Why inflation math matters
A dollar today buys less than it did 30 years ago. The reverse: your grandparents' "expensive" house might be cheap in today's dollars. Inflation is the invisible erosion of purchasing power — about 3% per year on long-term US average, with wild swings (15% in the 1970s, <2% in the 2010s, ~8% in 2022).
Historical US inflation by decade
- 1970s: 7.5% average (oil shocks, Vietnam deficit)
- 1980s: 5.6% (Volcker disinflation)
- 1990s: 3.0% (tech boom, cheap imports)
- 2000s: 2.6% (Greenspan era)
- 2010s: 1.8% (post-GFC slack)
- 2020s (so far): ~4.8% avg (COVID supply + fiscal stimulus)
How to hedge against inflation
- Stocks: Equities historically return 7% real (above inflation). Best long-term hedge.
- TIPS (Treasury Inflation Protected Securities): Principal adjusts with CPI. Pay ~1-2% real rate.
- I-Bonds: Treasury savings bonds paying inflation + fixed rate. Max $10k/year direct, $5k with tax refund.
- Real estate: Rents and home values typically track inflation over long periods.
- Commodities/gold: Volatile but historically inflation-correlated.
- Not cash: HYSA at 4-5% just keeps pace with high inflation and loses in normal years.
Fun facts from the data
- $100 in 1970 = ~$800 in 2026 (8x purchasing power loss over 56 years)
- $10 gas in 1990 = the "same" as ~$22 today
- A 1970 McDonald's burger at $0.35 = ~$2.80 today in real dollars (McDonald's actually costs more, reflecting real price increases beyond inflation)
- A $60,000 salary in 2000 = ~$108,000 in 2026 just to maintain the same lifestyle