It is very peculiar to me when I see government officials announce with much fanfare and celebration that inflation is under control and within the 3%-6% range. Even more odd is the response by some citizens who celebrate this as great news. In essence, however, they are merely rejoicing that the government was only able to make them between 3% and 6% poorer that year. Unknowingly, many have accepted inflation not as an unfair, nefarious, and clandestine taxation, but as something that is necessary and even necessary to keep the economy moving.

Broadly speaking, and notwithstanding oversimplification, inflation is tied to money printing or a country’s level of currency expansion. Each nation’s central bank expands it currency supply each year. For example, since detaching the US dollar from gold in 1971, developed countries have expanded their money supply at an average of 5% per year. That means every 15 years, their money supply doubles. To illustrate how reprehensible this is, a person who put a sum of money into a bank account 15 years ago will see the purchasing power of that sum at the very least decrease by three-thirds (taking into account the measly interest that they may have received). That is what increasing the money supply by only 5% does to savers.

What about developing nations? Developing nations have increased their currency supply at a much higher rate. The top ten countries with the highest average broad money supply growth have been between 100% and 400%, which explains why hyperinflationary periods have occurred disproportionately more frequently in developing nations. One thing is certain, however: hyperinflation is a form of monetary catastrophe that is exclusive to fiat currencies created by governments from thin air!

Alas, by design, money expansion and consequent inflation is the primary avenue by which governments and central banks move value from the people to themselves. It is an ingenious way of moving wealth from the working class to the banking class without a revolution. Inflation is not some monetary act of the gods beyond the control of humans. Rather, it is planned and perpetuated by world governments because the soft money (fiat currency) that citizens are forced into using is easy to print, create, steal, confiscate, and when necessary, destroy.

What restraint and motivation do governments have not to take the easy way out and expand the money supply? Historically, the answer is absolutely nothing. In fact, even the most recent pandemic has shown us how easy it is for governments to assume emergency powers and do anything they dream up to justify borrowing, printing, spending, and looting the freshly created currency.

But it was not always this way! In his book The Bitcoin Standard, Ammous provides a very interesting example of what happens to money (even soft money) under specific circumstances in which printing and devaluing is arrested.

Should a currency credibly demonstrate its supply cannot be expanded, it would immediately gain value significantly. In 2003, when the United States invaded Iraq, aerial bombardment destroyed the Iraqi central bank and with it the capability of the Iraqi government to print new Iraqi dinars. This led to the dinar drastically appreciating overnight as Iraqis became more confident in the currency given that no central bank could print it anymore. A similar story happened to Somali shillings after the central bank was destroyed. Money is more desirable when demonstrably scarce than when being liable to being debased.

The cost of owning and evaluating wealth primarily in government-issued fiat financial instruments is not only unwise, but it’s generally an inaccurate metric. So how does hard money counter this?

Before the modern economic epoch of floating fiat currencies, when the currency was backed by gold (even if only partially), governments and central planners could not simply press a button on their printing press. Hard money was the restraint. Value belonged to those who produced and offered something valuable to society. Today, value inevitably creeps to those in power, who specialise in controlling, manufacturing, and distributing of soft fiat currencies. With each year of inflation and currency supply increase, those in power will continue to own an even larger piece of the wealth pie and those who are not anchored to hard money will inevitably become poorer with each passing year.

Silver and gold are one of the safest and time-proven ways of securing the wealth you already have. Even today, these two monetary metals remain the antithesis of government-issued fiat money. After all, it is worth noting that global central banks continue to bash gold in the public but hoard it in private. Why? Perhaps because in the history of the modern world, countless people have gone bankrupt while holding paper money. There is yet one person to experience catastrophic loss of wealth with their silver and gold in hand. So, plan and save accordingly.