This isn't very surprising. Typical US economic policy aims for 2-3% annual inflation. That counter shows an average 2.6% inflation across 26 years, which is kind of right in the range we'd expect.
It's debatable whether this is good longterm policy - but it's been the norm in the US for decades.
This ticker's current speed is faster than that, though. It's going about 1e-9 dollar per second. That comes to about $0.03 per year, which as a fraction of the current base of $0.50, comes to 6% inflation per year.
I don't know how that speed was determined. Either it's using a linear decrease since 2000 (which isn't correct, the inverse of exponential inflation would be logarithmic decay, not linear), or it's weighting by recency for the high inflation since 2020 (which may continue, or may not.)
Good eye. The ticker was using the observed rate of change over the two most recent data points, so it's actually biased towards the most recent inflation numbers. I've updated it to simply use the slope between the oldest (January 2000) and the most recent data.
It won't be 100% accurate, but it's close enough to create a visual. And the number is always updated monthly with real data anyways.
Typical US economic policy aims for 2-3% annual inflation. That counter shows an average 2.6% inflation across 26 years, which is kind of right in the range we'd expect
We aim for "inflation of 2 percent over the longer run, as measured by the annual change in the price index for personal consumption expenditures" [1].
Accurately aiming inflation as a central bank is like trying to keep a deflating balloon the same size using a harmonica. 2.6% isn’t bad, I don’t know that many if any central banks have managed a tighter band.
> "as measured by the annual change in the price index for personal consumption expenditures"
How closely does that track with CPI-U, which is the index this web site is using? If I believe Gemini, PCE should show a slightly lower inflation number?
Hey all. This was merely intended as a fun visualization of inflation over long periods of time, in a format that’s slightly easier to grok for most people.
That’s it. There’s no further intention behind this, I just thought a real time “decay” visualization would be neat.
Literally everything about how this works is in the source in maybe 30 lines of js. It’s not complicated. Data is from BLS (whether or not that's accurate is another conversation entirely). I auto update the data monthly via a chron job, right around the time new data is published.
I’m not really changing this from where it’s at. It’s done as is. There are other sources out there already if you want to customize the date range or see a graph.
As much as the notion of "Purchasing Power" is economic, thus perhaps having a greater chance of being related to reality, I've been wondering if - and how - could these long-term measures account for greater diversity and "scale" of "things money can buy".
Nowadays if you're properly rich you can buy a seat on a sub-orbital flight. This wasn't an option in '00, no matter how rich you were.
On the other end of the scale, for basic things a (really) good quality loaf of bread will always be cheaper in Poland than say up north from Oslo, Norway; whereas a USA-designed made-in-China laptop pretty much never did scale with the rest of the "CPI basket"...
Point being: we sure do have numbers - what they really mean in practice is vague at best.
The PCE measure attempts to account for this in a more principled way. But precisely because it's trying to, it can't be reported as quickly, since there's no way to know how much a price change impacts PCE until you know how consumer behavior changed along with it. So the CPI data gets reported first (we got February CPI data in the middle of last month while PCE data isn't expected until Thursday), and thus drives media conversations about inflation.
The example is supposed to illuminate the limits of ppp or gdp adjustment. Anesthesia contributes almost nothing to gdp, but it matters more than almost anything to you if you need surgery.
The real time number isn't as interesting as the potential future number. If the dollar stops being the reserve currency, the purchasing power of the dollar will crash. No more cheap borrowing, no more low interest rates, hello constant high inflation. The Iran war has made that increasingly likely to happen. It may even have been intentional.
> No more cheap borrowing, no more low interest rates, hello constant high inflation.
Do you mean that we’ll have high inflation because we’ll keep running massive deficits? Because many countries that don’t have the reserve currency also have low inflation.
I think some people think that high velocity is deflationary. So if suddenly dollars are not traded as much, it slow down the dollar velocity and this has a global inflationnary effect. This isn't a bad theory tbh, i believe at least half of it (money velocity decreasing have an inflationary effect on assets, productive or not)
It means high inflation because if we're not the reserve currency, global markets sell their dollars, which leaves more dollars unused, which makes them plentiful, which makes them less valuable. This has a knock-on effect; it makes import goods more expensive, it makes government borrowing more expensive (which raises costs for citizens), and loss of petrodollar (the main reason for us being the reserve currency) makes oil more expensive. To pay for our debt, after we no longer have all this investment (other nations buying our dollars, t-bills), we print more money. So our currency is less valuable, and everything for us becomes more expensive, thus, inflation.
