The value of a dollar shouldn’t require much math. If you have $1, you have $1, right?
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Sort of! The dollar’s value fluctuates over time (inflation) and due to economic conditions (such as tariffs) based on how much you can purchase with that same dollar. Thus a dollar is really a measure of purchasing power.
For instance, there was a time when a single dollar could buy multiple groceries, whereas today you can’t even buy a dozen eggs for anywhere near that price due to inflation.
If the dollar lost half of its value, what would the impact look like on the economy and your wallet?
In truth, the dollar value fluctuating is a pretty regular occurrence, according to Jim Pendergast, general manager of altLINE by The Southern Bank. “[We] saw the dollar value drop at a fairly similar clip from 2022 into 2023, as it is now, before slowly recovering,” he said.
A 50% drop in dollar value is hard to envision in the short term, he said, and unlikely, though not impossible.
“We recently saw Argentina’s currency value drop drastically in just a couple of years, a decline that exceeded 50%, so it’s not entirely impossible. But within our borders, we haven’t seen things fail to revert to a relative norm in decades.”
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The immediate impact of a value drop would be inflation-related challenges, such as prices going up and the cost of goods increasing, Pendergast said.
“Another impact that may not be as obvious is the impact it has on savings accounts. Money in your savings account could be losing value, particularly if interest rates aren’t keeping up.”
Aaron Razon, a personal finance expert at Coupon Snake, takes a slightly more alarmist approach. He said that if the U.S. dollar were to really lose half of its value, the result could be “devastating for consumers.”
While such a devaluation would be a worst-case scenario, he said that scenario could “attack everyday expenses and drive up their prices in a way that would make affordability even more of a financial struggle than it is today.”
This could have an impact on utility costs like electricity, gas and water, because the cost of importing their equipment would have become more expensive. Importing oil and food would also become more expensive, leading to higher prices for gas, food and other essentials.