Commerzbank economists Bernd Weidensteiner and Christoph Balz have conducted a review of 250 years of US economic history, focusing on the long-term erosion of the US Dollar's value and the resurgence of federal debt to levels last seen during World War II [1]. They note that, historically, the US experienced major inflation episodes primarily linked to wars, such as the Civil War of 1861–65, but these were typically followed by extended periods of deflation, resulting in the overall price level in 1900 being unchanged from 1800 [1].
The economists highlight a significant shift in the 20th century, with the establishment of the Federal Reserve in 1912 and a steady rise in prices since the 1930s. By 2025, the Consumer Price Index is reported to have increased to 18 times its 1925 level, with no further deflationary phases and periods of very high inflation occurring even outside of wartime, notably in the 1970s and early 2020s [1].
A parallel trend is observed in US government finances. The debt-to-GDP ratio remained low throughout the 19th century, except for a spike during the Civil War, which was subsequently reduced after 1865. The 20th century saw government debt surge during the Great Depression and World War II, but the US managed to rapidly reduce its debt-to-GDP ratio after 1945 [1]. However, the report points out that solid fiscal policy ended under President Reagan, with only a temporary consolidation under President Clinton in the 1990s. The current trend is a renewed rise in the debt-to-GDP ratio, contrasting with earlier periods of post-war consolidation [1].
The analysis underscores the long-term risks to the US Dollar stemming from persistent inflation and increasing federal debt, suggesting potential challenges for the currency if these trends continue [1].
CONCLUSION
Commerzbank's review underscores the long-term erosion of the US Dollar's value due to persistent inflation and highlights the renewed rise in federal debt to historically high levels. The report suggests that these trends pose ongoing risks to the Dollar, with fiscal consolidation efforts less evident in recent decades.