If you’ve ever heard the statistic that the U.S. dollar has lost roughly 96% of its purchasing power since the early 1900s, it may sound abstract and almost academic. This illustrates the long-term effect of inflation on dollar-denominated assets.
In this article, we’ll explore some of the most frequently asked questions regarding the dollar’s long-term decline, the impact on purchasing power, and its implications for today’s wealth accumulation and preservation principles. We’ll also discuss how international diversification strategies, including investing in Switzerland, can fit into the conversation.
What does it mean that the dollar has lost 96% of its purchasing power?
When people talk about the dollar’s 96% decline, they’re referring to purchasing power, not the currency suddenly disappearing. In simple terms, one dollar today buys only a fraction of what it could buy a century ago.
A useful analogy is an ice cube left on the counter. It doesn’t vanish instantly, but over time, it slowly melts away. Inflation works the same way. Small, steady changes compound quietly, and decades later, the difference becomes too big to ignore.
What does this mean for investors? Holding wealth entirely in cash or cash-like investments tied to a single currency exposes long-term buying power to the erosive impact of inflation, not to mention taxes and other forms of erosion.
Read our Quick Guide: Investing in Europe: Considerations for. U.S. Investors
Why does purchasing power matter more in 2026 and beyond?
Inflation is not new, but its impact becomes more noticeable when your wealth reaches a particular scale; in effect, you have accumulated more, so you have more to lose. Fortunately, this also means you have more options for investing your assets.
Purchasing power matters because most financial goals, such as retirement spending, legacy planning, and philanthropy, are paid for in future dollars. If those dollars buy less over time, plans that once looked solid can slowly lose their overall effectiveness.
In 2026, this concern is amplified by:
- Elevated government debt levels
- Persistent fiscal deficits
- Long-term monetary policy trends
- Significant divergence in the U.S. political parties
None of these factors requires dramatic market outlooks to predict their impacts. They simply reinforce the importance of the effects of concentrating assets in a single country or currency.
Do U.S.-based investment portfolios fully address currency risk?
In some cases, traditional portfolios spread risk across stocks, bonds, and multiple economic sectors but may remain heavily exposed to the U.S. dollar. While this structure can perform as expected in certain markets, outcomes may be affected by changes in currency values.
When nearly all of your assets are priced and paid in U.S. dollars, portfolio outcomes remain closely linked to how the dollar performs over time. Even a well-balanced mix of stocks and bonds may still lose a lot of its value when currency-related pressures appear on the horizon.
For U.S. investors, an entirely domestic portfolio may be exposed to several overlooked risks, including:
- Long-term dollar fluctuations, which can erode global purchasing power even when account balances grow
- Policy and tax shifts that affect U.S.-based assets differently from those held abroad
- Global market stress arises, which can increase correlations, causing domestic assets to move in tandem despite sector diversification.
- Historical examples show that U.S. economic outcomes can be influenced by policy changes and decisions of the party in power.
Currency risk tends to be subtle. It rarely occurs in a single bad year. But it can significantly shape financial outcomes over the years, primarily if you are focused on retirement income or legacy planning, or if you have international business interests. This illustrates the potential role of international diversification in reducing exposure to a single currency and adding another layer of balance to a portfolio.
Broader thinking about diversification can include not only asset classes but also the jurisdictions in which assets are held, priced, and taxed, which may provide an additional layer of consideration in a long-term investment plan.
For investors evaluating their portfolios, currency exposure is one of several factors that may affect long-term outcomes and can be considered as part of a comprehensive evaluation.
Why do U.S.-based investors look to Switzerland for diversification?
Some U.S.-based investors consider Switzerland when a portion of their wealth is concentrated in a single currency, economic system, or set of political and financial conditions. Over time, this kind of concentration may create blind spots that can affect asset outcomes before considering inflation, taxes, and other expenses.
Switzerland has a different financial environment for accumulating and preserving your assets. Its financial system, currency, and approach to wealth management operate independently from the U.S., which can provide an additional layer of diversification for larger portfolios that require tailored solutions.
For high-net-worth investors, Swiss-based wealth management is often used to complement, rather than replace, U.S. investments, helping to spread risk across multiple currencies and legal jurisdictions.
Are Swiss bank accounts legal for U.S. citizens?
Yes. Swiss bank accounts for U.S. citizens are legal when properly structured and reported in accordance with applicable U.S. and Swiss laws. Transparency requirements such as FBAR and FATCA apply, and compliance is an integral part of the investment management process.
For many high-net-worth investors, the decision isn’t about avoiding oversight. It’s about adding geographic balance to their financial structure while remaining compliant with U.S. reporting requirements.
This distinction matters. Properly managed Swiss accounts are designed to complement, not replace, existing U.S. holdings.
Is international diversification only for ultra-wealthy investors?
International diversification becomes more practical as wealth increases and financial structures become increasingly complex. For investors with significant assets, the question often becomes one of where to invest in ways that have the potential to enhance overall returns.
Once portfolios reach a larger scale, concentration risk, including geographic, currency-based, business-related, or regulatory factors, can become more significant than market volatility.
This is why many globally minded, affluent families explore Switzerland as part of a broader, long-term strategy versus a short-term investment tactic.
How does LFA help U.S. investors think globally?
At LFA, our focus is on helping U.S.-based investors understand how international wealth management, particularly in Switzerland, can produce unique financial benefits.
This unique process includes:
- Evaluating currency exposure within a broader portfolio
- Explaining how Swiss banking works for U.S. citizens
- Coordinating with U.S. tax and legal professionals
- Structuring accounts with transparency and reporting in mind
We do not recommend that Switzerland’s wealth management services replace U.S. planning and investment services. Instead, after careful review, we may recommend allocating a portion of your assets to Swiss currency and global investments. This can provide additional diversification and reduce concentration risk.
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