The U.S. dollar is trading at pre-election lows, the world is beginning to shun the greenback, and President Donald Trump is advocating a reversal of the 20-plus-year strong dollar policy.
But has the U.S. dollar really been a strong currency? It has been a gradual descent for the last 100 years.
Since the inception of the Federal Reserve, the U.S. dollar has lost 95 percent of its purchasing power: a $1 Federal Reserve Note from 1913 would have a purchasing power of five cents today.
Here is a chart to highlight the rise and fall (mostly fall) of the U.S., courtesy of the American Enterprise Institute (AEI):
Make Money Great Again (with gold).
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According to the Bureau of Labor Statistics consumer price index, the dollar experienced an average inflation rate of 1.37% per year. Prices in 2016 are 2547.0% higher than prices in 1776.
In other words, $100 in the year 1776 is equivalent to $2,646.98 in 2016, a difference of $2,546.98 over 240 years.
The inflation rate in 2016 was 1.26%.
It has nothing to do with the FED. It is the result of price inflation of goods and services.
Check your “inflation” numbers between 1776 and 1913. You’ll see that the dollar didn’t change much until the FED was created in 1913.
Looking at the inflation charts, most inflation has happened after world war 2. This is caused by increased standard of living. more money in circulation, larger companies in control of the market prices, not the FED. Debt spending by government and individuals push prices higher, by creating a false demand, that demand would be less without credit.