The purchasing power of money held in savings accounts is falling faster than the interest those accounts pay. This is not a temporary condition. It is the arithmetic consequence of how governments fund spending, and it affects South African savers as directly as it affects anyone else.
| Point | What it means |
|---|---|
| US money supply growth | M2 grew from $287 billion in 1970 to $21.5 trillion by 2024. That is a 75-fold increase in 54 years. |
| Annualised M2 growth | Approximately 12.8% per year over the past 20 years. A savings account paying 2% real return loses roughly 10% of purchasing power annually. |
| US debt dynamics | National debt near $39 trillion. Annual interest cost approaching $1 trillion. Tax revenue around $4 trillion. One dollar in four of tax revenue services debt interest before any spending. |
| South African rand | The rand has lost more than 70% of its value against the US dollar over the past 20 years. South African savers face currency debasement on top of monetary inflation. |
| Bitcoin’s supply | Fixed at 21 million. No government, central bank or institution can expand it. The issuance schedule is determined by code, not by fiscal need. |
The debt that cannot be repaid
The United States government carries roughly $39 trillion in national debt. The annual interest bill is approaching $1 trillion. Total federal tax revenue is around $4 trillion per year. Before a dollar is spent on defence, healthcare, infrastructure or anything else, close to one in four dollars of tax revenue goes to servicing debt accumulated in the past.
These numbers do not balance through growth alone. The debt-to-GDP ratio continues to rise. Raising taxes enough to close the gap is politically and economically difficult. Cutting spending at the scale required has not been achieved by any major Western government in modern times.
What remains is a third path: inflate. By expanding the money supply, governments reduce the real value of their debt obligations over time. Creditors are repaid in currency worth less than what they lent. This process does not announce itself. It operates quietly through the prices of goods, the returns on savings accounts and the cost of assets.
What the money supply data shows
The US Federal Reserve publishes M2, a broad measure of money in circulation. In 1970, M2 stood at $287 billion. By 2008 it had reached $8 trillion. By 2024 it had climbed to $21.5 trillion. That is a 75-fold increase over 54 years.
Over the past two decades, M2 has grown at an annualised rate of approximately 12.8% per year. A savings account offering 2% interest does not compensate for that. In real terms, money sitting in cash savings loses roughly 10% of its purchasing power each year.
The practical consequence: R100,000 held in a typical savings account earning 1% real return, against 12.8% money supply growth, is worth approximately R50,000 in real purchasing terms within six years. The number in the account has not changed. The problem is what that number buys.
South Africa is not insulated from this
The US example is useful because the data is well-documented. The underlying dynamic is not unique to America. The South African Reserve Bank has also expanded the domestic money supply over the same period, and the rand has paid the price in external purchasing power.
The rand has lost more than 70% of its value against the US dollar over the past 20 years. A South African investor holding rand-denominated savings is exposed to two layers of erosion: domestic monetary inflation and rand depreciation against harder currencies. Savings accounts denominated in rand and paying rand interest do not address either.
Government debt as a share of GDP in South Africa has risen steadily. The South African government’s interest bill now consumes a substantial portion of the national budget. The structural pressure to inflate is present here as it is in the US, in Europe and across most major economies.
Why Bitcoin is relevant to this calculation
Bitcoin has a fixed supply of 21 million coins. The issuance schedule is written into the protocol and enforced by the network. No central bank, government or institution can issue more. This property does not rely on trust in any counterparty; it is verifiable by anyone running the software.
The relevance to savings is direct. If the supply of a currency grows at 12.8% per year and the supply of Bitcoin grows at less than 1% per year (approaching zero after the 2024 halving), then the exchange rate between the two should, over time, reflect that difference. This is not a forecast. It is the arithmetic of relative scarcity.
Bitcoin is not a speculation on technology or adoption. For South African savers, the case begins with a simpler question: if money supply growth is eroding savings, what asset has a supply that cannot be expanded to match? The answer that fits the description is Bitcoin. A regular purchase plan is one way to build exposure systematically over time without trying to time the market. Those holding larger positions should also consider how to secure them properly.
Frequently asked questions
Is the money supply expansion really that significant for ordinary savers?
Yes. The effect is cumulative and compounds over time. A savings account paying below the rate of money supply growth loses purchasing power every year, even if the nominal balance is rising. Most South Africans experience this as rising prices rather than a falling account balance, which makes the mechanism less visible but no less real.
Does this mean all fiat currencies will collapse?
Not necessarily. The argument is not that currencies will fail overnight. It is that gradual debasement is the historical path of least resistance for heavily indebted governments. Currencies can lose significant purchasing power over decades without a single dramatic collapse. South African savers have lived through this with the rand over the past 20 years.
What about South African bonds or inflation-linked instruments?
Inflation-linked bonds protect against CPI, but CPI measures a basket of goods, not money supply growth. If M2 grows at 12.8% per year and CPI is reported at 5%, an inflation-linked bond still underperforms money supply expansion by a wide margin. The instrument protects against the official measure, not against the underlying monetary dynamic.
Why not gold instead of Bitcoin?
Gold has served as a monetary hedge for centuries and continues to do so. Bitcoin shares gold’s key property of limited supply but adds verifiability, divisibility, portability and a settlement network that operates without intermediaries. For South African investors specifically, Bitcoin can be held without a broker, transferred across borders and verified independently in a way that physical gold cannot match.
How much of a savings portfolio should be in Bitcoin?
There is no universal answer. Bitcoin is volatile, and position sizing should reflect both the investor’s time horizon and their ability to hold through significant drawdowns. What the monetary arithmetic suggests is that holding no Bitcoin at all, in an environment of persistent money supply expansion, is itself a decision with a cost. How much to allocate is a personal judgement that merits a proper conversation.
Sources
- US Federal Reserve: M2 money supply data and historical monetary aggregates
- South African Reserve Bank (SARB): domestic monetary policy, M3 data and rand exchange rate history
- The Bitcoin Standard, Saifedean Ammous: monetary history and the economic case for sound money
- Lyn Alden: analysis of fiscal deficits, debt dynamics and their relationship to monetary expansion
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Talk to a Bitcoin SpecialistWritten by James Caw, Founder of SimplB. James has helped South Africans understand, buy and secure Bitcoin since 2015. SimplB operates as a Juristic Representative of CAEP Asset Managers, FSP 33933. Last updated: May 2026.
This article is for general educational purposes only and does not constitute financial, legal, tax or exchange control advice. The information reflects the regulatory position as at the date of publication. Your individual circumstances may differ and you should seek qualified professional advice before making any decisions.
