Money debasement
How much money there is, what it has done to the dollar, how broad inflation is, what markets expect and what a dollar earns after it — plus gold's verdict
Thesis
Is the dollar losing purchasing power faster than usual?
- Money supply outgrows the economy.
- Inflation is broad, not confined to a few items.
- Expected inflation drifts up while real yields fall.
Index
Five indicators, standardized and equal-weighted, updated daily — 100 = January 2003, higher means faster debasement
Money Debasement Index
118.6
1 wk
↑ +0.7
1 mo
↓ -0.2
1 yr
↑ +0.2
Source: Liquiqui, from FRED / BEA / BLS
Where each constituent stands today, in standard deviations from its own average since 2003
- M2 / GDPMonthly · Aug 3, 2026+0.6
- PCE inflationMonthly · Aug 3, 2026+0.8
- Inflation breadthMonthly · Sep 1, 2026+0.9
- Inflation expectationsDaily · Oct 16, 2026+0.6
- Real 10-year yield (inv.)Daily · Oct 15, 2026-1.7
Notes
- What is happening
- The index stands at 119.3 on 9 October 2026 against a base of 100 in January 2003. Its all-time low is 87, in March 2009, when markets were pricing deflation; its high 160, on 11 March 2022, when M2/GDP, inflation, its breadth and expectations all peaked together with real rates negative. Rising real rates brought it back to 117 at the end of 2023 and 112 in early 2025. It had climbed back to 123 in early September and has given back four points since: the real yield rose to 2.9% after the Fed's 16 September hike, and the BEA's annual revision of 30 September lowered the PCE inflation path. Inflation breadth and PCE inflation remain above their averages (+1.2 and +0.8 standard deviations), M2/GDP and the breakeven slightly above (+0.6 each), and only real rates pull the other way (−1.8 inverted).
- Why it matters
- Debasement cannot be read off any single number: the money stock can swell without inflation, inflation can be narrow and passing, and stable expectations can coexist with rising prices. This index combines five measures at equal weight — money relative to the economy, realised inflation, its breadth, expectations, and the real rate that fights it — each standardised against its own history, to answer one question: is the dollar losing value faster or slower than usual?
- What's driving it
- Inflation broad across most CPI categories and expectations above 2% push up; a real yield at 2.9%, the highest since 2008 after the Fed's 25 bp hike on 16 September, pulls down.
- What to watch
- The current regime is unusual: broad, above-target inflation, but high real rates and anchored expectations. The signal to watch is the breakeven — while it stays below 2.5%, the market treats the episode as reversible. A breakeven above 3% with real rates falling would be the 2021 configuration, the one in which the index set its record.
Signals
Each indicator scored by how far it has moved — and the arrow points the way the pressure is heading
| Criterion | Current Reading | Trend | Comment |
|---|---|---|---|
M2 / GDPin the index How much money is there relative to the size of the economy? | Moderate | → | 71.7% of GDP in August 2026, against 70% at the end of 2019 and a peak of 91% in 2021. The 2020-2021 excess was absorbed by inflation and nominal growth, not by M2 shrinking — it is growing 5.7% a year again. |
Purchasing power since 2019table only How much of a January 2019 dollar is left? | High | ↑ | 75.6 cents in August 2026: prices are up 32% in seven and a half years, most of it over 2021-2023. Kept out of the index — a cumulative figure can only fall — but it is the number the index summarises. |
PCE inflationin the index Is the Fed's own inflation measure back at 2%? | High | ↑ | 3.4% year on year in August 2026, 3.0% excluding food and energy, against 2.7% a year earlier — levels lowered by the BEA's annual revision of 30 September, which had July at 3.7% and 3.3%. After the 7.2% peak of 2022, disinflation stalled well above target, and the 2026 move is up again. |
Breadth of inflationin the index How much of the basket is rising more than 2% a year? | High | → | 16 of the CPI's 21 categories, or 76%, in August 2026, down from 81% in July, against a 2010s average of 46% and 95% at the worst of 2022. Inflation this broad is no longer an energy or used-car story: it is monetary. |
Inflation expectationsin the index Does the bond market still believe in 2% over ten years? | Low/Moderate | → | 10-year breakeven of 2.33% on 9 October 2026, unmoved by the Fed's 16 September rate rise, against a 2010-2019 average of 1.99% and a 2022 peak of 3.02%. The market still anchors expectations near target — which is what separates the present from a loss of confidence. |
Real ratesin the index Does a risk-free dollar earn more than inflation? | Low | ↓ | 10-year real yield (TIPS) of 2.87% on 8 October 2026, the highest since 2008 after the Fed's 16 September hike, against −1.19% at the 2021 trough and a 2010-2019 average of 0.42%. This is the line defending the currency: at this level, savings are paid above expected inflation. |
Goldtable only What does the price of the monetary asset with no counterparty say? | High | ↓ | $4,197 an ounce on 12 October 2026, up 1.5% in a year and 225% since January 2019, but 21% below January's high of $5,318 and down 4.8% in a month. Kept out of the index: gold also reflects central-bank buying and geopolitics, but holding a level like this with real rates at 2.9% is still the most unusual signal on the page. |
Raw data
M2 / Nominal GDP
M2 / GDP
71.7%
1 mo
↑ +0.4%
1 yr
↑ +0.8%
Source: FRED
Notes
- What is happening
- 71.7% of GDP in August 2026. The ratio held around 50% for thirty years, rose to 70% through the 2010s, then jumped to 91% in 2021 on the $5 trillion created in eighteen months. It has come down since — not because M2 fell, it dipped only briefly in 2023, but because nominal GDP caught up through inflation. M2 is growing 5.7% a year again, at $23.3 trillion.
