How Scary Is Inflation? Can Infinite Banking Help Me Combat Inflation?

When we came to Canada for the first time in 2009, I remember that I could go to a big store and then just for $100, I could fill the whole cart, full cart of.

Groceries, almost overfilling it, probably falling out of the car.

Exactly. The groceries will fall off the cart for 400 bucks. Now I can only, you know, cover the bottom 400 bucks. Right. So this tells me much more about inflation than anything else. I can feel it. I can feel that I can't really buy as much as I did 13 years ago.

So you're pissed off about inflation going up because you can't control any of it. It's driving you nuts. You're seeing in the headlines, you're watching YouTube clips, and you're seeing it on the Tic Tacs and the tweeters and the, and the Instagrammies and all the things out there about how inflation is kicking us in the nuts, proverbial nuts, that is. It would be pretty amazing if inflation was a physical person that could kick you in the nuts. But you're tired of it and you want to know what you can do about this and how can you protect yourself to some degree? Well, we're going to have all the answers, but I'm here with my friend Roman today and we're going to talk a little bit about what has happened in the past and we're going to talk about a real world example of our mentor, R. Nelson Nash, and one of the stories he used to relate and share to us about how inflation showed up over his years on planet Earth. Now, Nelson, he lived to the ripe age of 88. He would say 88 revolutions around the sun. That's how he would describe it. And in that time frame, he experienced so much. You know, he was born in the 30s. He lived through the Second World War amongst many other wars that followed. In that whole timeframe, he experienced all kinds of ups and downs and ups and downs and hills and valleys and mountains of financial good and a lot of financial bad. And so he had a huge level and breadth of experience to speak about what was consistent in his life and how he saw inflation play a role as he lived his life. So I think, Roman, you know, we. I'm glad I'm talking to you about this today because you also have a lot of unique perspective to bring. And you and I have had a few conversations in the past about, you know, your journey coming to Canada and your, your past living over in Europe and how you saw things happen in the financial system there. And the concern may be that especially folks, you know, who are. Who have immigrated to Canada find maybe their perspective on things like inflation is a little different because they've had a different experience than most living Canadians today. And I'm excited to have this conversation with you.

Yeah, thank you so much, Richard. You know, inflation was one of my biggest fears when I came to Canada, because when I experienced infl back in my country, we just had the same inflation, the same thing with just more zeros attached to it. Right. It's pretty much. It works the same way. So the currency is depreciating in its value, losing its purchasing power every day or every year, and the citizens just have to deal with it. They have to embrace it, have to accept it, because when you wake up and then all the goods and services went up in price, you just need to do something with it. And then. So people are actually looking to hedge the capital against it. Right. Somehow you need to find a way to either overpace inflation with something that is growing better than inflation or do something else. Right. In the country where I lived, you know, one of the hedges was US Dollar, Right. So US Dollar, we would just buy US Currency and then keep it in cash or keep it in a bank account. This was our hedge. But guess what? US Dollar also has its own inflation, right? US Inflation. And there's no real protection from inflation. We're just going from one currency to another currency, from one zone to another inflation zone. So. And yeah, we just wanted to talk today about inflation and how the policyholders, how the Canadians can make sure that we protect our capital from inflation.

