On a humid afternoon in August 1971, President Richard Nixon appeared on national television to announce what he called a temporary suspension of the dollar’s convertibility to gold. The Bretton Woods system—which had anchored the global monetary order since World War II—collapsed in a single evening. What Nixon didn’t say, and perhaps didn’t fully grasp, was that he had just unleashed one of history’s grandest experiments in currency debasement.

More than half a century later, that experiment continues. The dollar you hold today purchases roughly 15 percent of what it could buy in 1971. Yet this isn’t simply a story about inflation or the inevitable erosion of purchasing power. It’s a story about how governments discovered that the printing press—or its modern equivalent, the Federal Reserve’s balance sheet—could become the most powerful tool of statecraft since taxation itself.

Currency debasement is as old as currency itself. Roman emperors understood the game well. When Nero needed to fund his extravagances, he reduced the silver content in the denarius from 100 percent to 90 percent. By the time of Diocletian, two and a half centuries later, the silver content had fallen below 5 percent. Each emperor passed the problem to his successor, and the empire’s economic foundation crumbled along with its territorial borders.

The mechanism was simple: create more currency units, each containing less intrinsic value. The modern version is more sophisticated but functionally identical. Instead of shaving precious metals from coins, central banks expand the money supply through asset purchases, interest rate manipulations, and what has become euphemistically known as “quantitative easing.”

Since 2000, the Federal Reserve’s balance sheet has exploded from roughly $600 billion to over $7 trillion at its peak. The M2 money supply—a measure of cash, checking deposits, and easily convertible near money—has grown from approximately $4.6 trillion to over $21 trillion. This represents a more than four-fold increase in just two decades. To put it bluntly: the United States has created more dollars in the past twenty years than existed in the entire history of the republic before the year 2000.

But here’s where the story diverges from Rome. The debasement of the dollar hasn’t simply made bread and circuses more expensive. It has fundamentally transformed the nature of wealth itself, creating what might be called an “asset price civilization”—a society where holding cash is for suckers and entry into asset ownership is the primary determinant of economic fate.

When the Federal Reserve floods the system with liquidity, that money doesn’t distribute evenly like water seeking its level. It concentrates in asset markets. Stocks, bonds, real estate—anything that can be owned and traded—becomes inflated first and fastest. The S&P 500 has returned over 400 percent since 2009, a period that coincides almost exactly with the Fed’s most aggressive monetary expansion. In October 2025, the index broke above 6,800 for the first time in history—up more than 40 percent from its April 2025 bottom. In just six months, the S&P 500 added $17 trillion in market capitalization, a sum larger than the entire GDP of China. This is what monetary debasement looks like in real time: not gradual erosion, but explosive wealth creation for asset holders.

This creates a peculiar dynamic. If you owned assets—a home in 2010, index funds, even a modest retirement account—you’ve likely seen your wealth multiply. The median home price in the United States has increased from roughly $170,000 in 2000 to $435,000 as of October 2025. Those who held S&P 500 index funds through the April 2025 dip have watched their portfolios surge 40 percent in just six months. Meanwhile, if you worked for wages and saved in cash, you’ve been swimming upstream against an invisible current.

The implications are profound and troubling. Wealth inequality has widened not primarily because the rich work harder or innovate more, but because they hold assets while others hold jobs. The Federal Reserve, in its effort to prevent economic collapse and stimulate growth, has inadvertently engineered one of the largest upward transfers of wealth in American history. When the stock market can add $17 trillion in value in half a year—more wealth than most nations will generate in a decade—while wages grow at 3 or 4 percent annually, the mathematical divergence between asset owners and wage earners becomes impossible to bridge through work alone.

For years, economists puzzled over a strange contradiction. The money supply was exploding, yet consumer price inflation remained mysteriously subdued. The CPI—the Consumer Price Index that measures the cost of goods and services—showed inflation averaging around 2 percent annually through most of the 2010s, even as the Fed’s balance sheet quintupled.

The answer lies in understanding where the money went. It didn’t immediately flood into the consumer economy. Instead, it accumulated in asset markets and, importantly, was offset by powerful deflationary forces: globalization, technology, and the transition to a service economy. Chinese factories and Amazon’s logistics network suppressed the price of manufactured goods. Automation and software reduced labor costs. The result was a bifurcated economy where assets inflated dramatically while consumer goods remained relatively stable.

This arrangement worked beautifully—until it didn’t. The COVID-19 pandemic changed the equation. Supply chains fractured. Workers demanded higher wages. Governments deployed unprecedented fiscal stimulus, sending checks directly to households rather than channeling money through banks and financial markets. Suddenly, all that liquidity found its way into the consumer economy.

The result was the highest inflation rates in four decades. Prices for everyday goods surged 20 to 30 percent in just two years. Suddenly, the debasement that had been invisible to ordinary Americans became impossible to ignore. The grocery bill told a story that economic statistics had obscured for years.

This brings us to what might be the most consequential development of the debasement era: the desperate hunt for inflation hedges. When money itself becomes unreliable, people seek refuge in things that hold value independent of government decree.

Traditionally, gold served this function. Since Nixon closed the gold window in 1971, gold prices have risen from $35 per ounce to over $4,100—a more than 117-fold increase that dramatically outpaces even the dollar’s official loss of purchasing power. But gold is ancient technology, difficult to transport and impossible to divide for small transactions.

