A January of 2017 Smithsonian article by Kat Eschner placed the wealth of John D. Rockefeller as peaking at almost 900 million dollars in 1912. A little over a hundred years later, Elon Musk is the wealthiest American. How does the wealth of Musk compare to that of Rockefeller who is frequently presented as the wealthiest person in American history?
Forbes currently estimates Musk’s wealth at roughly 235 billion dollars. So, dividing 235 billion by 900 million, one would find that Musk has about 260 times more wealth than Rockefeller had. However, that conclusion does not seem right. In this case, comparing dollars to dollars is really like comparing apples to oranges. A dollar in 1912 is quite different from a dollar in 2024.
One way to make the comparison more apples to apples is to compare the amount of gold into which the wealth of each individual could be converted in the respective times.
In 1912, the United States dollar was as good as gold. Indeed, 20 dollars was equivalent to an ounce of gold under the gold standard. That would continue to be the situation until President Franklin D. Roosevelt devalued the dollar in the 1930s. In terms of gold, Rockefeller’s 900 million dollars of wealth is measured as 45 million ounces of gold.
Unfortunately for Musk, measured in gold, each of his dollars are worth much less than was each of Rockefeller’s dollars. Around 90 years of dollar devaluation has resulted in gold reaching this year a record high dollar value of roughly 2,500 dollars an ounce. Still, Musk comes out well in this wealth comparison. Musk’s 235 billion dollars of wealth is measured as 94 million ounces of gold — a little over double the amount for Rockefeller.
Back in Rockefeller’s day and until the devaluation of the dollar really got rolling, being a millionaire was a big deal wealth-wise. That is not so much the case nowadays. Consider that the median price for an existing, rather than newly built, home in America reached nearly 400 thousand dollars in November. This price would consume about 40 percent of a million dollars. The purchase of a home at the median price in the most expensive states of New York, Hawaii, and California would consume around 65 percent, 70 percent, and 80 percent, respectively, of the wealth of an individual at the millionaire threshold. And that is just one of many costs that have gone sky-high in dollar terms. Being a millionaire is not what it used to be.
When twenty dollars equaled an ounce of gold, a million dollars meant 50,000 ounces of gold. Now, a million dollars will buy only 400 ounces of gold. In terms of gold, a million dollars is worth just 0.8 percent of what it was in pre-1930s dollars. In fact, to have wealth measured at the old millionaire threshold of 50,000 ounces of gold, a person today would need wealth of 125 million dollars.
The US dollar is no longer on the gold standard. But, gold still provides an important standard for economic measurement. Understanding changes in the dollar value in terms of gold over time can help make sense of the present and the past.