Jaspreet Singh: Is Inflation a Hidden Tax?

Is inflation essentially a form of tax?

It is a tax, it's a hidden tax. And the person who bears the burden of that is the person who doesn't understand what inflation is, which means it's primarily the financially uneducated, the middle class and the poor. Inflation disproportionately hurts the middle class and the poor, while the disproportionately benefits the financially wealthy and the financially educated.

And why does inflation benefit the financially educated?

So let's think of it this way. I'll give you just a real life example. When the stimulus checks were sent out, money was created, right? The government doesn't have trillions of dollars it's sitting on. They are in debt, they are running a national deficit, meaning they spend more money than they bring in as it is. So if the government wants to fund thousand dollars checks to people, that money has to come from somewhere. And that money comes from money printing. The Federal Reserve bank prints money, gives it to the government, the government then gives this money out. Now people got these $1,000 checks. Now what do you do with this check? Well, some people saved it, some people invested it, but most people went out and spent this money. Where did they spend it? Well, some people had to go and buy their groceries at Walmart, some people went and bought on Amazon, some people use this money to go out and shop at Louis Vuitton and Gucci and other places. But this money was spent. So now when you go out and you spend this money, where does that go? Well, if you spend it at Walmart, Walmart is making the money. Who's Walmart? Walmart is the shareholders of Walmart, the investors into that company. Who are the investors? Well, it could be regular people who invest in the company, but it's also institutions and banks and, and big hedge funds that own shares of companies like Walmart. So when people, when this money is created, the value of your savings goes down, the value of your earnings go down because now your savings and your earnings have less buying power. That's what inflation is. Now you go out and you spend this money at Walmart. Now what does that mean? You own a smaller share of the total amount of dollars out there because more money is created. You take the money that you got and now you spend it. And, and now corporations like Walmart have a larger share of the total amount of currency, the total amount of dollars out there. Who does that benefit? It benefits the shareholders of Walmart, it benefits the investor class. And this is where. Now if you own the means of production and you don't have to be Walmart. I mean, you can be a investor with $100 and start capitalizing on this. But it's that mindset. If you own the shares of these companies where the money is going to, you can benefit from that inflation. So you as a consumer get hurt by inflation. Because now consumers, people, everybody's a consumer. Rich, middle class, poor, everybody's a consumer. When you have inflation, as a consumer, you need more dollars to go out and buy your groceries. You need more dollars to buy a handbag, you need more dollars to go out and buy a vacation, period. So as a consumer, inflation hurts you because now you need more dollars to go out and buy things. As the investor, you own the place where the money is going. And then as the prices of things rise, when Walmart has to charge more money for their groceries, you as the investor own the higher prices of things. You get to sell the things that you own for a higher price. That's why inflation disproportionately hurts the middle class and the poor. Because most people in the middle class and financially poor financial segment don't invest, they don't own the assets versus the wealthy and the financially educated. They're working to do one thing. They're not working to buy a fast car and a big home. They're working to buy assets, they're working to buy investments. So their primary income are their investments versus everyone else isn't.

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Correct. And that's where now again, who does that benefit? And that's where it is what it is. And this is where the financial education is so important. And this is where I always try to hammer this home is we go to school to get good grades, to get a good job, to make good money, because we think that this is, you know, how we make more money. Like I grew up thinking that the better grades I got, the more money I would make. I thought it was linearly correlated and no one really corrected my line of thinking. That was just kind of the way that me and everyone that I knew was raised that, hey, if we do good in school, you're going to get a better job, you're going to get a better job, you're going to make more money, you're going to be more successful, you're going to be happier and all that other stuff. Well, what financial education tells you, and this is what I learned the hard way, was that's a complete lie. Sure, getting good grades can help you get a good job and getting a good job could potentially help you make more money. But there's a complete different analysis of how do you become wealthy and that is financial education, because you will see people making $50,000 a year who will retire wealthier than people making $150,000 a year just because of what they did with their extra money. If you make $150,000 a year and you're constantly buying new cars, you're going on vacations, you're spending your money, you don't have any investments versus somebody who's making 50 grand a year. And now you're putting money away. Every week to invest is a little bit of money, but you stay at it from the day you turn 21 to the day you retire. Guess what? You will retire wealthier than somebody making three times more money than you just because of what you did with their money. And that is the financial education that were never taught. And so now when you have these things like inflation happening that most people have no idea about, most people had no idea what inflation is prior to 2021. How do I know that? I used to walk the streets. I have videos on my YouTube channel of me walking down the streets of cities like New York, Washington D.C. chicago, San Francisco, where I would stand there on the street and ask people. One of the questions I asked people, this is like 2018 or 2017. I would ask people, what is inflation? And the answers were, I mean, they're hilarious. It was a kind of a funny video. But none of the answers were right or very few of the answers are right. And people would always ask me, how many people did I have to go up and ask to get these questions? As if I'm trying to find like pick and choose the best answers. No, these were just the people that I asked, the people that I, I talked to. This is the average idea or perception of inflation was completely wrong. Most people didn't know what inflation was prior to 2021. Now it's become much more aware because inflation has become a real problem. But we go through life not learning a thing about money, not knowing a thing about inflation, not knowing how inflation hurts us. And then we wonder why we're stuck in this rat race where we're working to, to get paid and we don't have the ability to live a decent lifestyle. I mean, just look at, look at where life was in 1970 versus where it was today. Now I wasn't around in 1970, but if you read any book, it'll tell you that in 1970, generally it was a one income household. Generally the man went to work and that one income provided for the house. That's just how it was then. And that one income allowed people to buy a home, buy a car or two, go on some nice vacations, go on a vacation a year, pay for college and pay for retirement. All with a one income household. Fast forward to where we are today. We don't have one income households anymore. We have two income households now. With these two income households, people are still struggling to buy a home, people are struggling to pay for a car or two, people are struggling to pay for that vacation, people are struggling to pay for retirement and people are struggling to pay for college. Why? It all comes back to the same thing. Inflation. Who creates the inflation? Well, this is what we talked about in the beginning of this. It all comes to the Federal Reserve bank and the money printing. That's what creates the inflation. But most of us don't understand why this is happening. And then we start hating all the wrong things. Oh my corporation isn't paying me enough. Oh, the government is greedy. Oh, banks are evil. And we start pointing fingers hating everything without really understanding, okay, this is what's going on. This is what's happening. Now what you need to do is be financially educated that way. Now, despite what's happening, you can become wealthy because your job as a financially educated person is to take care of yourself, your family, and your community. That is my belief that you need to now get financially educated. That way, you can do more about it. Foreign.

This episode was brought to you by Disruptive Media, helping bold entrepreneurs stand out through podcasting, video and social content. Visit disruptive media.co.uk to learn more.

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This episode was brought to you by Disruptive Media, helping bold entrepreneurs stand out through podcasting, video and social content. Visit disruptive media.co.uk to learn more.

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