Runaway Inflation

The U.S. dollar has lost almost a third of its purchasing power over the last six years.

If you attended the most recent Top of Ohio Patriots event in June, called Money Matters, you know exactly why this is happening.

And hopefully the 5 tips at the end of the Money Matters presentation are helping you prepare for the coming years. To recap, here’s what we can do:

1. Educate ourselves

2. Reset our daily relationship with money

3. Reconsider income and money storage

4. Recognize the stock market (including Bitcoin) for what it really is

5. Understand the Fed then End the Fed

Regarding “educate ourselves,” check out this recent chart from the Bureau of Labor Statistics:

We can readily see some interesting things up above. For example, it’s clear that the prices that are rising the fastest are for the goods and services that are most heavily subsidized by the government, while private sector goods and services are actually becoming more affordable.

There are plenty of other interesting things to observe in this chart as well. So, sit with it for a while and see if you can find some other Easter eggs.

At the same time, try not to forget the Big Picture, which is this:

It’s not that “things are getting more expensive.”

Most things – including the red items in the above chart are actually cheaper now than they were in the past. It’s just that they appear to be more expensive because we’re using the wrong yardstick to measure the costs.

That wrong yardstick is, in fact, the U.S. dollar.

Let’s say we measured the height of a table a few weeks ago with our trusty tape measure, and we found it to be 30 inches tall. Then today we measured the table again and find that it’s 36 inches tall. Our instinct would be to say that the table has changed somehow, that it has gotten 6 inches taller. But what if our tape measure is the thing that actually changed rather than the table?

Having a tape measure that’s willy-nilly when it comes to measuring things is, of course, of very little use to us. And sadly, that’s what the dollar has become when it comes to measuring the value of goods and services.

Put another way, let’s look at the historical cost of a newly built house:  

At first glance, it seems crystal clear that new houses have gotten more expensive over the last century and a quarter.

But this is not true!

New houses today are actually cheaper than they have ever been, and they are also bigger and better than anything you could have purchased in 1900.

It’s nearly impossible to understand this looking at the above chart or infographic. That’s because the U.S. dollar itself is changing over time. The dollar has become an unreliable yardstick for measuring the real cost of a new house – or the real cost of anything!

So, what we need is a different yardstick that can accurately measure the cost of things over time.

Luckily, there are several stable monetary yardsticks that we can rely upon. One of them is gold.

For example, if we use gold as a reference instead of dollars when looking at the cost of a new house over time, here’s what we get:

If you’re like us here at TOP, it’s simultaneously comforting and frightening to think about this.

But think about it we should.

And the next time you hear someone say, “Wow, I can’t believe how much ____ costs these days,” you might courteously remind them that it’s not that the item costs more – it’s that the dollar buys less.

– TOP