- Why it matters
- M2 over nominal GDP measures the amount of money per unit of economy — the inverse of velocity. When the ratio rises there are more dollars chasing the same output; that is the primary definition of debasement, before it shows up in prices.
- What's driving it
- The 2020-2021 money creation is still in the system; nominal growth has absorbed part of it, quantitative tightening the rest.
- What to watch
- The ratio is settling at its 2019 level, as if the excess had been digested. A move back above 75% with M2 growing faster than nominal GDP would signal a new cycle of money creation — which is what every episode of fiscal dominance has produced.
Purchasing Power Since 2019
Purchasing power of a 2019 dollar (cents)
75.1
1 mo
↓ -0.5
1 yr
↓ -2.8
Source: BLS, via FRED
Notes
- What is happening
- 75.6 cents in August 2026: prices are 32% higher than in January 2019. The loss ran at 2.5 cents a year through 2019-2020, then 12 cents in two years over 2021-2022, and continues at 2 cents a year since. In seven and a half years a quarter of purchasing power has gone — as much as in the whole 2010s.
- Why it matters
- This is debasement as a household sees it: what a January 2019 dollar still buys, measured by the consumer price index. Annual inflation rates come and go and are forgotten; the cumulative loss is never recovered — a rise in prices is not undone by inflation returning to 2%.
- What's driving it
- Cumulative inflation of 32% since 2019: the 2021-2022 surge first, then three years above 3%.
- What to watch
- At 2% inflation it would take 35 years to lose another quarter; at 3.4%, the current pace, under ten. The threshold to watch is 70 cents: it would be reached in 2029 if inflation stayed where it is.
PCE Inflation
PCE inflation, year on year
3.4%
1 mo
↑ +0.1%
1 yr
↑ +0.7%
Core PCE inflation, year on year
3.0%
1 mo
↑ +0.0%
1 yr
↑ +0.2%
Source: BEA, via FRED
Notes
- What is happening
- 3.4% year on year in August 2026 for the headline index and 3.0% for core, against 2.7% a year earlier. The BEA's annual revision of 30 September lowered the whole recent path: July, first reported at 3.7% and 3.3%, now reads 3.4% and 3.0%. After the 7.2% peak of June 2022, disinflation stalled around 2.5% through 2024-2025 without ever reaching target, and 2026 marks a reacceleration. This is the fourth consecutive year above 2%.
- Why it matters
- The personal consumption expenditures price index is the measure the Fed targets at 2%: broader than the CPI, weighted by what households actually buy, and revised. The version excluding food and energy is what the Fed watches for the trend.
- What's driving it
- Services inflation that never came back down, tariffs in goods prices and energy costs.
- What to watch
- Core is the figure that matters: at 3.0% it is higher than at any point between 2008 and 2020. The Fed made its choice on 16 September, raising rates 25 bp with a 2026 PCE inflation median of 3.7%; a sustained core move above 3.5% would set that choice against the cost of the public debt again — the direct link to the Fiscal Dominance page.
Breadth of Inflation
CPI categories rising above 2%
71%
1 mo
↓ -5%
1 yr
↑ +5%
Source: BLS, via FRED
Notes
- What is happening
- 76% in August 2026 — 16 categories out of 21, after 17 in July — against a 2010s average of 46%, 48% at the end of 2019 and 95% at the June 2022 peak. Only new and used vehicles, medical goods, alcoholic beverages and household furnishings are below 2%. Rent, electricity, gas, food, apparel, gasoline and transportation services are all above.
- Why it matters
- Narrow inflation — a few categories spiking, the rest flat — is a supply shock; broad inflation, where nearly everything rises, is monetary. This measure counts, each month, the share of the CPI's 21 expenditure categories whose price is more than 2% above a year earlier, unweighted: each category counts once.
