TL;DR: How Much Has Your Money Really Lost Value?
Let's take £100 from 1969 and see what happened:
The Government Says:
- £100 should be worth £1,411.77 today (official inflation)
What Actually Happened:
- £100 in wages grew to £2,283 (sounds good!)
- But £100 in house value grew to £6,795 (yikes!)
The Reality Check:
- Houses have grown 4.8x faster than official inflation
- Houses have grown 3x faster than wages
- Your saving power is now 1/3 of what it was in 1969
- Young people need to work 2.8x longer than Boomers to buy a house
Translation: We're earning more than ever, but everything important is getting more expensive even faster. And the gap keeps growing.
If you want to learn more about how Bitcoin could help protect you from this devaluation, check out my guide on Achieving Financial Independence with Bitcoin.
Right, let me tell you about the moment that sent me down one of the craziest rabbit holes of my life…
I was scrolling through Twitter one day and saw Robert Kiyosaki (ye know, the "Rich Dad, Poor Dad" guy) posting about buying Bitcoin, gold, and silver.
My first thought? This guy's lost it.
I mean, gold and silver? What was this, are we all pirates or are we in the 1800s?
I was an engineer with a decent understanding of stocks and index funds – surely precious metals were just for conspiracy theorists and doomsday preppers?
and pirates of course.
But something made me curious.
Why would someone recommend buying literal chunks of metal in 2024?
That question led me down a proper wild journey of discovery about our money system.
What I found did my head in so much that I had to triple-check everything. Let me show you what I mean…
The Money Illusion – It's Worse Than You Think
Even Measuring Inflation Is a Problem
Here's something weird – try this experiment:
- Go to the <a href="https://www.bankofengland.co.uk/monetary-policy/inflation/inflation-calculator">Bank of England's inflation calculator</a>
- Put in £100 from 1969
- Check what it says you should have today
You'll get £1,411.77.
But wait…
- Use a different inflation calculator, get a different answer
- Check government statistics, get another number
- Ask about "real inflation," get blank stares
Why does this matter?
Because even the official numbers don't agree on how much your money has lost value.
The Government's Story vs Reality
Let's use that £1,411.77 figure as our baseline.
According to the government:
£100 from 1969 should be worth £1,411.77 today.
In this case, as the government says, inflation means over the past 55 years inflation means life is 14x more expensive (rounding 1411/100)
So just to break even in terms of your purchasing power your wages need to have increased by 14x
A very important note though is that this is taking the official government inflation data – in my opinion actual inflation is much, much higher than this – Understanding Inflation: What It Really Is
Anyway lets carry on with this farce and use government CPI numbers.
Sounds reasonable? Let's see what actually happened…
Wages: The False Comfort
If you earned £100 in 1969, your equivalent job today would pay you £2,283.
UK Wages Growth Since 1969:
- 1969: £100 (base)
- 1979: £358 (3.6x more)
- 1989: £839 (8.4x more)
- 1999: £1,086 (10.9x more)
- 2009: £1,573 (15.7x more)
- 2019: £1,852 (18.5x more)
- 2024: £2,283 (22.8x more)
Source: Office for National Statistics
At first glance, this looks brilliant:
- Government says: £1,411.77 (14.1x increase)
- Actual wages: £2,283 (22.8x increase)
- We're earning more than inflation suggests!
But here's where it gets properly mental…
The Housing Reality Bomb
Now look what happened to house prices over the exact same period.
