US Dollar’s Purchasing Power Drops 98% In 50 Years
The strength of the US dollar has taken a hit amidst the international conflict surrounding the greenback. According to a report from Visual Capitalist, the US dollar has lost an astounding 98% of its purchasing power since 1971, indicating a significant decline in its value over the last five decades.
🇺🇸 US dollar has lost 98% of its purchasing power since 1971.
— Watcher.Guru (@WatcherGuru) April 14, 2023
US Dollar Decline
Purchasing power refers to the amount of goods and services that can be acquired through a single unit of currency. In 1933, a single US dollar could buy ten bottles of beer. Today, the same amount of currency can only buy a small cup of coffee from McDonald’s, highlighting the extent of the decline in the value of the US dollar.
The Federal Reserve Act granted the Federal Reserve Bank the authority to manage the money supply in 1913. However, the increase in the circulation of US dollars led to a decrease in the currency’s value. By 1929, the Consumer Price Index had increased by 73%, indicating a decline in purchasing power.
Over the past two decades, the money supply in the United States has grown exponentially, from $4.6 trillion in 2000 to $19.5 trillion in 2021. The COVID-19 pandemic has further affected the money supply, with $3.4 trillion created in 2020 alone.
International Trade under Threat
The trend is concerning, particularly given the trajectory of international trade. The finance minister of Saudi Arabia, Mohammed Al Jadaam, recently expressed the nation’s willingness to trade with alternative currencies, such as the euro or the Saudi riyal. This statement is in line with recent actions taken by BRICS nations seeking to diminish the dominance of the US dollar.
The decline in the value of the US dollar has far-reaching implications for the global economy. As the world’s reserve currency, the strength of the greenback has been a key determinant of global trade for decades. However, the decline in its value could lead to a shift in the global economic order, with other currencies vying for dominance.
The US government must take measures to address the decline in the value of the US dollar. Failure to do so could lead to further erosion of the currency’s purchasing power, with far-reaching implications for the global economy.
