Purchasing Power Of The U.S. Dollar Over Time

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purchasing power of the dollar

The Briefing

  • The purchasing power of the U.S. dollar has fallen over time, as money supply has grown
  • In fact, $1 in 1913 had the same purchasing power as $26 in 2020

What is Purchasing Power?

The purchasing power of a currency is the amount of goods and services that can be bought with one unit of the currency.

For example, one U.S. dollar could buy 10 bottles of beer in 1933. Today, it’s the cost of a small McDonald’s coffee. In other words, the purchasing power of the dollar—its value in terms of what it can buy—has decreased over time as price levels have risen.

Tracking the Purchasing Power of the Dollar

In 1913, the Federal Reserve Act granted Federal Reserve banks the ability to manage the money supply in order to ensure economic stability. Back then, a dollar could buy 30 Hershey’s chocolate bars.

As more dollars came into circulation, average prices of goods and services increased while the purchasing power of the dollar fell. By 1929, the value of the Consumer Price Index (CPI) was 73% higher than in 1913, but a dollar was now enough only for 10 rolls of toilet paper.

Year Event Purchasing Power of $1 What a Dollar Buys
1913 Creation of the Federal Reserve System $26.14 30 Hershey’s chocolate bars
1929 Stock market crash $15.14 10 rolls of toilet paper
1933 Gold possession criminalized $19.91 10 bottles of beer
1944 Bretton Woods agreement $14.71 20 bottles of Coca-Cola
1953 End of the Korean War $9.69 10 bags of pretzels
1964 Escalation of the Vietnam War $8.35 1 drive-in movie ticket
1971 End of the gold standard $6.39 17 oranges
1987 "Black Monday" stock market crash $2.28 2 boxes of crayons
1997 Asian financial crisis $1.61 4 grapefruits
2008 Global Financial crisis $1.20 2 lemons
2020 COVID-19 pandemic $1.00 1 McDonald’s coffee
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