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25 Interesting Facts About . . .

Inflation

  1. A dollar from 1950 is now worth only $0.12.a
  2. 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
  3. 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 a year.h
  4. inflation
    The U.S. inflation rate has fluctuated between nearly zero inflation and 23%
    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
  5. 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
  6. 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
  7. 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
  8. 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
  9. 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
  10. Historians cite runaway inflation as a major cause of ancient Rome’s fall.e
  11. civil war
    War and inflation often go hand-in-hand
    Historians have noted that war and inflation go hand-in-hand. Every war in the last century has brought high inflation.e
  12. In 2008, the top three countries with the most inflation were Zimbabwe (12,563.0%), Burma (35%), and Guinea (23.4%).b
  13. In 2008, the three countries with the lowest inflation rates were Naru (-3.6%), San Marino (-1.5%), and Burkina Faso (-0.2%).b
  14. 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
  15. Twenty-eight hyperinflations occurred in the 20th century, with twenty happening after 1980.a
  16. 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
  17. Imported gold and silver from the New World caused widespread inflation in Europe between the 15th and 17th centuries.a
  18. 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
  19. 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
  20. Nations who were on the Gold Standard during the 19th century until 1914 experienced little or no inflationary trends.a
  21. shopping
    Inflation decreases the value of money, making goods more expensive to buy
    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
  22. 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
  23. 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
  24. The dollar has lost 21% of its purchasing power in the last decade.a
  25. 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
    declining u.s. dollar
    *Adapted from source i
    Cost of Living Comparison
    Item 1950s 1980s 2008
    Movie Ticket $.50 $3.50 $8
    Loaf of Bread $.16 $.51 $2.50
    Average house $16,000 $100,000 $250,000
    Average car $1,800 $6,000 $20,000
    Average gallon of gas $.20 $1 $4
    Average salary $3,000 $16,000 $50,000

    *Adapted from source e
    Top Five Inflation Periods in the U.S.
    Historical Event Inflation Rate
    American Revolution ~23%
    Civil War ~20%
    War of 1812 ~17%
    WWI ~17%
    WWII ~13%

    *Adapted from source g
    Highest Inflation Rates in History
    Country Date Highest Rate
    Hungary July 1946 1.295x1016
    Zimbabwe
    (last measureable)
    November 2008 79,600,000,000%
    Yugoslovia January 1994 313,000,000%
    Germany October 1923 29,500%
    Greece November 1944 11,300%
    China May 1949 4,210%

    *Adapted from source d

-- Posted August 22, 2010

References

a Bernholz, Peter. 2003. Monetary Regimes and Inflation. Northampton, MA: Edward Elgar Publishing.

b “Country Statistics at a Glance.” Infoplease. Accessed: August 21, 2010.

c “Domestic 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 9, 2010.

h Sargent, Thomas. 1999. The Conquest of American Inflation.

i “The Shrinking Value of the Dollar.” Infoplease. Accessed: August 9, 2010.

j “Zimbabwe Inflation Hits 11,200,000 Percent.” CNN. August 19, 2008. Accessed: August 9, 2010.