Because it is designed to. The Federal Reserve's official target is 2% inflation per year: not a failure it fights, a goal it aims for. Two percent sounds gentle, and compounding makes it a demolition on a delay. At 2%, prices double roughly every 35 years, meaning the dollar is engineered to lose half its purchasing power over one working life, before a single crisis, war, or stimulus round adds more.
Your grandparents were not imagining it
Run the family math. In 1970, the median American home cost about $23,000 and the median household earned about $10,000 a year: a house was two and a half years of income. Today the median home runs around $420,000 against roughly $80,000 in income: more than five years. Same house, same country, same species of buyer. The measuring stick changed under it.
Or take the unit itself: a 1970 dollar does the work of roughly eight of today's dollars. Everything your grandparents told you ("a burger was a quarter, we bought the house on one salary") is not nostalgia. It is data.
Why the leak feels like weather
Inflation is the only tax that arrives without a bill. It moves at a pace calibrated to be invisible: fast enough to transfer real wealth every year, slow enough that no single year feels like theft. Stretch a 90% loss across three generations and people born into it never know how much was taken. It feels like the weather, something that just is, not something being done.
That is not an accident of psychology; it is why the mechanism survives. A government that seized 2% of every savings account each January would face revolt by February. A government that prints the equivalent faces an editorial about "price pressures."
Who wins, who pays
Follow the flow and inflation stops looking random.
| Winners | Why |
|---|---|
| Borrowers, biggest first | Debts are repaid in shrunken dollars; the largest borrower on Earth is the government itself |
| Asset owners | Houses, stocks, and land float up with (or above) the tide |
| Whoever spends new money first | Banks and institutions transact at old prices before the dilution reaches everyone else |
| Payers | Why |
|---|---|
| Savers | Cash and deposits melt quietly, year after year |
| Wage earners | Paychecks chase prices from behind, and every raise must be renegotiated |
| Anyone without assets | The ladder's bottom rungs inflate away fastest: housing, tuition, healthcare |
Notice the pattern: inflation moves value from people who hold money toward people who hold assets and debts. It is a transfer, upward, annually, by design.
Isn't the fix just "buy Bitcoin"?
Bitcoin diagnosed this exactly and then overcorrected into the mirror-image failure: a currency so committed to gaining value that nobody will spend it. Inflating money punishes savers; deflating money punishes commerce. A real currency has to refuse both.
Stable purchasing power is one of the five design requirements of the Alignment Economy: every verified human receives 1,440 points a day, and a daily rebase pins the supply per person permanently, so a loaf of bread costs about the same in points on day one and day ten thousand. No target, no committee, no leak. The unit is a minute, and nobody can print more of those.
FAQ
Isn't some inflation necessary to make people spend? That is the standard defense, and note what it concedes: the system needs your savings to melt or the economy stalls. There are cleaner ways to encourage spending than dissolving everyone's cash; expiring daily allocations do it without touching savings' purchasing power.
Don't wages rise with inflation? Eventually, partially, and only after negotiation. Prices adjust automatically; paychecks adjust when you win a fight. The gap between those two speeds is the transfer.
Is deflation the answer then? No. Deflation rewards hoarding and strangles trade, which is Bitcoin's paradox. The answer is neither leak nor squeeze: a unit that holds still.