The U.S. Dollar Over 125 Years: Strength vs. Purchasing Power
A public, expanded version of a newsletter article.
Two different measures. Don't mix them.
- ICE U.S. Dollar Index (DXY) starts in March 1973, base = 100. It measures the dollar against a basket of six currencies: euro 57.6%, yen 13.6%, pound 11.9%, Canadian dollar 9.1%, Swedish krona 4.2%, Swiss franc 3.6% (ICE). It does not include China or Mexico.
- Before 1973 we track purchasing power, meaning what a dollar buys at home, using BLS CPI-U. That index starts in 1913. The Fed's broad trade-weighted index (FRED DTWEXBGS) starts in 2006 and was 121.40 on Oct 16, 2026. These are different yardsticks: a "strong" DXY says nothing about grocery prices.
Milestones
- 1900: The Gold Standard Act fixes the dollar to gold at $20.67 an ounce.
- Dec 23, 1913: The Federal Reserve Act creates the Fed. CPI-U in Jan 1913 was 9.8 (FRED CPIAUCNS).
- 1933–34: Gold ownership is restricted. The Gold Reserve Act (Jan 30, 1934) revalues gold from $20.67 to $35/oz, which cuts the dollar's gold value by about 41%.
- July 1944, Bretton Woods: other currencies peg to the dollar, and the dollar is convertible to gold at $35 for foreign governments.
- Aug 15, 1971, the "Nixon shock": gold convertibility is suspended. CPI-U Aug 1971: 40.8.
- March 1973: major currencies float, and DXY begins at 100.
- Feb 1985: DXY peaks at about 164.7, its all-time high. The Plaza Accord (Sept 22, 1985) then coordinates a dollar decline.
- 2008: DXY hit its record low, near 71, in March 2008. During the fall crisis it rose as investors rushed into dollars.
- Sept 2022: DXY reaches about 114, a 20-year high, as the Fed raised rates fast.
- Now: DXY 101.71 at close, Oct 20, 2026 (WSJ 4:47 PM ET; Yahoo 101.79). Its 52-week range is 95.55–102.94 (WSJ).
Purchasing power (CPI-U, not DXY): Jan 1913 = 9.8 → Sept 2026 = 336.94 (NSA). That means $1 in 1913 buys what about $34.38 buys today, and the dollar has lost roughly 97% of its 1913 purchasing power. Since Aug 1971 (40.8), prices are up about 8.3×. What it means for consumers: a stronger DXY makes imports and travel abroad cheaper and hurts U.S. exporters. Falling purchasing power means savings that don't earn interest lose value over time. Wages and assets have historically risen too, so the 97% figure alone doesn't mean people are 97% poorer. Sources: FRED/BLS, ICE, WSJ. Information only, not financial advice.
Sources
Sources were read Oct 18–20, 2026. Details may have changed since.
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