72% of the dollar's purchasing power was destroyed in just four episodes

Original Article ↗ Hacker News Discussion ↗

An analysis of U.S. inflation since 1914 argues that a handful of major shocks—world wars, 1970s stagflation, and the COVID era—account for most of the dollar’s long‑term loss of purchasing power, though several commenters note the effect looks less dramatic when scaled properly. Participants debate whether this erosion is inherently harmful or simply a planned feature of modern monetary policy, how it interacts with wages, debt, and asset ownership, and to what extent war spending, reserve‑currency status, and the petrodollar system distort the U.S. and global economies. Many emphasize that inflation’s real impact depends on broader context such as income growth, manufacturing strength, tax rules, and the growing use of alternative currencies and payment systems.

How to Interpret the Chart and Inflation Episodes

  • Several commenters say the main takeaway is that steady, compounding inflation slowly erodes purchasing power; recent decades show lower volatility than early 20th century.
  • Some argue the “four episodes” (WWI, WWII, 1970s, COVID) are cherry‑picked and the framing oversells drama; other spikes and dips (e.g., 1930s, 1950s) are comparable.
  • Multiple people say the chart should be on a log scale and/or use more consistent baselines; comparing everything to 1914 exaggerates early moves and minimizes recent ones.

Purchasing Power, Wages, and Living Standards

  • Several note you must consider median income and wage growth: lower dollar value doesn’t automatically mean people are worse off.
  • Others stress that quality and variety of modern goods make simple CPI‑based comparisons across a century conceptually shaky.
  • 2% target inflation is seen as a design choice to discourage hoarding cash and encourage investment, but some criticize that this systematically punishes savers.

Inflation, War, and Fiscal Policy

  • Broad agreement that large wars and supply shocks (WWI, WWII, oil crisis, COVID) coincide with rapid inflation via:
    • Huge deficit spending and money creation.
    • Destruction or diversion of productive capacity and trade.
  • Some push back on the common idea that “war is good for the economy,” arguing it destroys capital and only helps specific sectors.

Petrodollar, Reserve Currencies, and Geopolitics

  • Long subthread debates whether the petrodollar is:
    • A major advantage that lets the US “export inflation” and fund an empire, or
    • A “resource curse” that overvalues the dollar and hollows out manufacturing.
  • Discussion of Iran, China, and the possibility of oil trade in yuan:
    • Some think petro‑yuan would hurt China by forcing liberalization and breaking its currency controls.
    • Others argue China can run closed‑loop trade in yuan with partners because it is the main goods supplier.

Weak vs Strong Dollar and Manufacturing

  • Some claim a weaker dollar could restore US manufacturing competitiveness; skeptics say only much cheaper labor and deregulation would move low‑end manufacturing back.
  • Several point out that manufacturing output in the US is still large; the real issue is fewer well‑paid low‑skill jobs, not “no manufacturing.”

Inflation as Tax and Distributional Effects

  • Multiple commenters reiterate the view that money‑supply‑driven inflation acts like a tax/wealth transfer from holders of cash and fixed claims to borrowers and the issuer.
  • Others note that nominal capital gains taxation on inflationary “gains” and bracket creep for wages make policy design around inflation nontrivial.