You’ve probably heard the line about how inflation has destroyed 90% of the dollar’s value over the last several decades.
It gets repeated ad nauseum by inflation truthers, gold bugs, Fed haters, and all of their fellow travellers.
The problem is that it’s almost entirely BS.
Matt Busigin has put together a great chart showing the dollar’s value since 1948.
It’s true, that the purchase power of a dollar has fallen massively since 1959. BUT that changes dramatically as soon as you assume your theoretical saver is getting any interest at all. The orange line in the middle shows what’s happened to your purchasing power if you’ve collected the most basic interest rate on your savings. And the top line, the light purple line, shows what’s happened to your purchasing power if you’ve constantly collected the rate being paid by 3-month T-Bills. That top line shows that your purchasing power has gained.
Including the rate of interest you get from savings is entirely fair, just as (as Matt points out), you can’t calculate the return on stocks without dividends, or the return on bonds without interest payments.
So yes, if someone had a bunch of cash in 1959 and literally put it in a shoebox, they’d have lost a lot of money over the last several decades. But for almost anyone in the real economy who’s collecting anything on their cash, the myth of inflation destroying the dollar is just that: a myth. And of course, this chart doesn’t include the real possibility that “savers” will also have money in stocks, bonds, and real estate, which means they will crush the effect of a depreciating dollar.
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