Barrister Brief – Inflation killed the penny

What a Penny Tells Us About Inflation—and Your Financial Future

As we approach the July 4th holiday, I wanted to share a quick but powerful perspective on inflation, inspired by a recent piece in Grant’s Interest Rate Observer. It’s a publication I deeply respect, written by the sharp and ever-insightful Jim Grant. In a recent issue, he published a submission from reader Alex Pollock that struck a chord with me—and I think it will with you, too.

Pollock asked a simple but revealing question: What’s the real value of a penny today?

If we take 1950 as our baseline, when the Consumer Price Index (CPI) was around 24, and compare it to today’s CPI of about 321, the penny has lost 93% of its purchasing power. In fact, a 2025 penny is worth roughly 1/13 of a 1950 penny. Think about that. Back then, no one needed a coin worth 1/13 of a cent—so why do we need one now?

The loss in purchasing power extends beyond the penny. A nickel today is worth only about 3/8 of a 1950 penny. A dime? Worth 25% less than that 1950 penny. This simple comparison starkly illustrates the long-term effects of inflation and its impact on our money.

Why This Matters for Your Financial Plan
You may not have a 75-year retirement horizon, but if you retire at 60, 65, or even 67, a 30-year retirement isn’t out of the question. And with advances in medicine, it could be even longer. That’s why understanding inflation—and planning for it—is crucial.

Right now, money markets may be yielding 4% or slightly more. It’s tempting to feel safe keeping large portions of your portfolio there. But what’s your real return after inflation? If inflation is running around 3.5% (or more, depending on your grocery bill), your real return might be close to zero—or even negative.

That’s why we can’t get too comfortable in what feels like safety. Over decades, cash that isn’t growing will almost certainly lose purchasing power. A diversified portfolio that includes growth-oriented investments is key to maintaining your lifestyle over time.

The Bigger Picture
The penny’s decline is more than a numismatic curiosity. It’s a warning. If the penny is all but useless today, will the nickel or dime be next? What does that mean for your savings?

Inflation is not just a number—it’s a force that slowly eats away at your wealth unless you plan for it. So as we celebrate our nation’s independence this week, take a moment to reflect on your financial independence, too. Make sure your long-term plan considers inflation, real returns, and the need for growth.

Wishing you and your loved ones a joyful, safe, and reflective Fourth of July.