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Purchasing Power of the U.S. Dollar Over Time

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VCE Purchasing Power of the US Dollar

What is Purchasing Power?

The purchasing power of a currency is the amount of goods and services that can be bought with one unit of the currency.

For example, one U.S. dollar could buy 10 bottles of beer in 1933. Today, it’s the cost of a small McDonald’s coffee. In other words, the purchasing power of the dollar—its value in terms of what it can buy—has decreased over time as price levels have risen.

Tracking the Purchasing Power of the Dollar

In 1913, the Federal Reserve Act granted Federal Reserve banks the ability to manage the money supply in order to ensure economic stability. Back then, a dollar could buy 30 Hershey’s chocolate bars.

As more dollars came into circulation, average prices of goods and services increased while the purchasing power of the dollar fell. By 1929, the value of the Consumer Price Index (CPI) was 73% higher than in 1913, but a dollar was now enough only for 10 rolls of toilet paper.

Year EventPurchasing Power of $1What a Dollar Buys
1913Creation of the Federal Reserve System$26.1430 Hershey’s chocolate bars
1929Stock market crash$15.1410 rolls of toilet paper
1933Gold possession criminalized$19.9110 bottles of beer
1944Bretton Woods agreement$14.7120 bottles of Coca-Cola
1953End of the Korean War$9.6910 bags of pretzels
1964Escalation of the Vietnam War$8.351 drive-in movie ticket
1971End of the gold standard$6.3917 oranges
1987"Black Monday" stock market crash$2.282 boxes of crayons
1997Asian financial crisis$1.614 grapefruits
2008Global Financial crisis$1.202 lemons
2020COVID-19 pandemic$1.001 McDonald’s coffee

Between 1929-1933, the purchasing power of the dollar actually increased due to deflation and a 31% contraction in money supply before eventually declining again. Fast forward to 1944 and the U.S. dollar, fixed to gold at a rate of $35/oz, became the world’s reserve currency under the Bretton Woods agreement.

Meanwhile, the U.S. increased its money supply in order to finance the deficits of World War II followed by the Korean war and the Vietnam war. Hence, the buying power of the dollar reduced from 20 bottles of Coca-Cola in 1944 to a drive-in movie ticket in 1964.

By the late 1960s, the number of dollars in circulation was too high to be backed by U.S. gold reserves. President Nixon ceased direct convertibility of U.S. dollars to gold in 1971. This ended both the gold standard and the limit on the amount of currency that could be printed.

More Dollars in the System

Money supply (M2) in the U.S. has skyrocketed over the last two decades, up from $4.6 trillion in 2000 to $19.5 trillion in 2021.

The effects of the rise in money supply were amplified by the financial crisis of 2008 and more recently by the COVID-19 pandemic. In fact, around 20% of all U.S. dollars in the money supply, $3.4 trillion, were created in 2020 alone.

How will the purchasing power of the dollar evolve going forward?

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200 Years of Global Gold Production, by Country

Global gold production has grown exponentially since the 1800s, with 86% of all above-ground gold mined in the last 200 years.

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global gold production

Visualizing Global Gold Production Over 200 Years

Although the practice of gold mining has been around for thousands of years, it’s estimated that roughly 86% of all above-ground gold was extracted in the last 200 years.

With modern mining techniques making large-scale production possible, global gold production has grown exponentially since the 1800s.

The above infographic uses data from Our World in Data to visualize global gold production by country from 1820 to 2022, showing how gold mining has evolved to become increasingly global over time.

A Brief History of Gold Mining

The best-known gold rush in modern history occurred in California in 1848, when James Marshall discovered gold in Sacramento Valley. As word spread, thousands of migrants flocked to California in search of gold, and by 1855, miners had extracted around $2 billion worth of gold.

The United States, Australia, and Russia were (interchangeably) the three largest gold producers until the 1890s. Then, South Africa took the helm thanks to the massive discovery in the Witwatersrand Basin, now regarded today as one of the world’s greatest ever goldfields.

South Africa’s annual gold production peaked in 1970 at 1,002 tonnes—by far the largest amount of gold produced by any country in a year.

With the price of gold rising since the 1980s, global gold production has become increasingly widespread. By 2007, China was the world’s largest gold-producing nation, and today a significant quantity of gold is being mined in over 40 countries.

The Top Gold-Producing Countries in 2022

Around 31% of the world’s gold production in 2022 came from three countries—China, Russia, and Australia, with each producing over 300 tonnes of the precious metal.

RankCountry2022E Gold Production, tonnes% of Total
#1🇨🇳 China33011%
#2🇷🇺 Russia32010%
#3🇦🇺 Australia32010%
#4🇨🇦 Canada2207%
#5🇺🇸 United States1705%
#6🇲🇽 Mexico1204%
#7🇰🇿 Kazakhstan1204%
#8🇿🇦 South Africa1104%
#9🇵🇪 Peru1003%
#10🇺🇿 Uzbekistan1003%
#11🇬🇭 Ghana903%
#12🇮🇩 Indonesia702%
-🌍 Rest of the World1,03033%
-World Total3,100100%

North American countries Canada, the U.S., and Mexico round out the top six gold producers, collectively making up 16% of the global total. The state of Nevada alone accounted for 72% of U.S. production, hosting the world’s largest gold mining complex (including six mines) owned by Nevada Gold Mines.