Yeah. And the idea is to try to give yourself every chance or opportunity to have a hedge. And there are multiple ways that you might be able to do that. And for some people watching, you've probably already taken some of those steps, you know, and, and, and good for you on that. You know, Roman and I, you. We had another video that we did a little while back, and we talked a little bit about, you know, silver and gold to a degree, in that being a bit of a hedge. A lot of people believe that that's the case. But again, the purpose of doing that is. Isn't so much a matter of, you know, as an example. I go and get silver coins, and then I have a stack of those, you know, in a little sleeve of silver coins, and I'm sitting on them. They're just sitting there and they're doing nothing. They're just sitting in a safe. Essentially, the idea is, okay, at some point in time if we, if we really start to see, you know, a really big economic type collapse scenario, whatever that is in your geographic area. So, so us in Canada. And maybe it'll happen, it'll start, happen, happening in different places. And, and so you have a little bit of a, something that, that's physical that if you needed goods and services, you are more likely to be able to now negotiate or, or have a conversation with a vendor, a supplier, a business owner about, hey, I need your service. I know that you don't want to take my pink Canadian money today because for whatever reason it's, you know, it's been manipulated too much and it's no longer worth its value. So this, you're not going to accept this hundred dollar or fifty dollars bill, but will you accept one of these silver coins in, in exchange instead? And then there's that physical tangible nature. And so now you're in kind of this, you're almost like back to a barter system. Ultimately everything we do is a barter system. We're just using the currency denomination to add speed to that barter aspect. And, and we don't need to barter with the, you know, like when I ordered something on Amazon today, I didn't have to barter with Jeff Bezos to get the delivery to my door. I didn't have to barter the delivery guy to just show up magically and leave it on my front doorstep. So we've been able to utilize the currency method and computer technology to add lightning speed onto transaction activity where I can now buy from anyone in the world without having to really physically speak to someone or go and negotiate with that individual. But ultimately what we're doing is the same thing. It's just, it's just happening on this mass scale now. And so when the, when the value of the currency comes down and, or it's a combination of, you know, value of currency comes down or price of goods go up, they're really the same thing that's taking place. And where you, where you see that happen is often in, in specific areas. So like, you know, people would talk about certain staples that you put in your fridge. You know, you buy groceries, okay, well, the price of fruit went up or the price of milk went up and, and there could be a higher degree of price change. Like let's say I want to buy a gallon of milk, you know, yesterday, and it's four bucks and today I want to go do it, it's $7. Well, that's a pretty dramatic increase in that one, one spot I might not see the same increase on, let's say, a can of piece. Okay, so, so there's a variable there, and that has to do with supply chain dynamics and supply and demand. Now I'll give you, I'll give you a direct example of this. So where I live in Chilliwack, I love it here. It's fantastic. Chilliwack, B.C. is a beautiful, wonderful place. And one thing I really love about it is something that's like, reminds me of growing up. So growing up in Alberta, in a small town in the Alberta area, we used to literally just drive down the road to a neighbor's house and we used to get our milk there. We would just go get a jar of milk. I remember, like, we would separate the cream off and that's how we got our milk. We didn't go to the store to get it when I was, when I was a, a young boy. And it was fantastic up until the point where it didn't, it just wasn't sensible to do that anymore because sometimes it was a. The timing didn't work out. Now today in Chilliwack, I can actually go and do that in, in local places. There's a, there's a place, it's about maybe six, seven minutes down the road. They actually have a vending machine where I can go and I can bring my own jug and I can basically get milk right out of the jug and I can put like loonies into it. So that's kind of cool. But also one of the things that we do is we buy a lot of local produce and things like eggs. So I can walk down the road, I can take my dog and go for a walk. And it's about a five minute walk, six minutes. And I can, I can literally drop money in a little box, an honesty box, you know, that's $7. And I can get a dozen eggs and I can walk home with them. Okay, so that's pretty cool because I'm happy that I don't have to pay the GST government slavery tax and some other things. And I get to give my money directly to the farmer who made those eggs and did all that stuff. I'm really happy about that. Now what's interesting though is about, say six months ago, roughly, maybe, maybe seven months ago, those same dozen of eggs were about four bucks or 450. So the increase on 12 eggs has gone up pretty substantially. Now I know the reason for that or part of the reason for that is because the farmer, that local farmer, they've had a dramatic increase in chicken feed. Yep. So the, the cost to feed the chickens is now pushing the price up on the consumer because they, they can't keep their chickens, they can't feed them unless they do that. They have to. So again, it goes back to the situation of the consumer. The consumer pays for everything. So we are always as a consumer for everything we do in life, we're paying the top level price. That has to happen. That's absorbing all the supply chain problems and costs and, and all the manipulation of money supply that, that governments and central banks are doing and shenanigans that are happening on a global basis. We are paying that price. So goods are getting exported from another country, whether it's, you know, China or wherever and it comes to, to our shores. Well, you got to pay for that. And then there's import fees and duties on that stuff that comes into the country. That's a tax. That tax gets added to the price that it goes to the wholesaler. The wholesaler has to send it to the retailer. There's a, they have to get a profit that, that gets added in. And then it's like it just levels up and levels up and levels up and then we pay the price and then on top of that price that the business needs so that they can try to earn a profit or keep their employees employed, then we have to pay tax on top of that price. So the, these combination of factors really amplify the inflation problem because we see it at the consumer level level, at the daily goods that we buy, we're seeing the valuation of the dollar or in other words, what our dollar can purchase is going down. I'm going to give you one more example. Sorry, I'm on a soapbox a little bit here, Roman. And now I don't know when you were growing up, if you had vending machines that you could go buy like, like soda or pop or like Coke and that sort of thing. Now when you used to go to a vending machine, you could go put in a certain amount of money and you could get a Coke. And I remember it being, you know, there was places I could go, like I could go to the hockey rink and get it for like 50 cents and it wasn't Coke, it was like RC Cola. It was a, it was a knockoff. Maybe it was 75 cents for a Coke and then it went up to a dollar and now. And it was there for a really long time as far as I remember. In fact, I used to, at my local school, I used to be the guy that filled the vending machine and I had to take, you know, collect the coins and, and all that sort of thing. And then I remember as I age, okay, now it's a dollar 25, then it's a dollar 50, now it's 2 bucks. Now you want to go and buy one and you go to the airport and buy one. It's like $3 for the. Pretty much the equivalent Coke. It's not in a can anymore, it's in a bottle. Maybe there's a little bit more volume of. But you're paying like $3 for that, sometimes more. So that's a pretty dramatic difference in a, let's call it a 30 year time frame. And I'm curious, what was your experience growing up where you were when you would do something similar?

