Look, I’m not professional economist, numbers brainiac, wealth manager, or banker…but, I think I have a pretty good grasp on what is happening economically. But then again…what the heck does a senior citizen (i.e. old) retired firefighter wannabe glamsteader know? Let me take a stab at answering a couple of questions that came to me.
Well, that answer depends on who is answering it, there are generally two answers…both of which are correct…but, the first is caused by the latter.
First answer: the general increase in the price of goods and services.
Second answer: the decrease in the purchasing power of money caused by the increase in money supply.
There is a third answer but it is the weakest and least reliable: supply and demand. This is generally referred to as “too much money chasing too few goods.” But, the “too much money” part of it is caused by the money supply being increased. There is a semi-accurate, although seldom, aspect of “supply and demand”.
To get this out of the way first off…I will give you a “supply and demand” example but it is seldom actually seen in real life. Let’s say there is a state, call it Ohio. For this example say there are 100’s of farmers raising cattle, thousands and thousands of them. Now Ohio hits a dry year and 2million of the 12million residents also leave due to immigrants being deported and companies closing. So we see lot’s of people leaving (demand lowering) and farmers selling off cattle due to the cost of hay & feed skyrocketing (supply increasing). At the livestock sale barns the price of cattle goes down due to way more cattle being taken to market and far fewer people buying hamburger. But, these types of “supply and demand” issues are usually short lived and not indicative of the economy in general.
Now on to real life…
We all can see inflation easily when we go to the store and see an item that was $2.99 two years ago now priced at $3.99. Even worse when viewed over a 10 or 50 year time span. An obvious example would be home prices. In 1965 the average house price was less than $22,000. In 2025 the average house price was $360,000. That’s an increase of 1536% in 60 years. Few reasonable people could question that is a huge increase in price.
So you go back a bunch of years and “inflation” meant one thing…an increase in the money supply. When you think about it, when you just use the term inflate, what comes to mind? Yup, to make something bigger, like a balloon or football.
When you talk about the price of goods and services going up what comes to mind is a price “increase” not price “inflation”. So the term “inflation” when applied to economics has become seriously transformed/corrupted over the years.
So, when you see prices go up it becomes necessary to compare it to the money supply. Let’s start by looking at US inflation, the best way to do that is to look at $1,000 in 1900 by 1965 you would need $4,000 to have the same “buying power” as the original $1,000 in 1900. That means the original $1,000 (money) lost ¼ of its buying power over 65 years. Now, look at the next 60 years…1965 – 2025. In 2025 you would need $38,000 to match the same “buying power” of the $4,000 in 1965. That is a HUGE loss of buying power. It takes nearly 10 times more dollars (money) to equal the same buying power.
What? Yup, when you look at it that way…the dollar lost most of its value from 1965 – 2025. The reality comes into focus when you see the average price of a home go from $22,000 to $360,000 during that same times period. Simply put…the dollar lost a huge amount of value…most of its value actually.
When you look at the inflation chart for that $1,000 in 1900 you see it is pretty stable for the most part until about the mid-1970’s. What happened then to make a huge spike begin? The United States went off the gold standard and became a fiat currency.
In 1900 the average price of a home in the US was about $2000 and could be bought with 95 ounces of gold. In late Sept 2025 the average price of a home in the US was about $360,000 and could be bought for about 95 ounces of gold. Do you see a relationship there?
The price of gold and the price of a home each went up 180 times; meaning that it took $180 in 2025 to equal $1 from 1900. That equates to the dollar lost most of its value in 125 years!
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- Why compare the dollar to gold? Because gold has a pretty static intrinsic value.
- What was the 1900 price of gold in the comparison? $21 per ounce.
- What was the Sept 2025 price of gold in the comparison? $3760 per ounce (right before it made the huge spike in price.)
So why does the price of gold fluctuate in comparison to the dollar? It doesn’t. The value of the dollar fluctuates in comparison to the value of the gold. That is the whole point. In Sept 2025 it took $3760 to buy an ounce of gold. In 1900 it only took $21 to buy an ounce of gold. The dollar in 1900 was super strong…in Sep 2025 the dollar was super weak.
