Inflation: The Silent Tax
Real vs. nominal returns and purchasing power
You have $100,000 in a savings account paying 1%. After a year, your statement reads $101,000. You feel slightly richer.
But the things that cost $100,000 last year now cost $103,000, because inflation ran at 3%. Your account number went up; your real wealth went down by about 2%. This is the most consistently underappreciated force in personal finance, and it never sends you a notice.
Inflation is what happens when the same dollar buys less stuff next year than it did this year. It is not a moral failing of the economy and not always a sign of mismanagement — it is a fact of fiat-money systems and has averaged about 3% per year in the United States over the long run. Some years it runs lower; in 2009 and 2015 the U.
S. saw near-zero inflation. Some years it runs hot; in 2022 it peaked above 9%, the highest reading in forty years.
That is the opening. Finishing a lesson is where it stops being interesting and starts being useful: the full lesson runs to 9 sections and ends with 5 practice questions. A free account is what opens the rest, and the other 255 lessons in the Academy with it. No card.
What this lesson covers
- 1Nominal versus real — the only return that actually matters
- 2Why 'safe' is dangerous over decades
- 3Inflation Erosion Simulator
- 4Asset classes vs. inflation (long-run historical average annual returns)
- 5The Fisher equation — connecting nominal, real, and inflation
- 6What $100,000 in cash is actually worth after inflation
- 71980 to 2024 — what 44 years of inflation did to a dollar (and what stocks did with a different one)
- 8Where to see this on the platform
- 9Summary