How much value has the U.S. dollar lost since 1913? The answer might surprise you

  • On December 23, 1913 the U.S. Federal Reserve was created.
  • What is the actual value of the U.S. dollar today compared to 1913?
  • Conclusion: Accounting for inflation the U.S. dollar has about 2 percent more purchasing power in 2020 than it did in 1913.

On December 23, 1913 President Woodrow Wilson signed into law the United States Federal Reserve Act. Overnight the nations currency creation and policy were placed in the hands of a privately owned central bank. Over the past 107 years the United States has transitioned from the gold standard of the past to the fiat system of the New World.

Some believe the dollar has lost over 98 percent of it’s value since the Fed’s creation. But how does the dollar of today honestly compare to the dollar of 1913? The question is complex but I’ve made a dedicated effort to peel back the layers by applying hard data to give you the truth.

How do you measure the value of a dollar?

While deciding how to weigh in on the topic, I realized that the question is complex and there are several methods one could use to compare today’s dollar to the one from 1913. I thought it would be best to analyze the price of several essential commodities from 1913 then extrapolate the cost in today’s dollars.  Finally, creating several charts to compare the above data to median wages from the same period.

Crunching the factual numbers should provide a real answer to my question: How much has the value of a dollar changed since 1913?

Buying a home

*The average price of a home in the U.S. *2018 price from Zillow

The average home in 1914 was $3500 by 2018 the median home was $223,000. This means that the average home has increased by almost 64 times in cost since the inception of the Federal Reserve. Other factors to consider:

  • The real estate market is global and investors now speculate world-wide.
  • Millions of upper middle class homes have been built since 1914.
  • The nation’s interior was still being developed in 1914 and some homes were poorly constructed and equated to cheap barns or sheds.

Buying an automobile

*Chart illustrating the average cost of an automobile from 1914 to modern times.

In 1914 the average automobile was $500 dollars. By 2018 the average brand new automobile was a little over $35,000. Without considering inflation you could have bought 70 vehicles in 1914 for the price of one vehicle today.

Cost of food

Having access to affordable and healthy food is vital to every human being. Disregarding inflation the above chart illustrates that the $2.50 spent on bread in 2018, would have bought over 41 loafs in 1914.

Cost of energy

*Chart illustrating the average price of a gallon of gasoline from 1914 to modern times.

The cost of gasoline is closely related to the cost of good and services. Increased energy costs ultimately trickle down and equates to higher prices for consumers. So measuring the cost of energy over the decades should provide a reliable piece of data. It’s also worth considering that the price of oil is complicatd and relies on global co-operation.

*Precious metals: An ounce of gold was around $20 in 1913, today in 2020 the cost is around $1,735 per ounce.  So the same ounce of gold has increased more than 86 times in cost since 1913.

Tying it together: Comparing salaries

*Chart illustrating U.S. median per capita income by decade.

The average American made $400 in 1913.  By the end of 2019 the average citizen’s salary was $48,516. But over 46 percent of the population had jobs that pay less than $30,000 annually.

Since 1913 the median salary in America increased by over 121 times. The 46 percent or ‘Middle America’ has seen a 75 percent increase in income and now earn about $30,000 per year.

By comparing the housing and automobile data to both the median income data and the income data from ‘Middle America’, we can see what inflation has actually cost the American dollar since the Federal Reserve’s inception.

*Chart displaying median income (GREEN) automobile price (BLUE) and home cost (PURPLE) since 1914.

Median income comparison

Housing:

  • In 1914 the cost of a home was about 8.75 times the annual median salary in America.
  • By 1964 the cost of the average home was down to 7.7 times the annual median salary.
  • By 2018 the average home was 4.6 times the median salary.

Conclusion: Inflation adjusted cost of home ownership is cheaper today than it was in 1914 for median income earners. Factors that make today’s home ownership more expensive that didn’t exist in 1914 include tax rates, utilities and entertainment options such as cable and wifi services.

Automobiles:

  • In 1914 an automobile was 1.25 times the median annual salary.
  • By 1964 the typical vehicle had risen to 1.34 times the median salary.
  • By 2018 the pendualm swung the other direction and vehicles were only .72 times the median income.

Conclusion:  Competition between automakers has driven inflation adjusted cost of automobiles down for median income earners since 1914.

Comparison for the middle 46 percent

I was curious what the numbers would look like when compared to the actual middle class and not just the median income, which could skew the picture because of the higher earning mega rich at the top.

  • In 2018 the average home was 7.4 times average annual salary for those earning $30,000 dollars per year.
  • The inflation adjusted cost of a home is slightly cheaper for the middle class today.
  • Today the average automobile is about 1.1 times average middle class income.
  • The cost of a vehicle is actually down from the 1.25 times the cost in 1914.

Conclusion: Home and automobile ownership are slightly cheaper for middle America than it was in 1913.

Ultimate comparison inflation vs income

Inflation is of course, one of the primary effects of currency printing. The chart below eloquently displays the substantial inflation the United States has experienced since 1913.

*Chart displaying inflation percentage by decade using the official statistics provided by the Federal Reserve.

For the final and most useful piece of data, let’s look at a chart and compare the rate that median wages increased with the annual inflation rates released by the Federal Reserve. Crunching the number reveals that salaries are actually up 2 percent vs inflation through 2015.

*20 year comparison: Inflation percentage in red. The green graph highlights the percentage salaries increased during the same period.

The evidence is in, the dollar has been relatively flat since the inception of the Federal Reserve in 1913. Wages are slightly up versus inflation but new circumstances exist and many American’s feel a dollar doesn’t stretch as far in 2020. But the truth is they actually have a little more inflation adjusted purchasing power today than they did in 1913. What is different is consumption on an industrial scale. The average American has taken on massive amounts of debt to finance a modern lifestyle which include far more expenses and luxuries that were unavailable in past times.

*All price data compiled from the Farmers Almanac unless otherwise noted.

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