Government Control of Money: A Brief History of Central Banking

Central banks are a relatively modern invention. The Bank of England was founded in 1694 — not to serve the public, but to fund a war against France. The US Federal Reserve was created in 1913 after a series of banking panics, sold to the public as a stabilizing force that would prevent financial crises. In the 110+ years since, the US has experienced the Great Depression, stagflation, the dot-com bust, the 2008 financial crisis, and the 2020 monetary explosion. The institution designed to prevent crises has presided over all of them.

The core issue isn’t incompetence — it’s incentive structure. Central banks serve governments first and citizens second. When a government needs to fund spending beyond what taxes provide, the central bank can create the difference. This is politically convenient because it avoids the backlash of raising taxes or cutting spending. The cost — inflation — is diffuse, delayed, and difficult for voters to attribute to any single policy decision.

The Playbook: Print, Spend, Devalue

The pattern is consistent across centuries and continents. A government takes on debt to fund wars, social programs, or crisis response. Debt grows faster than the economy. Eventually, the debt becomes unsustainable through normal repayment. The government then faces three options: default (politically catastrophic), austerity (politically painful), or inflation (politically invisible). They almost always choose inflation.

France did it with the assignat during the Revolution, printing currency backed by seized church lands until the money became worthless. The Weimar Republic printed marks to pay World War I reparations until a loaf of bread cost billions. Zimbabwe’s government printed trillions to fund a land reform program and military spending. Venezuela’s government printed bolivars to cover oil revenue shortfalls. In every case, ordinary citizens lost their life savings while government obligations shrank in real terms.

The American Version

The United States follows the same pattern at a slower pace — so far. The national debt exceeds $35 trillion. Annual deficits regularly exceed $1 trillion. The Federal Reserve now holds over $7 trillion in government bonds purchased through QE programs. This is debt monetization: the government borrows, and the central bank buys the debt with newly created money. The mechanics are more complex than Zimbabwe’s printing press, but the economic effect is identical.

The dollar’s unique position as the world’s reserve currency has allowed this to continue longer than it otherwise would. Global demand for dollars absorbs some of the supply expansion. But reserve currency status isn’t permanent — the British pound, Spanish real, Dutch guilder, and Roman denarius all held that position before losing it. History suggests that the privilege erodes precisely when a government overuses it.

Separation of Money and State

Austrian economists have long argued that money is too important to leave in the hands of governments. Friedrich Hayek proposed competing private currencies in his 1976 work The Denationalization of Money. His argument was simple: if currencies had to compete on quality — stability, scarcity, trustworthiness — governments would lose. They’d be unable to inflate because people would simply switch to a better currency.

For most of history, this was a theoretical exercise. Then Bitcoin was created in 2009 — a currency with rules enforced by mathematics instead of policy, with a supply that no government can alter, running on a network that no authority can shut down. It’s the first practical implementation of what Hayek described: money that competes on merit, not mandate. Whether it succeeds on a global scale remains to be seen, but the experiment is live and growing.

Go Deeper

The relationship between governments and money is one of the most consequential and least understood dynamics in economics. These videos explore different aspects of that relationship:

• Economics in One Lesson — Foundational thinking on government intervention and unintended consequences.
• Sound Money and Austrian Economics — The intellectual case for separating money from government control.
• The Problem With Money — How government monetary policy creates systemic fragility.

Want to model what happens when your retirement is denominated in sound money instead of government currency? Run the Bitcoin Retirement Calculator. To understand how the Fed works step by step, see our infographic: The Fed Explained in 60 Seconds.

Keep Reading

• What Is Inflation? The Hidden Tax on Your Savings
• How Does Money Lose Value? Currency Debasement Explained
• Your Dollar Has Lost 87% of Its Value Since 1971

How Does Money Lose Value? Currency Debasement Is an Ancient Trick

Governments have been quietly reducing the value of money for thousands of years. Roman emperors shaved silver from coins and mixed in cheaper metals — a process called debasement. The coins looked the same but contained less precious metal. Soldiers and merchants eventually caught on, prices rose, and confidence in the currency collapsed. The Roman denarius went from nearly pure silver to less than 5% over three centuries.

