Inflation

Inflation is a sustained rise in the general level of prices, which is the same thing as a decline in the purchasing power of money. In the United States it is most commonly tracked by the Consumer Price Index, and the Federal Reserve aims for about 2 percent per year. At 2 percent, prices double roughly every 35 years; at 7 percent, they double in about a decade.

Why it matters

Inflation compounds quietly and relentlessly against anyone holding cash. Even the official target rate cuts a dollar's purchasing power in half over a working career, and episodes above target do far more damage: US CPI inflation peaked at 9.1 percent year over year in June 2022, the fastest pace in four decades. Wages, savings, pensions, and fixed-income investments all lose real value when inflation runs ahead of returns. That is why the search for assets that keep pace with or outrun inflation drives so much of investing.

In the gold vs bitcoin debate

Gold and bitcoin are both marketed as inflation protection, with different evidence behind them. Gold's case is historical: it rose from $35 to over $800 per ounce during the inflationary 1970s and has broadly tracked money supply growth over long horizons. Bitcoin's case is structural: a supply capped at 21 million cannot be inflated, though its short history includes periods, notably 2022, when its price fell while inflation was high. The honest comparison is long-run supply discipline on both sides, with very different lengths of track record.