The big picture on inflation, by ITM Trading. Everyone nowadays is completely used to a small and persistent inflation. But it didn’t used to be that way. For centuries, when gold was money, there basically was no inflation — price levels were remarkably constant century in, century out.

Gold was replaced by paper money progressively from 1913 (the start of the US Federal Reserve, similar dates throughout the West) to 1971 (US President Nixon severed the last tie between gold and paper currencies). From 1971, inflation has been persistent, especially in asset prices.

The following graph shows United States inflation over the past 241 years. Look at the tiny blips of hyperinflation during the Revolutionary War, War of 1812 and the Civil War. During these wars the government currency lost all value in a blaze of hyperinflation, but they only look tiny as compared to the inflation we’ve experienced since the Federal Reserve was given control of our monetary system.

But the US has been in a perpetual state of war since 1987 and inflation has been compounding at an exponential rate since 1971. Which is why, according the Federal Reserve, today, there is only 4 cents of purchasing power value left in the original dollar. And yet the central bankers’ cry for even more inflation.

Reminder: The world has built up a huge amount of debt since moving off the gold standard in 1971. This has involved a huge bubble of GDP growth from 1982 to the GFC, and the financialization of our economies, as money manufacture became the main means to wealth for some. See the graph.