Courtesy: Nick Barisheff, Bullion Management Group Inc.
The above chart demonstrates the relationship between the increase in money supply as measure by M3 and the loss of purchasing power of the US dollar. Using the official CPI the US dollar has lost about 82% of its value while the total money supply has climbed from about $800 billion in 1970 to $13 trillion today. The annual increases in total M3 are now more than the total money supply was in 1970. If you use the old formula for the calculation of the CPI, based on a fixed basket of goods and services, without hedonic adjustments or substitutions, the US dollar has lost about 95% of its purchasing power. For a detailed explanation of the changes that have been made to the methodology now used to calculate the CPI see http://www.shadowstats.com/article/56.