Send this article to a friend:
April
24
2026
|
Send this article to a friend: April |
When the Measuring Stick Shrinks:
He shook his head and said something I’ve been hearing more and more lately:
Granted, he’s a special case – he spends more on malpractice insurance than my family does on our mortgage. And obviously, he does quite well for himself and his family. So I was surprised to hear him talking about his bills – because it sounded like he was sharing the same experiences as Birch Gold Group customers over the last five years:
All in all, he’s living the same lifestyle… but it somehow it just costs more to maintain it. (I looked up the actual numbers after our conversation.) Now, he wasn’t asking for an explanation. He already had one:
I mean, the man’s a brain surgeon – far be it from me to correct him! After all, that’s the common sense answer. It’s also incomplete. Because when everything gets more expensive at the same time, it’s worth asking a different question: What if it’s not just prices changing? What if the thing we’re using to measure prices is changing? The shrinking measuring stick Most of us think about money as something stable. A dollar is a dollar – like an inch is an inch, a pound is a pound and a pint of Guiness still wets your whistle just as much as it always has. But that’s not really how modern currency works. (Dr. Ron Paul and Phillip Patrick discussed exactly this issue in our recent webinar, The Great Repricing.) A useful way to see this comes from what we now call behavioral economics. In a classic set of studies by Daniel Kahneman, Jack L. Knetsch and Richard Thaler, workers were asked about their pay under different scenarios. When wages rose 2% and inflation 4%, most people said they felt okay with it – even though their inflation-adjusted purchasing power declined. When wages were cut 2% while inflation was 0%, workers were angry – even though their inflation-adjusted purchasing power declined the same amount. In other words, so long as the numbers on their paychecks go up, people feel better. This experiment built on work done 100 years earlier by pioneering economist Irving Fisher, who called this way of thinking The Money Illusion. Simply put, it says people think of their money in nominal, not inflation-adjusted terms. So if my neighbor’s take-home pay rose 10% since 2020, he’s probably feeling pretty good about himself… Until he realizes his expenses have risen 30% or more. That’s where the confusion comes from. If you feel like you should be doing better, but in reality you’re doing worse? You could be falling prey to The Money Illusion. In the modern world, purchasing power is not fixed. Our dollars aren’t a wooden yardstick. In fact, they act more like a yardstick made of rubber. Rubber can expand, and contract. And sometimes, it does both at once, in different places. Okay, so let me ask, since 2020:
Obviously, the answer is no. The goods and services we enjoy mostly didn’t improve (some are notably worse). That’s because goods and services, groceries and insurance, didn’t become more valuable. Their prices went up because our dollar measuring stick shrank. That’s the part that’s easy to miss! We’re trained to think:
And yes, sometimes those factors matter. Sometimes supply and demand really is in the driver’s seat. But our dollar measuring stick is always part of the equation. When all prices move in the same direction at the same time, that’s not a supply chain snarl. That’s not a drought in the Midwest and wildfires in California and a greedy corporate profiteer raiding homeowners all at the same time. That’s a shrinking yardstick. Who’s in charge of the yardstick?Over the past several years, something subtle but important has changed. And it’s about more than prices at the pump or our purchasing power. I’ve come to understand that the basic yardsticks all economists and financiers use to measure value – things like interest rates, inflation expectations and long-term debt assumptions – have become less reliable. Now, that might sound abstract… But the effects are rock solid. Here’s a simple way to think about it: For decades, the Federal Reserve could respond to inflation by raising interest rates. That helped stabilize purchasing power, drawing dollars out of the economy and into banks. Paul Volcker famously broke the back of the 1970s stagflationary episode by raising the Fed funds rate to 20%. Today, that tool doesn’t work the same way. Why? Because global government debt has grown so large that raising rates aggressively risks destabilizing the entire financial system. (As The Economist put it in their October 2025 special issue, Governments going broke.) So they end up in a bind:
It’s like trying to dig your way out of a hole! The hole just keeps getting deeper… Why this feels different than ever before We’ve had inflation before. We’ve had economic slowdowns before. But what feels different right now is how broad and persistent the pressure has become. It’s not one category – it’s everything! It’s housing and healthcare costs, insurance and ice cream. Many Birch Gold Group customers feel like it’s impossible to plan for the future right now – because the future is so uncertain. Yet, when we look around, the economy looks… fine. It’s that contradiction that throws people off. If something was clearly broken, it would be easier to understand. Instead, we’re seeing a kind of quiet distress. And it shows up in family budgets long before it shows up in headlines. A different way to look at goldThis is where many people start looking at gold – and often for the wrong reason. They think:
But that framing misses the bigger picture. Historically, gold doesn’t just rise because it’s becoming more valuable. It rises because the currency used to measure it is shrinking. In other words, gold isn’t necessarily going up – and hasn’t been for years now. Instead, the measuring stick is getting smaller. When I say “the measuring stick,” I should clarify – I mean all the measuring sticks. Euro, British pound, Japanese yen and Indian rupees – it doesn’t matter what system your measuring stick uses, gold has been rising steadily for the last six years. That’s why gold has played such a consistent role in finance over time. Not because it’s exciting – but because the price of gold is a useful measuring stick across time and space. What this means for your savings If the measuring stick itself is shrinking, then the question isn’t just:
It becomes:
That’s a different problem entirely. And it leads to a different kind of thinking:
For many Americans – especially those approaching or in retirement – that shift matters more than ever. Because when you’re no longer earning at your peak, you don’t have the luxury of simply “waiting it out” if the economy moves in the wrong direction. There’s a reason these things are complicated!Listen: When it comes to macroeconomic forces like global currency flows and central bank interventions and Federal Reserve swap lines, I’m far from an expert. I’ve learned as much as I know mostly from studying the real world and discussing it with people much smarter than me. I’d go so far as to say I don’t understand the theory behind these things. But I do understand the impacts. And because these vague and shadowy forces are so incredibly complicated (and under-reported), most people simply ignore them. Most of my friends and family have a tendency to focus on visible risks:
But some of the most important risks are the quiet ones: The slow erosion of purchasing power. The gradual loss of confidence in long-term planning, if not our financial futures themselves. The feeling that we’re standing on shifting sands, and the numbers no longer quite reflect the reality we thought we were living in. Now, those risks don’t make headlines. But they shape everyday decisions – how much to save, how much we can afford to spend, what we can afford and what we no longer can. And over time, they matter more than any single crisis. Where to look for stability I’m not suggesting there’s a perfect solution here. There isn’t. But history does offer a consistent pattern: When financial yardsticks become less reliable, people begin looking for assets that aren’t dependent on them. That’s where physical precious metals come in. Not as a way to chase returns (even though they’ve had a good run these last few years). That’s irrelevant, though – because their “good run” is just another way of saying, “Our yardsticks shrank.” Physical precious metals are an asset that serve as a different financial yardstick. One that looks a lot more stable, over time, than the ones we’ve been relying on. A simple question worth asking If everything feels more expensive at once, it’s worth asking: Is it really just prices going up? Or is it possible that your yardstick is shrinking? That’s not a question most people are encouraged to think about. Because we don’t have any control over the dollar’s purchasing power (that’s in the hands of the Federal Reserve and the federal government). When deciding how to position your savings for the years ahead, this is a critical question that prudent savers must answer. If you’d like to better understand how physical precious metals can play a role in diversifying your savings – especially in times like these – we’re here to help. Start your due diligence by learning about the benefits of physical gold ownership, or how to purchase precious metals.
|
Send this article to a friend:
