Real Assets
Purchasing Power of the U.S. Dollar Over Time
What is Purchasing Power?
The purchasing power of a currency is the amount of goods and services that can be bought with one unit of the currency.
For example, one U.S. dollar could buy 10 bottles of beer in 1933. Today, it’s the cost of a small McDonald’s coffee. In other words, the purchasing power of the dollar—its value in terms of what it can buy—has decreased over time as price levels have risen.
Tracking the Purchasing Power of the Dollar
In 1913, the Federal Reserve Act granted Federal Reserve banks the ability to manage the money supply in order to ensure economic stability. Back then, a dollar could buy 30 Hershey’s chocolate bars.
As more dollars came into circulation, average prices of goods and services increased while the purchasing power of the dollar fell. By 1929, the value of the Consumer Price Index (CPI) was 73% higher than in 1913, but a dollar was now enough only for 10 rolls of toilet paper.
| Year | Event | Purchasing Power of $1 | What a Dollar Buys |
|---|---|---|---|
| 1913 | Creation of the Federal Reserve System | $26.14 | 30 Hershey’s chocolate bars |
| 1929 | Stock market crash | $15.14 | 10 rolls of toilet paper |
| 1933 | Gold possession criminalized | $19.91 | 10 bottles of beer |
| 1944 | Bretton Woods agreement | $14.71 | 20 bottles of Coca-Cola |
| 1953 | End of the Korean War | $9.69 | 10 bags of pretzels |
| 1964 | Escalation of the Vietnam War | $8.35 | 1 drive-in movie ticket |
| 1971 | End of the gold standard | $6.39 | 17 oranges |
| 1987 | "Black Monday" stock market crash | $2.28 | 2 boxes of crayons |
| 1997 | Asian financial crisis | $1.61 | 4 grapefruits |
| 2008 | Global Financial crisis | $1.20 | 2 lemons |
| 2020 | COVID-19 pandemic | $1.00 | 1 McDonald’s coffee |
Between 1929-1933, the purchasing power of the dollar actually increased due to deflation and a 31% contraction in money supply before eventually declining again. Fast forward to 1944 and the U.S. dollar, fixed to gold at a rate of $35/oz, became the world’s reserve currency under the Bretton Woods agreement.
Meanwhile, the U.S. increased its money supply in order to finance the deficits of World War II followed by the Korean war and the Vietnam war. Hence, the buying power of the dollar reduced from 20 bottles of Coca-Cola in 1944 to a drive-in movie ticket in 1964.
By the late 1960s, the number of dollars in circulation was too high to be backed by U.S. gold reserves. President Nixon ceased direct convertibility of U.S. dollars to gold in 1971. This ended both the gold standard and the limit on the amount of currency that could be printed.
More Dollars in the System
Money supply (M2) in the U.S. has skyrocketed over the last two decades, up from $4.6 trillion in 2000 to $19.5 trillion in 2021.
The effects of the rise in money supply were amplified by the financial crisis of 2008 and more recently by the COVID-19 pandemic. In fact, around 20% of all U.S. dollars in the money supply, $3.4 trillion, were created in 2020 alone.
How will the purchasing power of the dollar evolve going forward?
Real Assets
Visualizing Global Gold Production in 2023
Gold production in 2023 was led by China, Australia, and Russia, with each outputting over 300 tonnes.
Visualizing Global Gold Production in 2023
This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.
Over 3,000 tonnes of gold were produced globally in 2023.
In this graphic, we list the world’s leading countries in terms of gold production. These figures come from the latest USGS publication on gold statistics (published January 2024).
China, Australia, and Russia Produced the Most Gold in 2023
China was the top producer in 2023, responsible for over 12% of total global production, followed by Australia and Russia.
