Why Your Dollars Keep Losing Value to Inflation (And What to Hold Instead)

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Every Friday I run the same numbers so you can watch what happens to the dollar over time instead of just hearing someone talk about it. In this one I show how much purchasing power the dollar has already lost, where that loss actually comes from, and the simple way regular people convert dollars into assets.

I'm not a financial advisor and this isn't financial advice. It's the same math I use on my own money after getting out of debt.

What you'll learn

• How much value the dollar has lost over 25, 50 and 120 years
• Why savings accounts, CDs and short treasuries still lose to inflation
• Where inflation comes from and who is really causing it
• What gold, silver, Bitcoin, Ethereum, the Dow 30 and the S&P 500 did over the last year
• How ETFs make it easy to own all six without picking stocks or setting up a crypto wallet
• Why I watch the 2-year and 10-year treasury yields and the unemployment rate

Holding cash is not the same as keeping your money

If you put $100 in the bank, ten years from now you still have $100. But can you buy the same item with it? No. That's inflation. The chart I show goes from 1900 to 2020 and the purchasing power of $100 ends up around $3. And that chart stops in 2020, so it's worse now. A Seeking Alpha article I pull up says the dollar has declined 40% in the last 25 years and 80% since 1970. Most of you watching are older than 25, so this already happened to your money.

What cash is actually paying you

Here are the numbers I track every week: savings at 0.43%, a 3-month CD at 1.52%, and a 3-month treasury at 4.64%. Those have barely moved since February. Meanwhile October inflation came in at 2.6%, and it went up from the month before. And remember 2021, 2022 and 2023 when we had prints well above 5%. That's why cars went up and never came back down, why food went up and never came back down. For those prices to reverse, these numbers have to come down a lot, not just stop climbing.

Where inflation comes from

The government keeps going into debt. When it does, more money ends up in circulation. More money in circulation means prices go up. Prices going up is inflation. That's the whole chain, and that's why the dollar chart only points one direction.

What the wealthy hold instead

Study after study shows people who keep their wealth over time convert dollars into things that go up: real estate, stocks, commodities, and now crypto. So every week I look at six of them. Gold was at $2,652, way up since February. Silver at $31.38, way up. Bitcoin almost $100,000, way up. Ethereum, way up. The Dow 30 went from about 36,000 to 44,000 over the year, roughly a 24% increase. The S&P 500 went from 4,500 to over 6,000, about 33%. So if a dollar in the bank became 97 cents after inflation, a dollar in an S&P fund became about $1.33 before you subtract inflation.

Look at the Dow going back to 1984 and you see dip after dip after dip. That tells you something important: don't put money in the market that you need in three or six months. You don't know when the dips come.

The easy way: ETFs

You don't have to learn how to buy crypto, set up a wallet, or store a bar of gold. Inside Schwab or Fidelity you can buy a spot ETF for gold, silver, Bitcoin or Ethereum, plus index funds for the Dow 30 and the S&P 500. Put $100 in each and you're diversified across six things in a few clicks. Yes, there are real differences between holding the physical asset and owning the ETF, and I've covered those separately. But the ETF route is fast and it works.

The economy signals I watch

The 2-year treasury was at 4.09% and the 10-year at 4.15%. Normally the 10-year should pay more than the 2-year. When it pays less, that's called inverted, and it happened right before every recession shading on the chart, usually about six months ahead. We were inverted from 2022 until August 2024. Does that guarantee trouble? I don't know. It's worth watching. Unemployment also moved from 3.4% in 2022 and 2023 up to 4.2%. That sounds small, but it's a lot of jobs, and it raises the odds you or someone you love gets affected. That's your reminder to have an emergency fund.

Key steps

1. Get your high-interest debt handled first — run your numbers in the Credit Card Payoff Calculator.
2. Keep an emergency fund in dollars. That money is transactional, not an investment.
3. Take what you don't need for bills right now and convert it into assets.
4. Use spot ETFs for gold, silver, Bitcoin and Ethereum instead of buying them directly.
5. Add index funds for the Dow 30 and the S&P 500 so you're not picking individual stocks.
6. Dollar cost average over time instead of trying to time the dips.
7. Check the 2-year vs. 10-year spread, inflation and unemployment so nothing surprises you.

FAQ

Should I invest before my credit cards are paid off?

I focus on getting out of debt first, because high-interest debt works against you faster than most assets work for you. Once your emergency fund is set and the expensive debt is gone, that's when converting dollars into assets makes sense. Compare the two paths with real numbers in Pay Off Debt or Invest First.

Where should my emergency fund live if cash loses value?

Still in dollars. You need it available and stable on the day something breaks, and you don't want to be forced to sell an asset during a big dip. I think of dollars as transactional: hold enough for bills and emergencies, and put the rest to work.

Do I have to buy actual gold or crypto?

No. Spot ETFs let you buy a share that represents an equivalent amount of gold, silver, Bitcoin or Ethereum through a normal brokerage account. You're not holding the asset yourself — the ETF is — but you gain or lose proportionately.