The S&P 500 really does not beat inflation. You might think this sounds absurd because it seems obviously false, but the truth of the matter is that “inflation” is more than just consumer price inflation.
To start, the CPI just measures a select basket of consumer goods…that’s it.
For another thing, prices going up is the effect of inflation —monetary inflation. Monetary inflation is the expansion of the money supply. Monetary inflation JUST IS inflation. The money supply is what inflates: prices themselves don’t “inflate”.
In fact, when you compare the S&P 500 to growth in the money supply, it hasn’t made a new all-time high in over 100 years — no joke. In addition, it doesn’t matter what measure of the money supply you look at — M0, M1, M2, etc.
You might wonder why this would matter. Well, for one thing, it shows you that your investment in the S&P 500 isn’t going up per se; instead, the currency is losing value. For another thing, it shows you that your real return is just holding steady. In other words, it would actually be more akin to saving than investing. Although, it is indeed a weird form of saving if you are just flat.
But that’s the reality of fiat money. Things like stocks and houses become means of storing value, not actual investments. And in the case of housing, one could argue that absent fiat money, they would go back to being a utility.
None of this is the case with Bitcoin. Bitcoin not only outpaces growth in the money supply, but it beats it by a wide margin. So, at the very least, we have to look at the opportunity cost of putting most of your eggs in the S&P 500.
