Combat Inflation by Owning Assets: Cash vs. Gold, Silver, Crypto and Index Funds

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Three days a week I run what I call "the dollar is dead" — a plain look at how the US dollar loses buying power over time. On Fridays I check a basket of assets I started tracking back in February and compare it to what your money would have done sitting in a bank account. This is informational only. I'm not a financial advisor.

The point isn't to talk you into any one investment. It's to show you, with real numbers, why holding only dollars is a slow leak — and why the wealthy hold things instead.

What you'll learn

• What savings accounts, 3-month CDs and treasuries were actually paying
• How those returns compare to reported inflation — before and after taxes
• What gold, silver, bitcoin and ethereum did since February
• What the Dow and S&P 500 did over the same stretch
• What an inverted 2-year/10-year treasury spread is telling us

Why holding only dollars loses

From a thousand-foot view, diversification means owning things other than dollars — real estate, commodities like gold, stocks, bonds, securities. The dollar goes down over time because of inflation, so your buying power shrinks even when your account balance doesn't. Over the last hundred years the dollar has lost more than 99% of its value. That's what the rich understand: dollars go down, assets go up.

What cash was paying

Pulling the FDIC national rates: the average savings account was paying about 0.5%. A 3-month CD was around 1.5%. Treasury yields were up at 5.4%. Some online accounts advertise around 4%, but those float up and down with interest rates — they're not locked in.

Now compare that to inflation, which came in at 2.9% in July. So after you park money in a bank or a treasury, collect your return, and pay taxes on it, you're lucky if you even match inflation. And that's using reported inflation — real inflation on the stuff you actually buy has been meaningfully higher, especially over the last couple of years. Look at where it was last September, or two years ago.

The basket since February

Gold went from just over $2,000 in February to roughly $2,570 — call it a $500 gain on $2,000, about 25%. Put differently: $1,000 in gold became about $1,250, while $1,000 at a 5% bank rate became $1,050. Silver moved from $22.88 to $28.91. Bitcoin went from about $43,000 to $58,000. Ethereum, the largest altcoin by market cap, went from roughly $2,299 to $2,400.

Stocks did the same thing. The Dow Jones Industrial Average — 30 stocks people like to watch — sat at 41,800 versus a little over 38,000 in February. The S&P 500, a broader index of 500 companies, was at 5,600 versus just over 4,900. You don't have to buy 500 individual stocks; you can buy a fund or ETF that tracks the index. On a one-year and five-year chart, both go up and to the right. That's not what the dollar does.

The yield curve

The 2-year treasury note was yielding 3.929% and the 10-year 3.907%. The 2-year paying more than the 10-year means the curve is inverted, which typically signals we're in or heading into a recession. It's been inverted since 2022 — a long stretch — but it's very close to flipping back. Un-inverting is generally a good sign: it means people are confident enough in the long term to accept a higher rate for locking money up longer.

The takeaway

If you save for ten years and your $10,000 becomes $11,000, that doesn't mean you have more buying power. If you were saving for a car and finally got to $20,000, but the car now costs more than that, the savings didn't help. Run it through a calculator that includes taxes and inflation before you assume you're ahead.

Key steps

1. Write down what your cash is actually earning — savings rate, CD rate, or treasury yield.
2. Subtract taxes, then subtract inflation. See what's left.
3. Run the numbers yourself in the investment interest calculator, which includes taxes and inflation.
4. Compare that result to what an asset basket did over the same period.
5. Knock out high-interest debt first — that's a guaranteed return no asset can promise. Start with the credit card payoff calculator.
6. Once the expensive debt is gone, diversify into assets instead of parking everything in dollars. More on that in where to put money after your emergency fund is full.

FAQ

Is a 5% savings account enough to beat inflation?

It's closer than 0.5%, but you have to subtract taxes on the interest first, then subtract inflation. With inflation around 2.9% and taxes taking a bite of your yield, you may barely break even in buying power. Also, those advertised high-yield rates float with interest rates — they can drop.

Should I invest before paying off my credit cards?

Nothing in this basket is guaranteed. Paying off a high-interest balance is the one return you can count on. I'd clear the expensive debt first — see investing while in debt for the math.

What does an inverted yield curve mean for me?

When the 2-year treasury pays more than the 10-year, the market is nervous about the near term, and historically that's lined up with recessions. Practically, it's a reason to shore up your emergency fund and your debt payoff plan. The recession-proofing guide walks through it.