- Shift back to exchange based taxes away from income taxes.
- Spin down the federal reserve, establish a US bank and adjust the self-loans against the future into a solid repayment plan at a minimal interest rate.
- Reestablished precious metal backing to core currencies (gold, silver, etc.)
- Establish constitutional amendment establishing non-living entities and restricting speech rights as such. If a CEO wants to donate personal funds, cool, no corporate backing to political organizations full-stop.
- Strong protections and some spending in favor of domestic security and production.
- Drop subsidy spending for GMO commodity foods and byproducts. Eliminate GRAS protections against any "food" that didn't exist in the US food supply before 1880. FDA acknowledgement when more than one region considers an engineered food product as unsafe, minimally processed animal and plant products excluded.
This study doesn't correct for baseline exponential decay due to inflation, to better highlight the meaningful variations. By comparing based on 1914 dollars it also causes old variations to be relatively more extreme and newer inflationary events to look less extreme. You must compare apples to apples.
Finally the events are quite cherry-picked. It is a conclusion looking for a result, when the statistical reason for choosing those 4 events simply isn't evident when you look at the data itself. There is no mathematical rule you could apply to your dataset that would distinctly highlight those 4 periods.
Yes, a log chart would be better. That said, apples cannot be compared in this case; probably very few of us would choose to go back to 1914. A Tesla model Y would cost $1,680 in 1901 dollars, but would have been worth millions of those same 1901 dollars. Or nothing, depending on how much charging tech you could fit in the frunk. Many quality of life items are not covered by PPP (or money supply or other measures) adjustments.
Why would anyone pay millions of dollars - that would be the equivalent to a billionaire's entire fortune - for a Tesla Model Y in 1901?
You'd have nowhere to charge it. Electricity would be more expensive than gas even if you did.
You'd benefit almost nothing from the technology. There's no internet. Not much of it would work. And it wouldn't really help move you forward technologically, as it's just too advanced.
Right. Many, many reasons why the dollar that bought the Tesla in 2026 is not quite so disadvantaged against the dollar of 1901 it’s being compared to by CPI.
Also we’re looking at periods that involve dramatically different monetary policy (gold standard before WWII, Bretton Woods from 1944-1976, then the current regime).
One could argue that the defining aspect of each of those shifts in monetary policy has been to devalue the dollar further. I have a relatively basic understanding of economics though, and do understand the arguments that even if that's the outcome it's not an inherently bad one as an american, though a notable effect appears to have been massively widening inequality.
This is dogma, but I'm not sure it's possible or even ideal. Booms and busts seem endemic to any economy that targets inflation, and of course most entities (that don't understand the balance) want to encourage booms and limit busts. Meanwhile, there's another way to think of inflation (and also deflation):
Inflation obfuscates the value of money and therefore of goods, services, etc. In an environment where value is volatile, it makes sense to keep moving, keep trading, because you might come into possession of something that was undervalued before you owned it, or that you'll need in a future when it would otherwise be too expensive. The people who skim off the top of all of this activity love this environment.
Deflation, on the other hand, makes value readily and immediately apparent. What was speculative and risky goes to zero and people hold onto things with intrinsic value. Those who skim profit off of economic activity hate the slowdown, obviously, but maybe you need periods of this to reset when valuations becomes too far removed from reality.
Is it a bad thing for people to buy what they need, when they need it, instead of being forced by inflation to anticipate their needs further and further out?
You're basically critiquing a chart showing how purchasing power is decayed due to inflation because it isn't adjusted for "baseline" inflation. That doesn't make sense.
And yes, earlier variations are more impactful because compounding.
I will say that a better representation would be a logarithm of the inverse. The problem with doing it this way is that later changes look very small. $1.00 to $.99 is the same y-axis delta as $0.05 to $0.04 but the latter is very different.
This supports my hunch that the current Iran war creates a lethal trifecta that could potentially cause a dollar collapse. 1. Massive military overspend. 2. Petrodollar squeeze (Strait of Hormuz). 3. Allies pulling out: Europe and the Gulf diversifying both their investments and defense purchases.
#1 creates oversupply of dollars and #2 and #3 lower demand. This study supports the idea that wars can indeed destroy purchasing power.
Iran is also playing its own Uno card here by saying that it would consider allowing some oil and gas shipments through the Strait if they have been bought with Chinese Yuan, than the US dollar. ( The Islamic Republic may grant safe passage to oil tankers if the cargo is traded in Chinese yuan - https://www.lbc.co.uk/article/iran-allow-chinese-ships-hormu... ).
I've never heard the expression "to play one's Uno card." Is this a play on "to play one's Trump card"? I can understand why this phrasing could cause confusion, but want to make sure I'm not missing something.
Trump attacked Iran thinking that this would somehow be good for the US, except it's weakening the petrodollar because it's pushed Iran to simply accept Yuan for oil.
This is particularly funny if you consider petrodollar to be a bad deal for US, not a good one. Ironically, if yuan becomes new petroleum currency, it might hurt Chinese long term.
USD reserve = print USD for everything liquidity to sustain debt financed existence where Triffin hollows out industry, and financialize everything because having stupid amount of liquidity incentivizes certain behaviors.
Petro-yuan = PRC gives swap lines to trusted partners to buy oil denominated in yuan in exchange for things like resources. Hormuz ships ~1 trillion USD worth energy that needs "swapping" - incidentally PRC imports around ~2-3 trillion, more than enough to cover.
So think petro-yuan = PRC gives trusted countries with resources that PRC bonds credit lines to buy yuan denominated energy (possibly at discount), in return they guarantee PRC resources or other commercial/geopolitical arrangements. It will be narrow, not like USD brrrting reserves.
This benefits PRC because get to have leverage over "need" transactions (countries need energy to survive, it's no negotiate) while US keeps supporting "want" transactions by reserve debt servicing blackhole that US cannot extricate itself from until it debases / technical defaults. PRC best game plan is... assume privileged part of exorbitant privilege, while leaving US the exorbitant.
The problem with that plan is that no one wants to trade hard commodities for a currency that can’t be spent. One part of the dollars appeal is that it spends the world over. The sanctioned countries frequently have more liberal access to dollars than to unsanctioned yuan.
So no one is going to take up a lot of yuan trade unless that changes or they are forced to.
But that puts China in a bind. Liberalizing their currency is going to require very careful and slow actions, China threads this needle now in a very fraught way. If they openly start trading oil at any real size in yuan that will break their peg as you’ll be able to trade through the oil markets.
This is the main reason there isn’t more petro yuan already, it’s bad for China.
> The problem with that plan is that no one wants to trade hard commodities for a currency that can’t be spent. One part of the dollars appeal is that it spends the world over.
> So no one is going to take up a lot of yuan trade unless that changes or they are forced to.
Related on the “forced to”point, this is where Russia is stuck with its crude oil sales to India where the payments have been made to it in Indian Rupees. There’s almost nothing that Russia can do with the Indian Rupee. This is a huge and growing problem because India’s imports from Russia eclipse its exports to Russia by more than 10 times. [1]
Literally buy from PRC... most of worlds largest trade partner. That's why the system should work, it's closed loop. And we know world aktually fine with yuan denominated trade since PRC increased yuan settlement from 10 to >50% in a few years after US went sanction happy. PRC basically super costco, apart from chips and commercial aviation (both coming) they sell everything country needs for modernity, at discount.
They do not need to liberalize currency. They just need to have stuff people want, and leverage to force them to transact in PRC preferred currency. Previously this was hard, PRC had goods, and affordable prices = reduce friction/switching cost vs USD liquidity, but USD liquidity still made USD transaction preferred. PRC had no leverage for others to transact in yuan.
But in persistent high global energy environment, if PRC controls basically global supply of cheap renewables... and 30% of GCC oil vs Iran enforcing petro-yuan, they have stupid leverage to snow ball system. Again key is this for 30% of GCC oil exports if Iran locks down (big if), it's not global petro-yuan, it's Costco membership only access petro-yuan.
30% of global oil is inelastic existential survival leverage, if PRC wanted to charge in blowjobs countries would pay in blowjobs, currency liberalization doesn't matter when selling water in desert.
For that 30% control number to make any sense you have to believe that: the gulf states are going to allow Iran to control their existential oil trade long term, that they will do so in the face of a currency getting manipulated adversarially against them, that no manufacturing bases can be built up to be alternatives and that none of that is going to have major impacts on the economy or political elites in China.
All of that happening with the worlds biggest oil producer, its second biggest manufacturer, who is food independent and has the worlds most powerful military just lets it happen. And no shooting war breaking out between them.
I’m betting on slow currency liberalization and a transition to a multi currency petroleum industry and subsequent inefficiencies in global trade. But feel free to bet how you want.
I am not betting on one or other happening, I am simply stating, the downstream effect of Iran being able to hold onto Hormuz, i.e. by outlasting US political will create conditions for GCC petro-yuan. Which may not be out of question because we're not in nothing ever happens world anymore.
> make any sense
GCC petro-yuan scenario is predicated on BIG IF that Iran can control Hormuz oil. Rest is the downstream logic for ~10 years, i.e. before any alternative buildout/pivot by GCC states to some how insulate... which apart from Saudi, they might not (too small). This also why PRC hasn't exactly enthusiastically signed up despite IR offer, because it would burn GCC bridge when IR fate uncertain. But if alternative is IR can hold hormuz hostage, PRC would rather participate in petro-yuan than not, at which point having priority access to energy, possibly at discount is net win. Note in this case IR as SLOC guard dog actually has leverage over PRC, gating energy access also offer PRC cannot refuse.
> US
Hence big if, if US has appetite and capability to break Iran, and it matters US settlement/conditions, because if US reasserts control over Hormuz oil and tries to throttle PRC oil as victory, then PRC may go all in on Iran support. Situation is fluid, the wild card is in fact US or ISR deciding to simply break GCC oil. There is still plenty of room for escalation and shenanigans.
You can buy from China though. And China is the largest import trading partner for the majority of countries in the world. They literally don't need to do anything to prop up a "petro-yuan".
You can’t largely. At least not with offshore yuan. To do that you have to go through the controlled settlement channels to get onshore yuan. That’s tightly controlled to protect the peg.
So no one is going to use a controlled currency for a hard liquid commodity. So if China wants petro yuan they have to liberalize that, which will break their peg.
China could have more international trade in the yuan before all of Americas recent misadventures. But that has cast consequences for their economy, and possibly the ruling elites power structures.
Yes, but for a consumption addicted society like the US, an abrupt end to the petrodolar would be an incredibly traumatic event.
Think about it, every single mother fucking year, the US roughly buys 1 trillion dollars more on services and goods from the rest of the world, than it sells.
It has this privilege/curse basically because the US dollar IS the world's global commerce and finance currency.
The petrodollar confers a huge advantage to the US, which is the whole point of it. It soaks up liquidity and allows the US to export inflation which allows it to be in the insanely profitable business of printing money. An argument could be made that this is corrupting and economically distorting to society resulting in a net negative but there is no guarantee that the same corruption would undermine China in a timely manner. I think the effect would be rather muted provided that the US remains world hegemon but if the US would lose the petrodollar and credible force projection at the same time we will shift from the current looting stages of collapse to the free for all stage of collapse. Or put another way, from a managed decline to an unmanaged decline.
It's not advantage, it makes for artificial demand for your currency, which completely screws up all the relevant metrics and makes you unable to actually inflate the currency when getting less competitive.
We are assuming a resource curse on steroids, the ability to sell the ‘resource’ is used to distort the economy and pay for the cost of running an empire. The US chooses to do this because it is controlled by those who benefit from this not for the long term benefit of the country.