That £100 of house value in 1969? Hold onto your tea…
UK House Price Growth Since 1969:
- 1969: £100 (base)
- 1975: £241 (2.4x more)
- 1980: £526 (5.3x more)
- 2016: £4,605 (46x more)
- 2022: £6,272 (62.7x more)
- 2024: £6,795 (68x more)
Source: UK Land Registry
Let's line these up:
- Government inflation says: £1,411.77 (14.1x)
- Your wages went up to: £2,283 (22.8x)
- House prices went up to: £6,795 (68x)
In real terms:
- Houses have grown 4.8x faster than official inflation
- Houses have grown 3x faster than wages
- The gap keeps getting bigger every year
Why Age Matters (A Lot)
This hits different generations differently:
Baby Boomers (bought in the 1970s):
- Average house price: £5,000
- Average wage: £1,800
- Years of salary needed: 2.8
Generation X (bought in the 1990s):
- Average house price: £50,000
- Average wage: £13,760
- Years of salary needed: 3.6
Millennials (buying today):
- Average house price: £293,000
- Average wage: £37,430
- Years of salary needed: 7.8
For young people today:
- Need to save 2.8x longer than Boomers
- Need to borrow 2.8x more relative to income
- Need to work 2.8x more years to pay it off
"But That's Just Houses, Right?"
Wrong. Let's look at other essential costs relative to that £100 baseline from 1969:
Education:
- 1969: FREE
- 2024: £9,250/year
- Government inflation suggests this should cost: £700/year
- Reality: Infinity times more expensive
Energy Bills:
- 1969: £100 equivalent
- Government says should be: £1,411.77
- Actually costs: £5,556
- 3.9x higher than inflation suggests
Why Official Inflation Understates Reality
The government's inflation numbers miss the mark because:
- The Basket Problem:
- They measure a "basket" of goods
- Many items get replaced when they get too expensive
- New, cheaper alternatives get added
- The real cost increases get hidden
- The Quality Adjustment:
- "But things are better quality now!"
- They reduce the price increase in the calculations
- Your actual cost still went up though
- The Measurement Problem:
- House prices weren't even in the main inflation figures until recently
- They use "rental equivalence" instead of actual house prices
- Your real costs aren't what they measure
The Real Inflation Rate: What They're Not Telling You
The Savings Destruction
"But I'm being smart and saving money!"
If you saved one month's average salary:
- 1969: Could save 1/31st of a house price in a month
- 2024: Can save 1/94th of a house price in a month
Your saving power has dropped to ONE THIRD of what it was and this is all pre-tax remember.
Building Financial Independence Through Alternative Investments
What This Really Means For You
- The Good News:
- Wages have beaten official inflation
- We earn 22.8x what people did in 1969
- On paper, we're richer
- The Bad News:
- Everything important costs more than wages increased
- Houses: 68x more (3x faster than wages)
- Education: From free to unaffordable
- Energy: 55.6x more (2.4x faster than wages)
- The Ugly Truth:
- Your money is being devalued faster than official numbers show
- The gap between wages and costs keeps growing
- Saving is getting harder, not easier
- Your hurdle rate is now 11%
- Young people are hit the hardest
And that Robert Kiyosaki tweet that started my journey?
Turns out he wasn't so crazy after all. But to understand why, we need to look at something that happened back in 1971 that changed everything…
The 1971 Turning Point – Coming Off the Gold Standard
Turns out there's a very specific reason why everything went crazy – and it all started on August 15, 1971.
The Game-Changing Moment
Before 1971:
- Money was backed by gold
- There was a limit to how much could be created
- Prices stayed relatively stable
- One income could support a family
Want to see how bad 1971 really was?
Check out this great visual from visual capitalist that shows in a very stark way the impact the creation of the Federal Reserve as well as what coming off the gold standard has done in the US.
If this happened in the US then it would have impacted everyone else in the world as the US dollar is the worlds reserve currency.
Let's Look at the Numbers
Remember our £100 from 1969? Let's see what happened before and after 1971:
Before 1971 (1969-1971):
- House prices: +15%
- Wages: +12%
- Everything moved roughly together
After 1971 (1971-2024):
- Government says £100 should be £1,411.77
- Wages grew to £2,283
- House prices exploded to £6,795
- The gap keeps getting bigger
C. Why This Matters For You
This single change explains why:
- Houses now cost 3x more in real terms
- You need two incomes to survive
- Saving gets harder every year
- The gap between rich and poor keeps growing
D. The Generation Gap
This created a massive divide between generations:
Boomers:
- Started before the change
- Bought assets early
- Benefited from inflation
Millennials and Gen Z:
- Started after 50 years of inflation
- Fighting an uphill battle
- Need to work 2.8x longer for the same assets
[Link: <a href="https://adamdroper.com/why-traditional-career-paths-are-failing-us">Why Traditional Career Paths Are Failing Us</a>]
For a more in depth look at charts that tell a rather disturbing story since 1979 check out WTF Happened in 1971.
