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

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

#51

Post by RobotToaster »

windenntw wrote: post #17
latentframe wrote: post #2

[flagged]

IMO the first graph would make a lot more sense when plotted in log scale. Also this way of framing "As of February 2026, the US dollar has lost 96.9% of its purchasing power relative to January 1914. This means that $100 in 1914 would buy only approximately $3.05 worth of goods today" is of course math-correct but difficult to understand intuitively. I think it makes more sense to explain it in the opposite directio…

Also if you had that $100 in 1914 dollar coins it would actually be worth $5,400 in silver.

If you had $100 in 1914 $10 coins you would have $24,800 in gold.

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

#52

Post by t-3 »

tines wrote: post #16

Why do wars tend to devalue the dollar?

In addition to the already-stated causes of government issuing currency necessary to meet war spending and the fact that war spending produces destruction of economic capability rather than development, wars tend to introduce trade barriers and divert resources away from productive tasks. Whether barriers are legal (tariffs, embargoes), or simply higher premiums due to increased risk, less trade happens, which raises prices (inflation). Economists also really hate number-go-down even when down is good, so policy is oriented towards making sure deflation never gets a chance in the interwar development periods.

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

#53

Post by ramesh31 »

kogus wrote: post #28
gwbas1c wrote: post #15

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

I'm pretty sure you are right. Or to emphasize the devaluation, "$100 today would be worth only $3.05 in 1914." I think it is astonishing that we accept that in a best case scenario of sustained 2% inflation, we are literally planning for the value of the dollar to be cut in half every 36 years.

>I think it is astonishing that we accept that in a best case scenario of sustained 2% inflation, we are literally planning for the value of the dollar to be cut in half every 36 years.

Our system is designed to encourage asset ownership, not cash saving. If you stuff it under a mattress for 36 years, yeah you'll get fleeced. But buying assets is the way to keep up; an investment of $100 in the S&P500 in 1990 and never touched would be worth $4,120.93 today.

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

#54

Post by tharmas »

d3ckard wrote: post #43
thisislife2 wrote: post #30

Earlier quoted context omitted.

Iran is also playing its own Uno card here by saying that it would consider allowing some oil and gas shipments through the Strait if they have been bought with Chinese Yuan, than the US dollar. ( The Islamic Republic may grant safe passage to oil tankers if the cargo is traded in Chinese yuan - https://www.lbc.co.uk/article/iran-allow-chinese-ships-hormu... ).

This is particularly funny if you consider petrodollar to be a bad deal for US, not a good one. Ironically, if yuan becomes new petroleum currency, it might hurt Chinese long term.

>Ironically, if yuan becomes new petroleum currency, it might hurt Chinese long term.

Agreed. Which is why the Chinese do NOT want their currency to become the Petrodollar or world's reserve currency. They know that that is what destroyed US Manufacturing. China wants to maintain their manufacturing dominance. They've seen what de-industrialization has done to the US.

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

#56

Post by kmeisthax »

tines wrote: post #16

Why do wars tend to devalue the dollar?

Only half of the incidents listed were actually full-scale wars (WWI and II). The other two incidents are an oil shock and a pandemic.

The commonality between all four of these incidents is that they correspond to severe supply shocks:

- During WWI and WWII, industrial supply was rerouted by force to the war effort, leaving normal consumer demand unfulfilled.

- During the oil crisis of the 70s, a critical energy input to the American economy massively increased in price due to sanctions placed on America.

- During the COVID-19 pandemic, a significant chunk of workers were paid not to work, as a form of deliberate supply destruction to avoid the spread of a novel coronavirus.

In a "normal" economy, supply is flexible enough that you can print money and nobody even notices. The supply curve is smooth and gradual, so prices only rise a little. When supply is constrained, however, prices rise to whatever value is necessary to curtail demand, because they have to. The supply curve is a brick wall.

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

#57

Post by gruez »

windenntw wrote: post #17
latentframe wrote: post #2

[flagged]

IMO the first graph would make a lot more sense when plotted in log scale. Also this way of framing "As of February 2026, the US dollar has lost 96.9% of its purchasing power relative to January 1914. This means that $100 in 1914 would buy only approximately $3.05 worth of goods today" is of course math-correct but difficult to understand intuitively. I think it makes more sense to explain it in the opposite directio…

>Anyways, I liked a lot this visualization https://mlde8o0xa4ew.i.optimole.com/cb:VNTn.d9a/w:auto/h:aut... that visualizes the compression in time of the big value changes.

It's still a bad chart because of the "the great inflation destroyed more value than both world wars combined" claim, for two reasons:

1. It's not clear (from the chart at least), that the claim is true. 20.0% + 18.1% = 38.1%, greater than 30.2%, but the quote claims otherwise. True, the red and orange segments cover more than just ww1 and ww2, but if more granular data is available why not show it?

2. "destroyed more value" might be technically true if we define "value destroyed = inflation", but it's a non-intuitive definition to use. If you asked someone about the value destroyed in ww1/ww2, they'll talk about europe being bombed out, not higher inflation.

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

#58

Post by 6510 »

bubbleRefuge wrote: post #11

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

Right, then: 1910 normal salary was 200-400 (say 300), if 97% of value of the dollar was lost in 2026 the normal salary should be 6666 - 13333 (say $10 000)

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

#59

Post by dboreham »

znnajdla wrote: post #34
engineer_22 wrote: post #23

Earlier quoted context omitted.

It could also be a play to squeeze China or similar nation dependent on middle east oil. USA semicon production not ready, if there were signals that China was ready for a play on Taiwan maybe this is a gambit to buy some time.

That would be a double whammy for America then: a devalued dollar and higher oil prices. Both cause inflation. China doesn’t seem to be squeezed when they seem to have a deal with Iran to buy in yuan.

Quick note that "devalued dollar" is inflation, not a cause of inflation.
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