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Inflation
Learning and Fighting Resources

Why should you be very concerned about inflation?

The 6 Most Important Effects of Inflation

  1. Inflation creates uncertainty in prices, taxes, and interest rates.
  2. Inflation causes a devastating decrease in your purchasing power.
  3. Inflation threatens your financial security, independence, and freedom.
  4. Inflation robs you of your choices, now and in the future.
  5. Inflation leads to social unrest and greater class divide.
  6. Inflation leads to runaway government power and control; resulting in an unhealthy co-dependent relationship with the state. 

What is Inflation?

Most people speak about inflation as being an increase in prices. While this is not totally incorrect, it’s a bit misleading and disingenuous. Specifically, an increase in prices is correctly identified as “price inflation” but it is the only the effect of the cause which preceded it.

The cause of inflation is an increase in the quantity of money and credit, which leads to higher demand for assets and commodities – the supply of which have not increased in kind with the increase in dollars. As the production of good and services falls behind the production of dollars, the demand for money falls, and it’s exchange ratio, relative to other goods and services, falls.

The reason politicians, media and many economists blame “greedy people” for the cause of inflation is because they speak about the 𝗲𝗳𝗳𝗲𝗰𝘁 of inflation and not its 𝗰𝗮𝘂𝘀𝗲. The true culprit (government and central bank policy) avoids the responsibility because it has spoken only about the symptom of the problem.

Unfortunately, many investment advisors also fall prey to this misunderstanding of economics, and suggest that their clients returns through the last few years were based on their superior investment skills and prowess, instead of recognizing that the lower demand for money meant an increased demand (and price) in the capital markets.

Inflation is theft, purposely done by governments and central banks as a hidden tax. It happens when there is an increase in the money supply. The money supply increases when the Bank of Canada is required to print more money. When this new money is printed its exactly the same as counterfeiting. As money supply increases, the value of our currency declines which reduces the purchasing power of our money.

If you or I counterfeited money we would be in jail. The Canadian Criminal Code states every one who makes or begins to make counterfeit money is guilty of an indictable offence and liable to imprisonment for a term not exceeding fourteen years.

Julius Caesar/Roman government was one of the first the first recorded counterfeiters.  He did the very same thing over two thousand years ago – when he clipped the edges off gold coins – and melted down gold coins and replaced the gold with less valuable metals.

Who Is Responsible for Inflation?

Our forefathers are responsible for inflation.  Many who benefited financially, believed in an idea based on John Maynard Keynes and his 1936 book The General Theory that blamed economic depressions on a shortfall in “aggregate demand” (a measurement of the total amount of demand for all finished goods and services produced in an economy).

First, it promoted that government spending was a critical factor driving aggregate demand. That meant an increase in spending would increase demand. Second, Keynes argued that government spending was necessary to maintain full employment.

Many critics of Keynes attribute the success of his ideas to political appeal. Politicians were attracted to Keynesian economics because it could be used to justify profligate government spending. And because it provided economic justification for Fractional Reserve Banking (permits deposit-taking banks to loan out up to ten times the value of funds they have on deposit), something many economists were becoming increasingly critical of prior to his theory being published. As such, it was adopted.

With this adopted, government deficits and Fractional Reserve Banking require the Bank of Canada to print counterfeit money.

One of the many attractions of Keynes is that, like a good magician, he makes you think twice about what you think you see and know. And the General Theory is full of great tricks.  The word “theory” means an idea – many ideas were never tested before implementation to discover devasting side effects.

One of those devastating side effects was and is inflation.  Keynes, of course, advised against thinking too much about the long run. This is yet another example of how dangerous an idea can be when conflicts of interest exist and where there is no accountability.

Impact of Inflation

  1. Since 1935 the cumulative effect of the above has eroded the purchasing power of $1.00 Canadian to to only $0.05 in 2022!
  2. In the last 87 years there have been 12 recessions in Canada. The Keynesian theory was supposed to prevent recessions and inflation.

What are the Inflation Warning Signs to Watch For?

  1. Watch for an increase in money supply in the M2 money supply charts. https://tradingeconomics.com/canada/money-supply-m2
  2. Government spending and deficits. Whenever the government presents a budget with a deficit, the Bank of Canada is required to print more counterfeit money to fund the deficit. https://tradingeconomics.com/canada/government-spending
  3. Bank loans are created from Fractional Reserve Lending. This allows banks to loan up to ten times the amount of money they have on deposit.  Since this money does not exist, the Bank of Canada is obligated to print more counterfeit money. https://tradingeconomics.com/canada/loans-to-private-sector

What Can You Do About Inflation – Long Term?

Our traditional financial planning system is not working.  We’ve shared why.  Here’s what you can do.

  1. Learn more and more about inflation.
  2. Tell your politicians enough is enough – in the short term, no more deficits – in the long term, stop use of the Keynesian economic model and fractional reserve banking
  3. Tell the Bank of Canada to get their act together – until the abolishment of the Keynesian economic model – they were 12 months late raising interest rates – the result: higher and more severe interest rate increases

What Can You Do About Inflation – NOW?

  1. Stop borrowing from deposit-taking banks – this will slow down the economic impact of Fractional Reserve Banking
  2. Be part of the movement seceding from our current unstable monetary regime one household at a time. Start an Infinite Banking Concept® (IBC®) policy – on you, your spouse, parents, children, grandchildren, great-grandchildren, business key people and shareholders – and have them do the same.

How Does an IBC Policy Act as a Hedge Against Inflation Tax? 

  1. Your premiums are fixed today and become cheaper in the future as dollars aren’t worth as much.
  2. Your underlying asset mix adjusts with interest rate changes.
  3. Cash values remain liquid for other opportunities that may also help protect your purchasing power.
  4. Banks are a major cause of inflation because they are allowed to lend out more money than they take on deposit. Infinite Banking avoids participating in the expansion of credit.

More on IBC Policies: 

Here is some recommended reading/viewing on the devasting effects of inflation tax:

Check back for updates to this list.

To discuss things you can do to protect yourself from the impact of inflation.

Inflation Learning & Fighting Resources