Inflation–Past, Present, and Future

It has been said that nothing is inevitable except death and taxes. But personally, I add inflation to that list. Inflation is an insidious hidden form of taxation

We’ve been robbed! According to The Inflation Calculator, what cost $100 in 1905 would cost $2052.36 in 2005. The U.S. dollar has lost 95% of its value in that time. (If you were to buy exactly the same products in 2005 and 1905, they would cost you $100 and $4.87 respectively.) The inflation rate jumped considerably in the 1960s and 1970s. It is no coincidence that the U.S. Treasury stopped minting real silver coins in 1964.

Even it this current era of supposedly”low” inflation, the depredations of inflation are inexorable– but just slower. It is like watching a 50 pound ice block sitting in the sun. The real rate of inflation is presently about 6.5%. Thus, you need to make at least 6.5% a year on your money just to keep pace with inflation. In the long term the concept of “saving” for retirement is almost fallacious, especially when you consider the bouts of inflation that are likely to occur in the next 20 years. The twin deficits–budget and trade–will inevitably lead to much higher rates of inflation in the years to come. Perhaps we’ll even experience a full-blown hyperinflationary currency crisis that will wipe out the value of all of our dollar-denominated investments in just a few months. I’ve said it before, but I’ll say it again: If you want to protect yourself from inflation, then buy tangibles. My late father used to be fond of saying: “There are three kinds of people in the world: People who make things happen, people who watch things happen, and [the majority of people,] the people who wonder, ‘What the heck happened?'” Inflation is a process that is so subtle that the majority of people do not recognize it for what it is.

It is safe to assume that inflation will continue, and will only get worse, especially with commodities. Oil will likely double in the next 18 months. So that means corresponding increases in gas, diesel, and home heating oil. Wheat, rice, and other commodities will also jump up in price. They too, may double soon. Protect yourself from inflation. Stock up on tangibles. Not only is it wise to be prepared physically, but you can also consider these tangibles a prudent investment.