How to beat inflation and monetary debasement

Have you ever heard someone say that, in the past, they could buy a full shopping cart with much less money? These stories are common and, far from being just nostalgia, they reflect the real impact of inflation on our daily lives.

Inflation is like an invisible thief, steadily eroding the purchasing power of your money year after year. What used to buy a full basket of goods might now only cover half. But the issue goes beyond rising prices, it's deeply tied to something even more significant: monetary debasement, which reduces the real value of money in circulation.

In practice, this means that the money you have today will be worth less tomorrow, directly affecting your ability to protect and grow your wealth. However, there are strategies not only to preserve what you have but also to help grow your wealth, even in times of high inflation.

In this article, we’ll explore, in simple and practical terms, how to tackle inflation and secure a more solid financial future.

A Brief History of Money

To understand the impact of inflation, we need to take a step back and look at how the monetary system has evolved over time.

After World War II, in 1944, the Bretton Woods Agreement was established, reorganising the global economy. Under this system, the US dollar became the most important currency in the world, tied directly to gold. In other words, each dollar represented a fixed amount of gold held in reserves. This gave people confidence that their money had real value and limited the uncontrolled currency printing.

However, during the 1960s and 1970s, the United States faced significant expenses from the Vietnam War and other policies. To fund these expenditures, the government printed more dollars than it had in gold reserves, which led to growing mistrust of the system.

In 1971, President Richard Nixon ended the gold standard, making the US dollar a fiat currency (money with no backing). From that point onwards, the value of currencies has depended solely on the trust of governments and individuals, with no ties to physical assets like gold.

What Does This Mean for the Economy?

Without the gold standard, printing money became an easy solution for governments facing economic crises. However, this practice comes with a significant side effect: monetary debasement. When there is more money in circulation than goods and services available, prices rise, and purchasing power falls. Over time, this is why what could once fill a shopping cart now buys far less.

The end of the gold standard not only transformed the global financial system but also placed an invisible burden on populations. Today, stable economies face average inflation rates of 2% to 3% annually (much higher in some regions). For example, the UK's inflation rate is 2.3% this year, compared to 4.6% last year and its long-term average of 2.82%.

Source: YCharts

In practical terms, leaving your money "under the mattress" is a sure way to lose wealth over time.

Now that we've explored how history has shaped inflation and monetary debasement, let's focus on practical strategies to protect and grow your wealth.

Stocks and Indices

Investing in stocks is one of the most traditional strategies for protecting and growing wealth over time. By purchasing stocks, you become a part-owner of companies that, ideally, continuously create value.

Indices, on the other hand, are collections of these companies, offering a diversified solution for those seeking consistent results with lower individual risk. For example, the S&P 500, one of the world’s most well-known indices, represents the 500 largest companies in the United States, including giants like Apple, Microsoft, Amazon, Johnson & Johnson, and Tesla. Over the past 10 years, this index has delivered an average annual return of 13.4% . This performance generally outpaces inflation, especially in stable economies, making the S&P 500 a reliable option for long-term investors.

However, it’s important to consider the difference between nominal returns (gross) and real returns (adjusted for inflation). The chart below illustrates the performance of a portfolio based on the S&P 500 over time. The blue line shows the portfolio’s nominal growth (10.91% ), while the red line reflects inflation-adjusted growth (8.18%, or -2.73% difference). This highlights how inflation impacts returns, even for high-performing investments.

Source: Curvo

Cryptocurrencies

Cryptocurrencies are emerging as a powerful alternative to traditional investments, especially in times of monetary debasement. Unlike fiat currencies, which rely on trust in central banks and governments, Bitcoin operates on a decentralised and transparent system based on blockchain technology, offering a unique way to protect and grow your wealth.

While Bitcoin leads with its deflationary nature, other cryptocurrencies like Ethereum ($ETH) also incorporate similar features. Since transitioning to a proof-of-stake consensus model in 2022, Ethereum burns a portion of ETH with each transaction, reducing its supply over time and enhancing scarcity to support its value.

Investing in cryptocurrencies provides opportunities for asset appreciation and passive income. Strategies like staking, liquidity provision, and lending, giving investors diverse ways to leverage their investments.

Best of all, SwissBorg can help you take your first steps into crypto, while also offering opportunities for passive income generation, with yields up to 13% annually. Discover SwissBorg Earn today.

Bitcoin: A Deflationary Asset

Bitcoin, the first cryptocurrency ever created, stands out globally due to its unique characteristic: it is a deflationary asset. Unlike fiat currencies, which can be printed in unlimited quantities, the asset has a maximum supply of 21 million units , creating scarcity that tends to increase its value as demand rises.

One of the key mechanisms behind Bitcoin is the halving, which occurs every 210,000 blocks (roughly every four years). During a halving, the reward miners receive for processing transactions is cut in half, reducing the number of new Bitcoins entering circulation. This predictable reduction in supply reinforces Bitcoin’s deflationary nature. As shown in the chart below, Bitcoin's supply follows a decreasing and predictable curve, ensuring that its scarcity is maintained over time.

Source: Bitcoin.com

This deflationary structure has contributed to Bitcoin’s exceptional performance as a financial asset. Over the past 10 years, Bitcoin has delivered impressive average annual returns, even considering its short-term volatility. These returns consistently place it above traditional assets such as stocks, gold, and real estate, especially for those aiming to outpace inflation and grow wealth.

The following chart illustrates Bitcoin’s historical performance:

Source: Curvo

Bitcoin’s historical success reflects a combination of scarcity, growing demand, and increasing trust in its role as a store of value. Despite short-term fluctuations, Bitcoin has proven resilient, attracting both institutional investors and individuals seeking alternatives to protect their capital against monetary debasement.

A concrete example of this growing interest can be seen in the capital inflows to Bitcoin ETFs compared to gold ETFs. In the first year since the launch of Bitcoin ETFs, inflows have already surpassed the total from the first four years of gold ETFs combined, with the year still ongoing, leaving even more room for growth, as shown in the image below: 

These data show a clear shift in investor perception, especially among institutional investors. While gold has traditionally been seen as a store of value, Bitcoin is quickly establishing itself as "digital gold." The early strong capital inflows into Bitcoin ETFs further strengthen the thesis of a growing demand for a modern, transparent alternative

Conclusion

Protecting your wealth from inflation might seem like a daunting challenge, but with the right strategies, it’s entirely achievable. As we’ve seen, traditional assets like stocks and indices are essential for building a solid portfolio, while Bitcoin offers an innovative and increasingly relevant option for modern investors.

The most important step is to take action. Allowing your money to sit idle is no longer a wise choice in today’s economic climate.

If you’re ready to dive into this world, platforms like SwissBorg are here to make your journey easier. SwissBorg offers security, practical tools, and guidance so you can confidently invest in Bitcoin, other cryptocurrencies, and even diversify across multiple strategies.

Inflation may be inevitable, but with the right approach, you can not only face it but turn it into an opportunity to secure a stronger financial future.