Inflation is Legalized Counterfeiting

According to a recent MarketWatch article, inflation hit 8.5% in March which is the highest amount in 40 years. This raises the question, “Is Inflation Legalized Counterfeiting?” Also, how do you survive and even thrive during a period of high inflation?

Inflation is Legalized Counterfeiting 

Inflation is legalized counterfeiting and it's bad for consumers. Inflation penalizes savers, with 8.5% inflation you lose $8,500 a year in spending power on $100,000 in savings. Inflation is also a hidden tax. When the government decides to spend more money, they found that the country would revolt if the government imposed a flat 8.5% tax on all savings.

However, they can get away with it by just printing the money they want to spend. As a side note, the world would probably be a little bit safer if governments had to raise taxes for wars versus taxing the people through higher inflation. 


How to Survive a High Inflationary Period

You start with buying assets. Our fiat currency, not backed by any commodity such as gold or silver, is getting devalued by the day and a great place to start when buying assets is real estate because you can buy it with leverage. For most real estate investments, you can pay as little as 20% down. That means you're borrowing 80% of the value. So if you have 8.5% inflation at a 20% rate, you would actually get 42.5% return on your investment.

The Get Rich Education Podcast also reported that since 1994, home prices have increased for all seven times that interest rates have risen 1% or more. And guess what just happened? Interest rates have risen by more than 1%. Zillow also recently reported that Americans on average earn more from home price appreciation in 2021 than they did from their job.

So there's three benefits of buying real estate during inflationary environments: 1) Values rise during inflationary periods. 2) You have a fixed debt that's now worth less due to these new inflated dollars. 3) Cash flow increases because you have fixed debt and the rent increase is due to inflation, which is another reason why you don't want to be a renter in this market.

So with high inflation and the benefits of buying real estate during high inflationary environments, is there any wonder why on average, one out of four homes is being purchased by investors right now? What are your questions on inflation and how it relates to real estate?

Posted by Matt Curtis on


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