A C-note is not what it used to be

A new U.S. $100 bill offers a major lesson in inflation

by Jason Kirby

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The U.S. Federal Reserve unveiled the latest version of the US$100 bill last week, and suddenly everyone’s a numismatist. “Might as well be a euro,” mocked the conservative Drudge Report website, while the Business Insider gushed, “Boy, it is sexy.” The buzz centred on the new C-note’s anti-counterfeiting measures—such as a blue security ribbon that changes display as the note is tilted, or the Liberty Bell that shifts from copper to green. But with some economists warning of inflation ahead, it’s worth noting the look of the bill is not the only thing that’s changed over time.

The most recent update to the US$100 bill came in 1996, when Ben Franklin’s head was expanded to its present size and a security watermark was introduced. But while the last 14 years have been a period of relatively stable inflation—averaging roughly 2.5 per cent a year—today it takes US$138.71 to have the same buying power as consumers enjoyed then. Go back to the previous incarnation in 1991, and that figure rises to nearly US$160. And it’s when you look back to previous redesigns in the 1960s that you realize how corrosive inflation is on the value of money, and why it’s so hard to save for the future. In 1966 a smaller-sized version of the bill was released, followed by an oversized bout of inflation through the ’70s and ’80s. Since that time, prices have jumped 584 per cent; put another way, the buying power of $100 in 1966 has been eroded to just $14.90.

If economists are right and we’re on the cusp of another period of high inflation, this new bill might not buy much a few decades from now. Assuming even a modest annual inflation rate of three per cent, by 2030, when the bulk of American baby boomers retire, that $100 bill will only get you $54 of stuff in today’s dollars. If inflation hits five per cent, the value will be whittled down to just $36.

Of course, you could always just hold on to the bill itself and sell it to a collector. A crisp 1966 note might fetch US$150 today.




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A C-note is not what it used to be

  1. I have yet to see one of the new 100's, do these bills have RFID or any technology like that?

  2. "Government is the only institution that can take a valuable commodity like paper, and make it worthless by applying ink."

    - Ludwig Von Mises

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