- A dollar from 1950 is now worth only $0.12.a
- The term “inflation” is from the Latin term inflare,
meaning to “blow up or inflate,” and it was first used in a monetary
sense to describe “an increase in the amount of money” in 1838.f
Today, economists argue over the definition of inflation but generally agree
that it means a continued rise in prices while the value of money declines.e
- The inflation rate is the percentage increase in the price of goods per year.
For example, if the inflation rate is 2%, then a $1 candy will cost $1.02 in
The annual inflation rate in the United States has fluctuated greatly over
its history, ranging from nearly zero inflation to 23% inflation. The federal
government tries to keep inflation around 2-3%.a
The U.S. inflation rate has fluctuated between nearly zero inflation and 23%
- The Civil War’s direct cost was about $6.7 billion in 1860 money, which
would be $139 billion today. However, some economic historians believe the
indirect cost (such as disruption of the economy) would measure approximately
$46 trillion in current money.h
- The movie Cleopatra cost $44 million to make in 1963. With inflation
taken into account, the same movie would cost $300 million to make today.e
- Hyperinflation occurred in Germany in 1920, leading to great social unrest.
The purchasing power of money fell so low that the German currency, the Mark,
became cheaper than firewood. Hitler blamed the Jews for spiraling inflation,
which helped pave the way for the Holocaust.a
- The Zimbabwean dollar bank note holds the record for the greatest number of
zeros shown (100,000,000,000,000). Hungary holds the record for the largest
banknote ever issued, but its bank note did not depict all the zeros—the
amount was spelled out.a
- The post-WWII hyperinflation of Hungary holds the record for the most rapid
monthly inflation increase ever: 41,900,000,000,000,000% for July 1946, which
means prices doubled every 13.5 hours.a
- Historians cite runaway inflation as a major cause of ancient Rome’s
Historians have noted that war and inflation go hand-in-hand. Every war in
the last century has brought high inflation.e
War and inflation often go hand-in-hand
- In 2008, the top three countries with the most inflation were Zimbabwe (12,563.0%),
Burma (35%), and Guinea (23.4%).b
- In 2008, the three countries with the lowest inflation rates were Naru (-3.6%),
San Marino (-1.5%), and Burkina Faso (-0.2%).b
- The first country to hyperinflate in the 21st century is Zimbabwe. In 2008,
a loaf of bread cost 1.6 trillion Zimbabwe dollars. Officials in Zimbabwe blamed
it on rising global food prices and international sanctions.j
- Twenty-eight hyperinflations occurred in the 20th century, with twenty happening after 1980.a
- The United States has experienced two currency collapses due to inflation.
The first was the Continental Currency during the Revolutionary War. The second
was Confederation notes during the Civil War.a
- Imported gold and silver from the New World caused widespread inflation in
Europe between the 15th and 17th centuries.a
- When gold was used as currency, inflation could still occur if the government
diluted the gold with other types of metal such as silver, copper, or lead
in order to increase the money supply. As the value of each coin lessened,
consumers would need more of them to buy services and goods.a
- The high mortality rate during the Bubonic Plague in Europe increased the supply of available currency, which in turn created substantial inflation until the mid 1370s. Higher inflation decreased the purchasing power of wage laborers, so that even though they were paid more, their higher wages could not purchase more.a
- Nations who were on the Gold Standard during the 19th century until 1914 experienced
little or no inflationary trends.a
There is usually no one cause of inflation, but at least two theories are
accepted: (1) Prices rise as “Cost-Push inflation,” or inflation
that begins when rising costs result in increased prices, and (2) “Demand-Pull
inflation,” or when people’s ability to spend rises more rapidly
than the availability of goods and services.e
Inflation decreases the value of money, making goods more expensive to buy
- If inflation is controlled, it can be a positive force in the economy. It
can stimulate the economy, mitigate recessions, provide profits for businesses,
raise wages for workers, and reduce the real amount of debt.h
- In 1974, President Ford declared inflation “public enemy number one” and
urged the public to wear WIN pins, or “Whip Inflation Now” pins. At
the time, inflation was around 7%. The pins were immediately ridiculed and
even worn upside down to say “NIW,” or “Need Immediate Money.”h
- The dollar has lost 21% of its purchasing power in the last decade.a
- Adjusted for inflation, the top five highest grossing movies of all time are Gone
With the Wind ($1,606,254,800), Star Wars ($1,416,050,800), Sound
of Music ($1,132,202,200), ET: Extra Terrestrial ($1,127,742,000),
and The Ten Commandments ($1,041,450,000).c
The Value of a Dollar compared to a 1913 $1
*Adapted from source i
Cost of Living Comparison
|Loaf of Bread
|Average gallon of gas
*Adapted from source e
Top Five Inflation Periods in the U.S.
|War of 1812
*Adapted from source g
Highest Inflation Rates in History
*Adapted from source d
-- Posted August 22, 2010
a Bernholz, Peter. 2003. Monetary Regimes and Inflation.
Northampton, MA: Edward Elgar Publishing.
Statistics at a Glance.” Infoplease.
Accessed: August 21, 2010.
Grosses Adjusted for Ticket Price Inflation.” Box
Office Mojo. Accessed: August 20, 2010.
d Hanke, Steve H. “R.I.P
Zimbabwe Dollar.” Cato
Institute. May 3, 2010. Accessed: August 20, 2010.
e Hart, Joyce. 2010. How Inflation Works. New York,
NY: The Rosen Publishing Group.
f “Inflation.” Online Etymology Dictionary. Accessed:
August 20, 2010.
g Mulbrandon, Catherine. “U.S.
Inflation: Annual Percent Change (1774-2007).” Visualizing Economics. May 27, 2008. Accessed: August
h Sargent, Thomas. 1999. The Conquest of American Inflation.
Shrinking Value of the Dollar.” Infoplease.
Accessed: August 9, 2010.
Inflation Hits 11,200,000 Percent.” CNN.
August 19, 2008. Accessed: August 9, 2010.