What is the cumulative inflation since 2010? How big is the loss of purchasing power?
Sudden drop in purchasing power
The purchasing power of a dollar in 2010 is equivalent to about $1.40 today. The greenback therefore experienced cumulative inflation of 40%. Or 2.63% per year on average between 2010 and today.
This means that prices are 1.40 times higher than in 2010. A dollar now only buys 71% of what it could buy at the time. In other words, purchasing power fell by 29%.
For comparison, in the United Kingdom, £1 in 2010 is equivalent to £1.64 in 2023. That is a cumulative inflation of 64%. She was in France from 25%, which corresponds to a loss of purchasing power of 20%. The same euro buys 20% less things than in 2010.
This drop in purchasing power is partly offset by the increase in average salary (+8%). That said, a euro saved in 2010 still lost 20% of its purchasing power, salary increase or not.
Let us add that a good part of this inflation has manifested itself very recently. It was 10.5% over the last two years in France.
And given the geopolitical tensions which are added to those linked to energy (peak oil), there is no reason to be very confident for the future. Especially since certain scenarios for decarbonizing the economy promise 10% inflation per year for… a long time.
Indeed, gaining purchasing power requires increasing production per person (productivity). This increased production requires machines and therefore (inexpensive) energy. Inflation is closely linked to the prices and volumes of available fossil energy.
INSEE also forecasts that inflation will reach 5% again in 2023. Knowing that its figures are well below reality.
The real inflation
The Consumer Price Index is a gas factory. Among the accounting tricks, let us note the “substitution effect”.
For example, if the price of red meat increases and the French decide to buy more chicken, the weighting of the household basket will change in favor of chicken. This results in an automatic moderation of inflation.
There is also the quality effect. A computer costs 50 euros in the imaginary world of INSEE due to the improvement in their performance…
This fog dissipates, however, when we look at inflation not overall, but specific to each category.
Price trends between 2010 and 2023 in the United States for four essential products:
-Gasoline (+36%): From $2.73 per gallon to $3.73.
-Bread (+45%): From $1.36 to $1.98.
-Chicken (+48%): From $1.27 per pound of whole chicken to $1.89.
-Electricity (+41%): From $0.12 per KwH to $0.17.
In Franceover two years, food prices jumped by 20% and energy prices by 31%!
Note for the road the time required to lose half of one’s purchasing power under several annual inflation scenarios:
Comparison with the S&P 500 Index and Bitcoin
To put inflation in perspective, let’s take the example of a dollar invested in the US stock market (S&P 500) in 2010. This dollar would be worth $5 in 2023. That’s a return on investment of more than 400%.
However, this figure must be corrected for inflation. Subtracting approximately $1.46 from the $5, the actual return is only $2.63. Which still gives us a 163% increase in purchasing power.
In the case of bitcoin, the performance since 2010 is 3,500,000%. And 4,180% over the last seven years.
In short, those who invested their savings in the S&P 500 or bitcoin saw their purchasing power increase despite ambient inflation.
The fiat system is a monetary ponzi which inevitably generates inflation, and even more so as production (burning more and more fossil energy) weakens.
We burn fossil fuels to convert work into wages. Except that this energy is more and more expensive. Unless there is an energy miracle, we will never relive the thirty glorious years. It is written in advance that inflation will only get worse, exponentially.
This increasingly unbearable inflation will slowly push the masses towards bitcoin, the very first currency to exist in absolutely fixed quantity. What else ?
Bitcoin has the particularity of being within the reach of any stock exchange, unlike prestigious real estate, paintings by great masters or even stock market shares. Which stocks to choose to beat inflation? …
Skeptical? Visit these two articles which deal with the origins of inflation and debt.
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