A few years ago, 2022 was the year when everything changed economically. Central banks started raising interest rates aggressively to curb inflation that we hadn't seen in decades. If you experienced that, you know it affected your wallet: prices of everything went up, and your money was worth less and less.

Now, while governments tried to control the situation with restrictive policies, an interesting debate arose about how to protect people's purchasing power. In Spain, for example, there was a lot of talk about deflating the IRPF. But what does that really mean?

Essentially, deflating is an economic concept that allows us to compare real values without being misled by inflation or deflation. Imagine your country produces 10 million in goods one year, and the next year it rises to 12 million. That sounds like 20% growth, right? But if prices increased by 10% during that period, the deflated value of GDP only truly grew by 10%. That is, we remove the effect of prices to see the real growth.

This is fundamental to understanding whether an economy, a company, or a worker is truly improving or just gaining numbers that don't reflect real purchasing power. The deflated value is what matters, not the nominal number.

When we talk about deflating the IRPF, we mean adjusting the tax brackets according to inflation. If you earn more money but only because prices went up, you shouldn't pay more taxes in real terms. The idea is that the taxpayer doesn't lose purchasing capacity simply due to a nominal increase in income. It's a measure that the United States, France, and Nordic countries regularly apply, but Spain didn't do consistently at the national level.

Proponents of this measure argue that it protects families' purchasing power during inflationary times. Critics, however, point out that it benefits higher earners more, since IRPF is progressive, and that reducing taxes can limit funding for public services.

Now, how does all this affect your investments? In scenarios of high inflation and elevated interest rates, the strategy changes. Gold has historically been a safe haven: when the currency loses value, gold tends to maintain or increase its value. Stocks, on the other hand, suffer because financing becomes more expensive for companies and consumers' purchasing power decreases. Although 2022 was tough for the tech sector, sectors like energy posted record profits.

For the currency market, high inflation can depreciate the national currency, making it attractive to invest in foreign currencies. But beware: forex is volatile and high risk.

Diversification remains key. Mix assets that perform well in inflation (commodities, real estate) with defensive assets (Treasury bonds, government-backed securities). The deflated value of your portfolio is what truly matters: not just how much money you have, but what purchasing power that money represents.

In conclusion, if IRPF is deflated, people would have more disposable income, which could boost investment. But the actual economic benefits for an average person are not spectacular; we're talking about hundreds of euros. The important thing is to understand that in times of inflation, you need to think in terms of deflated value, not nominal numbers. Your true wealth is what you can buy with your money, not the number of digits in your account.