How Does Inflation Make Us Poorer…Without Our Knowledge?

I hear a lot of people still thinking that saving money will make them very rich. That the way to wealth is to work your butt off, cut expenses and save money. I’m here to argue against your false beliefs that saving will make you rich. In fact, I’m going to prove why saving will make you broke, poor and homeless.

This was written as a concern for all those baby boomers who are looking to start retiring.

The #1 Reason: The Fed is printing trillions.

The Federal Reserve System (Fed) is the central bank of the United States. It is the bank that lends to commercial banks such as JP Morgan Change Bank, Wells Fargo, Bank of America etc. And these commercial bank then lend to consumers such as me and you. The Fed is also the only bank that has the legal right to print the United States currency. But what most people don’t know (or understand) is that the money that the Fed printed was printed out of thin air, meaning it has no intrinsic value expect for the paper it was printed on. Now, how does that affect you and your finances?

It affects you by inflation. What’s inflation? Inflation means more currency chasing less goods. Its basic supply and demand. Let’s look at an example: if there were 100$ Billion circulating around the world and a can of pop cost 1$, then suddenly 100 Billion Dollars were injected to the supply, that would mean there’s now 200$ Billion Dollars circulating around the world. And since more cans of coke were not injected into the economy, that’s means that since the money supply doubled, the price of coke also doubled. Thus the more the fed prints, the more you pay for your coke. How does that affect you?

It makes you poorer! If you’re on a fixed income, i.e a salary, then as the fed prints money you get poorer because you can’t keep up with the price of goods and services. Let’s give an example. If you make 50,000$/year and a can of coke cost 1$, that means you can afford 50,000 cans of coke (50,000$/1$). But if the fed printed money then the price of coke went up to 2$, then you can now only afford 25,000 cans (50,000$/2$)……Whereas you used to have 50,000 cans, you now have only 25,000 for you and your family.

Do you remember when your grandpa or grandma used to buy a can of coke for a couple of pennies? Do you know why the price of that same can of coke went up? This is why. Inflation. Now inflation doesn’t only work for a can of coke. It works for everything you buy with your US dollar (USD). “But we buy everything with our USD” you say. And that is why in grandpa’s time you could buy a can of coke for 5 cents, meaning you could buy 1 ,000 ,000 cans of coke with a 50 000$ salary (50,000$/0.05, but now you can only buy 50,000.

Thus if you saved your earned money of 50,000 in grandpa/grandma’s time and used it today (2015) on the same product, you’d be at a loss of 950, 000 cans of coke.

Now, if you saved your 50,000 today and used in the future, do you think you’ll be able to buy as much cans of coke? The answer is an outstanding NO. You wouldn’t, not with this current monetary policy. Inflation is the secret tax imposed by the government. The tax unknown by most expect the well-read. Thus, savers are losers…..

Savers used to be winners back in grandma’s time, because the USD was backed  by gold before 1971 when President Nixon took us off the Gold Standard. Now….savers are losers. Even bigger losers are fixed-income earners, meaning salary.

Now, the government knows about this. In fact, they created a computed a number to tell us how much inflation is. It’s called the Consumer Price Index (CPI). It tells us the percentage that the price of things have increased due to mostly inflation (more money chasing less goods/services). The current CPI is at a low of 0.2%, meaning price of goods and service are moving up 0.2% per year. Thus a can of coke today at 1$ will cost 1.002$ next year (1*1.002).”Not a big deal, we don’t even use 1/10 of a penny” you say. Well it’s not until you apply to your salary. If you were making 50,000$ this year, it means that you would need to make 51,000$ next year to keep up your current lifestyle (50,000*1.002). That’s an extra 100$! That’s okay, if you get a raise of 1000$ every year. But as most of us know, we don’t.

But here’s another cache, that number reported by the Bureau of Labor Statistics (BLS) is false! It’s bogus, its fake, it’s unreal. Why Nikhil? That number doesn’t account for food and oil

But I’m hear to tell you that the CPI is a lie. Why? Because the CPI doesn’t include food and oil! Now I don’t know about you but on a week-to-week basis, my biggest expense is food and oil (i.e gasoline). The actual rate of inflation is an outstanding 6.25%! That number is reported by Shadowstats.com who compute the actual rate of inflation including food an oil, an essential for all of us.

Let’s look at our example again. If you buy a can of coke, now it costs $1.06. And if you make 50,000$ this year, next year you need to make 53,125$ next year to keep that same lifestyle (50,000*1.0625). hat’s an extra 3,, 125$! That’s okay, if you get a raise of 1000$ every year. But as most of us know, we don’t.

If we look at it in a savings perspective. Meaning instead of looking at how much it will cost to keep up our lifestyle, we look at how much money lost. Thus if 50,000$ was saved this on January of this year (2015) at an inflation rate of 6.25%, it means our money lost value at a rate of 6.25%, thus our 50,000$ is still 50,000$ in the bank, but it is only worth 46, 875$ by December 2015. Meaning your 50,000$ in the bank will get you 46,875$ worth of goods/service.

Now keep that money saved for 10 years, it will devaluate to almost half it’s value! That 50,000$ precious saving for retirement will be worth only $26, 223.02! Welcome to the world of the central banking, inflation, and corrupted government. The only reason the government allows this is because the government borrows printed money from the Fed. If the Fed stopped printing, i.e stealing, then it couldn’t lend money to the government.

You now understand a lot more than the average citizen. You’ve been exposed to new insights in our world. How finances work, how the economy works. You are now a more intelligent citizen! Welcome to the journey.

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To your success,

Nikhil