- What's driving it
- Shelter, services, goods and now energy rising together: the tariff pass-through of 2025 widened inflation beyond services, and the 2026 oil surge (gasoline up 27% on the year) adds to it.
- What to watch
- Over 2010-2019 the measure never exceeded 60%: that is the ceiling of a normal inflation regime. Above 75%, as now, inflation has no sectoral culprit left — and that is precisely what the bond market has not yet priced.
Inflation Expectations (10-Year Breakeven)
10-Year Breakeven Inflation Rate
2.35%
1 wk
↑ +0.02%
1 mo
↑ +0.02%
1 yr
↑ +0.07%
Source: US Treasury / FRED
Notes
- What is happening
- 2.33% on 9 October 2026, against a 2010-2019 average of 1.99%, a trough of 0.50% in March 2020 and a 2022 peak of 3.02%. Despite four years of above-target inflation and a reacceleration in 2026, expectations have barely moved — neither the Fed's 16 September rate rise nor a 10-year above 5.2% shifted them: the market is betting the Fed will bring inflation back to 2% in the end.
- Why it matters
- The 10-year breakeven is the average inflation the bond market expects over the decade: the gap between the nominal Treasury yield and the yield on inflation-linked TIPS. It is the judge of the Fed's credibility — while it stays near 2%, investors lend to the Treasury without demanding a debasement premium.
- What's driving it
- Four years above target, against a Fed tightening again since 16 September and a real yield that still tempts bond buyers.
- What to watch
- The breakeven is the slowest line on the page, and therefore the most important: it says when confidence gives way. 2.5% would be a signal, 3% a break — at that level, in 2022, the market was already demanding compensation for debasement.
Real Rates (10-Year TIPS Yield)
10-year real yield (TIPS)
2.78%
1 wk
↓ -0.09%
1 mo
↑ +0.16%
1 yr
↑ +1.02%
Source: US Treasury / FRED
Notes
- What is happening
- 2.87% on 8 October 2026, against −1.19% at the August 2021 trough, 0.18% at the end of 2019 and a 2010-2019 average of 0.42%. The real rate passed the October 2023 peak of 2.52% after the Fed's 16 September hike, has added another twenty basis points since, and is at its highest since November 2008: savings are paid above expected inflation again, for the first time in fifteen years.
- Why it matters
- The 10-year real yield — that of TIPS, indexed to inflation — is what a risk-free dollar earns beyond inflation. A negative real rate is guaranteed debasement for the saver; a high real rate is the currency being defended. It is the index's inverted constituent.
- What's driving it
- Heavy Treasury supply, a rebuilt term premium and, since 16 September, a Fed raising its policy rate again.
- What to watch
- This rate is what separates the present episode from 2021: the same broad inflation, but a dollar that earns. A return below 1% — through Fed cuts or rising expectations — would tip the index towards its record, and that is exactly what the interest bill on the public debt calls for.
Gold Price
Gold (USD/oz)
4,181
1 wk
↓ -35
1 mo
↓ -206
1 yr
↓ -124
Source: Yahoo Finance
Notes
- What is happening
- $4,197 an ounce on 12 October 2026, up 1.5% in a year and 225% since January 2019, but 21% below the 29 January high of $5,318. The retreat since January has tracked rising real rates and a firmer dollar — up 3% in a month — reinforced by the Fed's 16 September hike: the usual relationship. That gold holds $4,200 with real rates at 2.9% is still atypical; central-bank buying, diversifying reserves away from the dollar since 2022, is the most common explanation.
- Why it matters
- Gold is the monetary asset with no counterparty: nobody can print it, and it depends on nobody's solvency. Its dollar price is the market's vote on the dollar's future value — noisy with geopolitics and central-bank buying, but the only one that does not run through Treasury bonds. Out of the index for that reason, and on the page for the same one.
- What's driving it
- Central-bank buying, chiefly China and emerging markets, and the search for a reserve asset outside the dollar system.
- What to watch
- Gold at $4,200 with positive real rates says that someone — foreign central banks first — is not waiting for the breakevens to confirm. If the breakeven joins gold's verdict, the index will leave its historical range; if gold falls back, it was geopolitics.
Methodology
1Sources
FRED (M2, GDP, PCE prices, 10-year breakeven, 10-year TIPS yield), BLS (the 21 CPI components behind the breadth measure).
2Normalisation
M2 as % of GDP, PCE inflation year on year, breadth as the share of components above 2 %, rates in percent; monthly inputs carried forward on the daily calendar.
3Z-scores
Each constituent minus its mean since 2003, divided by its standard deviation; capped at ±3. The real yield enters inverted.
4Weighting
Five constituents, equal weights.
5Index
Average of the five z-scores × 20 points, rebased to 100 in January 2003. Updated daily.
6Interpretation
Higher means faster debasement. Gold is charted as the market's verdict but stays out of the index.