Wish I knew.
Inflation. Even though it has 9 letters, I’ll bet a lot of people treat it like a 4 letter word!
It seems to be a word that is generally disliked. But, like taxes, it’s a fact of life for most people.
So, our job as property investors I suppose is to try to figure out a way to live with it. Make it work for us.
Maybe the first step in this process is to understand what causes it. Then we can start working on a cure.
But, even before that, let’s get a good working definition for the word, what is inflation anyway?
I looked it up in Wikipedia and found a good definition as follows:
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.
This is the first line in the article. But, it gets more and more complicated from there on. Especially when they start talking about causes of inflation.
But, I like this definition. It’s simple. I can understand it.
Run-in with Inflation
And, it fits in with my experience. For instance, I remember complaining about paying $1 for a cup of coffee back in about 1990. I was at the airport in Denver. I also remember making corny jokes about my run-in with inflation:
Can you believe it, one dollar for a lousy cup of coffee? I can just see the next airline special … Free ticket to any city. Only one catch, you have to buy a cup of coffee. And, the coffee costs $150! Better off just paying for the ticket – forget the coffee. There’s got to be a law against charging so much for one cup of coffee!
Today, I couldn’t get an empty cup for that price! I’d be jumping for joy to get a good cup of coffee for a buck. Nowadays, people are lining up (me too) and plunking down around $5 for a cup of coffee!
Oh, how times have changed.
Welcome to inflation. Have you felt it too? It’s easy to recongnize, but what causes it?
Do we really need to know?
Referring back to Wikipedia, I must confess it’s all a bit too complicated for me. There are many theories for what causes inflation. So, my question is this …
Do we really need to know what causes it?
Accept it and Align with it
As property investors, can we just accept inflation as a reality and then align ourselves such that it benefits us? Kind of like accepting the wind as a fact of life and aligning our sails to take us to our intended destination?
From my basic understanding of inflation, it seems to me prices are generally going to rise over time; things like, building materials, wages, food, rent and land. So, doesn’t it make sense to either own these items or sell them or both?
For instance, when rents rise, wouldn’t it be great to have a bunch of quality rental properties?
How about when food prices rise; wouldn’t it be great to own a bunch of quality food stores?
When building materials are in big demand and selling for top prices, wouldn’t it be great to own a bunch of building supply stores.
If the price of land skyrockets, wouldn’t it be great to have a bunch of land to sell?
You get the idea. Be on the right side of the inflation equation. Make it work for you.
For those who must know …
For those of you who absolutely, positively must know what causes inflation, see the wikipedia article, Inflation. I could only make it about half way through before I fell asleep. It took 4 cups of coffee to wake me!
When you finish and fully understand the causes of inflation, could you write and article to explain it to me in simple language? Thanks.