographic accounted for merely 0.05% of the population in 1950, meaning our world has a notably higher percentage of older people than it did 70 years ago.

Why is this significant? An aging population typically means a declining workforce and an increase of people looking to cash in their pensions. This can put pressure on the working class if taxes are raised.

Of course, an aging population can have positive impacts on society as well. For instance, elderly citizens tend to volunteer more than other age groups. And research has shown that older communities have lower crime rates. By 2050, the crime rate in Australia expected to drop by 16% as the country’s population gets older.

To mitigate some of the risks associated with a rapidly aging population, certain countries are working towards more sustainable pension systems, to support aging citizens while taking the stress off the working population.

» Like this? Then you might like this article on The World’s Youngest and Oldest Countries

Where does this data come from?

Source: United Nations World Population Prospects 2019 (accessed Feb 12, 2021)

Datastream

Euro 2020: Qualified Nations and Past Winners

After a year-long delay, the 2020 UEFA European Championship is back with new rules, reduced spectators, and fierce competition.

Published

1 week ago

June 11, 2021

Niccolo Conte

The Briefing

The 2020 UEFA European Football Championship will kick off Friday, June 11th 2021 after a year-long delay due to COVID-19
The tournament will take place across 11 host cities and feature new rules, reduced spectators, and fierce competition

The 2020 European Championship Returns with New Rules

After a year-long delay, the 2020 UEFA European Championship is set to kick off what will be the largest international sports tournament to take place since the pandemic.

While the final stage of the tournament typically takes place in one or two nations, this year’s will be played across 11 different countries.

Running from June 11th to July 11th 2021, the opening game between Italy and Turkey will kick off at the Stadio Olimpico in Rome, and the final will take place at London’s Wembley Stadium.

COVID-19’s Impact on Teams and Spectators

Aside from the initial year-long delay, COVID-19 has changed how teams and spectators will participate in the tournament.

Squads have been expanded from 23 to 26 players, and coaches will be permitted to call up more players if COVID-19 infections force players into isolation.

For spectators, individual stadiums within host cities have announced varying capacities ranging from 20-100%, with strict stadium entry requirements across the board. Since these capacities are pre-tournament estimates, we’ll have to wait until matchday to see how many ticket-holders are comfortable attending the fixtures in person.

Host Stadium and City	Spectator Capacity
Johann Cruijff ArenA, Amsterdam	25-45%
Baku Olympic Stadium, Baku	50%
Arena Națională, Bucharest	25-45%
Puskás Aréna, Budapest	Aiming for 100%
Parken Stadium, Copenhagen	25-45%
Hampden Park, Glasgow	25-45%
Wembley Stadium, London	Minimum of 25%
Football Arena Munich (Allianz Arena), Munich	Minimum of 14,500 spectators (~22%)
Stadio Olimpico, Rome	25-45%
Estadio La Cartuja, Seville	25-45%
Krestovsky Stadium (Gazprom Arena), Saint Petersburg	50%

Source: UEFA

Strong Competition Among Euro 2020’s Favorites

Despite current world champions France remaining as undeniable favorites, bookies are putting England to win the tournament (despite a fairly young squad) partially due to the home field advantage in the semi-finals and final.

Spain, Germany, and Italy remain formidable competitors, and Belgium’s golden generation will have one final shot at silverware after their third place finish at the 2018 FIFA World Cup.

European champions Portugal are another obvious threat, as Cristiano Ronaldo will be looking to become the tournament’s top goalscorer of all time (currently tied with Michel Platini at 9 goals).

While the 2020 edition of UEFA’s European Championship features a variety of on-field and off-the-field changes, the trophy truly feels up for grabs and is a welcome return to international football for fans around the world.

»Like this? Then you might enjoy this article, The Top 10 Football Clubs by Market Value

Where does this data come from?

Source: UEFA