Inflation Explained: Why Your Money Buys Less Every Year (And What We Can Do About It)

The Inflation Mystery: How Money Creation Fuels Rising Prices

Here’s a wild fact: most of the money in our economy doesn’t come from the government. It’s created by banks every time they issue a loan. That means that new money is always being pumped into the economy, but it comes with a catch: it’s created as debt, with interest attached. This constant flow of debt-based money is one big reason why inflation exists in the first place.

Why Does Money Creation Cause Inflation?

• More Money Chasing the Same Goods: When banks create new money as loans, it means more money in circulation. But if the supply of goods and services doesn’t increase at the same rate, prices go up.
• Debt-Driven Demand: Debt-fueled money gives people and businesses extra purchasing power, which can drive up demand—and prices—with it.
• Interest Costs Passed Along: When companies and governments borrow, they pay interest, which can eventually trickle down as higher prices on goods and services.

Why Traditional Solutions Aren’t Working

Governments and central banks try to keep inflation in check using tools like interest rate hikes, but these approaches treat the symptoms, not the cause. Since almost all money is created by banks as debt, there’s a constant pressure on prices to rise over time. It’s like a balloon that keeps expanding—and one little pop can throw the whole economy into chaos.

What We’re Seeing:

• Higher Costs of Living: Everything from housing to food to transportation feels the impact as inflation eats away at our purchasing power.
• Savings Lose Value: As prices rise, the value of money saved over time decreases. That dream of an easy retirement? Inflation isn’t helping.
• Unstable Economy: The need to keep creating more money (and more debt) to fund growth puts the economy on a shaky foundation.

The Sovereign Money Solution: Inflation Without the Pain

Imagine an economy where money is created by a public authority and not by banks issuing loans. This is what Sovereign Money aims to do: create a stable money supply that isn’t tied to debt. With Sovereign Money, inflation wouldn’t be eliminated entirely, but it would be far less volatile, making price stability a reality.

Here’s How Sovereign Money Tackles Inflation:

• Debt-Free Money Creation: By creating money directly, without debt, the economy can grow without adding constant upward pressure on prices.
• Balanced Supply and Demand: Instead of pumping in debt-fueled cash, Sovereign Money allows for a stable, carefully managed money supply that matches real economic needs.
• Real Value in Savings: With stable prices, the value of money remains more consistent over time, making it easier for people to plan for the future.