The US dollar's purchasing power has seen a sharp decline in recent decades, with reports indicating that it has lost close to 98% of its value since the early 1970s. This phenomenon is known as dollar devaluation, and it can have far-reaching consequences for the national economy as well as consumers and businesses.
According to data compiled by the St. Louis Federal Reserve Bank, inflation adjusted US dollars were worth around $1.71 in 1971 but now only buy about $0.03 worth of goods. This means that prices for everyday items have significantly increased over the years due to the declining value of the currency.
So what are some of the main factors contributing to this ongoing devaluation? One key cause is inflation, which occurs when there is too much money chasing too few available goods or services in an economy. This creates an environment where wages cannot keep up with rising prices and workers find themselves unable to purchase basic necessities despite working more hours or taking on additional jobs.
Another important factor is economic policies such as quantitative easing (QE), wherein central banks create new money out of thin air in order to stimulate growth and spur activity in capital markets. While this approach may seem beneficial on paper, it can also lead to serious consequences such as a weakened currency, especially if done without proper oversight or cautionary measures.
Whether it’s due to inflation or economic policy decisions, one thing remains true: the US dollar’s ongoing slide in purchasing power presents a significant risk for both consumers and businesses alike who live depend on it for their daily transactions or investments. Consumers may find themselves unable to afford basic items due to rising costs while businesses will struggle with lowered profits from their products and services because their customers simply cannot pay full price anymore. Moreover, investors may be put off from investing their hard-earned money given uncertainty surrounding future returns on their investments and the potential devaluation of their assets should they decide to hold them long-term.