Saying it’s not an advantage is to assume those in control want to have manufacturing in the US, while such noises are made there is very little action beyond capricious crony capitalism tariffs that no normal business can possibly rely on.
>Ironically, if yuan becomes new petroleum currency, it might hurt Chinese long term.
Agreed. Which is why the Chinese do NOT want their currency to become the Petrodollar or world's reserve currency. They know that that is what destroyed US Manufacturing. China wants to maintain their manufacturing dominance. They've seen what de-industrialization has done to the US.
How are you connecting the petrodollar and US manufacturing? US manufacturing was destroyed because companies closed their factories in the US and used factories in China because labor was cheaper and they were less regulated.
Under normal conditions, when your economy becomes less competitive, your currency gets depreciated, increasing competitiveness.
Unless of course everybody is forced to buy your currency to get an essential resource. This causes:
- the currency to maintain value better
- puts you in position of other countries having to maintain a trade surplus with you so they can actually purchase said resource
- the oil producers end up with great amounts of your currency, which they have to spend, getting a political foothold in your country.
Petrodollar almost certainly was devastating to US economy. And like most resource curses, it's like a drug - you need to stop taking it to get better, but it will hurt as hell.
Petrodollar creates demand for dollars. This is demand that no other currency gets. That's why US production is expensive vs other countries. China labor is cheaper and it is less regulated, but the petrodollar exacerbates the problem.
One of the goals of the Heritage Foundation is a weak dollar. They believe they can bring manufacturing back to the US this way. I don't think they're right. I do think they will continue weakening the dollar.
> One of the goals of the Heritage Foundation is a weak dollar. They believe they can bring manufacturing back to the US this way.
Only cheap labor can bring manufacturing back to the US. Are Americans willing to work in factories for the same wages as the Chinese and Indians? I don't see it happening.
> Only cheap labor can bring manufacturing back to the US. Are Americans willing to work in factories for the same wages as the Chinese and Indians? I don't see it happening.
Under conditions of free trade with low-wage countries.
Free trade with low-wage countries is a policy choice, but a lot of people confuse it for a natural law.
That is the point of cheapening the dollar, BTW. The local wages can stay 'high' dollar denominated, but the euro-denominated value of those wages drops. It was for some time the strategy of the Chinese central bank; you can keep export good costs low by controlling your currency to weaker. The trick is to do that while everyone is paying you for your stuff.
Cheap labor wouldn't necessarily bring manufacturing back to the USA. Over time much of the labor can potentially be automated. But environmental and zoning rules effectively ban entire industries such as metal casting. If we want those industries back then we'll need a major realignment of public policy that goes beyond just labor.
You have a baseline of prosperity and life in your head.
The Heritage guys have a weird perspective where they idolize the early Federalist US and the Reagan Era. Prosperity for the common man wasn’t a highlight of either era, to put it mildly.
In 1790s New York, for example, “local control” meant that many of the people of upstate New York were a sort of serf-like tenant living on the estates of the great men, Dutch patroons who played ball with the colonial and State political infrastructure. They had the freedom to pay rent until their landlord was willing to let them go. That existed into the 1840s, when the country started getting woke.
So we can address housing issues with creative solutions. Why do poor people need their own apartments? Stuff them into a tenement. You can easily fit 15 people in a two bedroom apartment so they can build drones or whatever.
Of course, but even if Americans were willing to do that kind of work for those wages it wouldn't have much impact. The kind of manufacturing that makes serious money doesn't and usually can't use cheap labour, not in the long run at least. And in those parts of the economy where cheap labour is effective, agriculture for instance, the availability of cheap immigrant labour is simply holding back innovation.
But the US is a major manufacturing nation anyway. US manufacturing output is more than half of that of China while having only a quarter of the population.
When groups like the far right say bring back manufacturing they are just posturing to those voters who have been disadvantaged by changes in the commercial landscape that reduces the number of unskilled and semi-skilled jobs. If they really cared about those people they would support massive improvements to education and training so that at least the next generation had a chance rather than idiotic schemes to 'bring back' the kinds of work that no one needs.
I mean ”optimal” is not well defined. It is not great for the economy or societal stability and if wealth is more and more unevenly distributed. But the wealthy benefit in the short term by gaining power in society.
the only way a weak dollar would majorly matter for bringing back production is iff production is cheap
so a 20% weaker dollar must not come with 20% higher "dollar" prices (living cost, salary). You need to decrees living cost and dollar value in lock step (i.e. weaker dollar without inflation!). But this seem impossible IMHO. And if we look at what happened, if anything, it went the other way.
And if you try to force it anyway you are basically saying "we effectively disown most money of most US citizens" and use that to try to attack manufacturing, while likely not relevantly affecting the wealthiest.
That is just plain evil.
And not very surprising if you consider that many "manufacturing countries" have pretty horrifying working conditions often not "that" far apart from slavery.
Worse this likely wouldn't work either, because iff your countries population doesn't have the money to buy stuff anymore, and investments are risky, why would you even bother to produce there? To then export to countries where investments into production lines are more reliable? Like how is that supposed to work?
Naturally things can be different if we only speak about high-tech / high-end manufacturing. But the current steps do not seem promising to archive that either:
1) this kind of manufacturing lines need even higher investments, i.e. act even more allergic wrt. trade instability and uncertainty
2) Trump has brought some high tech manufacturing into the US with a mixture of force and bribes/subsidization. But honestly it looks a lot of it is mostly hollow promises, not making a relevant difference long term.
3) More then one case where companies did agree had a lot of big problems. One of the biggest issue being, that missing in depth know-how requires temp. importing people which can make sure things work while teaching that know how (if you want things to get going fast. If you go slow you can send your people to other countries to learn.). But a destroyed visa system makes this a high risk for anyone coming to the US and did lead to more then one person like that being detained and deported by ICE. The other risk is if this people don't teach enough you become dependent on foreign workers in a strange way for a while.
Either way nothing in the current politics seems to be actually well thought through ways to archive (relevantly) more manufacturing in the US long term. But everything seems to be designed to destroy the wealth of the majority of US citizens.
I believe the idea is to support the “real” economy vs a “paper” economy. The “real” economy manufactures stuff in meat space instead of making value through abstractions like financial derivatives. The real economies are tied to a stronger middle class and national security. That’s the thesis as I understand it.
The fundamental problem is the asymmetry of value creation. Software is perhaps the pinnacle of this, and why tech companies are so unfathomably wealthy.
A team of 10 SWEs can create a product worth $1B with the cost of 10 laptops. You get ten people worth $100M each.
To create $1B in value with any kind of manufacturing business, is going to take hundreds of people utilizing millions in various costs. You end up with something like 10,000 people worth $100k each once you wind your way through all those supply lines.
You said it better. I think the idea is that certain "paper" economies are disproportionately valued in the economy when the dollar is strong. A strong dollar leads to offshoring manufacturing, which leads to an over weighted "paper" economy, which leads to an eroding middle class.
I agree, depending on what services you’re speaking of. Although I don’t know that it meets the explicit aims of the heritage foundation (which was the OPs question).
I didn't realize that such causes like 90+% income taxes, lower income inequality, single earner households, and high unionization rates are "conservative" too.
Of course because that’s how marginal tax rates work.
As to how much actual money was taxed at 91%, we don’t really have records for that but certainly the top 0.01% paid significantly more in taxes as a rate than they do today.
Actually, a past that never existed. It's pretty typically for authoritarian regimes to create idealized versions of the past as they attempt to rewrite history to better fit with their talking points and agendas.
The United States is current getting the base material for its entire economy from a country that is openly at war with it: China. If the US attacked East Tiawan because East Tiawan attacked Taiwan, East Tiawan would simply stop exporting rare earths, silver, steel, and electronics to the US. As a result the US needs to manufacture at home. So too does the EU.
The endemic anti-intellectualism among white communities (especially rural and southern) has resulted in a steady decline of white people in well-paying professions in America. If you count the Jewish as a separate group, white people are likely a minority in corporate America. Combined with social upliftment of other groups ("wokism") and the opioid crisis (that has disproportionately affected hinterland communities but immigrant groups seem immune to), white people are sliding down the American totem pole. Trumpism, alt-right, anti-woke, and the general resurgence of racist rhetoric are basically just reactions to all this.
These people want manufacturing because manufacturing is largely considered a "white people sport". If America becomes a manufacturing-first society, the hope is that it puts white people at the front and center of American society again.
The data you linked shows that Native Americans, Blacks and Whites have the highest per capita rates of overdose (in that order), which validates my claim.
White American overdose deaths per capita are 6x that of Asian-Americans.
Even if not quite true, it doesn't change my argument since it was more about the rate of change.
You can construct the definition of white collar in a way that makes it seem like it's mostly white people, but among high paying job titles within a company, absolutely I would say there are fewer than 50% non-Jewish whites.
> Even if not quite true, it doesn't change my argument
This is one of the main points of bigotry. The facts don't matter. So when a person says something obviously ridiculous like
> among high paying job titles within a company, absolutely I would say there are fewer than 50% non-Jewish whites
the proper way to interpret is "I feel like there are too many unworthy people working there," where "too many" is entirely subjective and could be as few as one.
At my FAANG in Sunnyvale, I often feel like the last white guy on earth.
But I don't resent the people who stepped up to fill the jobs.
Rather, I am disappointed that these amazing jobs were basically gifted to US residents, but my fellow white people "Opted Out" of these high paying jobs.
In my worst cynical days, I think that's exactly the plan.
Erase US government debt via hyper-inflation, and let the people that will still have liquidity buy all remaining assets the middle class will be desperate to sell at pennies on the dollar.
#1: US military war spending concerns are largely overblown. It's expending what it already has. The spending is mostly on its own internal industry i.e. the US economy (with due respect to broken window fallacy). It arguably makes it all back from the increase in oil prices.
It's a very different thing to fire a $5m missile that you imported vs one that you made domestically with all-domestic components and labor.
I'd say firing a missile into another country is technically firing finite or hard to acquire resources into another country. All the resources for the new rockets have to be sourced from somewhere and it's not really important where they came from. They are a real cost not some circular funding. It's more or less blowing up big piles of cash that can not easily be replaced.
Why is it different? If it’s foreign made then you need to export $5 million of stuff to pay for it, so the economic effect should be similar.
Expending what it already has is true but doesn’t really help. It’s not like we’re going to sit here with a reduced stockpile forever. Those munitions will be replaced. The fact that the spending comes after using them rather than before doesn’t change the equation much.
Yes it tends to strengthen during times of conflict as countries buy more dollars in response. That's kinda the whole gimmick with the petrodollar. War is good for the US
But if Iran does successfully force countries to stop using the petrodollar by only allowing countries trading in yuan through the strait, then we could actually see that reverse. IMO destroying the petrodollar is the primary clear "victory" Iran could achieve from this war
I have checked. It’s too early to tell but anyway relative price is not what matters. What matters is purchasing power. EUR purchasing power was better and improving compared to USD. And check out interest rate derivatives — the euro has actually overtaken the dollar as the #1 currency in this massive market.
Commodities. Raw materials with which all goods and services are made. Coffee, sugar, wheat, pound of beef, gasoline. Also products which are supposed to be identical like a Big Mac. Purchasing power is hard to measure but it’s a question studied deeply by economists.
Even the Big Mac index is flawed because it's not quite the same burger, since it's not made in the same regulatory environment, or by people compensated equally fairly.
> Europe and the Gulf diversifying both their investments and defense purchases.
