What Inflation Actually Is

Most news reports describe inflation as prices rising. Eggs cost more. Rent costs more. Everything costs more.

That’s not wrong — but it’s describing the symptom, not the cause. And the distinction matters more than it might seem.

Prices don’t rise in a vacuum. They rise because the purchasing power of money falls. When there’s more money in the system chasing the same amount of goods, sellers can charge more. The goods didn’t become more valuable. The money became less valuable.

Think of it this way: if you wake up tomorrow and every price in the world has doubled overnight, have things gotten more expensive — or has your money gotten cheaper? The answer is both, but they describe the same event from different angles. Focusing on prices lets governments off the hook. Focusing on purchasing power puts responsibility where it belongs.

This framing matters for your finances. If you’re holding cash savings and inflation is running at 8%, you’re not breaking even. You’re losing 8% of your purchasing power every year — even if your bank balance never changes. The number stays the same. The value shrinks.

Over time, this is devastating. $100,000 in savings at 8% inflation loses half its purchasing power in about 9 years. You did nothing wrong. You saved responsibly. The system simply transferred your wealth — quietly, invisibly — to somewhere else.

To where? That’s tomorrow’s question.

Tomorrow: follow the money — who actually benefits when inflation rises?

— The Daily Bit