What Is the Value of a Dollar Today?

The value of the dollar today is much less than it was in the past. When the dollar loses value, that's called inflation. That's because prices inflate and each dollar can buy less.

The dollar's value has increased 25% since 2014. However, this hasn't offset its long-term decline. For more, see Why Is the Dollar So Strong Right Now?

Who Keeps Track of the Dollar's Value?

The value of the dollar today is determined by the goods and services it purchases.

As the dollar's value falls, the cost of living increases. The Consumer Price Index, or CPI, measures the cost of living. It compares the prices of a basket of goods and services for each month.

Exchange rates tell you how much the dollar's value is today in overseas markets. One easy way to find out the dollar's value against most of the world's currencies is to use the dollar index.

How Much Value Has the Dollar Lost?

The dollar has lost a lot of value in the last 100 years. In 1915, a person with only $4.26 could buy the same amount of food, clothing, and other necessities as $100 would buy today.  By 1920, he'd need double that amount, or $8.44. That's because hyperinflation after World War I cut the dollar's value in half. In 1930, he'd need less, or just $7.05. That's because the Great Depression of 1929 created deflation. That's when prices drop (deflate), and so the dollar gains value.

Ten years later, he needed even less money, only $5.91, to buy what $100 would buy today. After World War II, the global economy grew, and inflation returned. Here's how much someone would need to buy $100 worth of goods today. By 1950, the dollar's value had dropped even lower than before the Depression.

The following table shows how much its fallen. (Source: CPI Inflation Calculator)

Year	= $100 Today	Comments
1950	$10.17	Inflation resumed after World War II. The dollar's value fell by nearly half since 1940.
1960	$12.49	Inflation subdued and dollar retains most of its value.
1970	$16.37	JFK and LBJ used deficit spending to spur economic growth. That increased inflation, and lowered the dollar's value.
1980	$34.77	Nixon ended the gold standard in 1973. The dollar lost half its value.
1990	$55.14	Reaganomics cut taxes and increased the deficit, boosting inflation.
2000	$72.65	Although the budget was balanced in the 1990s, inflation continued due to expansive monetary policy that boosted the money supply.
2010	$92.00	Expansive monetary and fiscal policy added to the money supply to fight the Great Recession.

Why Is the Dollar's Value Lower Today than 100 Years Ago?

Inflation is the necessary cost of an expanding economy. The Fed keeps interest rates low to stimulate spending, which drives demand and ultimately economic growth. In fact, the Fed targets a 2% core inflation rate. In other words, as long as prices (excluding volatile food and energy) only rise 2% a year, the economy will grow at a healthy rate.

Many countries that export to the United States accumulate dollars as payments. They keep these on hand as foreign currency reserves Without foreign currency reserves, the value of the dollar today would be much lower. Here's three reasons why.

1. The dollar is the world's reserve currency. That means that most international transactions are made in dollars. Foreign governments keep dollars on hand in case their businesses need it for global trade.
2. Some countries, like China and Japan, export a lot to the U.S. They get a lot of dollars in return for their goods. If some companies have too much, the government will exchange it for them.
3. China and Japan also like to keep buying dollars to keep its value higher relative to their currencies. That makes their exports cheaper in comparison, giving their companies a competitive advantage.