The Quiet Erosion of Purchasing Power

Since the financial crisis in 2008, the world has witnessed a slow but relentless erosion of purchasing power. While hyperinflation grabs headlines, the less dramatic decline is just as significant.

Take Zimbabwe, where by 2008 inflation had reached an estimated 500 billion percent. People stopped using the currency altogether, opting for US dollars or South African rands instead. The pattern repeated in Argentina and Venezuela, where high inflation forced governments to reset their currencies.

In both Britain and America, central banks expanded their balance sheets, buying assets and creating reserves to suppress yields and push liquidity through the system. This quantitative easing (QE) led to a deliberate expansion of central-bank money, which had been seen as a relatively painless mechanism for stimulating economies.

However, the 2020 pandemic changed everything. Central banks created even more money to combat the economic downturn, but prices surged and purchasing power declined. By February 2026, the dollar had lost around 35% of its value since the financial crisis, while sterling had fallen by nearly 40%.

The experiment that began in 2008 has never truly ended. Central banks continue to expand their balance sheets, creating money and suppressing interest rates. Governments accumulate debt, which becomes easier to finance when interest rates are low. But this comes at a cost, inflation quietly erodes the real burden of fixed nominal debt.

Looking back, we can see that gold's purchasing power has increased over time, while fiat currencies have lost value. Since 2008 alone, gold's price has risen from around $872 to more than $4,200, producing an inflation-adjusted increase in purchasing power of over threefold. However, this does not mean gold has historically produced the greatest return, US equities and housing have generated higher returns.