INFLATION

INFLATION IN THE USA

Definition

According to Investopedia, Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. Central banks attempt to limit inflation, and avoid deflation, in order to keep the economy running smoothly.

As a result of inflation, the purchasing power of a unit of currency falls. For example, if the inflation rate is 5%, then a pack of gum that costs $1 in a given year will cost $1.05 the next year. As goods and services require more money to purchase, the implicit value of that money falls.

Inflation in the USA

 

In 1964, inflation measured a little more than 1 percent per year. It had been in this vicinity over the preceding six years. Inflation began ratcheting upward in the mid-1960s and reached more than 14 percent in 1980. It eventually declined to average only 3.5 percent in the latter half of the 1980s. 

While economists debate the relative importance of the factors that motivated and perpetuated inflation for more than a decade, there is little debate about its source. The origins of the Great Inflation were policies that allowed for an excessive growth in the supply of money—Federal Reserve Policies.  

The Great Inflation: 1965-1982

The Great Inflation was the defining macroeconomic event of the second half of the twentieth century. Over the nearly two decades it lasted, the global monetary system established during World War II was abandoned, there were four economic recessions, two severe energy shortages, and the unprecedented peacetime implementation of wage and price controls. It was, according to Jeremy J. Siegel, a prominent economist, “the greatest failure of American macroeconomic policy in the postwar period.”   
 

But that failure also brought a transformative change in macroeconomic theory and, ultimately, the rules that today guide the monetary policies of the Federal Reserve and other central banks around the world. If the Great Inflation was a consequence of a great failure of American macroeconomic policy, its conquest should be counted as a triumph.

Inflation Rates 2016-2045

YEAR	AMOUNT	INFLATION %	ACTUAL VALUE
2016	100,000	2.0	102,000
2017	102,000	2.1	102,304
2018	102,304	2.2	104,555
2019	104,555	2.3	106,960
2020	106,960	2.4	109,530
2021	109,530	2.52	112,290
2022	112,290	2.63	115,243
2023	115,243	2.75	118,412
2024	118,412	2.89	121,834
2025	121,834	3.0	125,489
2026	125,489	3.1	129,379
2027	129,379	3.22	133,545
2028	133,545	3.33	137,992
2029	137,992	3.35	142,615
2030	142,615	3.37	147,421
2031	147,421	3.5	153,171
2032	153,171	3.5	158,532
2033	158,532	3.5	164,080
2034	164,080	3.5	169,823
2035	169,823	3.5	175,767
2036	175,767	3.5	181,919
2037	181,919	3.5	188,286
2038	188,286	3.5	194,876
2039	194,876	3.5	201,697
2040	201,697	3.5	208,756
2041	208,756	3.5	216,063
2042	216,063	3.5	223,625
2043	223,625	3.5	231,452
2044	231,452	3.5	239,553
2045	239,553	3.5	247,937

Historical data on Inflation from 1914 till today is freely available.