Why Inflation Has Been Driving Up Prices Since 1971
By Ken McElroy
Did you know that in 1971, the average car cost about $3,500, and today, that same car is over $50,000? Or that a home in the 1970s cost $20,000 and now the median is well over $400,000? The big question is: why?
The answer lies in inflation and how the U.S. dollar changed when President Nixon took it off the gold standard. Once the dollar was no longer tied to gold, the government could print as much money as it wanted. That’s when the dollar’s purchasing power began to fall, and prices for nearly everything began to rise.
The Nixon Shock and the Rise of Credit
Before 1971, every dollar in circulation was backed by gold. After the “Nixon shock,” dollars became just paper. As more money was printed, inflation kicked in.
Back then, the United States carried about $500 billion in debt. Today, that number has exploded to over $34 trillion. Along with it came a massive credit bubble, credit cards, banking products, financial derivatives that fundamentally changed how our economy worked.
This is why assets like homes and gold skyrocketed in price while wages failed to keep pace. In the early ’70s, the median salary was around $10,000, and a home cost $25,000—just 2.5 times a year’s income. Today, the median salary is about $80,000, but homes average $400,000, over 5x income.
Why Hard Assets Build Wealth
Here’s the takeaway: wealth has flowed to people who owned assets.
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My parents bought a home in the 1960s for $11,000. Decades later, it was worth over $700,000 not because they were savvy investors, but because they held a hard asset through decades of inflation.
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Gold, which was $35 an ounce in the 1970s, trades today at over $3,300 an ounce.
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Real estate, timber, water, and other tangible assets continue to rise in value as the dollar weakens.
Meanwhile, people who relied only on wages or fixed income, like Social Security, have seen their purchasing power eroded year after year.
Inflation Isn’t Going Away
The U.S. government actually benefits from inflation. It reduces the “real” value of its debt, encourages spending, and prevents deflation (which they fear more than inflation). Add in tariffs, lower interest rates, and government stimulus, and the next administration will almost certainly keep fueling inflation.
That means one thing for investors: your cash will keep losing value.
The Case for Good Debt
This is where “good debt” comes in. By using fixed-rate debt to purchase hard assets, you can get on the right side of inflation.
For example, if I buy a $100 million apartment complex with 75% debt and 25% equity, inflation alone could push its value to $150 million over the next decade—even before considering cash flow or operational improvements. The debt stays fixed, but the value of the asset climbs.
The key is fixed-rate debt. Investors who took on floating-rate debt have been the ones losing properties.
What Investors Should Do Next
So, what’s the lesson here?
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Don’t sit on cash. The dollar will keep losing value.
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Own hard assets. Real estate, gold, silver, timber, and other tangibles rise with inflation.
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Use good debt wisely. Fixed-rate loans allow you to lock in today’s dollars while your assets grow in tomorrow’s inflated dollars.
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Think long term. Inflation is a feature of the U.S. system, not a bug. Your strategy should be built around it.
Final Thoughts
Inflation isn’t just an economic statistic, it’s how the U.S. funds growth. It’s why prices have gone up for 50 years straight, and it’s why they’ll keep rising.
The winners will be those who own assets and use debt to their advantage. The losers will be those who sit on cash or rely solely on wages.
The question I’ll leave you with is simple: What do you think your dollars will be worth in 10 or 20 years? If the answer is “less,” then the time to act is now.
Surviving inflationary times is more relevant and important that ever, especially if the U.S economy heads into a recession.
That’s why I created the Recession Playbook