With what? The euro, yuan? Or weapons from france?
I hate to admit it, but it's much less that the US is great because it's the reserve currency, and much more that the world reserve currency is the dollar because the US is what it is.
Weapons are expensive, and it only makes sense to buy them from a country that specializes in them. And a country that makes weapons at huge scale is likely to be big enough tilt the direction of the country to be all the ugly things the modern US military industrial complex is.
The US isn't delivering Patriot missiles to Switzerland. Switzerland froze paiements. The US unilaterally took the money Switzerland escrowed to buy F35s, put them towards paying for Patriot missiles they won't deliver, and asked Switzerland to refill the F35 escrow account. Hundreds of millions of dollars have been siphoned off.
I'm having trouble reconciling this comment with reports that US stockpiles are already being depleted by the Iran war. At this point the US weapons production seems relatively specialized and inefficient, not "huge scale." Someone more informed care to weigh in?
I’m probably not more informed, but it seems to me that it can be both. The rate of expenditure in a medium-sized war will far outstrip peacetime production needs. Even if you’re arming half the planet’s militaries, your peacetime production rate will be much smaller than what’s being used now, even if you’re building a lot by non-wartime standards.
Ukraine butchers soldiers for cheap. The US drops a bomb through the Atatollah’s bedroom window for not-cheap. It’s not clear to me which is more cost effective in the end. (Ignoring for a moment that US strategy in this war seems to be nonexistent. Imagine these capabilities were being used with some actual goal in mind besides “if we take their king then we win.”)
The US is defaulting on military orders to Europe and Germany just announced a 1 trillion euro rearmament plan. Europe is manufacturing big time. The Gulf states as of yesterday are now buying from Ukraine for fucks sake.
It could also be a play to squeeze China or similar nation dependent on middle east oil. USA semicon production not ready, if there were signals that China was ready for a play on Taiwan maybe this is a gambit to buy some time.
Is China really dependent on middle-east oil? I read that they had been diversifying in preparation for an energy resource fight for some time now. For example, they've massively invested in Solar power generation, are building a 300-400 billion dollar gas pipeline from Russia, already buy a lot of oil to from Russia, and also purchased from Venezuela (though how that's going now is anybody's guess). They also have a good relationship with most of the players in the middle-east and helped repair ties between the Saudis and the Iranians.
Inflation is about what goes on inside the country. So you can have inflation internally while the domestic currency strengthens against foreign currencies, and vice versa.
If your currency is falling against foreign currencies but prices are also dropping domestically, you get deflation. This was happening in China a couple of years ago, and they were exporting this deflation to other countries.
Whoever wrote this article seems to think a strong dollar is fundamental to a strong economy. But, notice where it is on this timeline the only prolonged strengthening of the dollar that shows up. Yep, you've got it, the depth of the great depression. And, notice where the WWII and postwar weakening of the dollar led -- that's right, to in many ways the most prosperous economy the world has ever seen.
Because we try to figure out how things like "strengthening" and "weakening" of the dollar fit in, and we actually have policies much more intelligent than, weaking of the dollar! Collapse is imminent!
And a strong currency usually means weak manufacturing. And I don't know how a country can be strong without a solid manufacturing sector. Like, when we a war breaks out, we ask our enemies to sell us components and medical key ingredients?
Note that most of this period falls before the modern inflation target was established in 1995. In the past 30 years we've had 75% accumulated annual inflation (aka prices have increased be a factor of exp(0.75) = 2.1) of which 16% (aka 21% of the total) took place during an inflation excursion (which lasted 2.5 years aka 8% of the total time period).
If anything the data points at "inflation targeting works and is producing slow and steady inflation" rather than "inflation comes in concentrated bursts".
Hum... I don't think people refer to the world wars as good times.
Out of them, there's one single interval that most people that talk about it refer as "the end of the good times" (but yeah, I've seen people refer as good times too) and the COVID pandemic.
Yeah, didn't people used to make like $10/week as the median wage at the turn of the 20th century? I agree that we have big problems now, but I feel like this analysis is deeply flawed without the inclusion of wage data.
Wage data, population growth, overall consumption, credit (and guarantees against it) are all drivers of inflation.
Look at student loans vs the cost of college:
1958: Federal program to encourage science and engineering.
1976: Remove restrictions on bankruptcy dismissal of this debt.
2005: Same rules for private loans.
Today college has a (as someone here so eloquently put it) a cruise ship ascetic, and has far more "administration" than "eduction" in terms of raw staff.
Tv went from an expensive box (fixed cost) to cable (monthly fee) to on demand programing (several monthly fees, and with ad's).
A phone used to be a single item in your house with a monthly fee. It was an item so durable that you could beat a robber with it and still call the police (see old att, black rotary phone). Now its an item per person in a household, that you can easily loose, might break if you drop it, and costs any where from 200 to 1500 dollars.
None of this is inflation in the traditional sense, but it does impact the velocity of all money in the system, and puts pressure on individual spending in a way that isnt even accounted for in this chart.
I believe the broader reason for an inflation target is to increase the value of "doing something" as opposed to "doing nothing" with money. Of course, like most policies, this acts on people with way too much of it and skews the perception of control and locus of control to those entities with too much.
That's a bit of falacy. If inflation target were 0%, people would still have an oportunity cost of doing nothing compared to deposits, bonds and other "zero risk" investments. You just stop punishing people that has their wealth in form of cash savings.
2% is an arbitrary number that just looks good and seems to work. The issue is that that target is very much not set into stone, as central banks often disregard or take too long to take action when inflation shoots up. And never, ever do they try to compensate afterwards with a lower target for a time.
You can have a government spend way beyond its income making inflation spike, eroding their own debt at the cost of cash savings purchase power and the central bank just sit put and wait until inflation runs too hot to then increase rates that then cut way before inflation is on target. As we are having right now in basically every country on earth.
Not to reply against you, just to add clarification. This is the reason why a slightly positive inflation rate is normally targeted. Theoretically, it would be entirely possible to target 0% inflation, but then you are so close to possible deflation, that most people would simply save up money instead of buying things from the economy.
>"that most people would simply save up money instead of buying things from the economy."
And making it not an option leads to the situations where rich buy assets that are only go up and become richer. Average Joe meanwhile does not own assets and gets poorer and poorer
1950-1985 and 1985-now are pretty steady. Decreased inflation volatility over time.
I think your chart shows the "that inflation slowly erodes purchasing power over time." That doesn't mean there aren't periods of change - if you study economic history at all you know about the Great Depression and stagflation - but for ~50 years it's been pretty well managed.
This article over and over describes inflation as a tax or destruction, without backing those claims up. It would be a much stronger article if it focused on the main point rather than having it interspersed with the author's personal opinion of changes in the denominator of a fraction.
>This article over and over describes inflation as a tax or destruction, without backing those claims up
Inflation due to money supply increase being like a tax is a fundamental economic result that doesn't need to be rehashed. If you were to counterfeit a trillion dollars and spend it, what happens? You get more things, reducing the remaining supply of things, and everyone else has the same amount of money but chasing a smaller amount of things, so their purchasing power per dollar goes down. It acts as a wealth transfer from other currency holders to yourself. The same applies if the government creates money, but in that case it's called a tax because wealth transfer to the government is termed taxation.
> This article over and over describes inflation as a tax or destruction, without backing those claims up...
C'mon. Whether you agree or not, any time spent in the field will expose you to this philosophy. If you disagree, ignore. There's no need to go through implicit ideas.
The purchasing power of $3.05 in 1914 would require $100 in today's time. A bag of "stuff" worth $100 today could have been purchased for $3.05 in 1914.
Technically, it does mean that $3.05 from 1914 is worth $100 today, but that's not a useful way of thinking about this. I.e., if your great-grandfather put $3.05 in an envelope in 1914 and you opened it today, it's still $3.05 worth of money (ignoring wheat pennies being a collectors items and whatnot).
I'm pretty sure you are right. Or to emphasize the devaluation, "$100 today would be worth only $3.05 in 1914."
I think it is astonishing that we accept that in a best case scenario of sustained 2% inflation, we are literally planning for the value of the dollar to be cut in half every 36 years.
>I think it is astonishing that we accept that in a best case scenario of sustained 2% inflation, we are literally planning for the value of the dollar to be cut in half every 36 years.
Our system is designed to encourage asset ownership, not cash saving. If you stuff it under a mattress for 36 years, yeah you'll get fleeced. But buying assets is the way to keep up; an investment of $100 in the S&P500 in 1990 and never touched would be worth $4,120.93 today.
"worth" can have two meanings in this context. $100 from 1917 can be worth exactly $100 today. Or it can be worth what you can buy with it.
Some folks will see a $100 bill from the era and see an old $100 bill. Some folks will imagine what that $100 took to save back then, and what it bought.
FWIW my brain automatically went with "the goods that can be bought with $100" - such as what I could buy in a grocery store today with $100 would be about what I could buy with $3 back then.
I never considered the other reading until this thread. It was obvious to me the author meant "you can buy 97% less stuff today with the same $100".
I'm trying to read this and not feel like an idiot.
Can someone explain to me how post-covid is considered one of the 4 episodes?
it looks to me that the dips at 1933-1936 or 1956-1958 are much more significant - are these just "regular" inflation? Are we ignoring these because we can't tie them to some specific current event?
I think probably the interest rate is higher, but the value as a proportion of the starting value on LHS is less significant, compared with the periods you mention. If you look at the monthly interest rates at the bottom, it seems to support this notion.
Appeal to readers' recency bias. Covid is the most recent big change for the readers so the article has to make it more significant than it actually was. If it only talked about things happened <40years people would be 'so what?' and bounce out.
The value of the dollar over time is largely meaningless unless you are a dollar investor (i.e. sit on lots of cash in consumer tier bank accounts). Generally once you have enough cash that this would meaningfully impact you, you are already beyond sitting on cash.
At the end of the day, the dollar or any other currency, is just a conversion tool for [value created] to [goods/services received]. A ratio of 3/1 is equivalent to a ratio of 300/100, even if 3 and 1 are 99% smaller than 300 and 100. The numerator and denominator can move out of sync, creating periods of strain and arbitrage while they equilibrate, but what really matters is how much xyz you get per hour of work at job abc. And overwhelmingly we are leagues beyond 1914 in that regard.
It's meaningful because you pay capital gains on nominal increase in dollar value even if there is no real change in value. Inflation is thus a tax on realized non-gains at roughly 1/5th the cumulative inflation.
I'd argue that's more of an issue with the tax code than a fundamental problem with inflation. In and ideal world we would be able to write off losses to inflation, I'm sure many financial geeks have griped about this before, heh
Why don't they refer to the 3rd 'episode' as Vietnam - since the timeline lines up pretty nicely with that downward slope (and it's more than just the 70's as is highlighted in the article)?
If seeing this graph has taught me anything it's that war is hell on many levels - including economically.
This article also doesn't seem to account for the median price of a single family home.
I compiled 1,357 monthly CPI observations from 1913 to 2026 (BLS data via FRED). The common narrative is that inflation slowly erodes purchasing power over time. The data tells a different story.
Four concentrated episodes — WWI, WWII/post-war, the Great Inflation (1968–82), and post-COVID — account for 72% of total cumulative price increase, despite spanning only 29% of the time period.
The dataset includes regime classification, episode tagging, and a decomposition analysis. Full CSV available for download.
IMO the first graph would make a lot more sense when plotted in log scale.
Also this way of framing "As of February 2026, the US dollar has lost 96.9% of its purchasing power relative to January 1914. This means that $100 in 1914 would buy only approximately $3.05 worth of goods today" is of course math-correct but difficult to understand intuitively.
