The Changing Value of the American Dollar: How It Affects You

Most of us have become all too familiar having to pay much more at the grocery stores recently. Food prices rose in 2014 at the quickest pace in over two years, especially in regard to such items as meat, poultry, fish and eggs. The value of the dollar today is considerably less than it was in the past. The value of the dollar today can be compared to what it bought in the U.S. in the past. When the dollar shrinks in value, it seems that prices are climbing, because the dollar buys less.

The Value of the Dollar Over Time

1n 1914, a dollar would buy almost 24 times what today’s dollar buys. However, by 1924, the dollar had shrunk almost 50 per cent, and was worth only about 12 times today’s dollar. During the Depression in 1929, the value of the dollar increased, and by 1940, the dollar could buy 16 times what it buys today.

By 1950, the dollar’s value had dropped lower than before the Depression. It was worth only 9 times what it is today, and in the more than half century since, it has continued to depreciate.

The dollar has always fluctuated and will continue to go up and down in value. When the value of the USD diminishes, it makes goods made in America cheaper than goods made in other countries. This increases the rate of U.S. exports and boosts economic growth. It also engenders a rise in the price of oil, since oil is priced in dollars. When the U.S. dollar shrinks, other countries raise the price of their oil to keep the profit margins high in their own currency.

The good news is that our currency is powerful. It is supported by the strength of the U.S. economy and international currency. It is not likely to collapse.

What It Means to You

Today, a family of four spends about 150.00 at the grocery store each week, compared to what the approximately 14.00 a week my parents spent in 1950 for their family of four.

How can we manage the impact of changing value?

The best hedge against inflation may be to invest in knowledge. Keep abreast of the global economic situation and diversify your investments away from the dollar by making sure you hold some precious metals and foreign bonds. Keep your assets liquid, so you can shift them quickly if it becomes necessary.

Remember, the dollar has always fluctuated and will continue to go up and down in value, but the U.S. dollar is powerful, and is not likely to collapse.

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