In 1971, President Nixon made an announcement that would quietly reshape the financial life of every American for generations to come. Almost nobody outside of economics circles understood what it meant at the time. Most people still don't.

He severed the last formal link between the U.S. dollar and gold.

Before that moment, every dollar in circulation was theoretically backed by gold held in reserve. There was a physical limit on how many dollars could exist because there was only so much gold. After that moment, the dollar became what economists call a fiat currency — money backed not by any physical commodity but by government declaration and the collective agreement to keep using it. The constraint that had limited how many dollars could be created was gone.

The result, documented by the Bureau of Labor Statistics, is that the dollar has lost over 85% of its purchasing power since 1971. A dollar today buys roughly what fourteen cents bought then. The same basket of goods and services that cost $100 in 1971 costs approximately $760 today. That erosion didn't happen all at once. It happened slowly, year by year, through a process most people never saw coming and most people still don't fully understand.

The mechanism is straightforward. When the Federal Reserve creates new money — through bond purchases, through lending to banks, through the various tools of modern monetary policy — the total supply of dollars increases. When more dollars are chasing roughly the same amount of goods and services, each dollar is worth a little less than it was before. This is inflation. It is not random weather. It is the predictable output of a monetary system in which the supply of money is controlled by institutions that have both the legal authority and, under certain conditions, the incentive to expand it.

The 2020 through 2023 period provided the most vivid demonstration of this in forty years. The Federal Reserve and the U.S. government injected trillions of new dollars into the economy in response to the pandemic. The money supply grew at rates not seen in modern American history. What followed — a spike in consumer prices that hit everything from groceries to housing to gas — was not a surprise to anyone who understood the mechanism. It was the predictable output of that mechanism operating at an unusual scale.

Here is what this means practically: the dollar in your savings account is not a static store of value. It is a depreciating asset. Every year it sits in a standard bank account earning 0.5% while inflation runs at 3% or higher, it is losing ground. The conventional financial advice to save dollars is not wrong — it is incomplete. It doesn't account for what you are saving into.

Understanding what the dollar actually is, how its value is managed and by whom, and what alternatives exist for preserving purchasing power over time is not advanced financial knowledge. It is foundational. And it is the financial education most people were never given.

This is the terrain covered in Pathfinders: Money Decoded — available now on Amazon.

Welcome to the territory. Let's figure out where we're going.

— L.J. Casados