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Inflation Medium Dive

Updated: Oct 21, 2022

I unfortunately think this is a really cool topic. But I don’t enjoy talking about it that much. Because I think it’s an unfortunate topic, right, but it’s a topic that we need to learn about. And that is the topic of inflation. So, inflation is simply when things go up in price. Actually, if you really want to reframe it and do it the right way, you have to look at it as when the dollar loses value, right? When the medium of exchange, the denominator actually goes down in value, prices seemingly go up. And so right now, the federal government is printing money, right? Printing it is like they used to, just printing out dollars and $100 bills. What they’re doing is adding zeros to the Fed’s balance sheet and spreading money out to the economy. And so, it’s, it’s when you have too much of something, it’s worth less, right like one rose is nice, 12 roses are really nice. But 1000 Roses, like, it’s not as nice. So, the value of those 1000 roses goes down, right, you don’t need to buy extra roses, you’re not going to want to spend the same amount of money that you spent on the first rose. So that’s a value thing. And so therefore, inflation contrarily goes up, and things go up in value. So, it gives you an idea. Before I give you the idea, though, I will tell you, the Fed came out and said or the reports came out and the CPI was reported at 7%, the consumer price index. Now, I don’t believe that, but that’s a government figure that’s created and changed over time to suit the government and its political purposes.

But nonetheless, they’re supposed to take a basket of goods and compare it to a basket of goods from last year in the year before, they always changed what’s in the basket of goods. So, I don’t really see how it’s that relevant. So, I could just tell you that we all have our own basket of goods. When you start to analyze what’s in the basket of goods, the cost of living, right, what’s our real cost of living, you start to get a sense that what the government is telling us is the cost of living and what we’re really experiencing of the cost of living is not quite matching up. So, I’m just going to go over a few numbers. And if you’re watching this podcast on a video, I’ll have it on the screen. If not, I’m just going to tell you what the numbers are. And I’m going to let them sink in. So, I’m just going to go through year over year increases year over year inflation in certain categories. The first one is gasoline. Gasoline has gone up 49.6% Right. Gas was a couple bucks last year, it’s now more than $3.50 – $3.60. And if you’re in California with all the extra taxes they glob on, you know, you’re talking over four or five bucks. So, gasoline 49.6% beef, if you’re a meat eater, 89%. 18.6% Pork 15.1% Chicken 10.4% Fresh fish 10.2% Oranges, right, they grow out of the ground, how can they be more expensive, now 9.9%. Notice how not a single one is 7% so I don’t know how they’re getting an average. But furniture is 13.8% If you can get it a lot of furniture sitting on ships right now, dresses. 8% Now we’re getting kind of close to that seven jewelry 8.8% new cars up 12%. I just went and purchased a new car a couple of weeks ago with my girlfriend and I couldn’t believe how much a new car was, over $50,000 for a brand-new car?! Like I remember buying a brand new 1988 Honda Accord for $13,000 loaded and now new cars are $52,000. Just amazing. Used cars are up 37% When in our lifetimes have the value of used cars actually gone up. Usually, they say you drive it off the lot. It’s worth 30% less. Well, that isn’t happening right now. Used cars up 37% hotels, even though we have a pandemic, they’re charging an arm and a leg for hotels. So, you know it’s not a demand situation. You know it’s a value situation with the dollar car rentals as a result of prices of cars going up. And you can’t get cars because of a chip shortage or whatever they’re going to blame it on. You know let them blame it on anything they want, but car rentals are up 36% and they’re not going to blame it on is themselves.

The fact that we’re printing money, we’re creating these green new deals and these build back betters and all these crazy programs that are not productive, because anytime you give the government money, they can’t spend it as effectively as the price the private sector can spend it. They just can’t. It’s they’ve never been able to, they never proven to be efficient, and it won’t work. So that’s what’s going on. Year over year, not a single one of those prices that I just told you was 7%.

So, I don’t know what they’re putting in those stats..?

