Inflation, according to Merriam-Webster online dictionary is defined as follows: a continuing rise in the general price level usually attributed to an increase in the volume of money and credit relative to available goods and services
We all pretty much have felt the effects of inflation in one form or another. However, economists and the central bankers chose to define inflation as an increase in the price of goods. This is an ingenious way to hide what they are doing as the real definition of inflation is an increase in the supply of money. If they can inflate the money supply and control the cost of some goods, to create the illusion that all is well. Then they have more or less won as the average person has come to associate inflation in terms of rising prices.
Massive subsidies help blur the landscape
One mechanism to keeping the cost of everyday goods down is through the use of massive subsidies. The idea is simple; prices are held in check by offering companies a subsidy. The idea is to keep the cost of certain goods in check so as to mask the effects of inflation. For example, a farmer needs to sell a gallon for $1.50 to churn out a profit, but the government through price manipulation can push the price down to $1.00 a gallon. However, to keep the farmer afloat, they can offer farmers a subsidy of 50 cents a gallon. The consumer thinks everything is great as the price of Milk appears to be low and the Farmer is happy because he is making a profit. However, the cost of going to college, rents, etc. will rise at a much faster rate. The net result is that you are poorer than you were before.
Inflation can be used to one’s advantage
As an investor you need to find investments that will rise at a faster rate than inflation; for example, investing in key stocks at the right time leads to very high gains. Why do you think the markets have gone ballistic? After each disaster, central bankers have unleashed large loads of hot money into the market. A disaster can be viewed as something terrible or opportunity waiting to be discovered; it all depends on the angle of observance. As long as fiat exists market crashes will prove to be long-term buying opportunities- History clearly supports this view.
The poor become poorer
The only problem with inflation is that for the most part the poor become poorer and the unprepared move down 1-2 ranks. That is why the “poor become poorer, and the rich get richer” while the middle class gets wiped out. We have bloodsuckers at the helm of the banking system; their inflationary tactics are designed to produce different benefits. Generally, if one inflates and spreads the money equally, individuals won’t feel the pinch as the price will rise in equal proportion to reflect this increase in the money supply.
That would be too nice for central banks; their idea is to make a killing and to do that the masses have to be milked. They want to inflate as much as possible and at the same time redistribute as little as possible of the new money they have just created out of thin air. The masses don’t understand that inflation is a silent killer tax and at the end of the day they are the ones that are going to pay the tab. A purse that was once full is now ¾ full; in other words, you a certain portion of your money has been confiscated, and most are none the wiser.
Cheap Good From China Mask Inflationary forces
This is what is happening now. Manufactured goods are incredibly cheap; yet look at the price of houses. Commodity prices despite the pullback are still quite high; housing is getting to be beyond the reach of most in the major cities. Salaries have not kept up with the level of monetary inflation. The only reason people can buy houses is that the artificially low-interest rate environment creates the illusion of affordability. This fools many a new buyer into taking debt that he/she does not have the means to pay off.
Inflation punishes the majority, but the astute investor can do very well by looking for investments that will do well in an inflationary environment. Despite what many a Gold bug States, the stock market is one of the best places to park your money so that it grows at a rate that is far higher than the rate of inflation. Look at the price of Gold from 1980 to the present day and then look at the Dow Jones. If you had invested in key blue-chips, you would have made significantly more than if you parked all your money in Gold. Gold does have a place in one’s portfolio, but one should never put all of one’s capital into a single investment vehicle.
Gold is not the only answer
Please don’t believe that Gold is the answer to all your problems, as it is not. Since 2011, it has taken a beating despite the fact that our national debt has more than doubled. There are times when it makes sense to invest in Gold, one such period was from 2003-2011; the reason comes down to the trend. The trend for gold was up, so getting into Gold was the right thing to do. At the moment gold is attempting to put in a bottom formation. Gold will trend higher again; all markets have cycles, and Gold is no exception. 2017 should be better for Gold than 2016. The Money stock has gone ballistic and yet the price of Gold has continued to drop from 2011. As we stated before, every investment has a phase and Gold is like any other sector; it cannot trend upwards forever.
