The Underlying Logic of Why Money Keeps Losing Value: Save Yourself 10 Years of Detours
Have you ever noticed that the blood, sweat, and tears money you’ve saved, sitting safely in the bank, not bothering anyone, seems to be silently evaporating? Why is our money becoming worth less and less?
This topic might sting a bit, but you must read to the end, because it relates to each of our retirement savings, our children’s education, and our future sense of security. Today I’ll peel this onion layer by layer, revealing the巨大 (huge) secret hiding around us.
Layer One: Where Did the Money in Memory Go?
Let’s play a memory game. Those of you watching, especially friends born in the 70s and 80s, you must remember childhood summers. The happiest thing was spending NT5 bought real happiness.
Think back more than 30 years. If a family had NT100K could buy a house in a small town, marry off a daughter in style, feed a family for years.
Now let’s come back to today.
What can NT$100K in your pocket do now? Maybe just a decent phone, or one month’s rent in a big city. Use it to buy a house? Probably can’t even buy you a toilet.
See the problem? From “ten-thousand-yuan households” to “monthly wipeout,” the money is still that money, the printed number hasn’t changed. But what it can exchange for has shrunk way, way too much.
We often say “prices rose.” But think about it from another angle — could it be that our money got thinner, more虚 (hollow)?
This is like a bowl of thick bone broth, delicious and rich. Later someone keeps pouring water into the pot — it’s still the same pot, still looks full. But taste it, more and more bland, more and more without nourishment. The money in our hands is going through this being-“diluted” process right now.
This “dilution” has a term in economics: “inflation.” In plain language, it’s that there’s too much money printed in circulation, more than all the goods (houses, cars, rice, flour) society produces.
Imagine: a village produces 100 pigs per year. Previously, only NT1,000. Later the village chief somehow issued another NT200K, but still 100 pigs.
So do you think pork prices will rise? Definitely! Everyone has more money competing for limited pigs, prices naturally rise, maybe NT$2,000 per pig.
See? The pig is still the same pig, hasn’t gotten fatter or stronger, but you need more money to buy it. It’s not that pork got more expensive — it’s that your money’s purchasing power dropped.
Every one of us is forced to drink this continuously diluted broth. You put money in the bank and count on that interest as if hoping the chef would add a spoonful of salt to make it taste strong again. But the water faucet over there hasn’t stopped. Your salt-adding speed can’t keep up with the water-adding speed.
This is the first, cruelest reality we must face: you think keeping money in the bank is safest, but you’re actually just watching its purchasing power drain away bit by bit with time.
Layer Two: Where’s the Faucet? Who Keeps Pouring Water?
Hearing this, you’d certainly ask angrily: “So who’s behind us pouring water into the broth? The printing press machines working 24/7?”
True, the printing presses are running, but that’s only a small part of the water. The real big faucet actually hides in the bank that each of us deals with. This process sounds a bit like magic. Let me tell a small story and you’ll understand completely.
Suppose you — Old Wang — worked hard to save NT100,000."
OK, do you think that NT$100K is just sitting in the bank’s vault, waiting for you to come withdraw someday?
Big mistake.
The bank isn’t a charity. It’s there to make money. How does it make money? By lending out the money you deposit and collecting the interest difference. According to national regulations, the bank can’t lend out all your NT10K) in case you urgently need to withdraw. That’s the reserve requirement. What about the remaining NT$90K? The bank can lend it to others.
At this point, your neighbor Xiao Li wants to open a bun shop and is short on cash, so he borrows these NT$90K from the bank.
Note — the most crucial step of the magic trick — the bank lending NT$90K to Xiao Li isn’t transferring your deposit to him. It’s凭空 (out of thin air) writing a number “90,000” on Xiao Li’s bank account.
Do the math now — how much money is out there? There’s the NT90K in Xiao Li’s account he can immediately use to buy flour and machinery. NT90K = NT100K you deposited became NT$190K flowing in society through this one bank transaction. Did money凭空 (appear out of thin air)?**
Not done yet! Xiao Li gets NT90K and deposits it into another bank. That bank, getting NT80K+ to someone who wants to buy a car.
This process is like a money-makes-money chain reaction. The original NT$100K you deposited, passed around the banking system, can eventually become hundreds of thousands or even millions in circulation. Every mortgage, car loan, business loan, repeats this money-makes-money magic.
Tens of thousands of people borrowing means this faucet keeps running, the total amount of money in society keeps growing.
So who’s the invisible person diluting our wealth soup? Not some villain — it’s this modern banking system none of us can live without. It needs to constantly create new money to support economic development, but the side effect is that all our saved money gets diluted.
Layer Three: Life’s Fork in the Road — Why Do Some Get Poorer Saving, Others Get Richer Borrowing?
Now that we understand the first two points, we come to the most piercing, most fate-changing question: in the same big money-printing game, why do different people have such dramatically different endings?
Let me continue the story. The protagonists are still our familiar two — Old Wang, the老实 (honest) saver, and Xiao Li, the savvy borrower.
Assume 10 years ago they both earned NT$1 million each through hard work.
Old Wang is the缩影 (microcosm) of most of us. He firmly believes “no debt, no worry,” feels uneasy about owing the bank. He safely deposits the NT40K in interest per year. He pinches pennies daily, watching the numbers on his passbook grow bit by bit, feeling his life has great safety.
Xiao Li figured out the logic we discussed earlier. He felt money sitting in the bank was just slowly losing value. He made a decision that made all his relatives and friends sweat — he took out his entire NT2.3 million from the bank, totaling NT$3.3 million to buy a place in the city.
