Another Dull Post About Inflation ðŸ«
On why inflation is a good thing. Contentious subject rite right now.
TLRD; The world doesn’t need another dull post about inflation. So, this is actually a blog about why inflation is a good thing. It also contains some promotional material about how you (yes, you!) can beat inflation, for real!
Everyone knows the impact of inflation — rising food prices, higher mortgage payments etc. Most people right now might not agree with the reasons below. But stick with me, there’s a method to my madness.
BTW. I’m not an economist and the opinions here are my own.
#1 — Inflation reduces the burden of debt
If you have a mortgage for £500,000 and you’re repaying £2,000 every month, over time, this £2,000 will actually reduce, because of the effects of inflation. £2,000 in 1970 was about enough to buy a house — £2,000 in 2023 won’t buy you a car.
#2 — You (might) get paid more
The strikes in the UK are pretty relentless, we all get that. However, most of the people striking are demanding one thing — more pay. Because the cost of bananas has increased, they have less month at the end of the month to spend. Wage growth can actually improve the standard of living for people.
The main issue with this point is that people aren’t generally given a raise. But that’s another subject and we’re talking about the positives today.
#3 — Encourages Spending and Investing
As prices soar, people with excess cash don’t spend it on holidays and leather goods. They invest it for a rainy day. Investing might seem mad during a recession on inflationary crisis, however usually stock prices are lower than usual — which can mean they’ll soar later themselves.
Investing in Gold is taking this strategy to the next level and we’ll cover a few points about why Gold is still the OG of inflation beating investments.
Now, there were a few more positive ideas I had but I’ll save them for another day. As you can see, inflation is actually a necessary evil in our day to day lives. Without it, our wages wouldn’t increase, we wouldn’t strive to find a better paid job, we’d all live in the same sort of house etc.
Why is Gold Still the OG of Inflation Beating
The Nazi’s weren’t the only ones who’ve tried to print more money to beat the effects of inflation. Governments can and do print as much as they like.
In Germany, prices ran out of control after WW1. For example, a loaf of bread cost 250 marks in January 1923. By November 1923, this had risen to 200,000 million.
Right now, Nigeria is facing inflation of over 22%. Other countries face similar situations. The UK is facing inflation around 10%.
Unlike paper money, Gold has a limited supply on earth. (You’ll find some crypto currencies like Bitcoin also have a fixed supply. Ethereum however, is not.) Gold has also historically been the safest bet during uncertain times.
Because of the limited supply, as a few other reasons not mentioned here, Gold has delivered positive returns for centuries. The downside is you don’t earn dividends etc. on your holdings. Which is also why no portfolio should be make up of 100% Gold.
