It’s no secret that the value of the dollar has decreased over time. In 2020, $1 was worth $1.16, representing a 16% increase in prices since the world changed dramatically. Going further back, $1 in 2010 was worth $1.29 – that’s a 29% decrease in the dollar’s purchasing power over ten years. And if you go back to 1994, the same dollar is worth $2.03 in today’s money – meaning its purchasing power has been reduced by almost 50%. That’s a huge difference in just 27 years!
Global inflation is still an issue
Inflation has been an issue all over the world, not just in the United States. According to the International Monetary Fund, the average inflation rate worldwide for 2023 is 7%, with higher rates in some countries, such as Argentina, which is reportedly at over 100% inflation.
It is important to note that each country has its own economic policies and factors that contribute to its overall inflation rate. Population growth, currency exchange rates, changes in taxes and tariffs, and global economic trends can all have a significant impact on inflation.
Countries that are more dependent on commodities or exports may also be more prone to inflation since their prices can fluctuate due to changes in global markets. We all learned about that first-hand with the supply-chain crisis experienced during the pandemic lockdown.
What brought us here?
Inflation is caused by an imbalance between the supply and demand of goods and services in an economy. When the demand for goods and services increases, prices rise. When there is an excess supply of goods and services, prices fall. The main cause of inflation is excessive money creation or printing of money by governments and central banks.
Excessive government spending can lead to an increase in the money supply. This means that the government is issuing more money than the public has saved in bank deposits, causing prices to rise. Additionally, when governments print more money, it devalues the currency and makes it worth less.
Over the last three years, we have seen unparalleled government spending, which has led not only to inflation but an entire debate over what to do with the national debt. While politicians figure out how to address the debt ceiling, Americans hope their elected leaders can put their differences aside and help guide their citizens out of an economic trench.