Like I said, yeah, so we had inflation on a different scale and normally the inflation was not lower than 10% in the countries where I lived. It was really, you know, hard to keep up with inflation. Sometimes especially I've seen inflation at, you know, 100% even 200%, even more. Right. So it's really hard to, you know, describe how we would feel about that. But the prices would just double in a month period or in several month period and then they will double again and then they will double again in a year or two. So the inflation really was a big factor when I lived, you know, I remember the prices when we lived in still in ussr, right? In USSR times when we could buy like some groceries, let's say like a big sausage for I guess 84 cents. And then after this USSR collapsed after the, you know, there was Russia, Ukraine, the prices just went up like crazy. Like we had like so big inflation because of bad economy, bad, you know, management because of bad government and everything just quadrupled in just overnight in the price. Just to give you an idea of what the inflation looks like when we look back, I'm going to be talking about Canada, not about Russia or Ukraine. So where I live, I live in Steinbeck, Manitoba. So anyway, have something called a Mennonite Heritage museum here in Steinbeck, which is a museum of, you know, how the first settlers came to Steinbeck from Germany, how they started, you know, living. And there's like a small shop with still prices on the wall for how much you can buy food for. Right. Like you can buy like a cup of tea for like 24, 24 cents. Right. So when I go back to that store, it always reminds me of inflation, of how the inflation works throughout the years you may not notice inflation in the. What it was in the last month or year. It may not be that significant. But when you look back for centuries, you will see that inflation created a huge problem where the money devaluated in like many, many, many times. And for example, when we came to Canada for the first time in 2009, I remember that I could go to a big store and then just for $100, I can fill the whole cart, full cart of groceries.

Almost overfilling it, probably falling out of the car.

Exactly. The groceries will fall off the cart for 400 bucks. Now I can only cover the bottom 400 bucks. Right. So this tells me much more about inflation than anything else. I can feel it. I can feel that I can't really by as much as I did 13 years ago.

Yeah, I mean that's, that's the real world example. And I would imagine people, you know, they're experiencing that in many ways. And it's, it's interesting when you start to think about like the individual products or you want to really start to kind of grasp how inflation is showing up in your life. Specifically think about specific things. I think the grocery store is a really good spot because that's, it's a fundamental need. We need food on our table, we have to feed our family. And so this is an area where we really get squeezed a lot. And there's many reasons that cause fluctuation in food prices. A lot of it, a lot of it has to do with supply and demand. And the supply chain has been. Because of the whole Covid scenario, supply chain has been really, really, you know, hit hard in many areas. You know, we saw a huge spikes in like lumber prices and construction materials for the same reason. And another thing that has has impacted that of course in the chain is fuel. So you're noticing it when you go to the pump to put, you know, put petrol and gas into your, in your tank of your vehicle. But think about now the trucker or the truck driver that's, that's delivering those goods and they have to fuel up. Well, whether they are a private truck driver or they work for a large company that's, you know, that's, that's what they do as a large organization. So they have that huge amplified cost, which means they must charge more for their delivery services. There is no other option or they're going to go out of business and then all those employees are going to be unemployed. Like it's a huge ripple effect.

Exactly. So. And all the businesses need to raise prices now. Because everything is tight on delivery, tight on transportation. Transportation is a blood of economy. When the gas prices go up, guess what? Everything will go up eventually. Not just, not just groceries. I mean, all the prices and all the services, building, you know, building materials and everything, literally everything will go up.