I think it makes more sense to explain it in the opposite direction or in both directions: "$100 in 1914 would buy only approximately $3.05 worth of goods today, or equivalently, $100 in 1914 is worth ~ $3278 nowdays (because 100 / 3.05 ~= 32.78 "
This also makes it easier to understand that the term "millionaire == person that has 1 million USD" only makes sense around 1914, because the equivalent amount of wealth nowdays would be "millionaire == person that has 32 million USD"
It's still a bad chart because of the "the great inflation destroyed more value than both world wars combined" claim, for two reasons:
1. It's not clear (from the chart at least), that the claim is true. 20.0% + 18.1% = 38.1%, greater than 30.2%, but the quote claims otherwise. True, the red and orange segments cover more than just ww1 and ww2, but if more granular data is available why not show it?
2. "destroyed more value" might be technically true if we define "value destroyed = inflation", but it's a non-intuitive definition to use. If you asked someone about the value destroyed in ww1/ww2, they'll talk about europe being bombed out, not higher inflation.
I'm not really convinced this data falsifies the narrative of a slow erosion. It's just the Pareto principle in action. I bet if you graphed the erosion of a hill you'd see the same pattern.
Fair point on Pareto distributions. The distinction I'd draw is that these aren't random clusters — they map to specific policy regimes (wartime monetization, oil shocks + Fed accommodation, post-COVID fiscal expansion). The concentration isn't statistical noise, it's identifiable macro episodes. The dataset tags each month by regime if you want to dig in.
Really not interesting analysis. Four "concentrated episodes" totaling 30 years, hardly "concentrated episodes", especially when you have a "concentrated episode" that lasts for fifteen years. It's extremely unsurprising there are periods of inflationary growth that's higher, and some lower.
Another way to frame this is that during inflationary episodes, debt became easier to repay.
My parents bought a house in the 1970s. Because of the inflation that occurred during that time, incomes and expenses rose, yet long-term debt obligations such as fixed mortgages remained unchanged; their mortgage payment was the same in year 30 as in year 1.
I guess another way to say it is that during an inflationary period, the people who HAVE money suffer the loss of its purchasing power. But the people who OWE money benefit from the dollar not being what it used to be.
In addition to the already-stated causes of government issuing currency necessary to meet war spending and the fact that war spending produces destruction of economic capability rather than development, wars tend to introduce trade barriers and divert resources away from productive tasks. Whether barriers are legal (tariffs, embargoes), or simply higher premiums due to increased risk, less trade happens, which raises prices (inflation). Economists also really hate number-go-down even when down is good, so policy is oriented towards making sure deflation never gets a chance in the interwar development periods.
Weapons cost ALOT and do very little to increase the future economy.
It's the issue Russia is facing right now in Ukraine. Even if Putin wanted to stop, his economy has turned entirely wartime, when it ends the country crashes on itself.
Only half of the incidents listed were actually full-scale wars (WWI and II). The other two incidents are an oil shock and a pandemic.
The commonality between all four of these incidents is that they correspond to severe supply shocks:
- During WWI and WWII, industrial supply was rerouted by force to the war effort, leaving normal consumer demand unfulfilled.
- During the oil crisis of the 70s, a critical energy input to the American economy massively increased in price due to sanctions placed on America.
- During the COVID-19 pandemic, a significant chunk of workers were paid not to work, as a form of deliberate supply destruction to avoid the spread of a novel coronavirus.
In a "normal" economy, supply is flexible enough that you can print money and nobody even notices. The supply curve is smooth and gradual, so prices only rise a little. When supply is constrained, however, prices rise to whatever value is necessary to curtail demand, because they have to. The supply curve is a brick wall.
"By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens." -- John Maynard Keynes
Right, then: 1910 normal salary was 200-400 (say 300), if 97% of value of the dollar was lost in 2026 the normal salary should be 6666 - 13333 (say $10 000)
You can pick arbitrary points and stick them on the graph. It appears that my family are the inflation stoppers. Calm periods correspond to weddings and childbirths in my family. As the first in the line to marry a Chinese person, I have broken the rule and my daughter’s arrival has triggered a dollar collapse.
The moon gods have spoken in the tea leaves and we have lost the Mandate of Heaven.
The most notable anomalous event if you zoom back to more like 1814 instead of 1914 is that ever since the US completely decoupled from the gold standard, it switched into purely inflationary mode rather than often bouncing back. From the 1800-1900 pretty much the entire time was spent at worst 1/2 to 2x the average value. Far less variance than after the introduction of federal reserve and taking off the gold standard, where purchasing power was destroyed to something like <1/10th of the century average.
> The Great Inflation of 1968–1982 alone accounts for 30.2% of all cumulative purchasing power destruction since 1914 — more than WWI and WWII combined. During this 15-year period, the CPI rose from 34.1 to 97.7, nearly tripling the price level.
In 1971, the United States ended the convertibility of the US dollar to gold, effectively bringing the Bretton Woods system to an end and rendering the dollar a fiat currency.
This allowed for the global reserve currency to float which allowed for global credit expansion at the cost of the dollar value but with the benefit of more overall dollars (monetary velocity increasing)
This is what politicians want because it makes the dollar printing machine the most powerful thing, hence why everyone hung on the fedchair words every few months.
So the USD is already hyperinflated but the price relative to other currencies is still high.
Once that price collapses (and it eventually will and increasingly soon) the entire US will look like the rust belt.
I think fuentes' theory holds merit: It's that in running for re-election trump was trying to avoid prison, so he was desparately looking for approval from many disparate and conflicting interest groups (some anti-war, some anti-immigration, some pro-immigration) one of which was pro-zionist. So not so much the epstien files but more just impending criminal charges in general (The epstien conspiracy voters were actually one of the interest groups trump wooed).
I also read an article here that suggested trump's bombing of iran during peace talks at the same time as israeli attacks established that if israel attacked then USA would also be a valid combatant (which wasn't the case previously). So this bombing of iran's nuclear facilities earlier was sort of a trap that made it so that israel could rope us into any conflict at any later time- which they did this time, they threatened to strike iran with or without us.
Lastly, I imagine that success in decapitating the venezuelan regime gave trump and his cabinet confidence in going to war.
This whole war seems good for israel but in the long term it doesn't really pan out in the long term for them either. It is sort of the cart leading the horse. There is a theory proposed by prof. Jiang (PredictiveHistory) that this war was catalyzed by a certain apocolyptic eschatology of jews/christians in a couple high places. Whether the Netanyahu or Trump adminstration is captured by this chohort or just pursing short term goals is hard to say, but this is the only explanation I can find for who benefits long-term from this action.
- Shift back to exchange based taxes away from income taxes.
- Spin down the federal reserve, establish a US bank and adjust the self-loans against the future into a solid repayment plan at a minimal interest rate.
- Reestablished precious metal backing to core currencies (gold, silver, etc.)
- Establish constitutional amendment establishing non-living entities and restricting speech rights as such. If a CEO wants to donate personal funds, cool, no corporate backing to political organizations full-stop.
- Strong protections and some spending in favor of domestic security and production.
- Drop subsidy spending for GMO commodity foods and byproducts. Eliminate GRAS protections against any "food" that didn't exist in the US food supply before 1880. FDA acknowledgement when more than one region considers an engineered food product as unsafe, minimally processed animal and plant products excluded.
This study doesn't correct for baseline exponential decay due to inflation, to better highlight the meaningful variations. By comparing based on 1914 dollars it also causes old variations to be relatively more extreme and newer inflationary events to look less extreme. You must compare apples to apples.
Finally the events are quite cherry-picked. It is a conclusion looking for a result, when the statistical reason for choosing those 4 events simply isn't evident when you look at the data itself. There is no mathematical rule you could apply to your dataset that would distinctly highlight those 4 periods.
Yes, a log chart would be better. That said, apples cannot be compared in this case; probably very few of us would choose to go back to 1914. A Tesla model Y would cost $1,680 in 1901 dollars, but would have been worth millions of those same 1901 dollars. Or nothing, depending on how much charging tech you could fit in the frunk. Many quality of life items are not covered by PPP (or money supply or other measures) adjustments.
Why would anyone pay millions of dollars - that would be the equivalent to a billionaire's entire fortune - for a Tesla Model Y in 1901?
You'd have nowhere to charge it. Electricity would be more expensive than gas even if you did.
You'd benefit almost nothing from the technology. There's no internet. Not much of it would work. And it wouldn't really help move you forward technologically, as it's just too advanced.
Right. Many, many reasons why the dollar that bought the Tesla in 2026 is not quite so disadvantaged against the dollar of 1901 it’s being compared to by CPI.
Also we’re looking at periods that involve dramatically different monetary policy (gold standard before WWII, Bretton Woods from 1944-1976, then the current regime).
One could argue that the defining aspect of each of those shifts in monetary policy has been to devalue the dollar further. I have a relatively basic understanding of economics though, and do understand the arguments that even if that's the outcome it's not an inherently bad one as an american, though a notable effect appears to have been massively widening inequality.
Exactly, it doesn't matter to me how much COVID contributed to the erosion of 1901 100 Dollars.
It (presumably) does matter to you how much COVID policy contributed to houses doubling in cost, though.
I think this graph shows the "apples to apples" comparison:
https://www.officialdata.org/us/inflation/1800?amount=1
Doing a spot check, this means $1 in in 1913 is equivalent to roughly $32.83 today.
That’s ~3.17% compounded annually.
Modest, stable inflation is good. It encourages investment & discourages deferring consumption for indirect monetary reasons.
“Stable” is the hard part.
This is dogma, but I'm not sure it's possible or even ideal. Booms and busts seem endemic to any economy that targets inflation, and of course most entities (that don't understand the balance) want to encourage booms and limit busts. Meanwhile, there's another way to think of inflation (and also deflation):
Inflation obfuscates the value of money and therefore of goods, services, etc. In an environment where value is volatile, it makes sense to keep moving, keep trading, because you might come into possession of something that was undervalued before you owned it, or that you'll need in a future when it would otherwise be too expensive. The people who skim off the top of all of this activity love this environment.
Deflation, on the other hand, makes value readily and immediately apparent. What was speculative and risky goes to zero and people hold onto things with intrinsic value. Those who skim profit off of economic activity hate the slowdown, obviously, but maybe you need periods of this to reset when valuations becomes too far removed from reality.
Is it a bad thing for people to buy what they need, when they need it, instead of being forced by inflation to anticipate their needs further and further out?
You're basically critiquing a chart showing how purchasing power is decayed due to inflation because it isn't adjusted for "baseline" inflation. That doesn't make sense.
And yes, earlier variations are more impactful because compounding.
I will say that a better representation would be a logarithm of the inverse. The problem with doing it this way is that later changes look very small. $1.00 to $.99 is the same y-axis delta as $0.05 to $0.04 but the latter is very different.
This supports my hunch that the current Iran war creates a lethal trifecta that could potentially cause a dollar collapse. 1. Massive military overspend. 2. Petrodollar squeeze (Strait of Hormuz). 3. Allies pulling out: Europe and the Gulf diversifying both their investments and defense purchases.
#1 creates oversupply of dollars and #2 and #3 lower demand. This study supports the idea that wars can indeed destroy purchasing power.
Iran is also playing its own Uno card here by saying that it would consider allowing some oil and gas shipments through the Strait if they have been bought with Chinese Yuan, than the US dollar. ( The Islamic Republic may grant safe passage to oil tankers if the cargo is traded in Chinese yuan - https://www.lbc.co.uk/article/iran-allow-chinese-ships-hormu... ).
