Economic Charts

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Saturday, August 14, 2010

Devaluation of the Dollar

While discussing the value of dollar with various people, I realized that a lot of people don't understand how much our dollar has devaluated over time. I think this is due to the dollar being the reserve currency and when I have $100 and put it in a drawer, it is still $100 dollars a decade later.  This makes it hard to envision how the dollar has devaluated.  I decided to use the CPI calculator provided courtesy of the great people at that allowed me to create screenshots of a few scenarios. First we look at how the dollar devaluated from the year 2000 compared to 2010.  The green rectangle represents results from ShadowStats analysis.
What you see is that in the year 2000, what you could purchase for $79.26 now costs you $100 in 2010.  This is a depreciation of 20.74%.  Formula to obtain: (1-(79.26/100))*100  .  Next we look at how much the dollar has depreciated from 1970 till 2010.
From this calculation you see that there was a 82.11% depreciation in the dollar.  That is pretty significant depreciation in the dollar vs assets.  Now to put this into perspective for you, lets look at the depreciation of the dollar since 1920 till 2010.
From 1920 to 2010 we have a total depreciation of 90.46%.  Finally we look at the debt chart from 1920 to 2010.  We noticed depreciation increased in the last 40 years, so did debt.  Now things are not this cut and dry, but in the spirit of keeping things simple I came up with this scenario to show the amount our currency has depreciated and its correlation to U.S. National debt.

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