Inflation is simply ‘more’. Monetary Inflation is printing more money. Price Inflation is simply that it costs more to buy things. We all know that the US went off the Gold Standard. At that point in time, the US Dollar became ‘fiat’. The year was 1971. The Dollar has lost much of its value since then and who wouldn’t want to buy gas or groceries at 1971 prices?
Some predicted ‘hyperinflation’ and depending on your definition, it has not happened yet. To the USA. But history reminds us of Weimar Germany – that was only 50 years before 1971 and it’s NOW about 50 years since 1971 and the switch from “backed by gold in Fort Knox” to “backed by the good faith and promise of the federal government”. Can it happen here?
I read that: “In Germany in 1923 hyperinflation took off; a loaf of bread that cost some 160 Marks at the end of 1922 cost 200,000,000,000 Marks by late 1923.”
Of course, that blows our mind. And it should. But let’s use another more recent example, our neighbor to the south, Venezuela. It was the richest country in all of South America and in less than a decade became the poorest as Inflation; money printing and price increasing, destroyed jobs, income, businesses and savings.
“High Printing Press Inflation and a collapse in the purchasing power of a currency usually go hand-in-hand.”
Did you know that in 1989 in Argentina inflation hit 2,000% a year.
How did some small businesses survive? Well, you food shopped daily, not weekly or bi-weekly and the store owner employed store assistants busily stamping higher-priced stickers over the existing price ahead of you as you shopped.
It sounds crazy, I know. And these are drastic examples. To make a point: A Business Owner can find a way! Would you rather be that Owner? Or that Shopper whose income is not keeping up with inflation in that scenario?
My point is that being your own boss, the owner, at least gives you a better chance if Inflation ratchets up. And it is happening. The 2019 price of wood is up 350% in the First Quarter of 2021. And I can name many more examples. Did sellers of wood go out of business? No, they have record breaking profits.