Other examples of using inflation to your benefit
- The astute investor would have started to notice that prices of houses started to increase rather drastically towards the end of 1999 and early 2000. Thus getting into real estate was a good idea up until 2003. In 2006 the crowd was ecstatic on real estate, so the smart thing was to get out of real estate.
- The dot.com bubble is another example; from 1996 to 1999 it made sense to own dot.com stocks, but then the crowd became extremely euphoric, and it was time to bail.
If you thought education was expensive, try a lifetime of ignorance
The simple steps mentioned above can help one find ways to deal with the evil effects of inflation
Why almost everyone including the Goldbugs is secretly rooting for inflation
Virtually every Gold bug is secretly rooting for inflation. Why do I say this? If they are expecting Gold to reach 1500, 2000, 3,000, etc. they are rooting for inflation. Gold prices are one of the leading indicators that there is something seriously wrong with the banking system and that the monetary supply is going out of control. In the later stages, we have the fear factor that tends to push the price of Gold right into the stratosphere as everyone panics and looks for a way to protect their assets. The last stage is the euphoric stage where the crowd jumps in thinking that Gold is the best way to make money in the markets and the market usually puts in a long top; it’s all downhill from there for the masses.
Investors that purchase real estate are also secretly rooting for inflation,
They want the prices of their property to increase. If you take the time to think about it, inflation is very beneficial to the astute investor. Those that are investing in the stock market are also rooting for inflation. It is these loose monetary policies that push people and business to risk more of their money in the market. Point and case, the Market keeps going higher and higher-why? Interest rates are so low, they don’t even cover the cost of inflation, so business and individuals in their quest for higher yields take on more risk. The lower the yield drops, the more risk they are willing to take and vice versa.
If you get into the right investment, the returns are several orders larger than the rate of inflation. This is why the rich continue to get richer. The one’s that make a killing are a small group of elite investors and the cronies of the central bankers who were privy to this information, long before these junkies started to run the press. The one’s that make a killing are a small group of elite investors who have close ties to the central banks; they trade based on inside information.
Fight inflation by getting into the right investment
When you think about it, life is nothing but one large marketplace, and in the end, someone needs to lose for someone else to win. Not everyone can win, and not everyone can lose. The sad part is that it takes a lot of someone’s to lose to make one someone wealthy. The net effect is zero. Money is not lost it only moves from many pockets to one big fat pocket.
When the NASDAQ crashed in 2000, everyone was made to believe that several trillions of dollars of wealth were lost. That was and is a huge fat lie. Those trillions of dollars only moved out from hundreds of thousands if not millions of pockets into a select few thousand pockets.
Do we condone inflation?
No, we don’t. Do we think it is something great? No, we don’t. But what we think does not matter as one needs to focus on the what the masses are thinking. The truth comes down to perception and if the perception is altered and the masses believe it, then what you deem as the truth is irrelevant. The masses will view it as a lie. This is why governments have vested so much time and effort in public education, and it’s the perfect hunting ground. Here they manipulate the order of things and make children believe whatever they want.
This is why today’s youth have no idea that Gold is a currency; the youth of today call it an ancient relic as they have completely forgotten the concept of hard money. Many of today’s youth don’t even know the true definition of inflation. Hence, trying to provide guidance on how to deal with is a futile endeavour for the most part. They focus on the false definition that defines inflation as an increase in the cost of goods and services, but this is only the symptom of the disease.
The goal here should be to focus on the trend and not the noise. The trend is your friend and the noise your foe.
Central banks Goal is to fleece the masses
The central bankers are not going to change; they have been doing this for far too long. They are masters at this game, one day they will lose or create the perception that they have, but who knows when that day will arrive. You might be dead and gone by then. Thus rather than joining the naysayers club where the dominant theme seems to be “utter as much rubbish as you can and do so as loudly as you can”, we would rather focus on the trend and find ways to profit from inflation and vice versa. Noise gets you nothing but unnecessary attention, but focusing on the trend is what increases the size of your trading account.
In spite of the cost of living, it’s still popular.
Kathleen Norris 1880-1966, American Novelist