Why Your Money Buys Less Every Year (And Who Benefits First)

Next time you’re at the grocery store, look at your receipt. Really look at it. The eggs that were $2 a few years ago are now $4. The bag of rice that lasted you a month used to cost $5 — now it’s closer to $9. Nothing changed about the eggs or the rice. They didn’t get better. They didn’t become rarer. But somehow, the number on the price tag keeps climbing.

You’ve probably felt this without thinking too hard about it. You adjust. You switch brands, buy less, stop noticing. But if you add it all up — groceries, rent, gas, insurance — the picture gets harder to ignore. The money in your account is the same, but it quietly buys less every year. It’s like a leak you can’t find: nothing looks broken, but the bucket keeps getting lighter.

Most people chalk this up to “inflation” and move on. Prices go up — that’s just how the world works, right? But here’s the thing that started bothering me: why do prices go up? Who decides that your groceries should cost more this year? And more importantly — does everyone pay the same price for inflation, or do some people benefit from it while others just absorb the cost?

Those questions led me to Lyn Alden’s Broken Money, and what I found there reframed everything I thought I knew about how money works. This article is my attempt to share what I’ve learned.

The largest money experiment in modern history

In March 2020, the world shut down. And governments responded by doing something extraordinary: they created money on a scale never seen before.

In the US alone, roughly $6.4 trillion was injected into the economy between 2020 and 2022. To put that in perspective, the total US money supply (what economists call M2) went from about $15.4 trillion in January 2020 to over $21.7 trillion by early 2022 — a roughly 40% increase in just two years.

Here’s the thing that fascinated me: the US dollar didn’t collapse. In fact, it strengthened against most other currencies during this period. Meanwhile, countries like Turkey — which tried similar money creation without the same structural advantages — saw their currency lose 44% of its value in a single year.

That contrast is the core puzzle. Why can some countries print trillions and survive, while others print far less and spiral into crisis? The answer, as Lyn Alden explains in Broken Money, lies in understanding how the monetary system actually works — not how we assume it works.

The three rules nobody explains clearly

Most people think of inflation as a simple formula: government prints money → prices go up. But that’s like saying “the sun rises → I wake up.” It’s technically correlated, but it misses the entire chain of causation that actually matters. Here are the three rules I wish someone had explained to me years ago.

Inflation is a behavioral chain, not a switch

Prices don’t rise because people see a headline about money printing. Prices rise because behavior changes — and that change cascades through the economy in a specific, predictable order.

It works like this: the government injects money into the system (through stimulus checks, bond purchases, or bank lending programs). The first institutions to receive that money — usually banks and large financial firms — start spending and investing more. That increased activity pushes up demand. Businesses, seeing stronger demand, raise prices. Eventually, those higher prices trickle down to you and me at the grocery store.

The key insight: inflation is an emergent effect. It’s the end result of a long chain of behavioral shifts, not an instant reaction to policy. This is why there’s always a lag. The money was created in 2020. The worst of the inflation hit in 2022. The chain takes time to play out.

Think of a crowded concert where the first few rows stand up. They can see fine. But now the rows behind them have to stand up too. And the rows behind them. By the time it reaches the back, everyone’s standing and nobody’s better off — but the first rows got the advantage of seeing clearly before anyone else had to adjust. Inflation works the same way. The early receivers of new money benefit before prices adjust. Everyone else just adapts to the new, worse conditions.

New money never arrives equally — the Cantillon Effect

This is the concept that changed how I see everything. Named after 18th-century economist Richard Cantillon, it describes a simple but devastating truth: when new money enters the economy, it doesn’t reach everyone at the same time.

And the order in which it arrives determines who wins and who loses.

This is why your parents could buy a house on a single income, and you’re running spreadsheets trying to figure out if you’ll ever own one. It’s not because you’re lazier or less disciplined. It’s because the system delivers new money to asset prices first, and to wages last.

Median household income grew 6x. Housing grew 17x. That gap isn’t random. It’s the Cantillon Effect compounding over decades.

The dollar’s “exorbitant privilege” — and why the US plays by different rules

Here’s where it gets geopolitical. The US dollar isn’t just America’s currency. It’s the world’s operating system.

As of 2025, the USD makes up roughly 57% of global foreign exchange reserves. It’s used in 89% of all foreign exchange transactions. When countries trade oil, semiconductors, or commodities, most of those transactions happen in dollars — even when neither country is the United States.

This creates something Lyn Alden calls the “global demand absorption” effect. When the US creates new dollars, the excess doesn’t just circulate domestically. It gets absorbed by the entire world — by foreign central banks buying Treasuries, by international traders needing dollars for commerce, by countries holding dollar reserves for stability.

