Let us use an example from the book “Fundamental analysis” by John C. Ritchie. According to the example, we will assume that on January 1, 1967, Irenaeus deposited $1,000 into his savings account, and expected to maintain or even gain his purchasing power. The annual capitalized interest rate was 5%. Irenaeus kept his money in his bank account until the end of 1985. So, we can calculate that at the end of 1985 he had $2,526.95 in his account. Should he be happy with this result? At the same time, the value of the dollar fell to 31 cents as compared to 1967, when the account was opened. Thus, in 1985 the purchasing power of the original amount $2,526 was now only $783.35 in terms of dollars from 1967. Irenaeus underestimated the impact of inflation. He did not expect that inflation would be so high, so he had lost some of his purchasing power (i.e. $216.65 from 1967) instead of maintaining or gaining it.