What is the Value of US dollar in 2008 compared to 1960?

Answer 1

There is no universally acceptable method for the comparison of the "value" of a unit of a particular currency at two (especially widely) separated instants of time. There are three main methods, each of which has certain drawbacks in communicating an understanding of the matter. One method is to use official statistics (Treasury, Federal reserve) as to the inflation rates of the intervening years or one or another assumptions made on the basis of the "money supplies" (M1, M2, M3) in existence through those times. Another is to compare the prices of the major monetary commodities in effect at the different times. For instance, in 1960, the official gold price (but at which the government was not obliged to sell it to anyone but foreign central banks collecting legitimate obligations of the US) was $42 and some cents. Currently, the price is in the neighborhood of $945. This would indicate that the dollar is worth only 1/22.5 of its value in 1960. But the significance of that relationship is not an objective fact but, rather, the starting point to other relevant comparisons. One can compare the relative prices of common articles of trade: bread, gasoline, a can of tuna fish, a movie ticket, etc. But this is still incapable of conveying a full understanding. For instance, in both times, telephone services have been widespread and important in daily life. But it is also true that phone service has become much cheaper, generally, than at any time in the past (for many reasons) and some phone services were not even in existence at the prior time (cell phones, etc.) No amount of money, large or small, could have purchased a consumer-oriented desktop computer (or cell phone) in those prior times. Though I haven't verified a comparison of bread or gasoline prices that long ago, "off the top of my head" I'd guess that bread has become somewhat cheaper, while gasoline has become somewhat (though not much) more expensive. (My memory of 1960 bread is about 26 cents for a standard, 1-lb loaf that sells now for about $1.12/lb (albeit in a 1-1/2 lb loaf now most common). In that ratio, bread is only a shade more than 4X (while gold's 22.5X). Gasoline was (to my memory) about 30 cents (now about 3.95), so even gasoline is only a bit over 13 times its previous price. The third method is to do something more or less a sophisticated version of what we just did in comparing a few items; It's collecting a larger number of items--some economists would call it a "shopping cart" or "market basket" of relevant goods. That will give a comparison whose validity wi;ll be related to how "relevant" those particular goods are to the life of the reader. Such matters are the subject of the study of Economics. I, myself, subscribe, in the main, to the view of what is known as the "Austrian School," of economic theory and a good introduction may be had by reading the book "Economics In One Lesson," by Henry Hazlitt. Warning: you could get "hooked."