From Stability to Devaluation

The Story of the Dollar vs. Gold Since 1913

Since the establishment of the Federal Reserve in 1913, the purchasing power of the U.S. dollar has dramatically deteriorated, impacting every American who earns, saves, or spends money. Initially, the Federal Reserve was created with the stated goals of stabilizing the economy, controlling inflation, and providing financial stability. Yet, looking back over the past century, the results reveal a markedly different story.

In 1913, a single dollar had considerable buying power, capable of purchasing everyday necessities with relative ease. However, persistent monetary expansion, extensive government debt, inflationary monetary policies, and the eventual abandonment of the gold standard drastically eroded that value. Over the past century, continuous money printing has flooded the economy with new currency, diluting the purchasing power of every existing dollar. As a consequence, today the dollar retains only about 4% of its original purchasing power.

A pivotal turning point occurred in 1971, when President Nixon fully severed the dollar's remaining ties to gold. Prior to this, the gold standard served as a powerful financial restraint, limiting the ability of the Federal Reserve to create currency arbitrarily. With this safeguard removed, money supply expansion accelerated dramatically, fueling rapid inflation and leading to a more pronounced deterioration of purchasing power. In practical terms, where a dollar once bought several loaves of bread or multiple gallons of milk, now it can scarcely buy a single loaf or a small portion of everyday items.

Contrast this scenario sharply with the performance of gold. In 1913, gold was priced at just $20.67 per ounce—a price relatively stable for decades due to the gold standard. Today, gold consistently trades at or above $2,000 per ounce, representing an astonishing increase that underscores its enduring value. This appreciation underscores gold’s longstanding role as a secure store of wealth, especially during periods of inflation, economic uncertainty, and currency devaluation.

But gold’s strength extends far beyond its simple capacity to protect against inflation. It reflects broader sentiments about confidence—or the lack thereof—in government and central bank policies. Over recent decades, extensive monetary expansion, rising national debt levels, and economic uncertainties have increasingly undermined public confidence in the dollar. In such times, gold often emerges as a preferred asset, trusted as a stable store of wealth, free from governmental manipulation or reckless monetary policy.

Historically, gold has proven particularly resilient during economic downturns and financial crises. During periods such as the Great Depression, the stagflation of the 1970s, the financial crisis of 2008, and recent economic upheavals, gold prices consistently rose or maintained their strength, protecting wealth during volatile economic conditions. Its limited supply—gold cannot simply be printed or digitally created—reinforces its intrinsic value, making it fundamentally different from fiat currency, which governments can and do frequently create at will.