Dollar's Purchasing Power Has Evaporated by 97% Since the Establishment of the Federal Reserve in 1913
Since the establishment of the Federal Reserve in 1913, the dollar has lost approximately 97% of its purchasing power, as measured by the CPI-U from the Bureau of Labor Statistics. One dollar in 1913 is equivalent to about 33 to 34 dollars in 2026, and a 1913 dollar can now buy approximately 3 cents worth of goods.
To put it more clearly: a product that cost 3 dollars in 1913 now costs about 100 dollars. In the same context, 100 dollars from 1913 is equivalent to about 3370 to 3390 dollars today, with a cumulative price increase of about 3270% to 3290%, resulting in an average annual inflation rate of about 3.16% to 3.2% over 113 years. The CPI in 1913 was about 9.9, while the index in 2026 is estimated to be around 330 to 334, indicating a price multiplier of about 33.5 to 33.7 times.
The loss has not been uniform. The cumulative price increases from World War I, World War II and post-war expansion, the high inflation from 1968 to 1982, and the price hikes from 2021 to 2023 due to the pandemic account for about 72% of the total price increase, despite only representing about 29% of the 113-year period. The high inflation period alone contributed about 30%, making it the largest segment. After the closure of the gold window in 1971, one dollar in 1971 is now worth about 13 cents in 2026, with the remaining purchasing power evaporating by about 87%.
On one side, cash holders continuously lose purchasing power due to inflation tax; on the other side, governments in debt, debtors with fixed interest rates, and asset holders who can pass on costs benefit. Harder assets like gold and Bitcoin are often compared: Bitcoin has a cap of 21 million coins and a decreasing issuance, but its price can drop by 50% to 80% in a single cycle, with a price of about 79,850 dollars in early September 2026, down from a peak of about 126,080 dollars in October 2025.
Cash and short-term debt are sold for purchasing power, while long-term nominal debt is diluted. This is driven by events combined with systemic factors: war financing, deficit monetization, and a 2% inflation target that institutionalizes "a little less each year" as policy. Those who benefit are entities that can issue debt, leverage, and hold assets with pricing power; those under pressure are households with wages lagging behind and savings held in cash and bank deposits.
Source: Public Information
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Since the Federal Reserve was established in 1913, the price history in the U.S. shifted from "long-term oscillation around a mean" to "trend-based elevation." The St. Louis Fed's analysis of prices since 1790 shows that the average inflation rate was nearly zero with high volatility before the Federal Reserve, while a stepwise elevation became the main pattern after World War I. The severance of gold coin redemption in 1933, silver certificate redemption in 1968, and the closure of the gold window by Nixon in 1971 all extracted the dollar from its metallic constraints. In the same CPI series, the Roman-style "debasement of coinage" transformed into balance sheet expansion.
The capital path is not about hiding money in a vault, but rather sending new purchasing power first to those who can spend it: the Treasury issues debt, the Federal Reserve buys bonds, banks lend, and government spending is realized. Cash holders are last in line. Rand Paul juxtaposes the approximately 147 million ounces of gold in Fort Knox with "97% since 1913 and about 85% since 1971," pointing to the same pipeline—when the deficit is around 2 trillion dollars annually, inflation is rebranded as "affordability," while households earning 50,000 dollars with no simultaneous 25% wage increase see their real income decline.
Key comparisons must be named: Weimar was a short explosion, while the dollar is a long compounding; the 1970s British pound crisis and the 2020s Argentine peso are accelerated versions of the same mechanism. In terms of industry position, the dollar remains the currency for pricing and settlement, currently in a "control rather than expansion" phase—reserve shares may gradually decline, but invoicing, oil, and U.S. Treasury collateral chains remain intact. Bitcoin is used as a comparison, serving the function of a store of value rather than replacing unit accounts.
Structural judgments indicate a transfer of pricing power. The mechanism is that fiat currency institutionalizes inflation targets as policy, and the stock of debt is maintained through nominal expansion, thus transferring pricing power from "those who can produce goods" to "those who can first access new currency." The 72% price increase concentrated in four crisis segments indicates that the usual 2% serves as a lubricant, while wartime and fiscal expansion act as the main pump. Cash is the party being priced, while hard assets and businesses with transferable costs are the parties setting prices.
ABAB News · Law of Cognition
- Inflation is not price increases; it is a tax paid by those who receive money later.
- The softer the currency, the more pricing power concentrates in debt and assets.
- An average of 3% over a hundred years means the principal is reduced to a fraction.