Imagine going out for a drink. What’s a drink costing out? A decent place, depends on where you live, of course, but I used to pay $8 and thought that was expensive for a martini. Now it’s $20 for a martini, and a lot of places, many places, sometimes it’s $24. That’s not 7%

Guys, like just five years ago, I was paying eight bucks for drink a couple years ago I was paying $2 for a gallon of gas a couple of years ago was paying, you know, $3.99 for a pound of chicken and now I’m paying a lot more. Everything has gone up. Okay, maybe it’s transitory as our fed, Chairman Jerome Powell says right? He says it’s transitory. And that one didn’t age well, because now he’s not saying transitory anyone anymore. And by the way, if you’re predicting your financial future, based on the predictions of the Fed, you’ve really sold a bill of goods, right? Because none of their predictions are right. And they’re the ones that are controlling the money. So why would we believe anything he says? Anything the Fed says, anything that politicians say, because what they’re telling you is that it’s transitory. It’s just going to be here for a little while. Well, we’re not going to say transitory anymore. Because, you know, we think it’s going to be here for a while, not a little while anymore. So, the Fed is looking pretty stupid. And the Fed is pretty stupid. And it has been ever since its inception, it served a purpose at the very beginning. But then they’ve gone astray. The Fed is trying to keep 2% inflation. Well, we’re way beyond 2% inflation, they think it’s seven, I’m telling you, it’s 20. And, you know, their purpose is to keep it at 2%. I mean, there’s no way, when real rates and real rates means that when you subtract what you’re actually getting from income, fixed income, and you subtract what the cost of living is, your real inflation rate is actually negative. So, if you get 2% on a bond, and that’s generous, but let’s say you get 2% on a bond, but your inflation rates 10%, you’re losing 8% a year in purchasing power, you keep your money in the bank, enough years, you’re going to lose all your purchasing power. Your $10,000 won’t be able to buy $10,000 worth of goods next year, it’ll buy much less. So in order to put this into perspective, and show you that it’s just not 7% It’s a little bit here a little bit there. It’s 32%. It’s 20. But I’ll tell you, let me go back to 1938. Tell you what things cost back then. And you can compare them what they cost around you and your area. A new house in 1938. You’re ready for it. $3,900 a new house. Okay. It didn’t have granite countertops, maybe back then. And it was a smaller footprint. It wasn’t a mansion. But $3,900 like double it to get a state-of-the-art home back then. You’re still talking about $7,800. How much was the average income back then? In 1938? If the average house was $3900. How much is the average income? $1,731 a year $1,731 A year if you’re making $1,731 a month now a lot of people consider you poor, right? A new car. I just told you how much a new car was, you know, a couple of weeks ago, it was $860 for a brand-new car in 1938. And they were pretty cool cars back then to write some cool 38 Mercury’s and Fords and really some really cool cars I’d love to have now. But $860 average rent. If you’re paying rent, I know you’re not paying $27 a month. And that’s what the average rent was back in 1938. About tuition to Harvard tuition to Harvard in 1938. You know what it is now, it’s like $40,000 a year or something like that. Tuition at Harvard $420 a year. A movie ticket 25 cents, gasoline 10 cents a gallon. You think that’s 7% increase and you know that many years. The US postage stamp back then was three cents. Today, you know what it is? It’s 55 cents or something like that. About Let’s talk about food, sugar, for 10 pounds of sugar. Now you go buy a pound or two. For 10 pounds of sugar, it was 59 cents. For vitamin D milk, a gallon of milk was 50 cents a gallon, ground coffee 39 cents per pound 1938. Bacon 32 cents per pound, it’s $10 a pound now guys, and eggs 18 cents a dozen. Now eggs, you’d be lucky to find them for under $2. They’re usually more like three or four. And so, you could see that there’s been an incredible devaluation, a debasement of our currency. And we’ve sat here and watched it happen, because it’s like the boiling frog analogy, right? If you put a frog in boiling water, he jumps right out. But if you put the frog in cool water, and then you put it on the stove, and you turn it up slowly, he’ll boil himself to death, because he doesn’t know when to jump out. We’re like the same way we let them do this, we let them print the money, debase the currency, give us freebies, we’re going to get some money for sitting at home during the pandemic, we’re going to get some special things for having kids, we’re going to get some special money for this for that. And while we look at our own interests, what’s happening around us is just crumbling. 

Inflation is a tax on the poor. And they wonder why the rich and the poor have a bigger and bigger divide. It’s because of inflation. Because the poor don’t have money to put into assets to hedge inflation. The poor don’t buy stocks, the poor don’t buy homes, they rent them, right? So, they don’t have a hedge against this debasement of our currency. But rich people, or even people that are just slightly fluid, have enough extra money to say, “You know what I need to invest for my future”. If I put money in stocks, well stocks track the rate of inflation over time, roughly. So, if you’re in stocks, you’re keeping ahead of inflation, or you’re staying even with it, or you’re certainly doing better than the person who doesn’t have anything in there and just lives hand to mouth. And it’s the government who is creating all of these problems, this divide, it’s not the supply chain issues, it’s not that we don’t tax the rich enough, it’s we just print money, because we give people free stuff. Or we think we can do it better as a government than they can in the private sector. And that just kills our economy.