Meanwhile, South Africa produced 110 tonnes of gold in 2022, down by 74% relative to its output of 430 tonnes in 2000. This long-term decline is the result of mine closures, maturing assets, and industrial conflict, according to the World Gold Council.

Interestingly, two smaller gold producers on the list, Uzbekistan and Indonesia, host the second and third-largest gold mining operations in the world, respectively.

The Outlook for Global Gold Production

As of April 25, gold prices were hovering around the $2,000 per ounce mark and nearing all-time highs. For mining companies, higher gold prices can mean more profits per ounce if costs remain unaffected.

According to the World Gold Council, mined gold production is expected to increase in 2023 and could surpass the record set in 2018 (3,300 tonnes), led by the expansion of existing projects in North America. The chances of record mine output could be higher if gold prices continue to increase.

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All the Metals We Mined in One Visualization

This infographic visualizes the 2.8 billion tonnes of metals mined in 2022.

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All the Metals We Mined in One Visualization

Metals are a big part of our daily lives, found in every building we enter and all devices we use.

Today, major industries that directly consume processed mineral materials contribute 14% of the United States economy.

The above infographic visualizes all 2.8 billion tonnes of metals mined in 2022 and highlights each metal’s largest end-use using data from the United States Geological Survey (USGS).

Iron Ore Dominance

Iron ore dominates the metals mining landscape, comprising 93% of the total mined. In 2022, 2.6 billion tonnes of iron ore were mined, containing about 1.6 billion tonnes of iron.

Metal/OreQuantity Mined in 2022 (tonnes)% of Total
Iron ore2,600,000,00093.3%
Industrial metals185,111,8356.6%
Technology and Precious Metals1,500,0080.05%
Total2,786,611,843100%

Percentages may not add up to 100 due to rounding.

Iron ores are found in various geologic environments, such as igneous, metamorphic, or sedimentary rocks, and can contain over 70% iron, with many falling in the 50-60% range.

Combined with other materials like coke and limestone, iron ore is primarily used in steel production. Today, almost all (98%) iron ore is dedicated to steelmaking.

The ore is typically mined in about 50 countries, but Australia, Brazil, China, and India are responsible for 75% of the production.

Because of its essential role in infrastructure development, iron ore is one of the most crucial materials underpinning urbanization and economic growth.

Industrial Metals

Industrial metals occupy the second position on our list, constituting 6.6% of all metals mined in 2022. These metals, including copper, aluminum, lead, and zinc, are employed in construction and industrial applications.

Aluminum constituted nearly 40% of industrial metal production in 2022. China was responsible for 56% of all aluminum produced.

Industrial Metals2022 Mine Production (tonnes)% of Total
Aluminum69,000,00037.3%
Chromium41,000,00022.1%
Copper22,000,00011.9%
Manganese20,000,00010.8%
Zinc13,000,0007.0%
Titanium (mineral concentrates)9,500,0005.1%
Lead4,500,0002.4%
Nickel3,300,0001.8%
Zirconium Minerals (Zircon)1,400,0000.8%
Magnesium1,000,0000.5%
Strontium340,0000.2%
Uranium49,3550.03%
Bismuth20,0000.01%
Mercury2,2000.00%
Beryllium2800.00%
Total185,111,835100%

In the second position is chromium, which plays a primary role in rendering stainless steel corrosion-resistant. South Africa led chromium production, accounting for 44% of the total mined last year.

Technology and Precious Metals

Despite representing less than 1% of all the metals mined, technology metals have been on the news over the last few years as countries and companies seek these materials to reduce carbon emissions and improve productivity.

Technology and Precious Metals2022 Mine Production (tonnes)% of Total
Tin310,00020.7%
Rare Earth Oxides300,00020.0%
Molybdenum250,00016.7%
Cobalt190,00012.7%
Lithium130,0008.7%
Vanadium100,0006.7%
Tungsten84,0005.6%
Niobium79,0005.3%
Silver26,0001.7%
Cadmium24,0001.6%
Gold3,1000.2%
Tantalum2,0000.1%
Indium9000.1%
Gallium5500.04%
Platinum Group Metals4000.03%
Rhenium580.004%
Total1,500,008100%

They include lithium and cobalt, used in electric vehicles and battery storage, and rare earths, used in magnets, metal alloys, and electronics. Many of them are considered critical for countries’ security due to their role in clean energy technologies and dependency on other nations to supply domestic demand.

However, despite increasing interest in these metals, they are still behind precious metals such as gold and silver regarding market size.

The gold market, for example, reached $196 billion in 2022, compared to $10.6 billion for the rare earths market.

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