I've never heard the expression "to play one's Uno card." Is this a play on "to play one's Trump card"? I can understand why this phrasing could cause confusion, but want to make sure I'm not missing something.
In Uno, you're supposed to say ‘Uno’ as you play your second to last card (indicating you are close to winning).
I think the internet use is usually “reverse uno (card)” which means the tables are being turned, aka what you tried is being reflected back at you.
I really don't think that HN would ace a card game knowledge test.
Thank you for your faith in HN, anal reactor.
https://knowyourmeme.com/memes/uno-reverse-card
Trump attacked Iran thinking that this would somehow be good for the US, except it's weakening the petrodollar because it's pushed Iran to simply accept Yuan for oil.
One of the previous times the US attacked Iran, it was because Iran wanted to accept Euros for oil.
This is particularly funny if you consider petrodollar to be a bad deal for US, not a good one. Ironically, if yuan becomes new petroleum currency, it might hurt Chinese long term.
Petro-yuan =/= reserve currency.
USD reserve = print USD for everything liquidity to sustain debt financed existence where Triffin hollows out industry, and financialize everything because having stupid amount of liquidity incentivizes certain behaviors.
Petro-yuan = PRC gives swap lines to trusted partners to buy oil denominated in yuan in exchange for things like resources. Hormuz ships ~1 trillion USD worth energy that needs "swapping" - incidentally PRC imports around ~2-3 trillion, more than enough to cover.
So think petro-yuan = PRC gives trusted countries with resources that PRC bonds credit lines to buy yuan denominated energy (possibly at discount), in return they guarantee PRC resources or other commercial/geopolitical arrangements. It will be narrow, not like USD brrrting reserves.
This benefits PRC because get to have leverage over "need" transactions (countries need energy to survive, it's no negotiate) while US keeps supporting "want" transactions by reserve debt servicing blackhole that US cannot extricate itself from until it debases / technical defaults. PRC best game plan is... assume privileged part of exorbitant privilege, while leaving US the exorbitant.
The problem with that plan is that no one wants to trade hard commodities for a currency that can’t be spent. One part of the dollars appeal is that it spends the world over. The sanctioned countries frequently have more liberal access to dollars than to unsanctioned yuan.
So no one is going to take up a lot of yuan trade unless that changes or they are forced to.
But that puts China in a bind. Liberalizing their currency is going to require very careful and slow actions, China threads this needle now in a very fraught way. If they openly start trading oil at any real size in yuan that will break their peg as you’ll be able to trade through the oil markets.
This is the main reason there isn’t more petro yuan already, it’s bad for China.
> The problem with that plan is that no one wants to trade hard commodities for a currency that can’t be spent. One part of the dollars appeal is that it spends the world over.
> So no one is going to take up a lot of yuan trade unless that changes or they are forced to.
Related on the “forced to”point, this is where Russia is stuck with its crude oil sales to India where the payments have been made to it in Indian Rupees. There’s almost nothing that Russia can do with the Indian Rupee. This is a huge and growing problem because India’s imports from Russia eclipse its exports to Russia by more than 10 times. [1]
[1]: https://www.financialexpress.com/india-news/india-russia-sum...
Literally buy from PRC... most of worlds largest trade partner. That's why the system should work, it's closed loop. And we know world aktually fine with yuan denominated trade since PRC increased yuan settlement from 10 to >50% in a few years after US went sanction happy. PRC basically super costco, apart from chips and commercial aviation (both coming) they sell everything country needs for modernity, at discount.
They do not need to liberalize currency. They just need to have stuff people want, and leverage to force them to transact in PRC preferred currency. Previously this was hard, PRC had goods, and affordable prices = reduce friction/switching cost vs USD liquidity, but USD liquidity still made USD transaction preferred. PRC had no leverage for others to transact in yuan.
But in persistent high global energy environment, if PRC controls basically global supply of cheap renewables... and 30% of GCC oil vs Iran enforcing petro-yuan, they have stupid leverage to snow ball system. Again key is this for 30% of GCC oil exports if Iran locks down (big if), it's not global petro-yuan, it's Costco membership only access petro-yuan.
30% of global oil is inelastic existential survival leverage, if PRC wanted to charge in blowjobs countries would pay in blowjobs, currency liberalization doesn't matter when selling water in desert.
For that 30% control number to make any sense you have to believe that: the gulf states are going to allow Iran to control their existential oil trade long term, that they will do so in the face of a currency getting manipulated adversarially against them, that no manufacturing bases can be built up to be alternatives and that none of that is going to have major impacts on the economy or political elites in China.
All of that happening with the worlds biggest oil producer, its second biggest manufacturer, who is food independent and has the worlds most powerful military just lets it happen. And no shooting war breaking out between them.
I’m betting on slow currency liberalization and a transition to a multi currency petroleum industry and subsequent inefficiencies in global trade. But feel free to bet how you want.
I am not betting on one or other happening, I am simply stating, the downstream effect of Iran being able to hold onto Hormuz, i.e. by outlasting US political will create conditions for GCC petro-yuan. Which may not be out of question because we're not in nothing ever happens world anymore.
> make any sense
GCC petro-yuan scenario is predicated on BIG IF that Iran can control Hormuz oil. Rest is the downstream logic for ~10 years, i.e. before any alternative buildout/pivot by GCC states to some how insulate... which apart from Saudi, they might not (too small). This also why PRC hasn't exactly enthusiastically signed up despite IR offer, because it would burn GCC bridge when IR fate uncertain. But if alternative is IR can hold hormuz hostage, PRC would rather participate in petro-yuan than not, at which point having priority access to energy, possibly at discount is net win. Note in this case IR as SLOC guard dog actually has leverage over PRC, gating energy access also offer PRC cannot refuse.
> US
Hence big if, if US has appetite and capability to break Iran, and it matters US settlement/conditions, because if US reasserts control over Hormuz oil and tries to throttle PRC oil as victory, then PRC may go all in on Iran support. Situation is fluid, the wild card is in fact US or ISR deciding to simply break GCC oil. There is still plenty of room for escalation and shenanigans.
You can buy from China though. And China is the largest import trading partner for the majority of countries in the world. They literally don't need to do anything to prop up a "petro-yuan".
You can’t largely. At least not with offshore yuan. To do that you have to go through the controlled settlement channels to get onshore yuan. That’s tightly controlled to protect the peg.
So no one is going to use a controlled currency for a hard liquid commodity. So if China wants petro yuan they have to liberalize that, which will break their peg.
China could have more international trade in the yuan before all of Americas recent misadventures. But that has cast consequences for their economy, and possibly the ruling elites power structures.
> The problem with that plan is that no one wants to trade hard commodities for a currency that can’t be spent
You can't spend US dollars either, in 99% of the world.
> a currency that can’t be spent
You can spend it in China, right?
Yes, but for a consumption addicted society like the US, an abrupt end to the petrodolar would be an incredibly traumatic event.
Think about it, every single mother fucking year, the US roughly buys 1 trillion dollars more on services and goods from the rest of the world, than it sells.
It has this privilege/curse basically because the US dollar IS the world's global commerce and finance currency.
The petrodollar confers a huge advantage to the US, which is the whole point of it. It soaks up liquidity and allows the US to export inflation which allows it to be in the insanely profitable business of printing money. An argument could be made that this is corrupting and economically distorting to society resulting in a net negative but there is no guarantee that the same corruption would undermine China in a timely manner. I think the effect would be rather muted provided that the US remains world hegemon but if the US would lose the petrodollar and credible force projection at the same time we will shift from the current looting stages of collapse to the free for all stage of collapse. Or put another way, from a managed decline to an unmanaged decline.
It's not advantage, it makes for artificial demand for your currency, which completely screws up all the relevant metrics and makes you unable to actually inflate the currency when getting less competitive.
It's resource curse on steroids.
We are assuming a resource curse on steroids, the ability to sell the ‘resource’ is used to distort the economy and pay for the cost of running an empire. The US chooses to do this because it is controlled by those who benefit from this not for the long term benefit of the country.
Saying it’s not an advantage is to assume those in control want to have manufacturing in the US, while such noises are made there is very little action beyond capricious crony capitalism tariffs that no normal business can possibly rely on.
long term in a sense of centuries? i think they can afford this.
Why?
Or not. It depends on policies other than just being reserved currency
>Ironically, if yuan becomes new petroleum currency, it might hurt Chinese long term.
Agreed. Which is why the Chinese do NOT want their currency to become the Petrodollar or world's reserve currency. They know that that is what destroyed US Manufacturing. China wants to maintain their manufacturing dominance. They've seen what de-industrialization has done to the US.
https://www.ft.com/content/c948b978-c22b-44b7-ba3d-4798e641e...
How are you connecting the petrodollar and US manufacturing? US manufacturing was destroyed because companies closed their factories in the US and used factories in China because labor was cheaper and they were less regulated.
Under normal conditions, when your economy becomes less competitive, your currency gets depreciated, increasing competitiveness.
Unless of course everybody is forced to buy your currency to get an essential resource. This causes: - the currency to maintain value better - puts you in position of other countries having to maintain a trade surplus with you so they can actually purchase said resource - the oil producers end up with great amounts of your currency, which they have to spend, getting a political foothold in your country.
Petrodollar almost certainly was devastating to US economy. And like most resource curses, it's like a drug - you need to stop taking it to get better, but it will hurt as hell.
Petrodollar creates demand for dollars. This is demand that no other currency gets. That's why US production is expensive vs other countries. China labor is cheaper and it is less regulated, but the petrodollar exacerbates the problem.
Because it increases US workers relative (to other countries) wage. Though with current automation levels this may be a lesser problem.
One of the goals of the Heritage Foundation is a weak dollar. They believe they can bring manufacturing back to the US this way. I don't think they're right. I do think they will continue weakening the dollar.
> One of the goals of the Heritage Foundation is a weak dollar. They believe they can bring manufacturing back to the US this way.
Only cheap labor can bring manufacturing back to the US. Are Americans willing to work in factories for the same wages as the Chinese and Indians? I don't see it happening.
> Only cheap labor can bring manufacturing back to the US. Are Americans willing to work in factories for the same wages as the Chinese and Indians? I don't see it happening.
Under conditions of free trade with low-wage countries.
Free trade with low-wage countries is a policy choice, but a lot of people confuse it for a natural law.
> Are Americans willing to work in factories for the same wages as the Chinese and Indians? I don't see it happening.
Create enough poverty and soon people will be willing to do an awful lot of things.
That is the point of cheapening the dollar, BTW. The local wages can stay 'high' dollar denominated, but the euro-denominated value of those wages drops. It was for some time the strategy of the Chinese central bank; you can keep export good costs low by controlling your currency to weaker. The trick is to do that while everyone is paying you for your stuff.
Cheap labor wouldn't necessarily bring manufacturing back to the USA. Over time much of the labor can potentially be automated. But environmental and zoning rules effectively ban entire industries such as metal casting. If we want those industries back then we'll need a major realignment of public policy that goes beyond just labor.
You have a baseline of prosperity and life in your head.
The Heritage guys have a weird perspective where they idolize the early Federalist US and the Reagan Era. Prosperity for the common man wasn’t a highlight of either era, to put it mildly.
In 1790s New York, for example, “local control” meant that many of the people of upstate New York were a sort of serf-like tenant living on the estates of the great men, Dutch patroons who played ball with the colonial and State political infrastructure. They had the freedom to pay rent until their landlord was willing to let them go. That existed into the 1840s, when the country started getting woke.
