Purchasing Power of the Dollar (1913-2026): A Visual Guide

If you hid $100 under a mattress in 1913, today it would be worth less than $3.50 in purchasing power.

This is the reality of purchasing power decline, the “silent thief” that slowly erodes the value of money over time. While we often hear about “inflation” as a percentage (e.g., “3% inflation”), the long-term impact on the dollar is far more dramatic when viewed over decades.

Using our Inflation Calculator, we can visualize exactly how the dollar has lost value and, more importantly, what you can do about it.

The 97% Decline

Since the Federal Reserve was created in 1913, the Consumer Price Index (CPI) has risen from roughly 9.9 to over 314. This means prices are more than 30 times higher today than they were a century ago.

Another way to look at it: $1 in 1913 bought the same amount of goods as $31.70 does today.

Key Eras of Inflation

1. The Roaring 20s & Deflation (1920-1933): After WWI, the US actually experienced deflation (prices dropped). $100 in 1920 was worth more in 1930. This is rare in modern history.
2. The Great Inflation (1970-1982): Driven by oil shocks and monetary policy, inflation skyrocketed. The dollar lost over half its value in just over a decade. $100 in 1970 was worth only $38 by 1982.
3. The Great Moderation (1983-2019): A long period of relatively low, stable inflation (2-3% per year). The decline was slower, but steady.
4. The Post-COVID Spike (2021-2024): Supply chain issues and stimulus money caused a sharp drop in purchasing power. In just four years, the dollar lost roughly 18% of its value.

Why “Cash is Trash” for Long-Term Savings

Holding large amounts of cash is a guaranteed losing strategy over the long term.

If you saved $10,000 in a safe deposit box in 1990, that money is still “$10,000” on paper today. But in terms of what it can buy (groceries, rent, gas), it’s only worth about $4,100 in 1990 terms. You lost nearly 60% of your wealth by playing it “safe.”

How to Protect Your Purchasing Power

To beat inflation, your money must grow faster than the inflation rate (historically ~3.3%).

1. Invest in Assets: Stocks (S&P 500), real estate, and commodities generally rise with inflation over time.
2. TIPS (Treasury Inflation-Protected Securities): Government bonds specifically designed to adjust their principal value based on the CPI.
3. Negotiate Salary: Use our Salary Inflation Calculator to ensure your pay raises are keeping up with the cost of living. If inflation is 4% and your raise is 2%, you have less purchasing power than last year.

Decade-by-Decade Purchasing Power Breakdown

Zooming into each decade reveals how unevenly inflation distributes over time. Some decades barely moved the needle while others crushed savers.

1913-1920: World War I triggered rapid price increases as governments printed money to fund the war effort. Prices nearly doubled in seven years. A dollar in 1913 was worth roughly 50 cents by 1920.

1920-1930: The post-war correction brought deflation. Prices actually fell, and the dollar temporarily regained purchasing power. This is one of the few periods in modern history where holding cash was rewarded.

1930-1940: The Great Depression kept prices low. Deflation persisted through much of the decade as demand collapsed. The dollar held relatively steady in purchasing power terms, though the economy was devastated.

1940-1950: World War II and the Korean War era brought another inflationary surge. Price controls during the war masked the true inflation, which exploded once controls were lifted. The dollar lost about 40% of its value during this decade.

1950-1960: A period of moderate inflation. The post-war economic boom kept prices rising steadily at 1-2% per year. The dollar lost roughly 15% of its value over the decade.

1960-1970: Inflation began accelerating late in the decade as Vietnam War spending and Great Society programs expanded government deficits. The dollar lost approximately 25% of its purchasing power.

1970-1980: The worst decade for dollar purchasing power in modern history. Oil embargoes, loose monetary policy, and wage-price spirals pushed inflation into double digits. The dollar lost over 50% of its value. A family earning $15,000 in 1970 needed $33,000 by 1980 just to maintain the same standard of living.

1980-1990: Federal Reserve Chairman Paul Volcker raised interest rates above 20% to crush inflation. It worked, but at the cost of a severe recession. Inflation fell from 13.5% to roughly 5% by decade’s end. The dollar still lost about 35% of its value.

1990-2000: The “Goldilocks” economy delivered low inflation (2-3%) alongside strong economic growth. The dollar lost roughly 25% of its value, but wages and asset prices generally kept pace.