So, I have a chart up here, if you’re watching this podcast on a video, but bottom line, I’ll walk you through it, this is from 1800 until, 2020, roughly. Tt’s the buying power of $1 over time, and it starts out at $1. And it goes up a little bit and then it goes down to 60%. And then it goes back up to $1.60. The buying power of $1 over time from 1800 until now, to 2022, I guess, and then it’ll drop to 80 cents, and then it shoots back up. Now, during this period of time it was going up and down. The ups were because we were on the gold standard. We for every dollar that we had, you could go get some gold for that dollar when you went to the bank, or you could get some silver, when you went to the bank in 1971. That all changed and we no longer backed up our dollar with gold. We went off the gold standard in 1971. And since then, there’s nothing backing up our dollar. It’s just air right. So, people go oh, well, you know, Bitcoin is such a bad investment because nothing’s backing it up. There isn’t anything backing up the US dollar either. Except the back that there’s a big government with big bombs. Right, that, you know, we say that we stand behind the dollar and the whole world uses it right now. It’s changing. So, I’ll keep going. So in about 1900, the dollar was worth maybe $1.40.  That’s your buying power of $1 went up? It’s pretty cool. That was the last time it really went up. It’s been going down since about the turn of 1900 century, what does that 20th century and it’s just been going down, it gone down in 1919 to 60 cents, up ticked a little bit back up near the dollar. And then after the depression, it’s got done nothing but go down. And if you look and tell how close it is to zero. But it’s worth about two cents. In other words, the dollar has lost, I don’t know depending on the study. But according to this thing, about 98% of its value. Since 1800, it’s lost 98% of its value. Crazy, right? So, the question is where does the inflation actually come from? If you look at it from that period of time, where’s our inflation coming from? You hear Jerome Powell? You hear the government figures tell you that it’s 7%. In food and beverages, the average inflation since 1800 has been 3.9% a year. Now that’s a year. Now think about that. That’s inflation that’s compounded on itself. So, the numbers when you really look at them are staggering. Now let’s see if you can get your brain around this food and beverages since the 1800s. The inflation rate has been 492,820% That’s How much food and beverages have gone up? Because there’s a compound effect of inflation, right? 3.9% of this year on top of 3.9% an extra and it starts to compound. So, it’s 492,000%. How about housing? Well, the average inflation rate for housing is 4% 4.18%, actually, but total inflation over that period of time 183,000% for a place to live, right. In other words, it was in when the dollar was worth $1, in 1800. Today, it’s worth 831 for every dollar to buy that same house. Apparel, about 2%. And the inflation rate on apparel is pretty modest. 7,307%, transportation 3% average, but 133,000% inflation in transportation. And that’s with all the technological advances, medical care, you’re going to freak out on this one, right? Medical care has averaged 4.69% inflation for more than 200 years. Okay. But when you accumulate it and compound it, it’s, uh, it’s 2,622,915% for medical care. Now, medical care has moved a long way. And we live a lot longer, but 2,600,000% It’s a little higher than the 7% that were supposedly being told that things are happening. Okay, education, about a 2% or 1.84%, average inflation rate, but 5,600% to be educated, and other goods and services, I don’t know what they put in other goods and services. But the average inflation rate on that is about 5%. But the total inflation percentage on other goods and services, get ready. It’s four and a half million percent, four and a half million percent. Now imagine if you’ve got that kind of a return for those many years, right? Well, you would first of all, you would hedge inflation, you wouldn’t get ahead of it. But you would have you know, if you invested $1, in 1800, you’d have, you know, $4,568,000 in today’s money, that’s what $1 would have bought you back then, is this starting to make sense? Are we starting to realize that what we’re being told is not, it’s not conducive to our well-being? And now the government is doing much, much more of this. And it’s accelerating the pace at which they’re debasing the currency. Why, why is that? Well, they’re using something called MMT, modern, modern monetary theory. And modern monetary theory just says, it doesn’t really matter what the dollar is worth, just keep, keep printing more of it, we need more dollars, we need to give people more dollars, we need to buy their boats and give them free stuff. If we give them free stuff, they vote for us. So, let’s keep ourselves in office and we’ll give them free money, keep them quiet, so they don’t have a revolution. And then they’ll vote for us. And we’ll just keep staying in power, and we’ll be able to be corrupt, because I think there’s a lot of corruption in government. People, you know, getting money under the table, that happens at the end of societies is the people at the top that are running things, all get richer, and then at the expense of the people that are at the bottom. And I think that’s happening. And I think we’ve got lots of reports that we see that it’s happening, but that’s beyond the scope of what we’re talking about.