Now gold is about $5,200 per ounce. That means the value of the dollar went down just about 38% in five months (Sept 2025 – Feb 2026).
I will give ground on one thing…in the last 25 years gold has taken on an element of speculation. Meaning, people are “betting” the dollar goes up or down based on what the future US and world economies look like, along with the global geopolitical outlook as well. So the price gold became a “bet” or “gamble” to some degree. But it is still tied to the value of the dollar…the “bet” that the dollar will go up or down in price. And people were buying gold to hedge that bet. Meaning that gold would hold its value and offset the loss of value in the dollar. Why do people “bet” on the value of the dollar? Because the dollar has no intrinsic value…it has no value in and of itself…it is a speculation or guess of what it can buy at some future point in time.
Bottom line…when you see the price of gold go up, the value of the dollar is going down. When gold goes down, the value of the dollar goes up. Gold is not changing value, the dollar is changing price.
That same principle applies to most prices of everything…when money supply goes up…prices go up because the value of the dollar is going down. That is called inflation in true terms.
- I heard that the US government can “inflate” its way out of debt?
Theoretically, yes. What the principle is that…the value of the dollar in 10, 20, or 30 years from now is much lower than the value of the dollar in today’s terms. As the money supply increases the value of dollar goes down. So, the Fed increases the money supply to stratospheric heights driving the “value” of the dollar down. Thus, a dollar used to pay the debt in 30 years is worth only a fraction of what it is now. And remember, it is the Federal Reserve (private bankers) that control the money supply, the national debt, and the interest rate paid on that debt.
In theory that means that the Fed could simply digitally create $39trillion dollars right now and pay off all the US national debt tomorrow. Done! Over! No more US debt. Nice! Sweet! Clean slate!
But here’s the catch…the current US money supply is about $22trillion. And the Fed now creates $39trillion to pay off the debt. What happens to the value of the dollar?
Think of it this way…Today there is money supply of $22trillion, tomorrow there is money supply of 61trillion US dollars ($39trillion addition to pay off the national debt). The very best case scenario…the value of the dollar is cut by about 60%. Yup, that means for every dollar you had in the bank it is now only worth 40cents in terms of buying power.
That is how the US government (via the Federal Reserve) could inflate its way out of debt…destroying the value of the dollar. Think of it this way…milk is about $3.50 per gallon today…tomorrow it would be right at $9.00 per gallon. That is called inflation…and inflating our way out of national debt.
Ask yourself this…if the Fed along with the US gov’t decided to inflate its way out of debt today…would your salary go up 2.6 times to match the inflation rate? The 2025 average salary in the US was about $66,000. That means overnight that salary would have to go to $172,000 just to maintain the same buying power.
That is called hyper-inflation.
You see, it is not about national debt, inflation rate, price of gold, or the value of the dollar…none of that! It is about “buying power” of a dollar. And folks…we are losing that fight BIG TIME!!! Yup, the buying power of the dollar keeps tanking year after year after year.
Question to ask yourself…Why is that happening? What is the purpose behind it?
Consider this…the 3-fold mission of the Federal Reserve is to conduct the nation’s monetary policy to promote:
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- maximum employment,
- stable prices,
- moderate long-term interest rates.
In 1913 the US federal government turned over that authority to a group of private bankers to control those 3 things. Have you ever wondered “why?”
And actually, ask yourself this…What gives the US federal government the “authority” to control those things, let alone turn that authority over to a group of private banks?
But maybe about now you are starting to see why the economy is a complete wreck, for over 50 years the middle-class has been disappearing, we have no hope of ever paying off the national debt in a responsible way, and the dollar is virtually worthless compared to 112 years ago when the Fed took over controlling the country’s economy.
Wait, here’s my bottom line…
What are you doing to prepare for these continued economic problems and the coming crash?
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