> It means high inflation because if we're not the reserve currency, global markets sell their dollars, which leaves more dollars unused, which makes them plentiful, which makes them less valuable.
So why don't Japan and Germany have high inflation, since those country's currencies aren't the reserve currency either?
For reasons? You want me to tell you the entire economic history of 3 countries in a HN comment? The US has no real industry except finance (well, and healthcare, and real estate (which is/was basically finance)), and our economy is only strong because of the petrodollar-created reserve currency. Take it away and we have a gaping void where an economy used to be.
Japan may implode if the US dollar collapses, due to the weird USD<->Yen cyclical debt scheme (yen carry trade) propping them up. If the world switches to the Yen to price oil this might not be so bad. They also just started moving away from negative interest rates and ZIRP, and BoJ may reach 1% interest at the end of this month. This is good for Japan, bad for US.
Germany is not doing great but they do/did have a strong manufacturing sector.
It's not the deficit itself, it's the quantitative easing that is used to pay for most of the deficit. If the US dollar weren't a reserve currency, printing more money would have a much larger inflationary impact.
The Federal Reserve's Real Broad Dollar Index (RTWEXBGS) is 113.51 as of February. Not saying it would crash losing all of that 13.51 excess overnight, but it's still overvalued against foreign currencies.
That would make imports more expensive and exports more competitive. Some pain, given we run a deficit [1]. But $50bn/month adustment in a $30tn economy is 2%. Not fun. But not a "crash."
(There is a genuine argument to be made that American voters have been rejecting dollar hegemony across multiple elections for a couple of decades.)
Perpetual trade deficit is modern system of tribute
Probably not. Equatorial Guinea, Palau and Kyrgyzstan run the largest current-account deficits as fractions of GDP [1]. (Current account counts goods and services.)
Resource extraction... High value infra projects in, low value unprocessed resource out.
Edit: Palau is the exception, it's main industry is tourism. Wealthy westerners come and consume and leave. Palau doesn't produce anything so all that consumption must be imported.
US current accounts deficit ~1 trillion annually, greater than your counterexamples' total combined economies. This should be a clue it's not the same mechanism of action.
It would cause inflation, which would lower purchasing power of imports; It would raise interest rates, which would raise the cost of loans and debt for individuals; and it would make the Government getting loans much harder, leading to spending cuts and higher taxes. All of these things will come together to weaken the dollar, thus making it have less purchase power. Whether it's a crash or slow bleeding out doesn't make a difference in the end.
In the last 12-24 months the price of fast food in particular has risen at a higher rate than inflation has hit other types of food and goods. Fast food makes no economic sense anymore.
And you're right, the food has gotten worse as well.
The Big Mac Index has the fatal flaw in that it assumes the value of Big Mac is consistent over time; McDonald’s has been at the forefront of fast food attempting to break into a more high income market segment.
Of course this is comparing to one data point that is an outlier. If people are choosing to pay $3 in today's dollars for it, that means that in 2010 McDonald's was underpricing that item relative to its market value. Presumably deliberately as a promotion. Compare across everything you buy and compare like-to-like if you want to judge its accuracy.
I like this visualization, but I think there is a harder to quantify layer under this. While someone making 50k a year in 2000, would need to make 100k in 2026 for the same economic power, it is actually much worse.
In the year 2000, there were just less products and services then there are now. And the products that did exist were generally more durable and repairable than today. And in many cases, products that exist now but didn’t back then have reasonable substitutes (like renting or buying movies, since you don’t have Netflix).
I would even take it one step further and say that the ways you had to interact with those substitutes were healthier and more social than what we have now.
$1 put into the S&P 500 with dividends reinvested would be more than $6 today. That more than offsets the inflation. It also gives some clues about why the raw dollar purchasing power has been lost to inflation.
At best, this is a strong warning not to keep your money in the mattress. Saved in any safe investment would beat this inflation and typical wage would also beat this.
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It's debatable whether this is good longterm policy - but it's been the norm in the US for decades.
I don't know how that speed was determined. Either it's using a linear decrease since 2000 (which isn't correct, the inverse of exponential inflation would be logarithmic decay, not linear), or it's weighting by recency for the high inflation since 2020 (which may continue, or may not.)
It won't be 100% accurate, but it's close enough to create a visual. And the number is always updated monthly with real data anyways.
>
Typical US economic policy aims for 2-3% annual inflation. That counter shows an average 2.6% inflation across 26 years, which is kind of right in the range we'd expectWe aim for "inflation of 2 percent over the longer run, as measured by the annual change in the price index for personal consumption expenditures" [1].