So we can address housing issues with creative solutions. Why do poor people need their own apartments? Stuff them into a tenement. You can easily fit 15 people in a two bedroom apartment so they can build drones or whatever.
Cheap labor requires cheap rent and cheap goods. You can't have indian/chinese wages at American cost of living.
How do you bring down costs? generally you'd need to restrict real estate. Lock down rent costs for both residential and commercial.
What if the "same wage" as Chinese/Indians nets you close to the same basic necessities and purchasing power as those countries.
Of course, but even if Americans were willing to do that kind of work for those wages it wouldn't have much impact. The kind of manufacturing that makes serious money doesn't and usually can't use cheap labour, not in the long run at least. And in those parts of the economy where cheap labour is effective, agriculture for instance, the availability of cheap immigrant labour is simply holding back innovation.
But the US is a major manufacturing nation anyway. US manufacturing output is more than half of that of China while having only a quarter of the population.
When groups like the far right say bring back manufacturing they are just posturing to those voters who have been disadvantaged by changes in the commercial landscape that reduces the number of unskilled and semi-skilled jobs. If they really cared about those people they would support massive improvements to education and training so that at least the next generation had a chance rather than idiotic schemes to 'bring back' the kinds of work that no one needs.
With a weak dollar, those wages will be more equal.
I don't think they are going to ask.
They are right on that. What they are wrong is when they decided that is a good thing.
Not every kind of "bringing manufacturing back" brings the same kind of wealth and quality of life.
Wealth is relative.
And the Heritage Foundation is not in the business of improving quality of life for everyone, or even the average American.
It's not the optimal course for most billionaires either. Maybe it is for a few of them.
I mean ”optimal” is not well defined. It is not great for the economy or societal stability and if wealth is more and more unevenly distributed. But the wealthy benefit in the short term by gaining power in society.
> I don't think they're right.
it's worse then them not being right
the only way a weak dollar would majorly matter for bringing back production is iff production is cheap
so a 20% weaker dollar must not come with 20% higher "dollar" prices (living cost, salary). You need to decrees living cost and dollar value in lock step (i.e. weaker dollar without inflation!). But this seem impossible IMHO. And if we look at what happened, if anything, it went the other way.
And if you try to force it anyway you are basically saying "we effectively disown most money of most US citizens" and use that to try to attack manufacturing, while likely not relevantly affecting the wealthiest.
That is just plain evil.
And not very surprising if you consider that many "manufacturing countries" have pretty horrifying working conditions often not "that" far apart from slavery.
Worse this likely wouldn't work either, because iff your countries population doesn't have the money to buy stuff anymore, and investments are risky, why would you even bother to produce there? To then export to countries where investments into production lines are more reliable? Like how is that supposed to work?
Naturally things can be different if we only speak about high-tech / high-end manufacturing. But the current steps do not seem promising to archive that either:
1) this kind of manufacturing lines need even higher investments, i.e. act even more allergic wrt. trade instability and uncertainty
2) Trump has brought some high tech manufacturing into the US with a mixture of force and bribes/subsidization. But honestly it looks a lot of it is mostly hollow promises, not making a relevant difference long term.
3) More then one case where companies did agree had a lot of big problems. One of the biggest issue being, that missing in depth know-how requires temp. importing people which can make sure things work while teaching that know how (if you want things to get going fast. If you go slow you can send your people to other countries to learn.). But a destroyed visa system makes this a high risk for anyone coming to the US and did lead to more then one person like that being detained and deported by ICE. The other risk is if this people don't teach enough you become dependent on foreign workers in a strange way for a while.
Either way nothing in the current politics seems to be actually well thought through ways to archive (relevantly) more manufacturing in the US long term. But everything seems to be designed to destroy the wealth of the majority of US citizens.
The bigger question is, why is that even the primary goal?
I believe the idea is to support the “real” economy vs a “paper” economy. The “real” economy manufactures stuff in meat space instead of making value through abstractions like financial derivatives. The real economies are tied to a stronger middle class and national security. That’s the thesis as I understand it.
A service-based economy is also a "real" economy and not a "paper" economy
The fundamental problem is the asymmetry of value creation. Software is perhaps the pinnacle of this, and why tech companies are so unfathomably wealthy.
A team of 10 SWEs can create a product worth $1B with the cost of 10 laptops. You get ten people worth $100M each.
To create $1B in value with any kind of manufacturing business, is going to take hundreds of people utilizing millions in various costs. You end up with something like 10,000 people worth $100k each once you wind your way through all those supply lines.
You said it better. I think the idea is that certain "paper" economies are disproportionately valued in the economy when the dollar is strong. A strong dollar leads to offshoring manufacturing, which leads to an over weighted "paper" economy, which leads to an eroding middle class.
I agree, depending on what services you’re speaking of. Although I don’t know that it meets the explicit aims of the heritage foundation (which was the OPs question).
Because Conservative politics is about returning to a past that often can no longer exist.
Or didn't exist to begin with. All too often mythologized into an absurd caricature of the past.
I didn't realize that such causes like 90+% income taxes, lower income inequality, single earner households, and high unionization rates are "conservative" too.
No one actually paid 90% income taxes. I wish that myth would go away.
Of course because that’s how marginal tax rates work.
As to how much actual money was taxed at 91%, we don’t really have records for that but certainly the top 0.01% paid significantly more in taxes as a rate than they do today.
There were a lot more tax shelters at that time. You only paid those top rates if you had poor or no financial advice.
So nobody would mind going back to that reality right? Companies would totally pay less in taxes than they do now, right?
Oh, they fight that actually.
Actually, a past that never existed. It's pretty typically for authoritarian regimes to create idealized versions of the past as they attempt to rewrite history to better fit with their talking points and agendas.
The United States is current getting the base material for its entire economy from a country that is openly at war with it: China. If the US attacked East Tiawan because East Tiawan attacked Taiwan, East Tiawan would simply stop exporting rare earths, silver, steel, and electronics to the US. As a result the US needs to manufacture at home. So too does the EU.
I'll dig down 3 levels of "why".
The endemic anti-intellectualism among white communities (especially rural and southern) has resulted in a steady decline of white people in well-paying professions in America. If you count the Jewish as a separate group, white people are likely a minority in corporate America. Combined with social upliftment of other groups ("wokism") and the opioid crisis (that has disproportionately affected hinterland communities but immigrant groups seem immune to), white people are sliding down the American totem pole. Trumpism, alt-right, anti-woke, and the general resurgence of racist rhetoric are basically just reactions to all this.
These people want manufacturing because manufacturing is largely considered a "white people sport". If America becomes a manufacturing-first society, the hope is that it puts white people at the front and center of American society again.
JD Vance wrote a book about this.
> white people are likely a minority in corporate America.
I don't see how this can possibly be true.
> that has disproportionately affected hinterland communities but immigrant groups seem immune to
Or this, especially in light of data such as this: https://www.cdc.gov/nchs/products/databriefs/db549.htm
The data you linked shows that Native Americans, Blacks and Whites have the highest per capita rates of overdose (in that order), which validates my claim.
White American overdose deaths per capita are 6x that of Asian-Americans.
> white people are likely a minority in corporate America.
Oh boy am I gonna need some actual data for this claim.
Even if not quite true, it doesn't change my argument since it was more about the rate of change.
You can construct the definition of white collar in a way that makes it seem like it's mostly white people, but among high paying job titles within a company, absolutely I would say there are fewer than 50% non-Jewish whites.
> Even if not quite true, it doesn't change my argument
This is one of the main points of bigotry. The facts don't matter. So when a person says something obviously ridiculous like
> among high paying job titles within a company, absolutely I would say there are fewer than 50% non-Jewish whites
the proper way to interpret is "I feel like there are too many unworthy people working there," where "too many" is entirely subjective and could be as few as one.
Why “non-Jewish”?
Jews are culturally isolated enough to effectively count as their own race.
Race is generally a misused concept because 99% of the time people actually mean culture, and anyone from any race can be part of a culture.
You know why.
At my FAANG in Sunnyvale, I often feel like the last white guy on earth.
But I don't resent the people who stepped up to fill the jobs.
Rather, I am disappointed that these amazing jobs were basically gifted to US residents, but my fellow white people "Opted Out" of these high paying jobs.
It's not, they don't give two shits about workers, and their masters don't care how they make their money, just that they make it.
Manufacturing is just their preferred lie to get otherwise intelligent people to support their insanity.
In my worst cynical days, I think that's exactly the plan.
Erase US government debt via hyper-inflation, and let the people that will still have liquidity buy all remaining assets the middle class will be desperate to sell at pennies on the dollar.
#1: US military war spending concerns are largely overblown. It's expending what it already has. The spending is mostly on its own internal industry i.e. the US economy (with due respect to broken window fallacy). It arguably makes it all back from the increase in oil prices.
It's a very different thing to fire a $5m missile that you imported vs one that you made domestically with all-domestic components and labor.
I'd say firing a missile into another country is technically firing finite or hard to acquire resources into another country. All the resources for the new rockets have to be sourced from somewhere and it's not really important where they came from. They are a real cost not some circular funding. It's more or less blowing up big piles of cash that can not easily be replaced.
Why is it different? If it’s foreign made then you need to export $5 million of stuff to pay for it, so the economic effect should be similar.
Expending what it already has is true but doesn’t really help. It’s not like we’re going to sit here with a reduced stockpile forever. Those munitions will be replaced. The fact that the spending comes after using them rather than before doesn’t change the equation much.
You should check your hunch against the reality, at least periodically. The US dollar has strengthened since the current US-Iran conflict started.
Yes it tends to strengthen during times of conflict as countries buy more dollars in response. That's kinda the whole gimmick with the petrodollar. War is good for the US
But if Iran does successfully force countries to stop using the petrodollar by only allowing countries trading in yuan through the strait, then we could actually see that reverse. IMO destroying the petrodollar is the primary clear "victory" Iran could achieve from this war
I have checked. It’s too early to tell but anyway relative price is not what matters. What matters is purchasing power. EUR purchasing power was better and improving compared to USD. And check out interest rate derivatives — the euro has actually overtaken the dollar as the #1 currency in this massive market.
Purchasing power for what? Consumer goods? Most purchasing power calculations are completely bogus because they rarely compare goods of equal quality.
A neighborhood with just a Walmart doesn't have higher purchasing power than a neighborhood with just a Whole Foods.
Commodities. Raw materials with which all goods and services are made. Coffee, sugar, wheat, pound of beef, gasoline. Also products which are supposed to be identical like a Big Mac. Purchasing power is hard to measure but it’s a question studied deeply by economists.
Even the Big Mac index is flawed because it's not quite the same burger, since it's not made in the same regulatory environment, or by people compensated equally fairly.
All measures are flawed but can you do better?
Just noting: it's interesting to see the term "lethal trifecta" used here given the relatively recent coinage relating to LLM security: https://simonwillison.net/2025/Jun/16/the-lethal-trifecta/
anyone who sees this are early early early, yes it's very likely to happen, probabilistically.
> Europe and the Gulf diversifying both their investments and defense purchases.
With what? The euro, yuan? Or weapons from france?
I hate to admit it, but it's much less that the US is great because it's the reserve currency, and much more that the world reserve currency is the dollar because the US is what it is.
Weapons are expensive, and it only makes sense to buy them from a country that specializes in them. And a country that makes weapons at huge scale is likely to be big enough tilt the direction of the country to be all the ugly things the modern US military industrial complex is.
