Incredible Shrinking Dollar

If you were to take the value of the dollar in 1800 as a baseline, what do you think it's value would be today? Think about it while you consider the following actions taken by the U.S. government in the years between 1800 and 2009 (Thanks to Sean W. Malone for this background.):

1800-1815: The value of the dollar was tied to the value of gold, i.e., we were on the gold standard. After an initial increase in value, the dollar declined to $0.93 as the War of 1812 took its toll in destruction of resources, as wars are want to do.

1815-1850: 35 years of relative peace and an unfettered economy resulted in economic growth and an increase in purchasing power. The dollar was worth over $2.00 by 1850; a better than 200% increase in 50 years.

1850-1865: After a slight dip and subsequent recovery, the Civil War, in just 5 short years wiped out nearly all the increase of the previous 35 years. Both sides financed the war by printing money and raising taxes (and abandoning the gold standard). Losing 650,000 lives on both sides contributed to a loss of wealth. Value in 1865 = $1.11.

1865-1900: A return to the gold standard, together with the explosion of wealth created by the Industrial Revolution and the unleashing of Capitalism, saw a recovery by 1900 to the pre-war value of $2.04. This was a peak never to be seen again.

1900-1935: The Spanish-American War, WWI and the creation of the Federal Reserve as controller of the money supply saw the value of the dollar fall to $.083 by 1920. In the next 15 years, the Fed eased up on printing money and, despite the bursting of the bubble created by the Fed in 1929, increasing growth in technology helped to recover the value of the dollar to $1.22 by 1935.

1940-1971: WWII was funded by an explosion of money printed by the Fed, followed by Korea and Vietnam. Richard Nixon officially ended the Gold standard in 1971. There has not been an objective value of money since.

1971-2009: Between the end of WWII and 2009, the supply of money increased by over $8 trillion. During that period, the U.S. saw 10 recessions, nearly continuous military involvement overseas and an explosion of the welfare state. As a result, the value of the dollar in 2009, compared to the 1800 benchmark, was $0.08. That's 8 cents. Think about that the next time a politician tells you we are better off now than any time in history. Our "wealth" is a mirage and the American dream is about to end.