Enter Bitcoin and the cryptocurrency revolution. In 2009, an anonymous programmer launched a digital currency with a hard cap of 21 million units—a direct rebuke to unlimited fiat creation. The timing was exquisite: Bitcoin emerged from the ashes of the 2008 financial crisis, just as central banks began their most aggressive monetary experiments.

Bitcoin’s advocates describe it as “digital gold”—a store of value immune to debasement because no central authority can create more of it. In just over a decade, Bitcoin has grown from worthless to a market capitalization exceeding $1 trillion, despite extreme volatility and numerous declared “deaths.” Love it or hate it, Bitcoin represents something historically significant: the first successful attempt to create money outside the control of nation-states.

The broader crypto ecosystem has spawned thousands of alternative currencies, decentralized finance protocols, and tokenized assets. Some are innovative experiments in governance and economics. Many are outright frauds. But collectively, they represent a vote of no confidence in traditional monetary management—a recognition that debasement is now baked into the system and alternatives must be found.

Perhaps no asset class has been more transformed by monetary debasement than housing. Homes have evolved from places to live into investment vehicles, wealth storage devices, and inflation hedges. This transformation has far-reaching social consequences.

When interest rates fall to historic lows—a deliberate policy choice to combat deflation—asset prices rise mechanically. A mortgage at 3 percent allows borrowers to purchase much more house than a mortgage at 7 percent. But this creates a trap: as prices rise, housing becomes unaffordable for first-time buyers even as it enriches existing owners.

Major metropolitan areas have become increasingly unaffordable. In cities from San Francisco to Austin to Miami, median home prices now exceed seven or eight times median household income—ratios that would have been considered absurd a generation ago. Young people face a Catch-22: they need assets to protect against inflation, but inflation has priced them out of the asset market.

The result is a new feudalism. Those who bought property in 2010 or inherited wealth sit atop appreciated assets. Those starting out face either permanent renting or crushing debt loads. The American dream of upward mobility through homeownership becomes progressively harder to achieve with each round of monetary expansion.

Central bankers face an impossible dilemma, one that goes to the heart of modern governance. Stop the monetary expansion, and you risk deflation, depression, and financial collapse—the catastrophes that haunted the 1930s. But continue the expansion, and you debase the currency, inflate assets beyond reach, and create a society of haves and have-nots divided not by effort but by timing and inheritance.

The Federal Reserve has tried various strategies. Forward guidance. Quantitative easing. Reverse quantitative tightening. Negative real interest rates. Each innovation buys time but doesn’t resolve the underlying contradiction: we’ve built an economy that requires constant monetary expansion to avoid collapse, even as that expansion creates instability and inequality.

Some economists argue for “helicopter money”—direct cash transfers to citizens rather than asset purchases that benefit the wealthy first. Others advocate for a return to sound money principles, though they differ on whether this means gold, Bitcoin, or simply fiscal discipline. Still others suggest we’ve entered a new paradigm where traditional concepts of sound money no longer apply.

The dollar’s debasement has consequences far beyond American borders. As the world’s reserve currency, the dollar’s instability reverberates globally. Emerging markets that borrowed in dollars face crushing debt burdens when their own currencies depreciate. International trade becomes unpredictable when the unit of account itself is unstable.

Yet the dollar’s dominance also gives America an “exorbitant privilege”—the ability to run persistent deficits and export inflation to the rest of the world. Other nations must hold dollar reserves and accept America’s monetary decisions, even when those decisions serve domestic rather than global interests.

This has led to mounting frustration and calls for alternatives. China promotes the yuan as a settlement currency. Some nations conduct trade in euros or gold. The BRICS countries discuss creating a common currency. But unseating the dollar is easier said than done. It requires deep, liquid financial markets, rule of law, and global trust—qualities that took generations to establish and cannot be replicated overnight.

The debasement of the dollar isn’t a conspiracy or an accident. It’s a policy choice—perhaps an inevitable one given the structure of modern economies and the political economy of democratic capitalism. But choices have consequences, and we’re beginning to see the contours of what those consequences look like.

An economy divided between asset holders and wage earners. A generation priced out of homeownership. Wild volatility as monetary policy swings between expansion and contraction. The rise of alternative currencies and stores of value. Growing political anger at institutions that seem to rig the game in favor of those who are already wealthy.

The optimistic view is that we’ll muddle through, as we have before. Inflation will moderate. Asset prices will stabilize. New technologies will create opportunities that offset the disadvantages of monetary instability. Human ingenuity will find a way.

The pessimistic view is darker. We’re in the late stages of a monetary experiment that will end, as all such experiments do, in crisis. When the crisis comes—whether through hyperinflation, financial collapse, or political upheaval—the reset will be wrenching. The shape of what follows is anyone’s guess.

What’s certain is that we can’t uninvent the knowledge that money can be created at will, nor can we easily return to systems that constrain that creation. The genie is out of the bottle. We’re living through the consequences of that liberation—both its benefits and its costs.

Perhaps future historians will look back at our era as a brief experiment between the gold standard and whatever comes next. They’ll note how we discovered that money is nothing more than collective belief, and how that discovery transformed everything from the way we save to the way we conceive of wealth itself. They’ll see us as pioneers navigating uncharted territory, making it up as we go along.

And they’ll wonder, as we do now, whether we were wise enough to avoid the fate of those Roman emperors who debased their way to ruin, or whether we’re simply repeating history with more sophisticated tools but the same inevitable destination.

Created in collaboration with Claude Sonnet 4.5