The US isn't delivering Patriot missiles to Switzerland. Switzerland froze paiements. The US unilaterally took the money Switzerland escrowed to buy F35s, put them towards paying for Patriot missiles they won't deliver, and asked Switzerland to refill the F35 escrow account. Hundreds of millions of dollars have been siphoned off.
https://www.rts.ch/info/suisse/2026/article/les-usa-detourne...
The US is not a reliable weapon supplier anymore. Contracts don't mean anything anymore.
I'm having trouble reconciling this comment with reports that US stockpiles are already being depleted by the Iran war. At this point the US weapons production seems relatively specialized and inefficient, not "huge scale." Someone more informed care to weigh in?
I’m probably not more informed, but it seems to me that it can be both. The rate of expenditure in a medium-sized war will far outstrip peacetime production needs. Even if you’re arming half the planet’s militaries, your peacetime production rate will be much smaller than what’s being used now, even if you’re building a lot by non-wartime standards.
Weapons are only expensive if you want them to be expensive.
Ukraine are butchering Russians for 870 USD per dead soldier.
The USA has the most expensive weapons in the world, the problem is that much of it is obsolete.
Ukraine butchers soldiers for cheap. The US drops a bomb through the Atatollah’s bedroom window for not-cheap. It’s not clear to me which is more cost effective in the end. (Ignoring for a moment that US strategy in this war seems to be nonexistent. Imagine these capabilities were being used with some actual goal in mind besides “if we take their king then we win.”)
The US is defaulting on military orders to Europe and Germany just announced a 1 trillion euro rearmament plan. Europe is manufacturing big time. The Gulf states as of yesterday are now buying from Ukraine for fucks sake.
Add the fact that some countries are using other currencies to trade oil and goods.
Also, some countries started to use other systems beside SWIFT to transfer money.
It is by design. How else can you make trillionaires?
Zimbabwe did make a 100 trillion note.
I think the idea is crash the stock market to force interest rate drop to refinance the massive debt.
That's not how bonds work
Huh? Wouldn't bond yields go up if stocks went down?
It doesn’t have to make sense to be the plan.
yess and real final episode will be fed printing into that high bond yield, after that it's just full fun :) especially for all boomers.
It could also be a play to squeeze China or similar nation dependent on middle east oil. USA semicon production not ready, if there were signals that China was ready for a play on Taiwan maybe this is a gambit to buy some time.
Is China really dependent on middle-east oil? I read that they had been diversifying in preparation for an energy resource fight for some time now. For example, they've massively invested in Solar power generation, are building a 300-400 billion dollar gas pipeline from Russia, already buy a lot of oil to from Russia, and also purchased from Venezuela (though how that's going now is anybody's guess). They also have a good relationship with most of the players in the middle-east and helped repair ties between the Saudis and the Iranians.
I saw an article that went really into depth - basically oil has huge diversity, and they really wanted Venezuelan oil:
https://open.substack.com/pub/endtropy/p/trumps-enormous-c-l...
That would be a double whammy for America then: a devalued dollar and higher oil prices. Both cause inflation.
China doesn’t seem to be squeezed when they seem to have a deal with Iran to buy in yuan.
Quick note that "devalued dollar" is inflation, not a cause of inflation.
Inflation is about what goes on inside the country. So you can have inflation internally while the domestic currency strengthens against foreign currencies, and vice versa.
If your currency is falling against foreign currencies but prices are also dropping domestically, you get deflation. This was happening in China a couple of years ago, and they were exporting this deflation to other countries.
Whoever wrote this article seems to think a strong dollar is fundamental to a strong economy. But, notice where it is on this timeline the only prolonged strengthening of the dollar that shows up. Yep, you've got it, the depth of the great depression. And, notice where the WWII and postwar weakening of the dollar led -- that's right, to in many ways the most prosperous economy the world has ever seen.
Because we try to figure out how things like "strengthening" and "weakening" of the dollar fit in, and we actually have policies much more intelligent than, weaking of the dollar! Collapse is imminent!
And a strong currency usually means weak manufacturing. And I don't know how a country can be strong without a solid manufacturing sector. Like, when we a war breaks out, we ask our enemies to sell us components and medical key ingredients?
If you aren't self-sufficient in energy, food, and to a lesser extent raw materials, a weak currency means everything is expensive.
Didn't know Switzerland was a "weak" manufacturer (currently one of the strongest currencies there is, also in wide use).
They export something else.
You're on to something, aren't you?
Like... Maybe manufacturing isn't the end all?
Note that most of this period falls before the modern inflation target was established in 1995. In the past 30 years we've had 75% accumulated annual inflation (aka prices have increased be a factor of exp(0.75) = 2.1) of which 16% (aka 21% of the total) took place during an inflation excursion (which lasted 2.5 years aka 8% of the total time period).
If anything the data points at "inflation targeting works and is producing slow and steady inflation" rather than "inflation comes in concentrated bursts".
The devaluation also mostly happened during the periods that everyone calls good old times now.
Hum... I don't think people refer to the world wars as good times.
Out of them, there's one single interval that most people that talk about it refer as "the end of the good times" (but yeah, I've seen people refer as good times too) and the COVID pandemic.
Who calls WWI, stagflation or Covid good old times? Only the post-WWII boom was really a good time.
there was wage growth
Yeah, didn't people used to make like $10/week as the median wage at the turn of the 20th century? I agree that we have big problems now, but I feel like this analysis is deeply flawed without the inclusion of wage data.
Wage data, population growth, overall consumption, credit (and guarantees against it) are all drivers of inflation.
Look at student loans vs the cost of college:
1958: Federal program to encourage science and engineering. 1976: Remove restrictions on bankruptcy dismissal of this debt. 2005: Same rules for private loans.
Today college has a (as someone here so eloquently put it) a cruise ship ascetic, and has far more "administration" than "eduction" in terms of raw staff.
Tv went from an expensive box (fixed cost) to cable (monthly fee) to on demand programing (several monthly fees, and with ad's).
A phone used to be a single item in your house with a monthly fee. It was an item so durable that you could beat a robber with it and still call the police (see old att, black rotary phone). Now its an item per person in a household, that you can easily loose, might break if you drop it, and costs any where from 200 to 1500 dollars.
None of this is inflation in the traditional sense, but it does impact the velocity of all money in the system, and puts pressure on individual spending in a way that isnt even accounted for in this chart.
I wont even get started on housing, but I will leave this chart behind and ask those who care to point to the housing crisis on it: https://fred.stlouisfed.org/series/RHORUSQ156N
I believe the broader reason for an inflation target is to increase the value of "doing something" as opposed to "doing nothing" with money. Of course, like most policies, this acts on people with way too much of it and skews the perception of control and locus of control to those entities with too much.
That's a bit of falacy. If inflation target were 0%, people would still have an oportunity cost of doing nothing compared to deposits, bonds and other "zero risk" investments. You just stop punishing people that has their wealth in form of cash savings.
2% is an arbitrary number that just looks good and seems to work. The issue is that that target is very much not set into stone, as central banks often disregard or take too long to take action when inflation shoots up. And never, ever do they try to compensate afterwards with a lower target for a time.
You can have a government spend way beyond its income making inflation spike, eroding their own debt at the cost of cash savings purchase power and the central bank just sit put and wait until inflation runs too hot to then increase rates that then cut way before inflation is on target. As we are having right now in basically every country on earth.
Not to reply against you, just to add clarification. This is the reason why a slightly positive inflation rate is normally targeted. Theoretically, it would be entirely possible to target 0% inflation, but then you are so close to possible deflation, that most people would simply save up money instead of buying things from the economy.
>"that most people would simply save up money instead of buying things from the economy."
And making it not an option leads to the situations where rich buy assets that are only go up and become richer. Average Joe meanwhile does not own assets and gets poorer and poorer
1950-1985 and 1985-now are pretty steady. Decreased inflation volatility over time.
I think your chart shows the "that inflation slowly erodes purchasing power over time." That doesn't mean there aren't periods of change - if you study economic history at all you know about the Great Depression and stagflation - but for ~50 years it's been pretty well managed.
This article over and over describes inflation as a tax or destruction, without backing those claims up. It would be a much stronger article if it focused on the main point rather than having it interspersed with the author's personal opinion of changes in the denominator of a fraction.
>This article over and over describes inflation as a tax or destruction, without backing those claims up
Inflation due to money supply increase being like a tax is a fundamental economic result that doesn't need to be rehashed. If you were to counterfeit a trillion dollars and spend it, what happens? You get more things, reducing the remaining supply of things, and everyone else has the same amount of money but chasing a smaller amount of things, so their purchasing power per dollar goes down. It acts as a wealth transfer from other currency holders to yourself. The same applies if the government creates money, but in that case it's called a tax because wealth transfer to the government is termed taxation.
> This article over and over describes inflation as a tax or destruction, without backing those claims up...
C'mon. Whether you agree or not, any time spent in the field will expose you to this philosophy. If you disagree, ignore. There's no need to go through implicit ideas.
> Instead, $100 in 1914 is worth $3.05 today.
Doesn't that mean $3.05 in 1914 us worth $100 today?
The purchasing power of $3.05 in 1914 would require $100 in today's time. A bag of "stuff" worth $100 today could have been purchased for $3.05 in 1914.
Technically, it does mean that $3.05 from 1914 is worth $100 today, but that's not a useful way of thinking about this. I.e., if your great-grandfather put $3.05 in an envelope in 1914 and you opened it today, it's still $3.05 worth of money (ignoring wheat pennies being a collectors items and whatnot).
I'm pretty sure you are right. Or to emphasize the devaluation, "$100 today would be worth only $3.05 in 1914."
I think it is astonishing that we accept that in a best case scenario of sustained 2% inflation, we are literally planning for the value of the dollar to be cut in half every 36 years.
Dollars that people hold onto, instead of using to purchase something else of value, are effectively worthless to everyone.
That means there are less dollars in circulation, which is the opposite of inflation.
>I think it is astonishing that we accept that in a best case scenario of sustained 2% inflation, we are literally planning for the value of the dollar to be cut in half every 36 years.
Our system is designed to encourage asset ownership, not cash saving. If you stuff it under a mattress for 36 years, yeah you'll get fleeced. But buying assets is the way to keep up; an investment of $100 in the S&P500 in 1990 and never touched would be worth $4,120.93 today.
Yeah, they must have gotten it the wrong way around.
Both are valid, depending on perspective. The joy of English.
I'm having trouble coming up with a valid use case of the way it's written, mind sharing?
"worth" can have two meanings in this context. $100 from 1917 can be worth exactly $100 today. Or it can be worth what you can buy with it.
Some folks will see a $100 bill from the era and see an old $100 bill. Some folks will imagine what that $100 took to save back then, and what it bought.
FWIW my brain automatically went with "the goods that can be bought with $100" - such as what I could buy in a grocery store today with $100 would be about what I could buy with $3 back then.
I never considered the other reading until this thread. It was obvious to me the author meant "you can buy 97% less stuff today with the same $100".
I don't understand how you mean. They say $100 back then, in what meaning is a $100 bill back then worth the same as having $3 today?
The graph should really use a log scale. At this point, a 50% drop in value would look tiny on that graph with the linear scale.
I'm trying to read this and not feel like an idiot.
Can someone explain to me how post-covid is considered one of the 4 episodes?
it looks to me that the dips at 1933-1936 or 1956-1958 are much more significant - are these just "regular" inflation? Are we ignoring these because we can't tie them to some specific current event?
I think probably the interest rate is higher, but the value as a proportion of the starting value on LHS is less significant, compared with the periods you mention. If you look at the monthly interest rates at the bottom, it seems to support this notion.
