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Have you noticed this very deceptive form of inflation?

Trakai Lithuania Camp

July 31, 2012
Bergen, Norway

Every summer, my colleagues and I invite young people from all over the world for an intensive 4-day workshop about freedom and entrepreneurship.

This year’s workshop just concluded yesterday afternoon, and it was, without doubt, the best one ever.

58 students attended from countries as diverse as Tajikistan, Bangladesh, Japan, Venezuela, Singapore, Russia, the Philippines, Greece, Malaysia, Turkey, Australia, China, Belarus, Switzerland, England, Poland, Canada, the US, and many more.

These are highly motivated young people. They get it. They know that the system has completely failed them. They know that the old path of ‘study hard, get into a good school, get a good job, work your way up the ladder, and retire’ is no longer valid for their generation.

They understand that they will not be able to count on their governments for anything. They realize that they only have themselves to rely on. They’re eager to learn, and to execute.

The experience of helping shape these sharp young minds is truly invigorating. And for many of the students, it can be life changing.

Something interesting happened this year, though.

For the past several years, we have been conducting this event at a lovely resort in the Lithuanian countryside. It’s a pretty place– a nice, comfortable, relaxing environment away from all the noise and distraction of daily life.

Now, I pay for the whole thing myself. I rent out the entire resort and pick up the total cost of food, lodging, entertainment, etc. For this year’s event, my staff was able to negotiate the same price as last year, and I was happy about this.

But after the first two days, we began to notice something different: the resort was actually skimping out on our food portions!

In other words, they kept the price the same as last year… but they were delivering less value than before. In this case, it was in the form of food portions that were at least 10% smaller!

(Needless to say, we rectified this by ordering several dozen pizzas… followed by a very candid conversation with the resort’s General Manager.)

This is an example of something that I see all over the world. It’s a shadow form of inflation that I call ‘value deflation’.

You see, most people think that inflation is really all about price, i.e. paying X% more this year than last year. But this is merely one version of inflation.

At its core, inflation is loss of purchasing power. This can mean an increase in price for the same amount of stuff, or it can mean a decrease in the amount of stuff for the same price.

I see many signs of both all over the world as I travel.

Price inflation is obvious. We all know when we’re paying more because we see the price tag. When the price of food or fuel goes up, in fact, it can even result in sticker shock.

Value deflation, on the other hand, is far more deceptive. Most people aren’t that closely attuned to realize that their portions are getting smaller, that their ‘extras’ are going away, etc. We didn’t notice until our stomachs started growling.

Value deflation is not taught at university economics courses; you’ll never hear any of these Nobel economists or central bankers mention it. Stiglitz, Krugman, and Bernanke all happily tow the line that ‘there is no inflation’ because the price of iPads keeps going down.

These are the people who have the power to influence policy and conjure trillions of dollars out of thin air… and it’s amazing how easily they can hide the truth from people through this shadow inflation.

Curiously, this is what passes as a free society today. It is a truly, truly bizarre system.


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About the author: Simon Black is an international investor, entrepreneur, permanent traveler, free man, and founder of Sovereign Man. His free daily e-letter and crash course is about using the experiences from his life and travels to help you achieve more freedom.

Comments on this entry are closed.

  • John Pitt-Rivers

    Simon, Are you travelling in Norway for some time? If so, please send me an e-mail. I would love to give you info on local matters and other things that you might be interested in. jprivers@gmail.com

  • Psboyce

     Value deflation and portions getting
    smaller is rampant. It is as obvious as going to the grocery store. What is also rampant, is how obvious the consumers are. Today’s example, i grabbed my weekly collection of random Od—-a (name obscured to protect the identity of the offender) juices and noticed right away they were smaller. Argued with my co-worker as i tried to explain this becoming a more familiar trend. He did not believe me until i was able to produce a couple of bottles i still had left over in my fridge from last wk…… Up a couple of cents, down a couple of ounces!

  • http://justen.us Justen Robertson

    Funny, my wife and I were just having a conversation about this. Most of the food we buy, especially imports, have either gone up in price by 30% or more or have gone down in portion substantially, from fresh and preserved produce to convenience foods to restaurants. Our grocery expenses have nearly doubled in 4 years (partially due to having a child, but that doesn’t explain everything). For packaged foods, sometimes they shrink the packaging, and sometimes they fill it with less product. Sometimes they actually create negative space inside the package with inserts or indentations in the bottom so it looks as full and as big as before. Cereal boxes have gotten thinner, chip bags have gotten smaller, ice cream containers are narrower or have false bottoms. But if you check the contents by weight / volume, many items have gone down by 20% or more from less than a decade ago.

    Very annoying to say the least. If nothing else it interferes with meal planning. I’d much rather the prices go up than have to recalculate what I need to buy to compensate for the new packaging.

  • Ryanassist

    We were just having a conversation about this exact thing last week. The US CPI is “not a concern” to our gov.  Meaning inflation is no problem.  Ya prices haven’t gone up all that much but as you say, value has dropped considerably. The price of a plane ticket hasn’t gone up much over the last few years but more taxes have been added, you now have to pay for check luggage, pay for food, etc. So while the ticket price remains similar, the total cost has gone up considerably.  Food prices have remained “stable” until you consider the portion sizes have shrunk. This is happening everywhere. 

  • Im_Rick_James

    I have absolutely seen this and spoken with a few of my more financially savvy friends about it, but very few others get it.  It’s not just smaller portions, but the quality of goods is deteriorating.  I have a t-shirt that I got 15 years ago that literally is still going strong, while others I have gotten in recent years have already fallen apart.  They are not making things like they used to (at least for more commoditized products) because it’s just too damned expensive.  It’s also a major contributor, I believe, to the decline of the middle class here in the US – people are just getting less and less of a bang for their buck over time, but much of it is contained in this “hidden” inflation…

  • Andy M

    I have always jokingly called this Sizeflation.  Very easy to see in so many ways.  One simple example is I cleaned out my closet this weekend.  It was amazing how much more cotton was in tee-shirts, dress shirts, and sweaters from the 1999-2002 time frame verses today. shirts and sweaters were 2-3 times more heavy.

  • Shawn W

    I have been living in the UAE for the past five years and have noticed this trend just about everywhere.   It is especially noticeable at restaurants, after the first recession, places did not raise their prices, but just started giving you smaller food portions or substandard ingredients. (or both!).  Now prices are starting to rise and portions and quality are remain the same.  It’s getting harder and harder to find real value for your money. 

  • Guest

    “Stiglitz, Krugman, and Bernanke all happily tow the line that ‘there is
    no inflation’ because the price of iPads keeps going down.”  Stiglitz, Krugman and Bernanke are divorced from reality, and each receives a handsome (created-out-of-thin-air, or hot-air) FRN paycheck.

  • $10039200

    We’ve seen this phenomenon in the airline industry as well. Sure, cutting inflight services holds down prices for awhile, but eventually the airlines run out of cost-cutting measures and prices resume their rise, except now the flying experience has become and will remain forever, crap.

  • Optin32

    McDonalds started de ‘downsizing’ trend with the size of their burgers

  • C_Broad_Arrow

    Actually this type of inflation is taught at all business schools and departments of economics. But you are 100% correct on your conclusions regarding the subtle nature of this type of inflation. Just look at apple juice as an example. It has held its price for 30 years. But the container in which it is sold has shrunk. This is a common strategy used in the CPG industry.

    When you are next at the supermarket you can do a “shelf” check and see this phenomenon for yourself.

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