What Can You Do About It?
That Robert Kiyosaki tweet about gold and Bitcoin doesn't seem so crazy now, does it?
But before we get to solutions, there's one more thing you need to understand about how money works today…
How Modern Money Really Works (And Why It's Mental)
Right, you've seen the numbers. You know about 1971.
Now let me show you something that properly blew my mind when I first learned about it – how modern money actually works.
Because here's the thing: most people think banks lend out money that people have deposited. That's what I thought too.
But that's not how it works at all.
The Modern Money Magic Trick
Let me walk you through something crazy.
When you go to get a mortgage, you probably think the bank is lending you someone else's savings, right?
Wrong.
They literally create that money out of thin air when you sign the mortgage papers. Mental, isn't it? And I'm not making this up – the Bank of England admits this themselves.
This is called fractional reserve banking, and it's why the money supply keeps growing even faster than governments can print it.
In a fractional reserve banking system, banks traditionally hold a portion of deposits (from checking or savings accounts) as reserves based on a central bank's reserve requirement, but since March 2020, U.S. banks have had no mandatory reserve requirements, allowing them to theoretically lend out the full amount of deposits while still maintaining some reserves for liquidity.
B. The Numbers Are Staggering
Since 2000:
- The UK money supply has grown by over 400%
- But the actual economy (GDP) only grew by about 70%
- That means there's WAY more money chasing the same amount of stuff
Just look at this chart of UK M2 money supply, looks scary right and just check out what happend after COVID.
source: United Kingdom Money Supply M2
And you know what happens when you have more money chasing the same goods?
Yep – prices go up.
Why Your Bank Account is Broken
This system creates a proper nasty problem for savers. Here's why:
When banks create new money through loans, they're basically diluting the value of all existing money – including that savings account you've worked so hard to build up.
It's like if you had 100 shares in a company, and they kept issuing new shares every year. Your 100 shares would be worth less and less as a percentage of the company.
The Asset Price Explosion
But here's where it gets interesting. All this new money doesn't affect all prices equally. It hits asset prices first:
- Stocks
- Houses
- High-end property
- Fine art
This explains why house prices have gone up 68x while wages only went up 22.8x – the new money goes into assets first, then slowly trickles down to wages.
Now, I am not sure many of you are buying fine art but I would bet the vast majority of you have your pensions almost entirely based int he stock market….
The Wealth Gap Explained
Now you can see why the rich keep getting richer.
If you own assets, this system works in your favor. If you're trying to save up to buy assets… good luck.
Think about it:
- Rich people own assets that go up with inflation
- Poor people have savings that get devalued
- The gap gets bigger every year
- And it's built into the system
Why Traditional Financial Advice Fails
This is why your dad's financial advice doesn't work anymore:
- "Just save 10% of your income" (It loses value too fast)
- "Put it in a savings account" (You're losing money every year)
- "Work hard and get a good job" (Wages can't keep up)
- "Property is the best investment" (True, but getting harder to buy in)
G. What This Means For Your Future
The implications are massive:
- Traditional retirement planning might not work
- You need to rethink how you save and invest
- Your career strategy needs to adapt
- The rules of the game have changed
But here's the thing – once you understand how the system works, you can start to use it to your advantage.
The Great Money Game
Think of it like a game. Now you know:
- Money gets created constantly
- It hits asset prices first
- Wages come last
- Savings get devalued
So what do the wealthy do?
They position themselves to benefit from this system instead of being crushed by it.
In my opinion, we are in a unique position in history where for once we have access to a great vehicle to do this and we can buy it as easily as they can….
Changing How You Think About Money
Right, now you understand how the system works, let's talk about how to think differently about money.
Because here's the thing – once you see how the game is played, you can't unsee it.
