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Comment by paxys | Hacker News Reader

Gold, silver, stocks, real estate, Bitcoin, baseball cards, fine art, Rolexes - everything is trading at or near their all time highs. The value of the US dollar is simply going down.

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The art market doesn't seem to be doing well at all:

https://news.ycombinator.com/item?id=45175628

Rolexes hit their all-time high in 2022:

* https://watchcharts.ca/watches/price_index

* https://watchcharts.ca/watches/brand_index/rolex

* https://www.hodinkee.com/articles/used-watch-market-prices-e...

>> The value of the US dollar is simply going down.

I wonder what could be causing nervousness in the USD regime…

Fiat money is not going down as much as asset prices are going up, though.

So it's part of the story, money losing value in the real economy. That's been happening since moving off the gold standard at roughly similar rates.

There's something that happened during ZIRP & Negative Real Interest Rate Policies that completely divorced the value of money in the real economy from the value of assets & future cash flows, and even when interest rates became positive again, the trend appears to have continued.

Perhaps all investors just believe ZIRP & Negative Real Interest Rate Policies are coming back, maybe to even more negative real rates than ever before.

> Fiat money is not going down as much as asset prices are going up, though.

How do you measure this? What is this claim founded in?

You could indeed say that inflation should be defined by the asset prices. This would couple fiat and asset prices definatorically.

Because normal people mainly use money to pay rent and utilities and taxes and buy corn from the grocery store, not to buy future cash flows.

At any given time, most of the money isn't in the hands of "normal people", though. It's in the hands of banks, states, and large companies.

The amount of money isn't relevant. Money is fake.

The real economy isn't.

I’m guessing what was meant is that the price of things that are to be invested in is growing wrt the price of things that are to be consumed. Which naively makes sense to me in an economy based on growth where the total consumption starts to stagnate—the surplus still has to go somewhere. Is it so or is reality more complicated than that?

I think this is a key observation.

Apparently consumables have become incredibly cheap.

But then again, consumables will like start to rise in price now people need more money to buy a house, etc.

You could also say that real salaries have gone down a lot, which is probably also true.

These effects have to go through very complex value chains.

It makes more sense or is more plausible to say that asset prices are rising to hedge or tracking inflation, versus a falling dollar. I

> There's something that happened during ZIRP & Negative Real Interest Rate Policies that completely divorced the value of money in the real economy from the value of assets & future cash flows

I’m not sure I follow. The USD is just a medium of exchange. 100% of the dollars commands 100% of the wealth of the economy. If you increase the number of dollars but the size of the economy itself doesn’t increase then the underlying prices would go up and the value of individual dollars would go down.

That’s not accurate for two reasons. First, the dollar isn’t just a medium of exchange, but a medium for storing value since it’s the reserve currency. Second, a dollar can get spent multiple times so there isn’t a direct relationship with the amount of economic activity as you suggest.

I don’t disagree with your first point, but your second point may have been a misunderstanding of what I said or I don’t understand what you’re saying. I’m not suggesting when you spend money it goes away and can’t be used again. I was more suggesting the M0/M1/M2 money supplies change in size which is distinct from GDP size, although I admit that is a simplification.

Gotcha. I thought you meant it was a 1:1 correlation. My mistake.

> If you increase the number of dollars but the size of the economy itself doesn’t increase then the underlying prices would go up and the value of individual dollars would go down.

Just looking the number of dollars, without looking at what they're doing, is like thinking you will gain weight because your fridge/pantry is stocked:

> But also – why do so many people insist that inflation is an increase in the money supply? This makes zero sense. Here’s why – our economy is mostly a credit based economy. So, if I take out a loan for $100,000 then the money supply has technically increased by $100,000. But what if I don’t actually tap that loan? What if I borrow the money because, for instance, house prices just went up 25% and I want to have some cash around for emergencies? This doesn’t tell us anything about prices, living standards or really anything. But this is what so much of the money supply represents – money that has been issued and is just sitting around unused. Why is this useful? It’s like calculating your weight changes by counting how much food you have in your refrigerator. No. That’s potential calories consumed and potential weight gain. The amount of food in your fridge tells you little about your future weight changes just like the amount of money in the economy tells us little about the actual price changes in the economy.

* https://www.pragcap.com/three-things-i-think-i-think-i-see-d...

Japan had an ever increasing money supply for decades and experience not just low inflation, but at times deflation:

* https://fred.stlouisfed.org/graph/?g=1680i

Besides the quantity of money, you have to actually look at what the money is doing (velocity), which in recent years is 'not much':

* https://en.wikipedia.org/wiki/Velocity_of_money

* https://fred.stlouisfed.org/series/M2V

As it stands there's just a growing pile of US money doing a whole lot of nothing in money market funds:

* https://www.cnbc.com/2025/09/12/7-trillion-cash-money-market...

* https://www.apolloacademy.com/6-trillion-on-the-sidelines-in...

I fully admit what I said was simplistic and not meant to indicate the true complexity of the system. I agree with everything you’ve posted as inflation is not immediate merely because the money exists. I was presenting a rough zeroth order approximation because I didn’t understand how the value of money could be completely divorced from assets/the economy.

