3 Urgent Things You *Must* Know About Inflation
Written by Mark Joyner

In the US, inflation just hit its highest rate since 1982.

"So what, man?  It's just a natural phenomenon.  And there's nothing we can do about it." 

Wrong and wrong. 

Here are three things you absolutely must know about inflation.   

(I'll give you a personal action plan at the end.  But do read this first.  It's essential.)

 1.  Inflation is Not a "Natural" Phenomenon 

Even allegedly reliable resources like Investopedia are rampantly spreading misinformation about this ... 

"Basically, inflation is caused by a rise in the price of goods or services."
- Investopedia 

Yikes.  No.  They have it precisely backwards.  (More about that in a moment.) 

They further (incorrectly) state inflation is primarily a function of supply and demand for goods and services. 

Oh boy.   

Let's dig in ... 

Yes, supply and demand for goods and services does cause fluctuations in price.  Of course.  But that's usually only a temporary and local phenomenon.  "Temporary" in that it changes as supply and demand fluctuate - and "local" to specific goods and services. 

It does not account for the much larger phenomenon:  the general economy-wide steady increase in prices over time.   That comes from the "inflation" of the supply of money.  Not of individual goods and services. 

Think of it like this ... monetary value is more a function of scarcity than of intrinsic value. 

Oxygen has vital intrinsic value.  But because it's everywhere, we can take it for granted. 

Gold, on the other hand, has relatively low intrinsic value, but high scarcity (and portability).   That's why it's been the standard unit of currency throughout history.  (Until very recently.  Hold that thought.) 

If we were to flood the market with massive volumes of gold, the value of gold would radically drop.   

      "I will give you 5 gold coins for that cow." 

      "Dude, I have a literal metric ton of gold in my backyard.  No way." 

So ... how then, does the supply of money go up?  If it's not a "natural" phenomenon, what is it? 

Well, before I answer that, let me give you a little puzzle to solve. 

Puzzle #1:  why has the price of gold (in US dollars per ounce) changed thusly?  (see chart - type your answer in the comments)

2.  Inflation is Controllable

What you first need to understand is that all official national currencies in the world today are "fiat" currencies. 

Fiat means "by decree."   

      "The US dollar has value because we say so."
       - The US Government (never actually said this, but ...  it's reality.) 

That is, if your government were to disappear (as they sometimes do), that paper you hold in your hands would have less value than toilet paper.  (Toilet paper at least has intrinsic value.) 

So, who controls inflation?  And how? 

      "Well, I don't know how, but it must be the government, right?" 

Well, yes and no. 

The government has some influence on it, but not as much as you may think. 

First, we need to understand what inflation actually is

As we learned above, monetary value is largely a function of scarcity.  So if the value of the dollar goes down ... 

... the supply of dollars is going up.  

Technically, we are actually "inflating" the supply of dollars. 

Therefore ... the as the value of the dollar goes down, the price of goods and services across the board go up. 

Puzzle #2:  The chart below means it takes 22 of today's dollars to purchase what $1 in 1800 could have purchased.   Knowing what you know now ... why was the value stable for so long and why did it suddenly start changing?  (type your answer in the comments)

     "Ah ha!  So the Treasury must control inflation because they control the printing of money."

Not quite. 

See, the number of physical dollars is actually decided upon by the Federal Reserve.  (I'm using US language here, but wherever you live, the situation is much the same.) 

But the total number of physical dollars is actually of little consequence.  Only around 8% of the total currency in circulation around the world exists in physical form.  Most of it is just an entry in a database. 

And these entries are controlled by the Federal Reserve Banking System. 

(Who actually controls the Fed?  How do they control the supply of dollars?  I'll leave that for you to research on your own [maybe some of you can comment on this below - please do], but ... beware of disinformation.  A simple Google search won't give you the answer.  For now it's enough to know that inflation is caused by an inflation of the dollar supply and this is a matter of deliberate human decisions - not a matter of nature.) 

3.  Inflation is a Hidden Tax on the Future 

And now we can get to the real point ... 

Saving "money in the bank" is not a viable long term survival strategy.  If your interest earnings are higher than the rate of inflation, congratulations, but ... can you rely on that forever?  How many retirement accounts have been wiped out by market corrections? 

I'm asking a lot of questions to get you to think. 

     "OK, I get it.  But can't you give us some answers?" 

I won't solve the puzzles for you, but I will reveal the ultimate strategy you need to adopt to survive ...   

You can learn it for free in a comic book called "The Great Financial Boondoggle."

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About the Author: 
Mark Joyner

Mark Joyner is the author of over a dozen books, 4 of which were #1 bestsellers, in print in 25 languages and used as university textbooks around the world. 

He is universally recognized as "The Father of Digital Marketing" because of his pioneering role in the early days of the Internet. 

He launched the first ebook publishing company ... 

Started a pay-per-click search engine while the Google founders were still in college ...

Invented "online sales funnels" ... the "one click upsell" ... the tracking pixel (when Mark Zuckerberg was still in elementary school) ...

And pioneered many of the online marketing best practices used by digital marketers around the world every day.

Mark is also a former US Army officer, Cold War Veteran of Military Intelligence, and has been awarded for his service by the US Army, the Republic of Korea Army, the Korean Consulate General, and the President of the United States.
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