The First Mindset Shift: Money Isn't What You Think
Remember when I thought Robert Kiyosaki was crazy for talking about gold and Bitcoin?
That was because I was thinking about money all wrong.
Here's what I've learned:
- Money isn't savings in a bank
- Money isn't numbers on a screen
- Money isn't even those pieces of paper in your wallet
- Money is a way to store your time and energy
Understanding What Money Really Is.
Stop Thinking in Currency, Start Thinking in Value
This was proper revolutionary for me. Instead of thinking "I have £50,000 in savings," start thinking:
- How many months of freedom does this buy me?
- What productive assets could this control?
- How much real value can this create?
- How quickly is this losing purchasing power?
I am not saying 50,000 (insert whatever fiat currency unit you want) isn;t a lot of money – it is.
what I am saying is that unless it is exchanged into something better it will simply melt away in a relatively few years and its the double whammy – your money is melting away and asset prices are increasing, thanks to the everything code!
Also, with the advancement of technology, the future is uncertain, I break down here why 2030 could be a key turning point in the economy and is something I think we should all be aware of.
By taking advantage of the economic singularity and the everything code there is the opportunity to make a lot of money by 2030 but here’s the kicker – how to make money after that?
The Three Types of Money
Once you understand the system, you realize there are really three types of money:
- Melting Ice Cube Money
- Cash in the bank
- Traditional savings
- Fixed salary
- Government bonds
- Store of Value Money
- Precious metals
- Bitcoin
- Essential commodities
- Real Estate
- Things that can't be printed
Understanding Different Types of Hard Assets
- Productive Money
- Income-generating assets
- Skills that create value
- Businesses that solve problems
- Things that grow naturally
The New Rules of the Game
Here's how I think about it now:
Rule 1: Your Time > Your Money
- Money can be printed
- Time cannot
- Optimize for time, not currency
- Find the best place to store your energy.
Rule 2: Value Creation > Value Extraction
- Don't just try to make money
- Create something valuable
- Solve real problems
Rule 3: Control > Ownership
- You don't need to own everything
- You need to control your time
- You need options
The New Path to Financial Independence.
The Freedom Formula
This is how I think about building wealth now:
- Protect Your Time
- It's your most precious resource
- Don't trade it cheaply
- Invest it wisely
- Create Value
- Develop valuable skills
- Solve real problems
- Build assets that work for you
- Control Your Options
- Geographic flexibility
- Multiple income streams
- Strong network
- Think Long Term
- Play infinite games
- Build systems, not goals
- Focus on fundamentals
The Mental Models That Matter
Here are the frameworks that changed how I think:
The Devaluation Defense:
- Assume your money is losing value
- Plan for higher future prices
- Build inflation resistance into your life
The Options Multiplier:
- Every skill creates new options
- Every asset creates new possibilities
- Every relationship opens new doors
The Freedom First Principle:
- Maximize flexibility
- Minimize dependencies
- Build redundancy
Why Geographic Flexibility Matter.
Questions That Changed Everything
Start asking yourself:
- "Is this building my freedom or reducing it?"
- "Am I creating value or just extracting it?"
- "Does this give me more options or fewer?"
- "Will this matter in 10 years?"
The Ultimate Protection
Here's what I've realized: The best protection isn't gold, or Bitcoin, or real estate.
It's your ability to:
- Adapt to change
- Create value in any environment
- Build and maintain relationships
- Think clearly about money and value
The Reality Check We All Need
Let's wrap this up with what we've learned:
The Numbers Don't Lie:
- £100 from 1969 should be £1,411.77 (government story)
- Wages grew to £2,283 (looks good!)
- But house prices exploded to £6,795 (ouch!)
The System Is Designed This Way:
- Money gets printed
- Assets inflate first
- Wages come last
- Savers get crushed
But here's the thing – once you understand how the game works, you can start making better decisions. You can't change the system, but you can change how you play the game.
Remember: your grandparents weren't smarter or harder working. They just bought their house before 1971 when money meant something different.
The Truth Is: The best time to understand this was 50 years ago.
The second best time is today.
Think this is mental? Share it with someone who needs to see these numbers.