> I was presenting a rough zeroth order approximation because I didn’t understand how the value of money could be completely divorced from assets/the economy.

Money has no value except in what it can buy you, the most important of which are shelter, water, and food for survival. After that you get into what can help you achieve happiness / fulfillment.

As a percentage of household spending, food (even with recent risen prices) have never been lower:

* https://www.npr.org/sections/thesalt/2015/03/02/389578089/yo...

and clothing:

* https://www.bls.gov/opub/ted/2006/may/wk5/art02.htm

* https://www.aei.org/carpe-diem/as-a-share-of-household-spend...

We've never lived longer, with fewer diseases, and had an easier (and safer) time to travel.

Sadly shelter (especially if you want to buy) has gotten more expensive (at least in the Anglo-sphere), but that's more about things like zoning policy and such rather than money supply.

So what exactly has dropped in "value" in human life/lives with the increased amount of money that's supposedly bouncing around? When in human history have things been better? If you could jump in a time machine that goes 88 mph, what period of history would you rather be in to live your life?

> Fiat money is not going down as much as asset prices are going up, though.

I'm assuming you are referring to CPI, but that is just a single measure of inflation and serves a very specific purpose. One could argue that "real" inflation in fact is the US dollar's value relative to gold or other similar assets.

If one was not someone who lived in the real economy and spent most of their money on things in the real economy, and instead was a billionaire, and spent most of their money buying future cash-flows, then sure.

There are plenty of people in this economy who sit somewhere in between having to spend their entire paycheck on rent and groceries and deciding which one of their yachts to take on the next vacation. I'd wager most people reading this are in the middle category, and so deeper analysis on inflation and long-term stores of money is absolutely relevant.

This is an imprecise take, in particular due to one thing: Target return rate.

The rich people expect a return rate regardless of how expensive the asset was, and eventually the asset will have to give that. This transaltes into more expensive consumables, rents, etc. Ie, Asset prices are a part of the real economy.

As expected. This is why we don't use nominal dollars for measuring changes in prices over long time periods. It's meaningless.

Assets like gold are also reaching new highs in real terms, which is giving people reason to be skeptical of the adjustments made for inflation.

But really none of it is as objective as it tries to pretend to be.

Those things are trading high relative to basic goods like food and clothing, so you can't explain it away as inflation.

Bingo

So then the question is - how long can this continue before something snaps

Pretty long, given that the US had a fully-fiat currency for 50+ years, and many European countries had it for longer than that. Per CPI, your dollar is worth 8x less than what it was worth in 1970.

This, in itself, doesn't mean anything profound. There's nothing to "snap" if the expectation of stable, modest inflation is baked into the markets. Fiat currencies usually implode only when something else undermines the confidence in the issuing government.

> your dollar is worth 8x less than what it was worth in 1970.

A dollar in 2025 is not worth -7 (i.e. eight times one less than one) dollars from 1970; it is worth ⅛th of a dollar from 1970.

Yes, I know what you mean. But ‘×’ is multiplication, not division — and phrases like ‘¼ less than’ and ‘3 less than’ have clear meanings inconsistent with using ‘8× less than’ to mean ‘⅛th.’

For that matter, the US recovered from the inflation of the 80s and avoided a serious hyperinflationary spiral of the sort seen in many less stable regimes, and when the real-terms price of gold spiked in 2011 it wasn't even accompanied by unusual levels of inflation.

The issue is that we're seeing asset price inflation that is far greater than CPI

In other words, we have two different inflations happening at once, leading to people who happened to own the right assets getting richer and everyone else getting poorer. I don't think that's what an efficient market would do, which implies that efficiency will kick in at some point and BOOM

> we're seeing asset price inflation that is far greater than CPI

Have a look at the CPI-adjusted gold chart, and think back to how awful things were (or weren't) in 2011.

> In other words, we have two different inflations happening at once

CPI is just an index of consumer prices. It's like saying that we have two stock markets because Nvidia is going up faster than Costco.

> People who happened to own the right assets getting richer and everyone else getting poorer

It's not a zero-sum game. Almost everyone is more wealthy than their peers 30-40 years ago.

Wealth disparities widen, but the reasons for this are complex and go beyond inflation. And frankly, many of them are self-inflicted. Every single housing development in my neighborhood is thoroughly protested by everyone. And most of what my city officials do is inventing new rules and regulations. They're not working for big corporations or the federal government.

> I don't think that's what an efficient market would do

Sounds like you spotted an arbitrage opportunity?

not really. Bitcoin is still around 10% from ATH. Art, wine and various collectibles are still down a lot from the highs. The dollar does not have anything to do with this. A falling dollar does not make Americans want to splurge or lead to speculation. Indeed, the dollar surged in 2008 and 2009, yet asset prices were falling. A falling dollar is only indicative of demand for other currencies. it has nothing to do with asset prices, as art and other prices are almost already quoted in dollars anyway. if people wanted to hedge the falling dollar, they would buy those currencies.

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