Inflation is a form of tax, a tax that we all collectively must pay. – Henry Hazliz
Inflation is devaluation of fiat currencies against the current reserve currency of the world dollar. Personally I will compare devaluation of fiat currency value to the real money gold. After “second world war” gold became the reserve currency as many times before in history.Iin 1971 dollar replaced gold as the reserve currency. for more information read “Nixon shock“. Image below the article title gives you an idea of the devaluation (declining purchasing power) of dollar over the years. if you are not in USA you can check the online the decline of your country against dollar and gold to get an idea.
Inflation will reduce your purchasing power of day to day items basically you are become poorer and poorer.
Honestly to be wealthy we need to beat and over perform inflation or at least break even. There are many ways to beat inflation below are some ways to achieve it.
- Live miser and without debt. once you have excess fiat currency lend or invest in metals and asserts.
- Borrow money only for productivity like education, shelter, start a business and pay them as soon ask you can. if you borrow money to spend you will be pushed to poverty.
- Pay your credit card debt every month without fail. In USA we can set auto payment every month from your bank account. explore what is available in your country.
- Improve your skills by learning.. write articles, books, make content and post in social media and make extra income
- Buy metals like physical gold and silver Less returns during peaceful times but in time of war, pandemic like COVID it will perform well. Metals are generally good for store of wealth or value. Ask or read online about stories of refugees who fled war, natural disaster zones how metal help them to safely migrate and start a new life in foreign country. After dollar gold is the second reserved currency at this point of time.
- Lend money to banks buy opening savings account, fixed deposit account, compound interest savings account (CD’s in USA)
- Buy government bonds, corporate bonds for an exchange of interest
- Invest in mutual funds, stock, exchange traded funds (ETF)
- Start a business.
What creates inflation?
Inflation is caused by the lax monetary policy of a governments.. i.e. too much money printed by government and circulated than the size of the countries economy. for more information read about quantity theory of money.
Example: During COVID pandemic countries around the world needed money without being productive so they printed money and the inflation went high. Basically too much money available in the hands of citizens to buy products and services but manufacturing or import came to a standstill so less product and services available. This supply and demand caused price to rise. Basically for the same value of product or service you pay more money.
Disclaimer –
“Believe nothing, no matter where you read it, no matter if I have said it, unless it agrees with your own reason and common sense.” – Buddha