2000-2010: Two recessions bookended this decade. The 2008 financial crisis briefly caused deflation, but overall the dollar lost about 22% of its value. Housing prices boomed then crashed, creating uneven wealth effects.

2010-2020: Extremely low inflation for most of the decade, with the Fed struggling to hit its 2% target. The dollar lost roughly 18% of its value. Asset prices (stocks, real estate) grew much faster than consumer prices, widening wealth inequality.

2020-2026: The sharpest purchasing power decline in decades. COVID stimulus, supply chain disruptions, and energy price shocks pushed inflation above 9% in 2022. Even after moderation, the cumulative effect cut the dollar’s purchasing power by approximately 25% in just six years.

The Hidden Tax: How Inflation Affects Different Income Groups

Inflation is sometimes called a “regressive tax” because it disproportionately impacts lower-income households. Wealthier individuals typically hold assets (stocks, real estate, businesses) that appreciate with inflation, effectively hedging their purchasing power. Lower-income households hold a larger share of their wealth in cash and spend a higher percentage of income on essentials like food, housing, and energy, which are categories that often inflate faster than the headline CPI number.

Food prices have risen faster than overall inflation in most decades since 1970. Housing costs in major metropolitan areas have outpaced CPI consistently since 2000. Energy prices are volatile but trend upward over multi-decade periods. These essentials consume 60-80% of lower-income budgets compared to 30-40% for higher-income households.

This disparity means the official inflation rate understates the real purchasing power loss for the average worker. A family spending 30% of income on groceries experiences a different inflation rate than someone spending 10%.

What About the Future?

No one can predict future inflation rates with certainty, but several structural factors suggest inflation will remain a persistent force:

• Government debt levels are at historic highs, creating incentives for governments to tolerate moderate inflation (which reduces the real value of debt)
• Demographic shifts in developed countries mean fewer workers producing goods for aging populations
• Energy transition costs require massive capital investment that flows into prices
• Deglobalization trends reverse decades of cheap overseas manufacturing

The practical takeaway: plan for at least 3% annual inflation when making long-term financial decisions. Use our Inflation Calculator to stress-test your savings plan against different inflation scenarios.

Frequently Asked Questions

Why has the dollar lost 97% of its purchasing power since 1913?

The primary reason is the shift from the gold standard to a fiat monetary system. Under the gold standard, the money supply was limited by gold reserves, which constrained inflation. After fully abandoning gold convertibility in 1971, the Federal Reserve gained the ability to expand the money supply without constraint. This flexibility helps manage economic crises but enables persistent inflation. Government deficit spending, wars, and economic stimulus programs have all contributed to the cumulative decline.

Does inflation mean the economy is doing poorly?

Not necessarily. Moderate inflation (2-3% annually) is actually considered a sign of a healthy, growing economy. Central banks like the Federal Reserve target roughly 2% inflation because it encourages spending and investment rather than hoarding cash. Deflation (falling prices) is generally considered more dangerous because it discourages spending, increases the real burden of debt, and can trigger downward economic spirals. The problems arise when inflation exceeds 5-6% and erodes purchasing power faster than wages can adjust.

How can I calculate what past dollars are worth today?

Use our Inflation Calculator to convert any dollar amount between any two years. Enter the amount, the starting year, and the ending year. The calculator uses official CPI data from the Bureau of Labor Statistics to compute the equivalent purchasing power. For example, entering $50,000 from 2000 to 2026 shows that you would need approximately $91,000 today to match the same purchasing power.

Are wages keeping up with inflation over time?

It depends on the measure. Nominal wages (the number on your paycheck) have generally risen over time. However, real wages (adjusted for inflation) have been stagnant for many workers since the 1970s. The median hourly wage in inflation-adjusted terms has grown only about 15% over the past 50 years, while productivity has more than doubled. This gap between productivity growth and wage growth is one of the defining economic challenges of the modern era.

Calculate Your Personal “Real” Wealth

Don’t just look at the number in your bank account. Use the Inflation Calculator to check the real value of your savings, debts, and investments. Compare what your salary could buy five years ago versus today. If your pay raise didn’t match the inflation rate, you effectively took a pay cut. Knowing the truth is the first step to preserving your financial future.