If 800 pounds in 1889 would be over eighty thousand U.S. dollars
today. What would a dollar from 1889 be today? What is the formula
used to arrive at that calculation?

Hi crshook:

Thanks for the interesting question. 

The comparison between 1889 British pounds and 2003 U.S. dollars was
probably based on relative worth or relative purchasing power. That
is, 800 1889 British pounds would purchase the same amount of goods in
1889 as over 80,000 2003 U.S. dollars does now.

Unfortunately, there is no way to extrapolate from that comparison
what a 1889 U.S. dollar would be worth today (in either 2003 U.S.
dollars or 2003 British pounds). The reason for this? Well, the
purchasing power of the British pound and the U.S. dollar have evolved
very differently over the last 114 years.

However, that does not mean we cannot find the relative worth of one
1889 U.S. dollar in today's currency! The Consumer Price Index (CPI)
measures the relative purchasing power of the dollar from year to
year. At the page

Consumer Price Index - (Estimate) 1800-2000:
http://minneapolisfed.org/research/data/us/calc/hist1800.cfm

is a listing of the actual (for more recent years) and estimated (for
further in the past) values of the CPI from 1800 - 2002.

Looking at that table, you can see that the CPI in 1889 was 27.0,
while in 2002 it was 538.0. This means that the amount of goods you
could purchase with $27.00 in 1889 would cost you $538.00 at the end
of 2002.

A formula for computing what $1.00 from 1889 would purchase at the end
of 2002 can be found by dividing the 2002 figure by the 1889 figure,
or:

     CPI:2002       538.00
     --------   =   ------   =   $19.93
     CPI:1889        27.00

Given that we are just a few days into 2003, the above figure is a
pretty good estimate for today's value of an 1889 U.S. dollar.

If you want to go one step further, you can use the currency
calculator at Bloomberg.com to compute the value of an 1889 U.S.
dollar in 2003 British pounds:

   $19.93 * .6232 = 12.42 pounds


I hope that this information has been of help to you.        
       
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Request for Answer Clarification by crshook-ga on 16 Jan 2003 10:23 PST

ok that was helpful but what i woilud like answered, I think i
could'nt articulate it yesterday, is what would a dollar from today be
worth in 1889. based on the information you gave me would that be
$538?

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Clarification of Answer by websearcher-ga on 16 Jan 2003 10:49 PST

Hi crshook:

Thanks for the clarification request. 

In order to calculate what a 2003 dollar would be worth in 1889 terms,
you only need to reverse the order of your ratio.


     CPI:1889       27.00 
     --------   =   ------   =   $0.05
     CPI:2003       538.00 

This means that the purchasing power of a nickel in 1889 was the same
as the purchasing power of a dollar in 2003.

So as much as you can "reverse time" and look at what today's currency
would be worth in the past, that's it. A nickel.

Hope this helps! 

websearcher-ga