Today’s version is more sophisticated but mechanically identical. Instead of shaving metal from coins, central banks create digital dollars from nothing. The Federal Reserve doesn’t need a printing press — it expands the money supply with accounting entries. The effect is the same: each existing dollar becomes worth less as more dollars flood the system.

How the Federal Reserve Devalues Your Savings

The Fed has three primary tools that expand the money supply and reduce your purchasing power. Interest rate manipulation makes borrowing cheaper, encouraging more debt creation (and every dollar of debt creates new money). Quantitative easing (QE) involves the Fed directly purchasing government bonds and mortgage-backed securities, injecting trillions into the financial system. Reserve requirement changes determine how much of your bank deposit the bank must actually keep on hand versus lending out.

During 2020-2021, the Fed created roughly $5 trillion in new money through QE and emergency lending programs. To put that in perspective, the total money supply was about $15 trillion before the pandemic. A 33% increase in the money supply in under two years is why grocery bills jumped 25-30% and housing prices exploded. The money was created for a reason — pandemic economic support — but the cost was paid by everyone holding dollars through reduced purchasing power.

Hyperinflation: When It All Breaks Down

The extreme version of money losing value is hyperinflation — when confidence in a currency collapses and prices double in days or weeks. Weimar Germany (1923), Zimbabwe (2008), and Venezuela (2018) all experienced it. In each case, the pattern was the same: government spent far beyond its means, financed the gap by printing money, and eventually the population stopped trusting the currency entirely.

Hyperinflation doesn’t happen gradually — it’s a tipping point. For years or decades, a government can run deficits and inflate slowly. Then, at some unpredictable moment, public confidence snaps. People rush to convert currency into real goods — food, fuel, foreign currency, gold — and prices spiral out of control. The US isn’t in hyperinflation, but the conditions that precede it (massive debt, persistent deficits, expanding money supply) are historically familiar.

What Holds Value When Money Doesn’t

Throughout every period of currency debasement in history, assets with natural scarcity have held their value. Gold has maintained purchasing power for 5,000 years — an ounce of gold bought a fine suit in ancient Rome, and it still does today. Real estate, productive land, and commodities have similarly preserved wealth across inflationary periods.

Bitcoin adds a new option to this category. With a hard cap of 21 million coins enforced by mathematics rather than policy, it’s the first monetary asset that literally cannot be debased. No government, corporation, or individual can create additional Bitcoin beyond the fixed schedule. This property — absolute scarcity — is why an increasing number of individuals and institutions treat it as a long-term store of value in an era of aggressive money printing.

Go Deeper

Understanding how money loses value is the foundation of protecting your wealth. These videos explore the mechanics of debasement, inflation, and what history teaches us:

• The Hidden Cost of Money — How currency debasement silently drains your savings.
• The Problem With Money — Systemic issues in the modern monetary system.
• What Gives Money Value? — Why trust erodes and what happens when it breaks.
• Hard Money Explained — The case for money that can’t be devalued by decree.

Want to see what protecting your purchasing power looks like over a 10, 20, or 30-year horizon? Try the Bitcoin Retirement Calculator. For a visual timeline of the dollar’s decline, see Your Dollar is Shrinking.

Keep Reading

• What Is Inflation? The Hidden Tax on Your Savings
• When Governments Control Money: A History of Debasement
• Are Wages Keeping Up With Inflation? (The Data Says No)

What Inflation Actually Is

The word “inflation” originally meant exactly what it sounds like: inflating the money supply. When a central bank creates new money, the total number of dollars increases, but the total amount of goods and services in the economy doesn’t change immediately. More dollars chasing the same goods means each dollar buys less. Prices rise — not because things became more valuable, but because the currency became less valuable.

This is a critical distinction. When the media reports that “inflation is 3.5%,” they’re measuring consumer price increases (the CPI). But CPI is a lagging indicator of something that already happened: money was created, it entered the economy, and prices adjusted upward. The cause is monetary expansion. The effect is higher prices. Modern economics has largely blurred this line, which makes it harder for everyday people to understand what’s actually happening to their money.

