23 December 1913: The Federal Reserve is born
President Woodrow Wilson signed the Federal Reserve Act, creating a central bank to provide an elastic currency and act as lender of last resort after repeated banking panics, especially the Panic of 1907. The Fed would go on to shape every boom and bust that followed, sometimes heroically, sometimes disastrously, as in the early 1930s. Few institutions have had more influence over what money is worth.
The lesson: Whoever controls the money supply quietly influences the value of everything you own.
What it meant for investors
$1,000 in US Treasury bills (cash) at the start of 1990 → $2,650 today, vs $19,429 in the S&P 500.
We start the clock at the start of 1990, the first year in our price data after the event. That is 2.6 times the money, but $16,779 less than a plain index fund made over the same years.
What US Treasury bills (cash) teaches: Cash is safe in nominal terms only; over long periods its real return hovers near zero, so the price of safety is giving up growth.
| Bought in | Price then | Worth today | S&P 500 would be |
|---|---|---|---|
| 1990 | $100 | $2,650 | $19,429 |
| 1995 | $125 | $2,120 | $14,783 |
| 2000 | $160 | $1,656 | $4,626 |
green = beat the S&P 500 · red = lost money
What if you bought US Treasury bills (cash)? Every starting year and the full story →
More US Treasury bills (cash) history
- 16 May 2000: The Fed raises rates by half a point to 6.5%
- 30 June 2004: The Fed starts its first rate hikes in four years
- 16 December 2008: The Fed cuts rates to zero
Could you have called it at the time? The wheel picks the year, you pick the position, ten seconds a pick.
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