Losing purchasing power: inflation quietly wipes out half your salary

Purchasing power has fallen by more than 50%: inflation's silent 'theft'

A loss of purchasing power of more than 50% is not alarmist exaggeration: it is the figure that emerges from the most basic calculations on how prices and wages have evolved in recent years. While prices have soared – especially housing, food and energy – nominal wages have grown far more slowly, or have stagnated altogether. The result is that, with the same money, today you can buy half of what you could a few years ago.

A deliberate plan or a side effect

The argument that inflation is premeditated 'theft' is gaining ground among those who look at the expansionary monetary policy of central banks and the rise in indirect taxes. Mario Conde's phrase – "inflation is theft" – resonates in a context where digital money promises to limit the ability to save even further. On the other hand, some point out that past inflation, in the 1980s, benefited one generation by liquidating their fixed-rate mortgage debts. Back then it was a 'lottery'; now, with variable interest rates and a precarious labour market, the same dynamic is suffocating those who have no debts but savings.

The digital euro as the next step

The ECB has already designed the digital euro with one key antiestéticature: the amount that can be held in a wallet will be limited and it will bear no interest. For many analysts, this completes the circle: not only does inflation erode cash, but the digital euro itself would make it impossible to take refuge in cash. The question that remains is whether society will react before the tap is turned off completely.

With real wages falling and economic policies pushing in the same direction, how long will it take for discontent to turn into something more than complaints on social media?