This means the US can create far more money than other countries before the consequences show up domestically. The inflation cost gets distributed globally. Other countries holding US dollars effectively absorb a portion of the purchasing power dilution.

It’s not free, of course. The US still faces rising interest payments, trust erosion, and long-term debt pressure. But compared to what happens when other countries try the same thing? It’s a different game entirely.

What happens when countries print without the privilege

If the US is playing the monetary game on easy mode, most other countries are playing on nightmare difficulty. And Turkey’s recent experience is the most vivid illustration.

In 2021, Turkish President Erdogan did something remarkable: he insisted that lower interest rates would cure inflation. Against virtually all mainstream economic thinking, he pressured Turkey’s central bank to cut rates from 19% to 14% while inflation was rising. He fired the central bank governor who disagreed.

The result was devastating. The Turkish lira lost 44% of its value in 2021 alone. Inflation spiraled to 85% by late 2022. Citizens rushed to convert their savings into US dollars — a painful irony that reinforced the dollar’s dominance even further.

The comparison tells the whole story. The US created trillions and saw single-digit inflation. Turkey created far less and saw economic devastation. The difference isn’t about smarter policy — it’s about structural power. Global demand for the dollar acts as a pressure valve that other currencies simply don’t have.

As Alden puts it: the global monetary system isn’t neutral infrastructure. It’s power infrastructure. And the US sits at the center of it.

One more distinction that matters: debt vs. printing

There’s a nuance here that took me a while to understand. The US doesn’t just “print money” in the way most people imagine. Instead, it issues Treasury bonds — essentially IOUs that domestic investors, foreign governments, and central banks buy.

This is a critical distinction. Debt is controlled money creation. It spreads the impact over time, maintains market trust, and creates an orderly system where investors willingly participate. Direct money printing — the kind that destroyed Zimbabwe’s currency or fueled Weimar Germany’s hyperinflation — is immediate dilution with no such controls.

Countries hold US debt not because they’re doing America a favor, but because Treasuries are among the safest, most liquid assets in the world. You export goods to the US, receive dollars, and park those dollars in Treasuries. It’s a rational, self-interested choice — which is exactly why the system is so durable.

But it’s not invincible. Inflation reduces the real value of that debt over time, which benefits the US at the expense of its creditors. And as interest payments grow — the US now spends enormous sums just servicing its debt — the pressure on the system increases. This is the tension that makes the next decade so interesting.

Why we don’t notice (and why that’s by design)

If you’ve read this far and feel a bit unsettled, that’s understandable. But I want to be honest about something: the system mostly works. And there are good reasons why it persists.

Debt-based money creation, for all its flaws, is genuinely more stable than the alternatives. It allows governments to respond to crises quickly (as we saw during COVID). It smooths economic shocks. It keeps credit flowing. The alternative — a rigid system where money can’t expand — has its own brutal consequences, including devastating deflationary spirals that destroy jobs and livelihoods.

The system also persists because the erosion is slow. A 3% annual inflation rate doesn’t feel like theft. It feels like normal life. You don’t wake up one morning robbed of your purchasing power — you just gradually notice that things cost a bit more, and you adjust. The slow pace is what makes it politically invisible.

And that’s precisely why understanding it matters. Not because the system is evil or because there’s some conspiracy. But because if you don’t see the mechanics, you’ll keep making financial decisions as if the rules are neutral — and they’re not. The rules consistently favor those who hold assets over those who hold cash. Those who borrow over those who save. Those who are closest to the money creation over those who are furthest away.

The mental models worth carrying

Here’s how I now think about money, distilled into the simplest frameworks I can manage:

Each of these reframes how you think about a different financial decision. “Should I hold cash or buy assets?” looks different through the dilution lens. “Why are prices rising?” looks different through the behavioral chain lens. “Why does the US seem to get away with things other countries can’t?” looks different through the liquidity monopoly lens.

Next time you’re at the grocery store — staring at a receipt that somehow costs more than last month — you’ll know it’s not random. You’ll know that new money flows to banks and asset owners before it ever reaches your paycheck. You’ll know why the US can print trillions while other countries spiral into crisis doing far less. You’ll know that the slow, quiet erosion of your purchasing power isn’t a bug. It’s how the system was built.

None of that will make the eggs cheaper. But you won’t be standing there confused anymore. And that changes more than you’d think — because the decisions you make about saving, borrowing, and investing look completely different once you stop assuming the rules are neutral.

They never were.