From then on, he became a房奴 (house slave). Every month when his salary arrived, he had to pay the bank a big chunk first. Life was tight. He couldn’t随便 (casually) eat out, couldn’t easily change phones. People around him said Old Wang was smart, Xiao Li was just折腾 (fussily struggling), why live so hard?
Ten years passed. Let’s see what kind of bill fate issued to these two different choices.
First, Old Wang. His NT1.4 million. The number grew by NT$400K, not bad, right?
But we have to calculate how much prices rose in these 10 years — ten years ago a bowl of beef noodles was NT80. On balance, the NT1 million ten years ago.
Old Wang worked hard for ten years guarding his passbook, only to find his purchasing power hadn’t increased — it had actually decreased. He felt he’d clearly been working hard, but was quietly falling behind on life’s track.
Now Xiao Li.
The NT6.6 million after ten years. Let’s calculate his net worth:
- He now owns a house worth NT$6.6 million — this is his asset
- He still owes the bank NT$2 million after years of repayment — this is his liability
- So his net assets are NT2 million = NT$4.6 million
Ten years ago his total assets were only NT4.6 million, almost 5x growth.
Why? The logic is simple but cruel —
First, the house Xiao Li bought with borrowed money is a “boat” — when the tide of big money-printing (inflation) comes, the water rises and so does the boat. His asset value rose with it, perfectly hedging the risk. Old Wang’s money is an “anchor” — when the tide comes, it sinks straight to the bottom.
Second, inflation did Xiao Li a huge favor. It not only made his house worth more, it made his debt lighter. Think about it — the NT$2 million he owes the bank is from 10 years ago. Back then that money’s purchasing power was much stronger. The money he repays each month now is 10 years later, already significantly shrunk in purchasing power — he’s essentially using increasingly worthless money to repay a debt that was once very valuable.
This story’s ending reveals a shocking secret — in this era, people who老老实实 (honestly) save money are actually using their own wealth shrinkage to subsidize those who dare to borrow from banks to buy assets. The money you save becomes Xiao Li’s capital for buying houses and opening companies through the bank. They enjoy the benefits of asset appreciation, while you silently bear the cost of money devaluing.
Layer Four: What Should We Ordinary Folk Actually Do?
Hearing this you might feel the sky falling — “Are we ordinary people who work hard to save doomed to be harvested?”
Don’t panic, don’t go to extremes. Seeing this rule clearly isn’t to make you疯狂 (madly) borrow money and speculate, but to open our eyes, change our way of life, protect our hard-earned money.
Here are three practical suggestions that we ordinary people can understand and do:
Suggestion #1: Shift Your Brain — From Saving Money to Saving “Things”
Stop stupidly staring at the numbers on your bank passbook. You need to start finding ways to convert your money into those good things that appreciate with the big faucet — these things are what we call “assets.”
For us ordinary people, what are the best assets?
First: a healthy body. This is the revolution’s capital. When everything else is gone, with health you have the chance to make a comeback. Don’t ruin your body to save money — that’s the biggest亏 (loss).
Second: your craft and abilities. Spend money to learn driving, cooking, computer skills — these abilities stored in your brain can’t be stolen, and can help you earn more money. Your speed of earning is the best weapon against money devaluation.
Third: only then those opportunities that lay golden eggs. For example, if you need to buy a place to live in a good location, or if you don’t understand stocks, you can save a few hundred a month to buy index funds (ETFs). This is like buying a tiny share of the best companies in the country, letting those bosses earn money for you. Long-term, you can beat the pace of money devaluation.
Remember the key: convert paper money into tangible, useful, value-appreciating things.
Suggestion #2: Have a Number in Your Heart — Don’t Look at How Much You Earn, Look at What You Can Buy
From now on, when your boss gives you a raise of NT$500, don’t be happy too soon. Go to the wet market, see if pork has also risen in price, if rent has also gone up. If your wage increase can’t keep up with price increases, you’re actually still getting poorer.
We need to learn to build our own “price ruler” in our hearts — stop asking “how much savings do I have,” and start asking “is the money in my hands enough for the kids’ college? Enough for parents’ medical bills? Enough for my dignified retirement?”
Use these real life needs to measure your wealth. Then you’ll see more clearly, and feel more grounded.
Suggestion #3: Expand Your Mindset — Treat Money as a Tool, Not a Treasure
Many people treat money as their lifeblood. They hoard it, lock it in the bank, watch the numbers grow each day, feel satisfied. What’s the result? They save their whole lives, enjoy nothing themselves, and in the end leave behind possibly just a pile of numbers with缩水 (shrunken) purchasing power.
Money isn’t your master. It’s not your ancestor. It’s just a tool — a tool that lets you live a better life. This tool is used to let you learn new things, improve yourself; to give your family better protection and security; to have the底气 (backbone) to say “no” when you encounter difficulties.
See the Rules, Live with Clarity
Seeing these behind-the-scenes rules of money isn’t meant to make you more anxious. Quite the opposite — it’s to free you from money’s bondage, to live more clearly and proactively.
Today we stripped apart “why money keeps losing value” from start to finish — from the feeling that money gets thinner, to the bank’s money-multiplication magic, to the different endings of savers and borrowers, and finally the ways ordinary people can protect their wealth. I hope today’s content can be like a key that opens a new window for you. From this window, what you see is no longer simple savings numbers, but the real rules of money flow.
Today we’re not talking about complex theories. We’re just talking about wealth truths closely related to our ordinary lives.
This article involves economic concepts like inflation and bank money multiplier. It is intended for personal financial knowledge普及 (popularization) only. It does not constitute any investment or borrowing advice. Each person’s income structure, risk tolerance, and life stage differ; please make independent judgments based on your own situation before acting.
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