You know, I've never seen someone riding a pedal bike, hauling a giant trailer behind them filled with all the stuff that shows up at a Canadian Tire or a Home Depot. You know, that's not how that stuff's getting to the store. It's getting there on a truck. Okay, the fuel prices are going. Okay, well, what is that? Okay, well, there's, there's obviously pricing and the actual cost of oil was a barrel of oil, those kind of things. But then it's also, where's that oil coming from? And then, and then further to that, it's what is the tax on getting it in there? And then what is the surcharges and the fuel taxes and all those kind of things. And then, you know, now we also have. And again, not to make, I'm just thinking about what are the things that are driving things up. And so then there's also now a carbon tax that's added and that's going to be escalating over the next number of years, you know, based on the current plans of the government in Canada. And so it's a tax on a tax on a tax, but it adds a little, it adds another layer and that's a layer that's chipping away at your money and it's making you have to work harder or trying to do whatever you can to try and increase your income and your revenues so you can keep pace now thinking about, you know, income and revenues when, you know, we're going to talk a little about Nelson and what are the things that Nelson experienced when, over his, you know, history on 88 years on the earth. And when he was talking about when he first started working and he was married as a very young man, he was in his, you know, late 20s and he was working at the, I'm trying to remember, it was like a National Guard kind of a situation. He was making about $10,000 a year. And he said that at that time that was better than the average bear. In other words, he was making a very good income at that point. And this is back in like 1959, $10,000 is US a year. And now today, the average person or middle class, average Canadian, maybe upper middle class, they're earning, you know, somewhere around 80 to $100,000. A year. You know, in general now because of the cost and the pricing of everything, a lot of households, they're also now need to be, they require to be a dual income household in order to have enough revenue coming in that they can support all the stuff that's going on. So, so again that's a big change now the incomes have gone up. If we were to look at, you know, Nelson in 1959 at 10 grand and let's just, you know, take the Canada US dollar out of the situation and we shoot for it today where let's just say the average income is about a hundred thousand and I'm, I don't know those numbers. I'm just using it as a barometer here. Then we're 10 times greater on the income. So incomes have gone up, but has, how is that related to all the other formats where we, where we're, where we're paying. So if you think about the cost of a vehicle, the cost of the fuel, the cost of the insurance, the cost of the housing, the cost of the this, the cost of that, like it used to be you could buy a vehicle for like $2,000 and that would be the, the brand new vehicle and yeah, that was a large portion of the $10,000 of income but you would have it paid for in like two or three years and now, but that vehicle wouldn't last as long because they didn't have the quality of materials and knowledge and construction and engineering that we have today. But you know, everything has a relevance point. And so yes, incomes have gone up from least Nelson's story of 1959, but have they gone up to keep pace with the inflation and, and the rapid inflation that we're seeing? Which my belief is. And you know, I did just did a recently with our friend Henry on this, talking about the bank of Canada and some of the manipulation of interest rates and money supply and that sort of stuff. There's underlying factors that have happened and all those factors are already history. In other words, they've already taken place. They took place 1, 2, 3, 4, 5, 6, seven years ago in a combination of events that's led up to the problem that we're now dealing with. So these are, these are things that happen that have an unintended consequence. We as a Canadian citizenship, as a population, we're dealing with the unintended consequence presently and whatever is going to be done. So this is really important, I want people to think about this. Whatever is going to be done by the top level people. So we'll just Just put a blanket statement on. We'll say, we'll say government and maybe it's bank of Canada, maybe it's this. There's a, this, the top layer of who's going to make decisions about this problem. That solution, quote, unquote solution that they create. You know, it's also going to have an unintended consequence. So just keep that in mind because there's this thing called the business cycle that Austrian economists talk about. You can learn a lot about that by, you know, great book to get is Economics in One Lesson by Henry Hazlett. And if you understand a little bit about the Austrian mindset of economics and the business cycle, the boom bust cycle that is created has a huge amount to do with the manipulation of interest rates and the fractional reserve system and the manipulation of the money supply. And we're seeing that in massive quantities. And especially because of the aftermath of COVID the amount of money that has been manufactured or added into effectively circulation by the federal government and et cetera, is. We don't know how that problem's really going to show up. I mean, we can make assumptions, we can use some logic to think it through, but we're not even seeing the real impact of that problem now. We're starting to see a portion of it, but I don't think we're going to see the real impact for a while yet. I don't know, Roman, I'd love to get your thoughts on that.

Yeah, absolutely. Richard, I totally agree with what you said and also I wanted to mention that inflation is not a huge problem if it is going both ways. On one end, there's an income coming to the family and then there's expenses. So money flowing in, money flowing out. The biggest problem with inflation is that it only affects the expenses side most of times, right? So because think about it. When, when the price of goods and expenses and especially gas and, you know, groceries and bills, everything goes up, then it affects your cash flow. Because if you have some, some sort of discretionary income, let's say your income is 50k and then your expenses are, let's say 44k, right? Including taxes, including mortgage and groceries and everything. And your discretionary income is about 6k, which is $500 per month, right? So when inflation hits, what happens is that the expenses go up, Expenses go up and then it shrinks your ability to save, shrinks your ability to grow your capital because the income doesn't go up automatically in value, right? So you don't really automatically get raised at work when the prices go up, do you really? Don't. Right. Normally, citizens get income raised from time to time, but does it keep up with inflation? Richard, what do you think?

Well, I think that I know everyone's enjoying this conversation, Roman, and really, we're going to encourage everyone to watch the rest of this conversation. All you got to do is head on over to the Bankers Vault Channel right now.