Appeal to readers' recency bias. Covid is the most recent big change for the readers so the article has to make it more significant than it actually was. If it only talked about things happened <40years people would be 'so what?' and bounce out.
money supply increased more than all those during the covid.
The value of the dollar over time is largely meaningless unless you are a dollar investor (i.e. sit on lots of cash in consumer tier bank accounts). Generally once you have enough cash that this would meaningfully impact you, you are already beyond sitting on cash.
At the end of the day, the dollar or any other currency, is just a conversion tool for [value created] to [goods/services received]. A ratio of 3/1 is equivalent to a ratio of 300/100, even if 3 and 1 are 99% smaller than 300 and 100. The numerator and denominator can move out of sync, creating periods of strain and arbitrage while they equilibrate, but what really matters is how much xyz you get per hour of work at job abc. And overwhelmingly we are leagues beyond 1914 in that regard.
It's meaningful because you pay capital gains on nominal increase in dollar value even if there is no real change in value. Inflation is thus a tax on realized non-gains at roughly 1/5th the cumulative inflation.
I'd argue that's more of an issue with the tax code than a fundamental problem with inflation. In and ideal world we would be able to write off losses to inflation, I'm sure many financial geeks have griped about this before, heh
Workers also pay more taxes when (or if) they get inflation-matching raises. Capital paying taxes on inflation gains isn't unfair.
Shouldn't the first chart have a logarithmic scale on the vertical? I don't trust anything using linear scales where they're a bad fit...
Why don't they refer to the 3rd 'episode' as Vietnam - since the timeline lines up pretty nicely with that downward slope (and it's more than just the 70's as is highlighted in the article)?
If seeing this graph has taught me anything it's that war is hell on many levels - including economically.
This article also doesn't seem to account for the median price of a single family home.
I compiled 1,357 monthly CPI observations from 1913 to 2026 (BLS data via FRED). The common narrative is that inflation slowly erodes purchasing power over time. The data tells a different story. Four concentrated episodes — WWI, WWII/post-war, the Great Inflation (1968–82), and post-COVID — account for 72% of total cumulative price increase, despite spanning only 29% of the time period. The dataset includes regime classification, episode tagging, and a decomposition analysis. Full CSV available for download.
This is very obviously an AI generated comment which is against the guidelines.
Why didn't you use log-scale? It seems like the obvious call.
IMO the first graph would make a lot more sense when plotted in log scale.
Also this way of framing "As of February 2026, the US dollar has lost 96.9% of its purchasing power relative to January 1914. This means that $100 in 1914 would buy only approximately $3.05 worth of goods today" is of course math-correct but difficult to understand intuitively.
I think it makes more sense to explain it in the opposite direction or in both directions: "$100 in 1914 would buy only approximately $3.05 worth of goods today, or equivalently, $100 in 1914 is worth ~ $3278 nowdays (because 100 / 3.05 ~= 32.78 "
This also makes it easier to understand that the term "millionaire == person that has 1 million USD" only makes sense around 1914, because the equivalent amount of wealth nowdays would be "millionaire == person that has 32 million USD"
Anyways, I liked a lot this visualization https://mlde8o0xa4ew.i.optimole.com/cb:VNTn.d9a/w:auto/h:aut... that visualizes the compression in time of the big value changes.
>Anyways, I liked a lot this visualization https://mlde8o0xa4ew.i.optimole.com/cb:VNTn.d9a/w:auto/h:aut... that visualizes the compression in time of the big value changes.
It's still a bad chart because of the "the great inflation destroyed more value than both world wars combined" claim, for two reasons:
1. It's not clear (from the chart at least), that the claim is true. 20.0% + 18.1% = 38.1%, greater than 30.2%, but the quote claims otherwise. True, the red and orange segments cover more than just ww1 and ww2, but if more granular data is available why not show it?
2. "destroyed more value" might be technically true if we define "value destroyed = inflation", but it's a non-intuitive definition to use. If you asked someone about the value destroyed in ww1/ww2, they'll talk about europe being bombed out, not higher inflation.
Also if you had that $100 in 1914 dollar coins it would actually be worth $5,400 in silver.
If you had $100 in 1914 $10 coins you would have $24,800 in gold.
Pretty close to the 80/20 rule of thumb.
Take my downvote, clanker.
I'm not really convinced this data falsifies the narrative of a slow erosion. It's just the Pareto principle in action. I bet if you graphed the erosion of a hill you'd see the same pattern.
Slowly and then all at once, as they say
I thought that was Hemingway specifically?
The Gompertz function strikes again.
Fair point on Pareto distributions. The distinction I'd draw is that these aren't random clusters — they map to specific policy regimes (wartime monetization, oil shocks + Fed accommodation, post-COVID fiscal expansion). The concentration isn't statistical noise, it's identifiable macro episodes. The dataset tags each month by regime if you want to dig in.
Dead internet theory really is in overdrive, huh.
It truly is.
Nowadays, the Dead internet theory isn't even trying to hide it, its so blatant nowadays.
Really not interesting analysis. Four "concentrated episodes" totaling 30 years, hardly "concentrated episodes", especially when you have a "concentrated episode" that lasts for fifteen years. It's extremely unsurprising there are periods of inflationary growth that's higher, and some lower.
Another way to frame this is that during inflationary episodes, debt became easier to repay.
My parents bought a house in the 1970s. Because of the inflation that occurred during that time, incomes and expenses rose, yet long-term debt obligations such as fixed mortgages remained unchanged; their mortgage payment was the same in year 30 as in year 1.
I guess another way to say it is that during an inflationary period, the people who HAVE money suffer the loss of its purchasing power. But the people who OWE money benefit from the dollar not being what it used to be.
The only thing sadder than AI-generated comments on human articles is human comments on AI-generated articles.
To big ones:
https://wtfhappenedin1971.com/
https://wtfhappened2012.com/
The scary part is not the number. It is that most people living through it barely noticed while it was happening.
Fiscal deficit. That is the main reason by far of Dollar's destruction. Everything else is wrong or over-thinking.
The cumulative duration of these four episodes looks to be about 30 years, so about a quarter of the total time period looked at
Interesting, but not quite as dramatic as I assumed from the title.
Why do wars tend to devalue the dollar?
In addition to the already-stated causes of government issuing currency necessary to meet war spending and the fact that war spending produces destruction of economic capability rather than development, wars tend to introduce trade barriers and divert resources away from productive tasks. Whether barriers are legal (tariffs, embargoes), or simply higher premiums due to increased risk, less trade happens, which raises prices (inflation). Economists also really hate number-go-down even when down is good, so policy is oriented towards making sure deflation never gets a chance in the interwar development periods.
Wars usually involve the destruction of assets. If the same amount of money chases fewer assets, the money has less value.
The government issues a lot of money to pay for the war but doesn't tend to increase taxes enough to make up for it, so inflation is high.
Weapons cost ALOT and do very little to increase the future economy.
It's the issue Russia is facing right now in Ukraine. Even if Putin wanted to stop, his economy has turned entirely wartime, when it ends the country crashes on itself.
Money printing and expensive bonds?
Only half of the incidents listed were actually full-scale wars (WWI and II). The other two incidents are an oil shock and a pandemic.
The commonality between all four of these incidents is that they correspond to severe supply shocks:
- During WWI and WWII, industrial supply was rerouted by force to the war effort, leaving normal consumer demand unfulfilled.
- During the oil crisis of the 70s, a critical energy input to the American economy massively increased in price due to sanctions placed on America.
- During the COVID-19 pandemic, a significant chunk of workers were paid not to work, as a form of deliberate supply destruction to avoid the spread of a novel coronavirus.
In a "normal" economy, supply is flexible enough that you can print money and nobody even notices. The supply curve is smooth and gradual, so prices only rise a little. When supply is constrained, however, prices rise to whatever value is necessary to curtail demand, because they have to. The supply curve is a brick wall.
(Guess)
A lot of money is printed.
Also, war is not an activity that generates wealth (but to some it does, obviously).
"By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens." -- John Maynard Keynes
so long and income exceeds or keeps up with inflation growth, it doesn't matter
Right, then: 1910 normal salary was 200-400 (say 300), if 97% of value of the dollar was lost in 2026 the normal salary should be 6666 - 13333 (say $10 000)
You can pick arbitrary points and stick them on the graph. It appears that my family are the inflation stoppers. Calm periods correspond to weddings and childbirths in my family. As the first in the line to marry a Chinese person, I have broken the rule and my daughter’s arrival has triggered a dollar collapse.
The moon gods have spoken in the tea leaves and we have lost the Mandate of Heaven.
And yet the feels surrounding $1M net worth have not been and likely will never be adjusted for this.
Sure they will. Making “$100,000” used to be a crazy milestone. Not anymore.
Likewise, a millionaire isn’t a millionaire until about $10M.
Has to be taken in light of median income too right?
This is a bizarre framing that totally misunderstands inflation, money, and macroeconomics.
How about other currencies?
Only USD for now. Would be interesting to compare — especially currencies that went through hyperinflation episodes.
The most notable anomalous event if you zoom back to more like 1814 instead of 1914 is that ever since the US completely decoupled from the gold standard, it switched into purely inflationary mode rather than often bouncing back. From the 1800-1900 pretty much the entire time was spent at worst 1/2 to 2x the average value. Far less variance than after the introduction of federal reserve and taking off the gold standard, where purchasing power was destroyed to something like <1/10th of the century average.
They make it sound like it’s a bad thing.
> The Great Inflation of 1968–1982 alone accounts for 30.2% of all cumulative purchasing power destruction since 1914 — more than WWI and WWII combined. During this 15-year period, the CPI rose from 34.1 to 97.7, nearly tripling the price level.
In 1971, the United States ended the convertibility of the US dollar to gold, effectively bringing the Bretton Woods system to an end and rendering the dollar a fiat currency.
This allowed for the global reserve currency to float which allowed for global credit expansion at the cost of the dollar value but with the benefit of more overall dollars (monetary velocity increasing)
This is what politicians want because it makes the dollar printing machine the most powerful thing, hence why everyone hung on the fedchair words every few months.
So the USD is already hyperinflated but the price relative to other currencies is still high.
Once that price collapses (and it eventually will and increasingly soon) the entire US will look like the rust belt.
What inspired Trump to do this? The Epstein files?
I think fuentes' theory holds merit: It's that in running for re-election trump was trying to avoid prison, so he was desparately looking for approval from many disparate and conflicting interest groups (some anti-war, some anti-immigration, some pro-immigration) one of which was pro-zionist. So not so much the epstien files but more just impending criminal charges in general (The epstien conspiracy voters were actually one of the interest groups trump wooed).
I also read an article here that suggested trump's bombing of iran during peace talks at the same time as israeli attacks established that if israel attacked then USA would also be a valid combatant (which wasn't the case previously). So this bombing of iran's nuclear facilities earlier was sort of a trap that made it so that israel could rope us into any conflict at any later time- which they did this time, they threatened to strike iran with or without us.
Lastly, I imagine that success in decapitating the venezuelan regime gave trump and his cabinet confidence in going to war.
This whole war seems good for israel but in the long term it doesn't really pan out in the long term for them either. It is sort of the cart leading the horse. There is a theory proposed by prof. Jiang (PredictiveHistory) that this war was catalyzed by a certain apocolyptic eschatology of jews/christians in a couple high places. Whether the Netanyahu or Trump adminstration is captured by this chohort or just pursing short term goals is hard to say, but this is the only explanation I can find for who benefits long-term from this action.