September 16, 2014

A Look at Inflation in the United States and Great Britain Since 1971

A $1.00 bill in 1971 has the purchasing power of only 18¢ today. A £1 bill in Great Britain has the purchasing power of only £0.09. That is, if you put money in a coffee can in 1971 and buried it in the back yard, you’ve lost 82% of your purchasing power in the United States and 91% in Great Britain. Don’t you love our governments printing money?

I’m writing several new articles at Investing for Beginners for, a division of The New York Times, which I am building around inflation and inflation rates.  This calculation, performed for one of those articles, has me shaking my head at my desk.  I realize that it is somewhat meaningless for those who owned stocks, real estate, private businesses, commodities, collectibles, and intellectual property so it is illusionary, in a sense.  If your entire net worth consisted of a portfolio of hotels that were well managed, you are undoubtedly richer today than you were in 1971, even after accounting for inflation.  But it still just seems immoral on some level.

The correlation is that a $1 bill in 1971 would be the equivalent of a $5.24 bill today.  Why haven’t we scrapped the lower currency bills and replaced them with higher currency levels?  It is idiotic to have a $1 bill anymore.  Likewise, there should be a $250 and $500 bill.

$500 Bill

  • Gilvus

    I believe pennies and nickels currently have a lower face value than the market value of their constituent metals. If there’s any U.S. currency that should relegated to museums and history books, it should be our lower-value coins.

    • Joshua Kennon

      Amen. The suspect the reason that it hasn’t happened is there is a lot of money made by trading houses on Wall Street based upon high volume and a few pennies here and there. If we were to get rid of the penny, we would move in 5 cent increments. It would making accounting easier in a lot of ways, but the opportunity to profit would be gone. You also have retailers that charge $22.99 for a product. The nickel shift would force them to move to $22.95 or $23.00 – the first makes less money, the second looks worse. So I think there are a lot of special interest groups that don’t want to see the currency simplified and streamlined. Most of it is digital now, anyway. But it just makes me sad to see how pathetic our (the United States) money is compared to other nations. Canada’s currency is beautiful. The Euro comes in a EU500 denomination. We are really behind the curve here.

  • Iluvbettyboop2

    when was it discontinued