How Inflation Steals From You

Inflation is often called a “hidden tax,” and the description is accurate. If the government printed $1 trillion and handed it out equally, you’d expect prices to rise proportionally — it would be a wash. But that’s not how it works. New money enters the economy unevenly: it flows first to banks, large corporations, government contractors, and asset holders. By the time it reaches wages and consumer spending, prices have already adjusted upward.

This is called the Cantillon Effect, named after 18th-century economist Richard Cantillon. Those closest to the money printer benefit most because they spend new money before prices rise. Those farthest away — hourly workers, retirees on fixed incomes, small savers — experience only the price increases without the corresponding income boost. Inflation systematically transfers wealth from savers to borrowers, from the poor to the wealthy, and from citizens to governments.

The Numbers Don’t Lie

Since the Federal Reserve was created in 1913, the US dollar has lost over 96% of its purchasing power. Since Nixon ended the gold standard in 1971, it has lost over 87%. The M2 money supply — the broadest common measure of money in circulation — went from $900 billion in 1971 to over $21 trillion today. That’s a 23x increase in the number of dollars, which directly explains why a house that cost $25,000 in 1971 costs $400,000 now.

Official CPI numbers consistently understate the problem. The Bureau of Labor Statistics has changed how it calculates CPI multiple times since 1980 — each time in ways that produce lower readings. If calculated using the 1980 methodology, real inflation has averaged closer to 7-10% annually in recent decades, not the 2-3% the government reports. This gap between official numbers and lived experience is why many Americans feel poorer even when the economy is “growing.”

Why Governments Love Inflation

Governments benefit from inflation in a way that most people don’t realize. When a government borrows $1 trillion and then inflates the currency by 10%, it effectively repays that debt with cheaper dollars. This is debt monetization — using inflation to shrink the real value of government obligations. It’s mathematically identical to a tax, but it requires no vote, no legislation, and most citizens never realize it’s happening.

The US national debt now exceeds $35 trillion. At this scale, deflation (falling prices and a strengthening dollar) would be catastrophic for the government because the real value of that debt would increase. This creates a structural incentive for perpetual inflation — the government needs your dollars to lose value so its debt becomes more manageable. Your retirement savings are collateral damage in this equation.

What You Can Do About It

Traditional financial advice says to put your money in a savings account. But when inflation runs at 7% and your savings account pays 0.5%, you’re losing 6.5% of your purchasing power every year. Over a decade, that’s a 48% loss in real terms. Holding cash is not “safe” — it’s a guaranteed loss in an inflationary system.

Assets with fixed or limited supply — real estate, equities, gold, and Bitcoin — have historically outpaced inflation because they can’t be created from nothing. Bitcoin is particularly notable because its supply schedule is mathematically fixed at 21 million coins, making it the only major asset with zero supply elasticity. Whether it belongs in your portfolio is a personal decision, but understanding inflation makes the case for holding something other than cash.

Go Deeper

Inflation touches everything — your groceries, your rent, your retirement timeline. These videos break down different angles of how inflation works and what it means for you:

• The Problem With Money — How fiat currency and money printing create systemic inflation.
• The Hidden Cost of Money — The invisible tax that transfers wealth from savers to borrowers.
• What Gives Money Value? — Why some money holds its value and other money doesn’t.
• Economics in One Lesson — Core principles that explain why inflation is always and everywhere a monetary phenomenon.
• Hard Money Explained — What inflation-resistant money looks like and why it matters.
• What is Money? — Start here if you want to understand what money should be versus what it’s become.
• Sound Money and Austrian Economics — The intellectual framework that predicted inflation’s consequences decades ago.
• What Gives Bitcoin Value? — How a fixed-supply digital asset fits into an inflationary world.
• Why Gold? Why Bitcoin? — Two inflation hedges across two eras of monetary history.
• The Cantillon Effect — Who really benefits when new money is printed.

