You give your time. Money carries it forward.
You work a shift, solve a problem, or make something useful. In return, you receive money. You can spend it now or put it aside for a future need. Saving is one way to carry the value of today’s effort into tomorrow.
But the number in an account and what it can buy are different things. If your usual basket of food, housing and services becomes more expensive, the same cash buys less. That is a loss of purchasing power.
Fiat money can expand.
The U.S. dollar is fiat money. Its supply has no fixed numerical cap like Bitcoin’s. Bank lending and monetary processes can expand the amount of money; deposits can also shrink as loans are repaid. This is more than printing paper notes.
M2 is one measure of money: currency and several kinds of deposits and other liquid balances. It is a stock of dollars. CPI measures changes in consumer prices. They answer different questions.
Three measures. Three different stories.
Indexing puts each series at 100 on the same starting date. It makes their proportional changes comparable even though their original units differ. The figures describe U.S. averages, not every worker or household.
Money, pay and prices do not move together.
Swipe or use arrow keys to explore the chart. A data table follows.
- M2
- Nominal hourly pay
- Consumer prices
Adjust pay for what it buys.
Swipe or use arrow keys to explore the chart. A data table follows.
| U.S. measure | Jan 2007 | Aug 2026 |
|---|---|---|
| M2 | 100.00 | 328.05 |
| Nominal hourly pay | 100.00 | 183.39 |
| Consumer prices (CPI) | 100.00 | 164.24 |
| Real hourly pay | 100.00 | 111.66 |
Sources: Federal Reserve M2SL; BLS CES0500000003 and CPIAUCSL, via FRED. Snapshot retrieved 16 October 2026. Data subject to revision. Download all 236 monthly rows (CSV).
Read the method and limitations
Each level index is 100 × current value ÷ January 2007 value. Real pay is 100 × (hourly pay ÷ CPI) ÷ the January 2007 ratio. Uninvested fixed dollars retain about 60.9% of their base-date purchasing power against this CPI measure; that calculation excludes interest.
Hourly pay is the average for all employees in U.S. private nonfarm payrolls, not a median or a measure of the same workers over time. CPI-U is the U.S. city average, not every household’s basket or an asset-price index.
October 2025 CPI was not published during a lapse in appropriations. Both CPI and real pay have a gap; no value is interpolated. The BLS explanation documents this missing month.
These are revised values available on 16 October 2026, not the original releases for each month. August earnings are preliminary. The July 2026 M2 netting change applies historically; we do not splice earlier vintages. Later September wage and CPI values are excluded to keep the same endpoint as M2.
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A raise can still leave you behind.
Imagine your pay rises 3% while your own living costs rise 5%. You receive more dollars but can afford a little less of the same basket. The exact change is 1.03 ÷ 1.05 − 1, or about −1.9%.
Wages do not always lag prices. The historical example above shows average real hourly pay rising across the full period. Your result depends on your earnings, your costs and the dates you compare.
A larger paycheck. A smaller basket.
Try a change between −50% and 100%. This local calculation uses only your two hypothetical percentages.
−1.9%less purchasing power
(1.03 ÷ 1.05 − 1) × 100 = −1.9%
Keep the claim as narrow as the evidence.
M2 growth minus wage growth is not a measure of lost purchasing power. A chart showing two series moving differently cannot establish why they moved. Production, spending, credit, policy and people’s choices all matter.
For a pay comparison, adjust nominal earnings for consumer prices. For cash set aside, compare what the same dollars buy over time, allowing separately for any interest. Neither calculation tells you what Bitcoin’s future return will be.
Check your understanding
Your pay rises 6% and your own costs rise 4%. Did your purchasing power fall?
No. In this hypothetical, it rises by about 1.9%: 1.06 ÷ 1.04 − 1. The exact ratio matters; the difference in percentage points is only an approximation.
Sources & further reading
Reviewed 16 October 2026. Sources support the explanations; hypothetical examples and diagrams are labelled where they appear.
- Federal Reserve: Money Stock Measures (H.6)
Definitions of M2 and the published money-stock series.
- BLS: Real Earnings technical note
How price adjustment changes nominal earnings into real earnings.
- Saifedean Ammous: The Fiat Standard
The author’s interpretation of debt-based fiat money; linked as a source, not a purchase recommendation.
- Principles of Economics, chapter 18: Civilization
Related reading by Ammous. Full chapter requires membership; no passage is quoted here.