No Inflation Friday: check out the ‘Dear, John’ letter I just received

December 12, 2014
Santiago, Chile

Long ago I sold almost all my possessions and left the Land of the Free.

It was a decision of optimism and adventure—I realized that there were much richer and more rewarding opportunities to do business, invest, and spend time abroad.

The only asset I keep there is a condominium in Dallas. It’s the same place I purchased more than a decade ago to be close to my father when he was diagnosed with inoperable brain cancer.

I left after he passed away, but I kept the condo so that I could have a place nearby my mother and stepfather (who still live in the area) in case the need ever arose.

Over a decade ago when I bought the place, my Homeowners’ Association dues were just barely $200 per month. And I got a lot of value for that.

Back then the dues paid for water, cable, security, gym membership… all sorts of stuff.

Since then the HOA dues have been rising steadily. This year I’ve been paying $450.38 per month.

Yet now I just received a letter notifying me that the fees will be increasing once again starting January 1st to $495.42.

That’s 10%. And that’s on top of a similar increase that I received on my medical insurance premium (after which I promptly dumped the company and switched to a much better international plan——premium members, watch out for an alert on this.)

What’s more, property taxes have gone up every single year that I’ve owned this condo.

(And in case you’re wondering, the unit is worth $20,000 LESS than what I bought it for years before the property bubble formed.)

If we are to trust the official inflation numbers the government puts out, the long-term rate of inflation hovers at around 2% per year.

But you and I both know that prices have been going up much more than that.

And even if you use their own official monkey numbers, wages haven’t kept up.

Think about it: let’s say a loaf of bread costs $1, and you make $50,000 per year. When denominated in bread, your salary is 50,000 loaves.

Next year the price of bread rises to $1.10. Your salary goes up to $51,000. Your new salary in bread is 46,363 loaves.

Even though your salary has actually increased, your standard of living when denominated in loaves of bread has decreased by 7.2%.

Certainly this is a simplistic example. But it shows that inflation is really just a form of theft.

At best, it’s an invisible tax—a transfer of wealth from responsible savers in the middle class to heavily indebted governments.

Through inflation, governments are able to reduce the real value of their debts. And at $18 trillion, the United States government is in serious need of doing so.

That’s why they lie about inflation. And it’s a lie that matters.

At 2% inflation, the average person will see prices double two times in his/her life. In other words, if the price of a widget is $1 on the day you’re born, it will probably cost at least $4 by the time you depart this earth.

Yet if inflation is ratcheted up just by a single percentage point to 3%, then you’ll see prices rise nearly EIGHT fold over the same period. And at 4%, roughly SIXTEEN fold.

Inflation is an extremely destructive force over the long-term for individuals.

Bankrupt governments have every incentive to create it. And they have even more incentive to lie about it.

About the Author

Simon Black is an international investor, entrepreneur, and founder of Sovereign Man. His free daily e-letter Notes from the Field is about using the experiences from his life and travels to help you achieve more freedom, make more money, keep more of it, and protect it all from bankrupt governments.