See exactly how inflation affects your retirement timeline: run your numbers through the Bitcoin Retirement Calculator. For a visual breakdown of what inflation has done to the dollar since 1971, check out Your Dollar is Shrinking, and see whether your wages are keeping up.

Keep Reading

• How Does Money Lose Value? Currency Debasement Explained
• Your Dollar Has Lost 87% of Its Value Since 1971
• Try Our Free Multi-Asset FIRE Calculator

Since 1971, nominal wages in the United States have grown roughly 3,800%. Sounds impressive — until you realize that cumulative price inflation over the same period hit 4,400%. The average American worker has actually lost purchasing power over the last five decades.

We built a visual breakdown of how wages and inflation have tracked against each other, decade by decade, so you can see exactly where the gap opened — and why it keeps getting worse.

What the Infographic Covers

• Decade-by-decade comparison of wage growth vs. CPI inflation from 1971 to 2026
• The 1970s disaster — when inflation outpaced wages by 45 percentage points in a single decade
• Real-world impact cards showing what your paycheck actually buys in housing, tuition, gas, and household income
• Why a fixed-supply asset matters when wages cannot keep up with money printing

The numbers tell a story that no politician wants to talk about: working harder and earning more has not kept up with the silent tax of inflation.

View the Full Infographic: Wages vs. Inflation — Who’s Winning? →

If your strategy for building wealth is “earn more and save in dollars,” this infographic will show you why that plan has a built-in ceiling.

Ready to model a different approach? Try the Bitcoin Future Wealth Calculator →

Keep Reading

• What Is Inflation? The Hidden Tax on Your Savings
• Your Dollar Has Lost 87% of Its Value Since 1971
• Try Our Free Multi-Asset FIRE Calculator

The short version: the Fed controls how much money exists in the United States. And for the last 50+ years, it has been creating more and more of it — which is why everything keeps getting more expensive.

We created a visual flowchart that walks you through the entire process in plain English, step by step:

• How the government borrows money it does not have
• How the Fed creates new dollars out of thin air to buy that debt
• Why this makes prices rise for everything you buy
• The debt spiral that keeps the cycle going — and accelerating

The infographic also includes a side-by-side comparison of the Fed’s dollar versus bitcoin — two fundamentally different approaches to money.

View the Full Infographic: The Fed Explained in 60 Seconds →

Understanding how the monetary system works is the first step toward protecting your purchasing power. You cannot fix a problem you do not see.

Want to model how bitcoin could fit into your retirement? Try the Bitcoin Future Wealth Calculator →

Keep Reading

• When Governments Control Money: A History of Debasement
• Your Dollar Has Lost 87% of Its Value Since 1971
• What Is Inflation? The Hidden Tax on Your Savings

Since 1971 — when President Nixon severed the dollar’s last tie to gold — the U.S. dollar has lost over 87% of its purchasing power. That means every dollar you saved back then buys just 13 cents worth of stuff today.

We built an infographic that breaks down exactly how this happened, year by year, and what it means for your money right now.

What You’ll See in the Infographic

• Real price comparisons — what a gallon of gas, a home, eggs, and college tuition cost in 1971 vs. today
• An 8-event timeline from Nixon closing the gold window to the national debt crossing $36 trillion
• A head-to-head comparison of $10,000 saved in dollars, gold, and bitcoin — the results will surprise you

The dollar didn’t lose its value overnight. It happened slowly, deliberately, through decades of money printing, bailouts, and debt expansion. Most people never notice because the numbers in their bank account stay the same — it’s what those numbers buy that keeps shrinking.

View the Full Infographic: Your Dollar is Shrinking →

Once you see the timeline laid out, the pattern becomes impossible to ignore. And once you understand why it’s happening, you can start making better decisions about how you store your wealth.

That’s what Halving House is here for — plain-English education about money. No jargon. No finance-bro nonsense. Just the facts.

Want to see how bitcoin fits into a long-term retirement plan? Try the Bitcoin Future Wealth Calculator →

Keep Reading

• How Does Money Lose Value? Currency Debasement Explained
• Are Wages Keeping Up With Inflation? (The Data Says No)
• Try Our Free Bitcoin Retirement Calculator