The Inflation Calculator uses US CPI data to calculate the equivalent value of the US dollar in any month from 1913 to 2024. The calculations are based on average Consumer Price Index (CPI) data for all urban consumers in the United States.
The Inflation Calculator uses historical Consumer Price Index (CPI) data from the United States to calculate the dollar's buying power in various years. Enter an amount and the relevant year, followed by the inflation-adjusted amount.
A Forward Flat Rate Inflation Calculator and a Backward Flat Rate Inflation Calculator can be used in theoretical scenarios to calculate inflation-adjusted amounts given an amount adjusted for the number of years and inflation rate. Historically, inflation rates in the United States and many other industrialized countries have hovered around 3%, making this a safe assumption. However, feel free to make adjustments as needed.
The Bureau of Labor Statistics in the United States publishes the Consumer Price Index (CPI) every month, which can be used to calculate the inflation rate. The following is a list of historical inflation rates for the United States (in US dollars) since 2013.
Inflation is described as an overall increase in the costs of goods and services and a decrease in money's purchasing power. Inflation can be artificial because a central bank, king, or government can control the amount of money in circulation. In theory, adding more money to an economy reduces the value of each unit of money in circulation. The inflation rate is typically a percentage price rise over 12 months. Most developed countries attempt to maintain an inflation rate of 2-3% through fiscal and monetary policy.
Hyperinflation is defined as extreme inflation that rapidly reduces the real worth of a currency. It usually occurs when the money supply expands significantly while the GDP remains relatively stable. Ukraine experienced hyperinflation in the early 1990s, as did Brazil from 1980 to 1994 when their currencies became worthless. These hyperinflationary economies generated horrible hardships for their citizens; Ukrainians and Brazilians had to cope by using stabilized foreign currencies and stockpiling finite resources with long-term worth, such as gold. Another well-known example of hyperinflation was in Germany in the 1920s when the government implemented stimulus measures such as printing money to fund WWI. This occurred at the same time as Germany was ordered to pay 132 billion marks in war reparations. As a result, economic activity plummeted, and shortages emerged. With too much money and insufficient goods and services, prices doubled every three days! The Papiermark, the German currency of the time, had lost so much value that people used it instead of firewood to heat their homes. Hyperinflation caused so many people to live in poverty or flee the country.
While hyperinflation can be extremely damaging to an economy, modest amounts of inflation year after year are considered healthy. Because money will lose value in the future, customers are incentivized to spend rather than save it, and this motivation is critical to supporting a healthy economy.
While inflation is not always good or bad, depending on whether it is moderate or severe, deflation, the inverse of inflation, is rarely desirable in any economy. Deflation is described as a broad drop in the pricing of goods and services. In this scenario, people are not motivated to spend because their money is expected to have higher purchasing power. This slows and, in some cases, reverses what should be an upward-growing economy. The Great Depression brought with it a phenomenon known as the deflationary spiral. The notion behind a deflationary spiral is that profit decreases when prices for products and services fall. Less profit means less expenditure. This, in turn, leads to decreased prices for goods and services, creating a negative feedback loop that can be extremely difficult to break.
Macroeconomic theories seek to explain why inflation happens and how to regulate it best. Keynesian economics, which was the mainstream economic model in industrialized countries for most of the twentieth century and is still commonly employed today, states that large-scale inflation or deflation can emerge when there are significant imbalances between supply and demand for goods and services.
Cost-push inflation—For example, consider the cost of oil rising due to political unrest; because so many goods and services rely on oil, their prices will rise to account for the greater costs associated with running a firm that includes oil as an expense. This is known as cost-push inflation.
Demand-pull inflation occurs when demand exceeds an economy's ability to produce. Because there aren't enough products and services for everyone, more currency is exchanged for them.
Built-in inflation—Built-in inflation, often known as hangover inflation, is caused by past events still felt today. It is closely tied to cost-push and demand-pull inflation, as these three types of inflation are the primary drivers of the current inflation rate. It is influenced by subjective and objective factors that contribute to the persistence of inflation, such as inflationary expectations and the price/wage spiral.
Inflation is most severe for persons with huge quantities of liquid cash sitting idle. Using the 2.5% inflation rate, a $50,000 checking account (that does not earn interest) will lose $1,250 in actual value by the end of the time. It is clear that when it comes to preserving money against moderate or severe inflation, it is generally preferable to do something other than keep it somewhere that does not yield interest. Inflation is the primary reason financial experts recommend spending or investing rather than saving money. In a world where moderate inflation is the norm, there is little alternative but to spend, invest, or suffer some inflation-related loss.
Unfortunately, there is no perfect hedge against inflation. People often buy real estate, stocks, funds, commodities, TIPS, art, antiques, and other assets to hedge against inflation. Each of these investing possibilities has advantages and disadvantages. Investors typically buy multiple types of these assets to mitigate risk. Commodities and TIPS are more frequently mentioned because they are strongly linked to inflation. However, they are not always the best investment hedges against inflation.
Investing in commodities, including gold, silver, oil, copper, and various raw materials or agricultural products, is a popular option for people to protect themselves from inflation because commodities have inherent value. Furthermore, demand for goods might rise when money loses value due to severe inflation. Gold has been considered an efficient resource for hedging against inflation for centuries due to its finite nature and ease of storage. While other precious metals can be used to protect against inflation, gold is the most common.
Financial instruments such as TIPS or Treasury Inflation-Protected Securities exist in the United States. These bonds issued by the United States Treasury are designed to protect against inflation. TIPS are a relatively efficient hedge against periods of high inflation because their principal is proportional to inflation as measured by indices such as the CPI. They typically account for only a tiny fraction of people's portfolios, but anyone desiring further protection might choose to invest more space in their portfolio in TIPS. They are also excellent diversifiers because they are mainly unrelated to equities, which comprise the majority of portfolios. In contrast to other bonds, TIPS maturation can be prolonged to gain term premiums while avoiding inflation risk. Other countries offer inflation-indexed bonds, such as the UK's index-linked gilt, Mexico's Udibonos, and Germany's Bund index.