Central banks. You have to love them. There aren’t that many man-made institutions that are so widely accepted, entrenched and protected in society that can (and have) so thoroughly paved so many roads to hell with the best of intentions.

They have to walk the most insane daily tightrope, though, to be fair. Central banks have a mandate to implement and manage a country’s monetary policy while pretending to be completely independent of government and financial ministries (pretending because, obviously, they aren’t). 

They have to maintain the most precise balance between inflation and economic growth using the ultimate economy-making-or-breaking weapon – money supply – with little more actual economic insights than the average player in the market they serve.

All while playing the ultimate PR game of managing public opinion of their policies, of course.

Yes, central banks might well prove to be one of the ultimate delusions of our modern society. And we might even have been happy to allow ourselves to dream onward into whatever glorious future they have planned for our civilisation… if they weren’t bungling and ruining our chances at building real wealth to cover their own backs.

You read that right: Central banks are killing your wealth-building ability.

To benefit themselves.

And lying to you about it.

Here’s what you really need to know about central banks and inflation.

Ask any armchair economist and they’ll tell you: “Inflation is the rate at which the prices for goods and services rise over a period”, usually annually. Great definition, so far, but there’s an important suffix you should never leave out: “and the rate at which the purchasing power of currency falls.”

That second part’s telling, because it means you’re paying more for the exact same thing, without its value increasing. This means there’s another way to look at inflation: How much less your currency is worth. Period.

You could even argue inflation has nothing to do with price increases whatsoever.

The proof’s in the tasting: When inflation is high, each unit of currency buys fewer goods and services, significantly impacting your ability to build, maintain and protect wealth. In layman’s terms, if inflation is high at 10%, something that costs R100 this year will likely cost R110 next year.

Meaning if you hold on to physical cash over time, it loses its value over time.

Now, again, there’s the standard rhetoric experts put forward, which is that inflation is “driven by market dynamics”. The textbooks will tell you that you get demand-pull inflation when there’s more demand for goods and services than supply, which means consumers suddenly have more money to spend than the economy has capacity to produce all the goods they want to buy.

So, everyone in the population got so rich overnight that suppliers have no choice but to charge us more? Likely.

The more believable scapegoat is cost-push inflation: The cost of producing goods and services has increased, therefore prices must increase. OK, that one’s a bit more realistic, because, you know, the cost of energy and moving goods go up, wages increase, so, yeah that seems to track a bit more.

You would expect the long tail of that to be that the higher wages create more spending power, which should balance out inflation and lead to economic growth, long term.

And if that’s not happening, it might be because there’s another, way more devious cause of inflation that almost no one talks about…

Unlike in the past, when currencies were linked to actual gold, the Fiat money system allows central banks to increase the supply of money by simply printing more (which increases the supply in the marketplace and thus de-values each unit of that currency). 

This is all good and well when you have a prudent central bank. But the dark side of this is that governments can (and do) use this to bail themselves out of debt. And whilst the governments are incentivised not to abuse this, the mere fact that it can happen and does happen to various degrees introduces risk for any investor or saver.

This practice of governments servicing their debts by printing more money devalues the currency (and thus the value of all goods, services and property owned in that currency) for everyone in the market, including your hard-earned savings and investments.

So, is there any way you can protect yourself against this?

The answer is to do the exact opposite of what the banks do, move away from Fiat-driven programmes and invest in real commodities with intrinsic value.

For this, we like gold.

Unlike paper currency, gold is a tangible asset that’s been used as a store of value for centuries. Gold's physical properties – it doesn't corrode, it's malleable, and it's scarce – make it an ideal medium for preserving wealth.

Historically, gold has maintained its purchasing power over long periods. For instance, the amount of gold required to purchase basic necessities like food has remained relatively stable, even as the prices of these goods have increased in terms of fiat currency. This stability makes gold a reliable store of value.

The supply of gold is relatively fixed. Mining gold is expensive and time-consuming, which means that new gold supply enters the market slowly. This constrained supply, coupled with steady demand, helps maintain its value over time.

When inflation rises, the price of gold typically increases as well, making your gold investment more valuable. This is because investors seek to protect their wealth by purchasing gold, driving up its price. Historical data shows that during periods of high inflation, gold prices tend to rise, preserving the value of investors' assets.

Troygold leverages the enduring value of gold with modern technology, allowing for fractional gold purchases and secure storage. This makes gold investment accessible and convenient. With tools like the Troygold Mastercard, which offers liquidity based on gold holdings, investors can enjoy the benefits of gold's stability while maintaining financial flexibility.