October’s official CPI inflation numbers came in at a 6.2% year-over-year increase, and the eurozone’s inflation rose to 4.1%. The U.S. inflation hit 30-year-high and the European 13-year-high. Here’s one way to describe what that means. According to official numbers, you lost money unless you got a 6.2% pay raise this year. In other words, thanks to inflation, you got a pay cut. So what is the primary driver of inflation? The answer is obvious and acknowledging the problem is the first step to solving it. However, most reports about inflation ignore the elephant in the room. We have inflation because the central banks print too much money into circulation. The more money is in circulation, the less they’re worth. Rising prices are just a consequence of monetary policies, and governments can blame it on the pandemic or supply shortages, but that’s simply not true. Why it isn’t true? When the central banks print more money and give it to people to spend, that doesn’t mean there is more product to buy. You just have more money to buy the same stuff. That’s basic supply and demand. However, it’s important to remember that the real inflation rate is much higher than 6.2% or 4.1%. Every sophisticated person knows that these numbers are not accurate. We don’t have time to discuss the intricacies of the official and unofficial inflation numbers, and I wrote about how the numbers are manipulated in my previous articles. But even with all that rigging, we still have 6.2% and 4.1% inflation, so you can imagine how bad the actual numbers are. More gas on inflation fire The problem is that the Fed and ECB make the situation even worse. And not only by ignoring it, but they’re actually pouring more gas on the fire. According to data from the Fed, 36% of all the money printed in the US was printed in the last 15 months. Things are getting out of hand. Most rich people have realized that inflation is here to stay, and they’ll have to protect themselves. They’re choosing Bitcoin and equities over paper money, with which governments are conducting a dangerous experiment. But Bitcoin and stocks aren’t the only assets that are benefiting from inflation. For example, here are selected commodity returns in 2021: Natural Gas: 107.6% Coffee: +75% Gasoline: +64.5% WTI Crude: +64.3% Heating Oil: +63.2% Cotton: +47.4% Aluminum: +34.6% Wheat: +36.3% Sugar: +29.1% Copper: 24.8% Corn: +19.3% Lumber: +15% Silver: -5.3% Gold: -2% As you can see, everything is up, more than double digits, except for the silver and gold. It may sound surprising to some, but gold has been one of the worst performers in the last decade. The historical safe-haven asset has lost value during the high inflation. Pretty incredible. In a nutshell, we have stocks, real estate, Bitcoin, wages, and inflation near an all-time-highs, yet our central banks hold interest rates down at 0% and print trillions more. That’s not the way how you combat inflation. Deny, deny, deny Rather than fighting inflation, the American and European governments just keep changing the media narrative. The narrative last year was that inflation wasn’t something to worry about, and then it evolved into inflation being transitory. And we’re now seeing a narrative of “inflation is good for you!” Inflation isn’t good for you. It’s not fun to have less food. They print money out of nothing, dumping trillions of new money in the system, and that new money dilutes the value of existing money. As a direct result, the entire US and European middle-class population is being taxed by record inflation. As Elon Musk has recently put it, “Inflation is the most regressive tax of all, yet is advocated by those who claim to be progressive.” Don’t fight the Fed There’s an old saying on Wall Street “Don’t fight the Fed.” In fact, no one is fighting the Fed. However, the Fed will eventually beat itself at its own game. There’s a limit to how long the Fed and ECB can print money and keep interest rates low. At some point, maybe sooner than you think, the hyperinflation arrives, and the currencies collapse. I can almost hear you thinking that the official measurement for hyperinflation is 50% month-over-month inflation. Why is the number 50% month-over-month? No one knows. Probably, it’s just a random number that some university professors came up with. According to that definition, if inflation is 49% month-over-month, it doesn’t count as hyperinflation even if the people literally can’t afford to buy food. In reality, if you were living in a country with 10% month-over-month inflation, you would be trying to run away as fast as you could from that country. You wouldn’t be waiting around for inflation to hit 51% a month to alert you that hyperinflation arrived. It’s better to think of hyperinflation as just technically high, runaway inflation. It’s not 50% monthly inflation, as the academics tell us. If we get to that point, it going to be too late anyway. In fact, any double-digit inflation is catastrophic to economies. Unfortunately, we're getting dangerously close to that number. Final thought First of all, don’t rely on the Fed or ECB to fix inflation. Whether they do anything or not, the prices are not waiting around. Inflation is nasty stuff. It’s the permanent feature of the world economy, and it’s not transitory, as they told us. It can significantly damage your purchasing power and your life. There’s no silver bullet for solving inflation, but there is a simple template for how it should be done. Simply don’t hold any cash on your account and start investing. I might sound like a broken record, but you have to learn about investing unless you want to be robbed in real-time.
