Why Your Money Buys You Less Every Year - Dominic Frisby

The End of the Gold Standard

Frisby emphasizes the transformative impact of moving away from the gold standard, particularly after 1971 when America officially severed the dollar's direct convertibility to gold. Historically, gold provided a tangible, scarce, and stable basis for currency value. Money tied to gold required governments and banks to restrain money creation to the amount of mined gold, which is costly and limited. This constraint maintained relative price stability over a long period and preserved the value of wages and savings.

The gold standard era, especially in the 19th century, saw the value of money increase rather than decrease, reflected in falling consumer prices and rising real wages. However, with the collapse of this system, governments have since had unchecked power to print money and stimulate economies through quantitative easing and increased debt issuance. This shift has allowed money supply to balloon, eroding the purchasing power of currency. Prices have generally risen, making life more expensive for the average citizen.

While it may appear that salaries and wages have increased alongside rising costs—inflation generally being reported at moderate official rates—Frisby points out that when comparing wages to commodities like gold, real income has declined. House prices, in particular, have surged far beyond the growth of wages, partly driven by credit availability through mortgages, which creates additional money and fuels asset inflation. In contrast, goods bought predominantly with cash—such as washing machines—have increased much less in price, and many have actually become more affordable thanks to technical innovation and global supply chains.

Inflation, Money Creation, and Government Spending

The discussion touches on the nature of inflation and its measurement. Official figures often fail to capture the full inflation picture due to the selection of goods and services in the consumer price index, many of which benefit from productivity gains or are bought without credit. However, significant portions of newly created money flow into financial assets and real estate, inflating their prices far above official inflation metrics.

Governments finance expenditure in three ways: extracting taxes, printing money, and issuing debt. With the gold standard removed, the reliance on money creation and debt has dramatically increased. The enabling power to generate money out of thin air has expanded state influence and bureaucracy to levels unheard of when money was scarce and stable. Yet, this power comes at the cost of financial stability, personal wealth erosion, and growing inequality.

Frisby warns that this drug-like dependency on money printing to solve economic crises has diminishing returns and risks eventual system failure, given the vast government debts and soaring interest obligations, which in places like the UK consume a significant portion of newly borrowed funds.

The Significance of Gold

Beyond explaining gold's historic role as money, Frisby reflects on the metal's unique physical properties—its durability, malleability, permanence, and cosmic age—which make it unrivaled as a store of value. Unlike fiat currencies that can be printed endlessly and lose value, gold cannot be created or destroyed easily, retaining purchasing power across millennia.

The interview also delves into the mystery and conspiracy theories surrounding American gold reserves, particularly the notorious claim that the U.S. does not possess the 8,000 tons of gold it claims. Despite public assurances, the gold held by the U.S. Treasury in Fort Knox has not undergone a comprehensive, publicly verifiable audit for decades. Both former President Trump and Elon Musk advocated for a transparent audit, which never came to fruition, deepening skepticism.

This silence becomes especially relevant against the backdrop of China's quietly aggressive stance on gold accumulation. China, unlike America, underreports its gold holdings, potentially by several multiples, due to opaque reporting and state control over mining and imports. Since 2007, China has been the world's largest gold producer and importer, amassing what could be tens of thousands of tons of gold. This underground gold hoard, coupled with the country's ambitions for the yuan to become a global reserve currency, heralds a shift that could challenge the dollar's dominance.

Financial Geopolitics

The podcast highlights the significance of reserve currencies—the dominant money used internationally for trade and banking—and how America's dollar supremacy confers immense political and economic power. However, this dominance is threatened by the combination of America's apparent gold accounting issues and China's gold buildup.

Frisby underlines that reserve currencies historically start with tangible metal backing—gold or silver—before becoming fiat and losing that backing over time. The potential for China to openly assert a gold-backed yuan could lead to a global currency realignment or conflict, undermining the U.S. dollar's primacy and causing massive financial upheaval.

Countries along China's Silk Road trading bloc are simultaneously decreasing their dollar reserves and increasing gold holdings, signaling a collective move toward de-dollarization and alternative global payment systems. Russia, too, has quietly expanded its gold reserves to escape economic sanctions and avoid reliance on Western financial systems.

Impact on Ordinary People

Frisby paints a sobering picture for ordinary citizens, especially those with salaries, who face rising living costs, stagnant or declining real incomes, and unaffordable housing markets. While the wealthy may preserve or grow their wealth through gold, real estate, or digital assets like Bitcoin, the average worker struggles with daily expenses and shrinking savings value.

The structural incentives of governments to overspend, print money, and expand welfare programs for political gain weigh heavily on the fiscal future. The current system's inherent contradictions—governments that can create money but still require taxation and borrowing—foster illusions about real economic health and unfairness in wealth distribution.

Financial literacy remains remarkably absent from education, leaving many ill-equipped to manage personal finances or understand the long-term implications of inflation and currency debasement. Frisby stresses that understanding money and its creation is crucial for societal stability, warning that ignorance breeds potential for upheaval.

As a hedge, Frisby advises accumulating non-government money forms—physical gold and digital assets like Bitcoin—to protect personal wealth from inflation and potential monetary crises, given their limited supply and resistance to political manipulation.

Government Spending

The conversation also touches on political economy, criticizing high taxation rates and bloated government spending, which now represent a much larger share of GDP than during historic periods of economic growth and innovation. The golden age of Britain, for example, existed under low tax burdens and sound money principles.

Yet, contemporary political promises often revolve around increased welfare and public spending, creating tension between growth aspirations and fiscal realities. Reformist movements risk merely mirroring traditional party policies without addressing fundamental economic challenges. Without tackling tax burdens and monetary policy effectively, social disaffection and economic stagnation may worsen.

Frisby also highlights demographic impacts, noting that rising living costs directly affect family sizes and societal renewal, with smaller families often cited as a consequence of economic pressures.