These days, most married couples have to work at a job to earn a living. Most of these couples would tell you that if they didn’t both work, life would be a struggle to make ends meet. However, it didn’t used to be this way. In the mid-20th century, it was common for one spouse to stay home while the other one went off to work each day. We will examine the value of a dollar in 1960 and compare prices of 1960 to 2020. We will also look at purchasing power and the value of a dollar in 1960.
What is purchasing power?
“Purchasing power is the value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing power is important because, all else being equal, inflation decreases the amount of goods or services you would be able to purchase.” –Investopedia
One thing that significantly affects inflation and purchasing power is money printing. When the US Treasury and the Federal Reserve Bank coordinate to print large amounts of money, it causes inflation. Inflation is simply an increase in the money supply. The bigger the money supply, the less the money in your wallet is worth. Moreover, inflation is a hidden tax. As a result, money you have in your bank account loses purchasing power when money is printed by the government.
On March 23, 2020, it was announced that the US Government would be giving out stimulus checks to Americans. In addition, they planned to give money and loans to businesses hurt by the COVID-19 epidemic. Almost overnight, approximately $2 Trillion in loans and grants were printed out of thin air. As a result, the internet went viral in creating money printing memes. One of those memes was the now infamous “money printer go brrrr” meme.
Consumer Price Index
According to the US Bureau of Labor Statistics, the consumer price index has increased 1.3% in the past 12 months (before seasonal adjustment).
“The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Indexes are available for the U.S. and various geographic areas. Average price data for select utility, automotive fuel, and food items are also available.” -The US Bureau of Labor Statistics, Definition of Consumer Price Index (CPI)
A consumer price index value of 1.3% seems reasonable for 2019-2020. If inflation or the CPI were only 1% per year, that means that in 100 years one US Dollar would lose about half its purchasing power. For example, $100 in 1960 would only purchase $50 worth of goods in 2020. However, real inflation for items we buy every day is much higher. In addition, we’ll soon see what the real inflation values are, and they are not pretty. As you can see, the value of a dollar in 1960 was much different than today.
The US Dollar Has Declined in Purchasing Power Since 1913; The Stated CPI Does Not Reflect Real Price Increases
In addition, the US Bureau of Labor Statistics provides a handy Inflation Calculator. Using their calculator, you can estimate what purchasing power (based upon inflation) is today compared with years past. For example, $10 in 1960 is equal to $88.71 today. That means that in the 60 years prior to 2020, the dollar has suffered 887% inflation over time. The value of a dollar in 1960 has changed a lot over time.
Since the Federal Reserve Bank was formed in 1913, the dollar has been in steady decline. The dollar’s purchasing power has decreased dramatically since 1913. Using the US Bureau of Labor Statistics CPI calculator, the US Dollar has lost approximately 96% of its purchasing power since 1913. This is an alarming statistic. But this doesn’t does not tell us the value of a dollar in 1960.
Value of a Dollar in 1960
Food Prices Have Lower Inflation Values; Housing Prices Have Increased Dramatically Since 1960
To fully understand the value of a dollar in 1960, let’s look at some specific examples of prices in 1960.
According the website 1960s Flashback, in 1960 one US Dollar could purchase:
- 25 first-class stamps for $1
- slightly more than 3 gallons of gas for $1
- nearly 2 dozen eggs for $1
- 2 gallons of milk for $1
The price of a new home in 1960 was approximately $16,500. According to The Ascent, a family home costs $280,600 in the year 2020. This is a 1700% increase in home prices from 1960.
Using the US Bureau of Labor Statistics provides a handy Inflation Calculator, we can see that the US Dollar has become weaker. On average, goods and services are (on average) 887% more expensive today, compared with 1960. A US Dollar today has lost approximately 89% of its purchasing power since 1960.
Can You Purchase a Home with One Year’s Salary? In 1960 You Could
In Mike Maloney’s video series, “Hidden Secrets of Money: Episode 6”, he discusses the wealth distribution cycle. As an example, Mr. Maloney displays his father’s 1955 tax return. His father was an auto parts store manager in Salem, Oregon during this time. He earned approximately $9,600 per year. -“Hidden Secrets of Money: Episode 6” by Mike Maloney of GoldSilver.com
What’s interesting is the average home cost during this time period in comparison with his salary. According to US Census Bureau data, the median price for a single-family home in Oregon ranged between $6,800 in 1950 and $10,500 in 1960. Moreover, his father’s annual salary was almost equal to the median home price during this time. Now, consider the average salary today and the price of homes. In contrast, could you purchase a home with your annual salary? Clearly things have changed and Americans are becoming poorer when we compare the value of a dollar in 1960.
What Can We Expect Regarding Future Prices?
The past is never a good indicator for what may occur in the future. However, in this case it seems clear that the value of a dollar in 1960 may also point to future results. We can expect more inflation in the United States and expect the US Dollar to be weaker in purchasing power over time.
Wrap Up: The Value of a Dollar in 1960
As you can see, the value of a dollar in 1960 was significantly different than today. Clearly, inflation has had a significant impact on prices over the past 100 years. The purchasing power of the US Dollar has declined significantly over that period.
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