The bottom line is the government is in the business of staying in the business of creating happiness among people, but people just think they’re happy. They’re just temporarily happy. But I can tell you, when your gas goes up, 50%, and you want to take a vacation with your family. And that last year was like the money you saved up and now you don’t have as much money to be able to spend on gasoline and hotels and food, you’re not going to be able to take that vacation with your family. It comes back to bite you another way. And that’s what’s happening to the government right now. And it’s going to get worse guys, you’re going to hear all kinds of reports in the next year, two years about how inflation is just a temporary thing. Once we raise rates, everything’s going to be fine. But when you raise rates, you raise the price of money. And when you raise the price of money, you slow down progress in the economy. When you slow down progress in the economy, people get fired. When people get fired. They’re upset, so you throw more money at them. What that means more people get fired. And the cycle continues until you have a recession and depression. That’s what we’re heading for right now. The government with this MMT theory is just like well, throw more and more and more money at it. But if you and I ran our households like the government runs its household, right? We would we would be in jail. They won’t let you just give people money that doesn’t exist, right. You have to pay your bills. And right now, we can barely pay our bills. The government interest on the debt that we’ve created is 30% of our GDP. It’s a crazy amount of money that we’re spending just to pay the interest off in our debt. Imagine if we raise the rates to try to quell inflation. Now we’ve got to pay more money on our debt. It’s a formula for disaster when you have to pay more money for your debt, you’re spending more and more of our taxpayer dollars. Now our taxpayer dollars are going to pay for some other country’s debt because they bought our debt 15 years ago, fine. But we don’t need to do that. You know, Ronald Reagan and several other presidents were out there saying we need a balanced budget to keep the government curtailed. I could tell you in the state of Florida, there’s a balanced budget amendment, and every year they come in with a balanced budget. Hmm. They don’t run deficits, right? They balance their budget every year, very responsible. As a result, the state runs well, there’s no personal income tax here, great place to live. And the economy is booming in the state of Florida. Contrast that with New York or New Jersey or Connecticut, high taxes, not a fun place to live right now. Right with all the lockdowns and craziness going on up there. Right, and mandates. And there’s no balanced budget So, they’re there, they’re going into debt there, things are going crazy in those states, and they have to borrow more and more money. And just like the federal government is borrowing all this money, it’s going to end in a disaster, right? So, I don’t know where it all ends. And when it all ends, I can just tell you that if you studied history and studied economics, and I have, and you start to look into what’s happened in other countries, when they’ve done the same exact thing at the end, those increases of free money increase at a much faster rate. And that’s what we have going on now. And it’s at the end of society where that’s happening. And I think because just looking at the graph, I don’t want to be doom and gloom because I love this country. But at the end of these things is where you’re going to get some major upheaval in the country, you’re going to have some major conflict, we’re already starting to see conflict in our country, just politically and socially. We’re starting to see some unrest. And if we don’t stop it, if we continue to be irresponsible, it’s not going to end well. And I think the way it doesn’t end well, and I don’t know how it manifests itself, right? Because it just doesn’t happen very often, probably happens every 100 years with a reserve currency. But when it doesn’t end well, you get a lot of changes. And so, I think that’s what’s going to happen, but you’re going to see potential defaults on the on the debt. Now I think we have a soft default going on by raising the rates, like we’re already defaulting on our rates, right? We’re devaluing the value of the bonds that people borrow. So that’s a soft default. Maybe eventually, it gets to the point where we undercut people, okay, we owe you $1,000 and will give you $500 for it, what do you say?  And that’s the beginning of the end, when people don’t lend us money. They don’t buy our bonds, and the economy basically collapses. That could be with the way it goes. It could be that there’s alternatives. There’s always been the gold alternative. Now there’s digital gold, which is Bitcoin it could it be that it moves toward that alternative? Because nobody can affect the supply and demand of Bitcoin? Or certainly the supply? You know, I don’t know, I can just tell you that with everything that comes down the pike. There are things that are setting up that are unpredictable. So, we don’t know what the tipping point is. Is it a bond collapse? Is it a stock market collapse? Is it the Fed inching up rates too fast or too slow, is that the government just continues to print indiscriminately, we don’t know where it’s going to happen. I can just tell you based on studying history, it has happened. So that’s my take on inflation. comment if you want, let’s have a discussion about it. But I certainly think there’s a lot of history behind what we’re doing. And I tried to give you a little bit of history so you can see what’s happening to your money in your wallet. And I hope that helps.

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