If we could save a dollar (or thousands of them) and depend on being able to use them to purchase what we can purchase with them today in the years ahead, it would be comforting, if not amazing. Unfortunately, the dollars we hold today are insidiously and persistently declining in purchasing power.

What is deceptive, is that for “short periods of time”, the value of the dollar can seem stable. But over any medium or longer term timeframes, the dollar’s value deteriorates at an alarming pace.

For instance, if you were born in the following years and handed a $100.00 bill, here is how much of today’s goods or services that you could have purchased at that time with your $100.00:

Age 76     1940     $1,718.91

Age 66     1950     $   998.54

Age 56     1960     $   813.00

Age 46     1970     $   620.22

Age 36     1980     $   292.05

Age 26     1990     $   184.12

Conversely, if you hold a $100.00 bill today, here is its worth expressed in prior years’ dollars:

Age 76     1940     $        5.82

Age 66     1950     $      10.01

Age 56     1960     $      12.30

Age 46     1970     $      16.12

Age 36     1980     $      34.24

Age 26     1990     $      54.31

That’s right.  If you are only 26 years old and were given a $100.00 bill when you were born, today it would only buy $54.31 worth of goods or services.

As we consider our financial futures, it is imperative we recognize this attribute of our currency. (Which for a while, is still the world’s reserve currency. If/when we lose the world’s confidence in the value of the dollar, it has the potential to drop rapidly in value.)

        “Paper money eventually returns to its intrinsic value – zero.” – Voltaire, 1694-1778

If the natural phenomenon of inflation weren’t enough, the Federal Reserve is determined and committed to achieving a 2% targeted inflation rate. That’s right, they are committed to “devaluing” the very dollars we hold at a rate of 2% each and every year while we are trying to save and grow our purchasing power.

I’m not promoting a specific strategy in response to this as many do. (Buy gold! Buy silver! Buy my book!) It’s just important to factor in this reality as we save, invest or trade in these manipulated markets.

Inflation has the appearance of being docile in 2016. But the extraordinary experiment of governments creating artificial money and continuously propping up our financial systems, will only work for a season of time. There is nothing new under the sun and every fiat currency that has ever been created was ultimately destroyed. Just as ours is deteriorating today.

That’s the “Truth About Inflation”

For a brief summary of the history of failed currencies, here is an article from History Squared