Join for free

Topic

Monetary Dilution: What Happened to the Dollar

Monetary dilution is what happens to each dollar as more of them are created, and Part I starts by measuring it.

Read more

Between 1926 and 2026 the US money supply grew from about $43.7 billion to nearly $22 trillion, so a 1926 dollar now represents about $0.0019, less than one-fifth of a cent, of the total pool.

We then asked whether the assets people trust to protect them had kept up with that dilution. None of them did: silver rose 67x, US houses 83x, gold 168x and UK houses 439x, all short of the 503x growth in M2, and cash took the full 99.8% loss.

  • 503x M2 growth, 1926 to 2026 The break-even multiple used in Parts I and II.
  • 168x Gold, 1926 to 2026 An M2-adjusted value of 0.33, so about two thirds of its share was lost.
  • 439x UK house prices since 1926 £619 to £271,809, an M2-adjusted value of 0.87.

Articles on Monetary Dilution

1 article from our research on this topic.

Plain-English definitions

Key terms for monetary dilution

Monetary dilution
The loss in each dollar’s share of the total money pool as new money is created, whatever happens to shop prices.
M2 money supply
The Federal Reserve’s measure of cash, current accounts and easily accessible savings in the US. We use it to see how quickly new money is being created.
M2-adjusted value 1.0 = break-even
An asset’s growth divided by M2 growth over the same years. Above 1.0 it gained share of the money pool, below 1.0 it lost share.
Safe haven
An asset people buy to protect wealth in bad times, such as gold or property. Part I tests whether they did that against M2.
FAQ

Questions about monetary dilution

Answers drawn from the figures in our research. Educational only, not financial advice.

How much has the dollar been diluted since 1926?

By our measure, a dollar from 1926 now represents about $0.0019 of the total money pool, because M2 grew 503-fold between 1926 and 2026. That is a 99.8% dilution for anyone who held cash throughout. It is a different number from CPI inflation, which tracks prices rather than the quantity of money.

Did any safe-haven asset keep up with monetary dilution?

Not over the full century in Part I. UK housing came closest with an M2-adjusted value of 0.87, gold kept 0.33 and the median US house 0.17. Gold did briefly double its relative purchasing power around 1980, and UK houses outpaced M2 during the late-1980s and mid-2000s booms, but both fell back.

Sources

← All topics