According to data presented by the investment company, River, the monetary inflation of the US dollar has reached 363% since 2000, while official inflation, measured by the Consumer Price Index (CPI), barely records an 88% increase in the same period.
This discrepancy questions the official narrative and highlights how monetary policies have unequally impacted the population.
The River graph, based on data from the Federal Reserve system, compares two key metrics: monetary inflation, which reflects the increase in money supply, and official consumer prices inflation. While the first shows exponential growth, the second seems to drastically underestimate the real impact on the cost of living.
How is it possible that there is such a large gap between these two figures? The answer, according to River, is in an economic phenomenon known as The Cantillon effectwho explains how New money injection benefits a few while harming the majority.
The Cantillon effect, appointed in honor of the 18th century economist Richard Cantillon, describes how freshly created money is not distributed uniformly in the economy.
Andrea Leal, author of the cryptopedic cryptopedoticia:
«Cantillon denounced that rulers, businessmen and elites have the advantage of being able to enjoy the real value of freshly printed money. This, in the short term, translates into disproportionate growth compared to other sectors. And, unlike the ruling dome, the rest of society is affected by receiving money that is already devalued and whose presence has distorted market prices ».
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When the Federal Reserve expands the money supply, this money first enters banks, financial institutions and large investors. These actors, having early access to money, can spend or invest it before prices rise, obtaining a significant advantage.
For example, after the financial crisis of 2008, the Federal Reserve injected billion dollars into the economy by buying government bonds. The banks, who were the first to receive this money, invested it in assets as actions and real estate, shooting the prices of these markets. Meanwhile, common workers and consumers, who are farther from the money injection point, did not see an immediate increase in their income. When money finally came to them, the prices of essential goods, such as housing, had already risen, eroding their purchasing power.
This phenomenon explains why monetary inflation (363%) is much greater than official inflation (88%). The new money does not translate directly into an increase in the prices of the consumer goods that the CPI measures, but Financial assets first inflate.
However, The CPI has its own limitationswhich contributes to this discrepancy. This index, calculated by the US Labor Statistics Office (BLS), measures the price increase of a basket of goods and services consumed by households.
But This metric does not include asset prices as actions or properties, that have experienced much greater inflation.
Besides, The IPC adjusts the goods basket to reflect changes in consumption habitswhich can underestimate the real impact of inflation. For example, if consumers replace beef with chicken because the first has been more expensive, the CPI assumes that the cost of living has not risen so much, although the quality of life has been affected.
Another IPC problem is the use of «hedonic» adjustmentsthat discounted the price increases attributed to improvements in the quality of the products. For example, if a mobile phone rises in price but includes a better camera, the CPI may not register that increase as inflation. This, combined with the exclusion of key costs such as housing in some calculations, makes the CPI do not reflect the true impact of monetary devaluation on people’s purchasing power.
Therefore, River’s graph also doubts the confidence in official metrics. Many people feel that the cost of living has risen much more than the CPI indicates. This leads to growing skepticism towards government statisticsfeeding interest in alternative assets that can protect purchasing power, such as Bitcoin (BTC), gold or real estate.
«That’s why we use Bitcoin»
Above all this, River comments on his official X account: «There is a 275% gap between the inflation they say and real inflation. That is why we use bitcoin ».
River’s statement is a statement that encapsulates an economic reality and a potential solution for millions of people who see how their purchasing power fades against inflation that official statistics fail to completely capture.
The thing is bitcoin (BTC), The digital currency created by Satoshi Nakamoto, It has positioned itself as a firm alternative to a broken monetary system.
Unlike the US dollar, whose money supply can be expanded at will by the Federal Reserve, Bitcoin operates under an unalterable mathematical protocol. Its offer is limited to 21 million currencies, a cap that is scheduled in its code and cannot be modified without the network consensus.
Bitcoin’s design responds to a philosophy opposed to that of Fíat money: while central banks can print billions to rescue economies or finance deficits, Bitcoin has a predictable and decreasing emission. Every four years, an event known as the halving occurs, which reduces the amount of new BTC generated by the miners, who validate transactions in the network.
Since its creation, this scheduled scarcity has made Bitcoin compared to digital gold. However, unlike gold, whose offer can increase if new mines are discovered, the maximum amount of bitcoin is recorded in «digital stone.»
Besides, Bitcoin is an antidote to the Cantillon effect. This effect, as we explain before, shows how the injection of new money in the economy first benefits the actors close to the financial system, leaving the last in the row facing higher prices without a proportional increase in their income.
Instead, Bitcoin, being a decentralized currency, eliminates this structural problem. There is no central authority that can broadcast more BTC to favor a select group. In the Bitcoin network, the rules are the same for all: it doesn’t matter if you are a mining, a retail investor or Nayib Bukele. The new money (the newly undermined bitcoin) is distributed transparently and predictablely, without privileging anyone for its proximity to a central bank.
Beyond the CPI: Bitcoin as a value metric
The consumer price index underestimates real inflation by focusing on a limited basket of goods and services, ignoring the excessive rise in assets such as housing or actions.
Bitcoin, on the other hand, offers an alternative perspective to measure the value. Being a global asset with a fixed supply, its price reflects world demand and confidence (or distrust) in Fíat currencies.
In just over 10 years, while Fíat money is devalued due to inorganic monetary issuance, the price of Bitcoin has passed from zero to more than $ 100,000 per unit, a growth that, although volatile, reflects a clear trend: People are looking for alternatives to the traditional system inherited.
Ultimately, the link between Bitcoin and real inflation lies in a simple idea: control. With the dollar, citizens are at the mercy of the Federal Reserve and its decisions. With Bitcoin, the control returns to the individual. This autonomy resonates with those who feel that the current system has left them behind.
As monetary inflation continues to exceed the officer, and the Cantillon effect expands inequality, Bitcoin is positioned as a shield against devaluation.