72% of the dollar's purchasing power was destroyed in just four episodes

p1esk

How about other currencies?

milesskorpen

1950-1985 and 1985-now are pretty steady. Decreased inflation volatility over time. I think your chart shows the "that inflation slowly erodes purchasing power over time." That doesn't mean there aren't periods of change - if you study economic history at all you know about the Great Depression and stagflation - but for ~50 years it's been pretty well managed.

anonymous_sorry

The cumulative duration of these four episodes looks to be about 30 years, so about a quarter of the total time period looked at Interesting, but not quite as dramatic as I assumed from the title.

mkagenius

Has to be taken in light of median income too right?

bubbleRefuge

so long and income exceeds or keeps up with inflation growth, it doesn't matter

znnajdla

This supports my hunch that the current Iran war creates a lethal trifecta that could potentially cause a dollar collapse. 1. Massive military overspend. 2. Petrodollar squeeze (Strait of Hormuz). 3. Allies pulling out: Europe and the Gulf diversifying both their investments and defense purchases. #1 creates oversupply of dollars and #2 and #3 lower demand. This study supports the idea that wars can indeed destroy purchasing power.

gwbas1c

> Instead, $100 in 1914 is worth $3.05 today. Doesn't that mean $3.05 in 1914 us worth $100 today?

tines

Why do wars tend to devalue the dollar?

latenode

The scary part is not the number. It is that most people living through it barely noticed while it was happening.

jawns

Another way to frame this is that during inflationary episodes, debt became easier to repay. My parents bought a house in the 1970s. Because of the inflation that occurred during that time, incomes and expenses rose, yet long-term debt obligations such as fixed mortgages remained unchanged; their mortgage payment was the same in year 30 as in year 1. I guess another way to say it is that during an inflationary period, the people who HAVE money suffer the loss of its purchasing power. But the people who OWE money benefit from the dollar not being what it used to be.

alright2565

This article over and over describes inflation as a tax or destruction, without backing those claims up. It would be a much stronger article if it focused on the main point rather than having it interspersed with the author's personal opinion of changes in the denominator of a fraction.

probablypower

This study doesn't correct for baseline exponential decay due to inflation, to better highlight the meaningful variations. By comparing based on 1914 dollars it also causes old variations to be relatively more extreme and newer inflationary events to look less extreme. You must compare apples to apples. Finally the events are quite cherry-picked. It is a conclusion looking for a result, when the statistical reason for choosing those 4 events simply isn't evident when you look at the data itself. There is no mathematical rule you could apply to your dataset that would distinctly highlight those 4 periods.

cperciva

Note that most of this period falls before the modern inflation target was established in 1995. In the past 30 years we've had 75% accumulated annual inflation (aka prices have increased be a factor of exp(0.75) = 2.1) of which 16% (aka 21% of the total) took place during an inflation excursion (which lasted 2.5 years aka 8% of the total time period). If anything the data points at "inflation targeting works and is producing slow and steady inflation" rather than "inflation comes in concentrated bursts".

AndrewKemendo

> The Great Inflation of 1968–1982 alone accounts for 30.2% of all cumulative purchasing power destruction since 1914 — more than WWI and WWII combined. During this 15-year period, the CPI rose from 34.1 to 97.7, nearly tripling the price level. In 1971, the United States ended the convertibility of the US dollar to gold, effectively bringing the Bretton Woods system to an end and rendering the dollar a fiat currency. This allowed for the global reserve currency to float which allowed for global credit expansion at the cost of the dollar value but with the benefit of more overall dollars (monetary velocity increasing) This is what politicians want because it makes the dollar printing machine the most powerful thing, hence why everyone hung on the fedchair words every few months. So the USD is already hyperinflated but the price relative to other currencies is still high. Once that price collapses (and it eventually will and increasingly soon) the entire US will look like the rust belt.

bloppe

The graph should really use a log scale. At this point, a 50% drop in value would look tiny on that graph with the linear scale.

skywhopper

This is a bizarre framing that totally misunderstands inflation, money, and macroeconomics.

WarmWash

The value of the dollar over time is largely meaningless unless you are a dollar investor (i.e. sit on lots of cash in consumer tier bank accounts). Generally once you have enough cash that this would meaningfully impact you, you are already beyond sitting on cash. At the end of the day, the dollar or any other currency, is just a conversion tool for [value created] to [goods/services received]. A ratio of 3/1 is equivalent to a ratio of 300/100, even if 3 and 1 are 99% smaller than 300 and 100. The numerator and denominator can move out of sync, creating periods of strain and arbitrage while they equilibrate, but what really matters is how much xyz you get per hour of work at job abc. And overwhelmingly we are leagues beyond 1914 in that regard.

arkensaw

I'm trying to read this and not feel like an idiot. Can someone explain to me how post-covid is considered one of the 4 episodes? it looks to me that the dips at 1933-1936 or 1956-1958 are much more significant - are these just "regular" inflation? Are we ignoring these because we can't tie them to some specific current event?

d--b

They make it sound like it’s a bad thing.

chistev

What inspired Trump to do this? The Epstein files?