| Country | Region | 2023E Production (tonnes) |
|---|---|---|
| 🇨🇳 China | Asia | 370 |
| 🇦🇺 Australia | Oceania | 310 |
| 🇷🇺 Russia | Europe | 310 |
| 🇨🇦 Canada | North America | 200 |
| 🇺🇸 United States | North America | 170 |
| 🇰🇿 Kazakhstan | Asia | 130 |
| 🇲🇽 Mexico | North America | 120 |
| 🇮🇩 Indonesia | Asia | 110 |
| 🇿🇦 South Africa | Africa | 100 |
| 🇺🇿 Uzbekistan | Asia | 100 |
| 🇬🇭 Ghana | Africa | 90 |
| 🇵🇪 Peru | South America | 90 |
| 🇧🇷 Brazil | South America | 60 |
| 🇧🇫 Burkina Faso | Africa | 60 |
| 🇲🇱 Mali | Africa | 60 |
| 🇹🇿 Tanzania | Africa | 60 |
| 🌍 Rest of World | - | 700 |
Gold mines in China are primarily concentrated in eastern provinces such as Shandong, Henan, Fujian, and Liaoning. As of January 2024, China’s gold mine reserves stand at an estimated 3,000 tonnes, representing around 5% of the global total of 59,000 tonnes.
In addition to being the top producer, China emerged as the largest buyer of the yellow metal for the year. In fact, the country’s central bank alone bought 225 tonnes of gold in 2023, according the World Gold Council.
Estimated Global Gold Consumption
Most of the gold produced in 2023 was used in jewelry production, while another significant portion was sold as a store of value, such as in gold bars or coins.
- Jewelry: 46%
- Central Banks and Institutions: 23%
- Physical Bars: 16%
- Official Coins, Medals, and Imitation Coins: 9%
- Electrical and Electronics: 5%
- Other: 1%
According to Fitch Solutions, over the medium term (2023-2032), global gold mine production is expected to grow 15%, as high prices encourage investment and output.
Real Assets
Charted: The Value Gap Between the Gold Price and Gold Miners
While gold prices hit all-time highs, gold mining stocks have lagged far behind.
Gold Price vs. Gold Mining Stocks
This was originally posted on our Voronoi app. Download the app for free on Apple or Android and discover incredible data-driven charts from a variety of trusted sources.
Although the price of gold has reached new record highs in 2024, gold miners are still far from their 2011 peaks.
In this graphic, we illustrate the evolution of gold prices since 2000 compared to the NYSE Arca Gold BUGS Index (HUI), which consists of the largest and most widely held public gold production companies. The data was compiled by Incrementum AG.
Mining Stocks Lag Far Behind
In April 2024, gold reached a new record high as Federal Reserve Chair Jerome Powell signaled policymakers may delay interest rate cuts until clearer signs of declining inflation materialize.
Additionally, with elections occurring in more than 60 countries in 2024 and ongoing conflicts in Ukraine and Gaza, central banks are continuing to buy gold to strengthen their reserves, creating momentum for the metal.
Traditionally known as a hedge against inflation and a safe haven during times of political and economic uncertainty, gold has climbed over 11% so far this year.
According to Business Insider, gold miners experienced their best performance in a year in March 2024. During that month, the gold mining sector outperformed all other U.S. industries, surpassing even the performance of semiconductor stocks.
Still, physical gold has outperformed shares of gold-mining companies over the past three years by one of the largest margins in decades.
| Year | Gold Price | NYSE Arca Gold BUGS Index (HUI) |
|---|---|---|
| 2023 | $2,062.92 | $243.31 |
| 2022 | $1,824.32 | $229.75 |
| 2021 | $1,828.60 | $258.87 |
| 2020 | $1,895.10 | $299.64 |
| 2019 | $1,523.00 | $241.94 |
| 2018 | $1,281.65 | $160.58 |
| 2017 | $1,296.50 | $192.31 |
| 2016 | $1,151.70 | $182.31 |
| 2015 | $1,060.20 | $111.18 |
| 2014 | $1,199.25 | $164.03 |
| 2013 | $1,201.50 | $197.70 |
| 2012 | $1,664.00 | $444.22 |
| 2011 | $1,574.50 | $498.73 |
| 2010 | $1,410.25 | $573.32 |
| 2009 | $1,104.00 | $429.91 |
| 2008 | $865.00 | $302.41 |
| 2007 | $836.50 | $409.37 |
| 2006 | $635.70 | $338.24 |
| 2005 | $513.00 | $276.90 |
| 2004 | $438.00 | $215.33 |
| 2003 | $417.25 | $242.93 |
| 2002 | $342.75 | $145.12 |
| 2001 | $276.50 | $65.20 |
| 2000 | $272.65 | $40.97 |
Among the largest companies on the NYSE Arca Gold BUGS Index, Colorado-based Newmont has experienced a 24% drop in its share price over the past year. Similarly, Canadian Barrick Gold also saw a decline of 6.5% over the past 12 months.
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