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Your "Inflationary Dollar," how much is it worth today?

Imagine that on the day you were born, your parents placed a dollar bill in a magic box.  The magical properties of this box change the contents to match the changes in the Consumer Price Index.   When the CPI increases, the amount of money in the box decreases because inflation erodes its value.  Likewise when the CPI decreases, the amount in the box increases as deflation increases its value.  Given the changes in the CPI since you were born, how much money do you think you'd find in your magic box if you opened it today?

The solution results from this equation.

birth year CPI   X
----------------------- =  ---------
current year CPI   $1

Solving for X tells us what the purchasing power of today's dollar would be in the year of the person's birth.  For example,  I was born in 1947.  The CPI (1982-84=100) stood at 22.3.  As I type, it is December 1998.  The CPI for the year through November is 162.9.  Therefore, X = 22.3/162.9 or .13689.  Rounded off that is 14 cents.

Reversing the equation (finding what $1 from the person's birth year would purchase today), you see

birth year CPI   $1
----------------------- =  ---------
current year CPI   X

For easier reading, we can express the equation as 

current year CPI    
----------------------- = X
birth year CPI    

Solving this for my birth year we find that a 1947 dollar would purchase $7.30 worth of goods at the end of November 1998. In other words, its value is 1/7.3 of what it was. This (rounded) divides out to same 14 cents we calculated with the first equation. Update: In 2011, the value of my dollar has shrunk to 10 cents.

In addition to the calculator, the Minneapolis site gives you a list of the yearly CPI numbers back to 1913.


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original web posting: Tuesday, December 22, 1998
last modified: Saturday, January 14, 2012