Inflation

“Inflation” is a word we have heard a lot in 2021. I wanted to bring some attention to it and what that means for us in practicality. 

 

What most of us think of first is that the cost of items is higher. But what is really happening is that the value of our money is decreasing. That might sound like semantics, but it’s a pretty important distinction.

 

In response to COVID and all the financial support the government has been giving to everyone, they have been printing money. So, in simplest terms, if you have one dollar and the government prints 10 more dollars, your one dollar is now 1/11 of what it was valued at. Our money is no longer backed by anything but by government decree, they can print as much as they want, and it only devalues the dollar more. Every dollar printed lowers the value of existing dollars. . 

 

The two oranges you once could buy are reduced to only one because the value of our dollar is less, not because the items got more expensive. Sure, we have supply chain issues compounding the situation, but that is NOT the only factor at play here. In 2021, we have the increased costs to produce goods because of supply chain disruptions plus we have a major inflation issue. The two are both responsible for the apparent increase in costs of goods, but inflation is really a devaluing of the dollar.

 

With that said, we need to watch how the media is portraying this. We need to remember that COVID didn’t cause this – our government’s response to it has. 

 

I was recently attending the Real Estate Wealth Lab where the amazing Jennifer Hunt, Head of Research, was explaining some great information on the power of the media. Now more than ever, we need to watch the message that the media is sending us. For example, when they state that inflation or GDP or any other economic metric is the “lowest” or “highest” increase or decrease, one must look at what they are comparing it to! An increase compared to what? Which month are they comparing to? What year or quarter? And we need to keep aware that it is not COVID that has caused this; it is the response to COVID. The virus is not the enemy here. We are all in control of our reactions and we need to watch where we put the blame. Blame is just a way of “b-lame” – being lame. 

 

What this means to you is:

 

1. Beware of the news you are consuming and believing.
2. Inflation is here and it will extend beyond 2021. It is here to stay for quite a while. No, it’s NOT “transitory.”
3. Inflation is going to get big. Our dollar is worth less internationally.
4. What can you do? Those who have lived during times of high inflation recommend:
   1. Adjust your lifestyle. If oranges are too expensive, see if there’s a cheaper option.
   2. Start investing in real estate, NOW.
   3. Take pride in your career and manage it  as wages should go up, too.

 

If this is useful to you, definitely also check out the Real Estate Wealth Lab. They provide weekly insights into all the economics, policies, and markets that affect real estate investing (and homeownership, too!), helping us understand the real deal. Check them out with their free trial! https://www.realestatewealthlab.com/