[1] https://www.federalreserve.gov/faqs/economy_14400.htm
> "as measured by the annual change in the price index for personal consumption expenditures"
How closely does that track with CPI-U, which is the index this web site is using? If I believe Gemini, PCE should show a slightly lower inflation number?
That’s it. There’s no further intention behind this, I just thought a real time “decay” visualization would be neat.
Literally everything about how this works is in the source in maybe 30 lines of js. It’s not complicated. Data is from BLS (whether or not that's accurate is another conversation entirely). I auto update the data monthly via a chron job, right around the time new data is published.
I’m not really changing this from where it’s at. It’s done as is. There are other sources out there already if you want to customize the date range or see a graph.
Thanks for checking it out :).
Nowadays if you're properly rich you can buy a seat on a sub-orbital flight. This wasn't an option in '00, no matter how rich you were.
On the other end of the scale, for basic things a (really) good quality loaf of bread will always be cheaper in Poland than say up north from Oslo, Norway; whereas a USA-designed made-in-China laptop pretty much never did scale with the rest of the "CPI basket"...
Point being: we sure do have numbers - what they really mean in practice is vague at best.
> The example is supposed to illuminate the limits of ppp or gdp adjustment.
... Yes, but that's like exemplifying the value of an actual slice of bread vs bitcoin to someone who is hungry.
Macroeconomic numbers may have an impact on the local - as in the individual scale - but that's neither the topic nor the thread.
https://www.jpmorgan.com/insights/global-research/currencies... | https://spectator.com/article/the-us-currency-is-under-attac...
> No more cheap borrowing, no more low interest rates, hello constant high inflation.
Do you mean that we’ll have high inflation because we’ll keep running massive deficits? Because many countries that don’t have the reserve currency also have low inflation.
> It means high inflation because if we're not the reserve currency, global markets sell their dollars, which leaves more dollars unused, which makes them plentiful, which makes them less valuable.
So why don't Japan and Germany have high inflation, since those country's currencies aren't the reserve currency either?
Japan may implode if the US dollar collapses, due to the weird USD<->Yen cyclical debt scheme (yen carry trade) propping them up. If the world switches to the Yen to price oil this might not be so bad. They also just started moving away from negative interest rates and ZIRP, and BoJ may reach 1% interest at the end of this month. This is good for Japan, bad for US.
Germany is not doing great but they do/did have a strong manufacturing sector.
>
If the dollar stops being the reserve currency, the purchasing power of the dollar will crashThis is far from clear.
>
it's still overvalued against foreign currenciesThat would make imports more expensive and exports more competitive. Some pain, given we run a deficit [1]. But $50bn/month adustment in a $30tn economy is 2%. Not fun. But not a "crash."
(There is a genuine argument to be made that American voters have been rejecting dollar hegemony across multiple elections for a couple of decades.)
[1] https://www.bea.gov/data/intl-trade-investment/international...
>
Perpetual trade deficit is modern system of tributeProbably not. Equatorial Guinea, Palau and Kyrgyzstan run the largest current-account deficits as fractions of GDP [1]. (Current account counts goods and services.)
[1] https://en.wikipedia.org/wiki/List_of_countries_by_current_a...
Edit: Palau is the exception, it's main industry is tourism. Wealthy westerners come and consume and leave. Palau doesn't produce anything so all that consumption must be imported.
US current accounts deficit ~1 trillion annually, greater than your counterexamples' total combined economies. This should be a clue it's not the same mechanism of action.
> If the dollar stops being the reserve currency, the purchasing power of the dollar will crash.
And thus manufacturing will return to the US! I thought we wanted that. It's the only way out of the Triffin dilemma.
The real hack was asking them to put Big Mac sauce on the McDouble. For $.30 it was pretty damn close at 1/3 the price.
And you're right, the food has gotten worse as well.
[0] https://en.wikipedia.org/wiki/Big_Mac_Index
In the year 2000, there were just less products and services then there are now. And the products that did exist were generally more durable and repairable than today. And in many cases, products that exist now but didn’t back then have reasonable substitutes (like renting or buying movies, since you don’t have Netflix).
I would even take it one step further and say that the ways you had to interact with those substitutes were healthier and more social than what we have now.
Don’t keep your retirement savings all in cash.
A change of one hundred millionth of a percent is not enough to consider even if I have 10 million dollars.
How is this calculated? It's a rate based on historical purchasing power parity index trends, or it's tied to live market data?