https://youtubetranscript.com/?v=lseWoxxJi8Q
You started this whole discussion by saying the biggest threat to the financial integrity of people, individuals over the long run, is inflation. And so why does that pose the cardinal danger to long-term financial security and prosperity for people? Yeah, well, first of all, it’s not working well. That is the problem. It worked much better when we had honest money. When we were on a gold standard, if governments wanted to spend money, they needed gold. And where did they get it? They had to collect taxes because they couldn’t create the gold. It needed to be mined. And so it was an honest system, and it was disciplined on politicians. Now, the politicians don’t want to be disciplined any more than teenagers want a chaperone at the prom. So they want to do a lot of stuff that the chaperone won’t allow. And so gold was keeping politicians in check. But to your point about individual prices, you can’t confuse prices individually will go up and down based on the supply and demand. But if the price of one thing goes up, it’s going to necessitate the price of something else to go down. And so the general level of prices won’t change. It’s only when you have the expansion of the money supply that the price of everything goes up because the value of money is going down. And so now you need more money to buy stuff. But the problem now is because these governments have run such enormous deficits and inflated the housing bubble that popped in 2008 in the US and then a decade or more of massive deficit spending, quantitative easing programs. And by the way, quantitative easing is inflation. They’ve basically taken inflation and put a nice sounding name to it because quantitative easing is printing money and buying government bonds. That’s inflation. But if the politician said, our policy is inflation, the public doesn’t like that. So they said, no, we’re doing quantitative easing. And somehow that sounds more palatable than inflation. But they’ve created so much. And for years and years, these central bankers were telling us that inflation is too low. We don’t have enough inflation because it’s not 2%. And again, we don’t need prices to go up. The reason they say that prices have to go up is they claim that we won’t buy stuff, that if we think prices are going to go down, we’ll just hold off on buying indefinitely waiting for a cheaper price and the economy is going to collapse. And that’s a bunch of BS because you buy things when you need them and when you can afford them. I mean, if that was true, nobody would own a cell phone, nobody would own a laptop computer, nobody would have a television set because all those things get cheaper every year, yet we keep buying them. So it’s nonsense that we won’t buy if prices going down. In fact, prices going down create demand. If you can’t afford something, the way to buy it is for the price to go down and then you can afford it and then you buy it. But they’ve created so much inflation when they said it was too low that now it’s exploded. You’ve got double digit inflation or high single digit inflation pretty much in all the vast economies in the world. And no government anywhere in the world is willing to actually do what it takes to reduce inflation because A, they have to accept responsibility for creating it and then B, they have to significantly reduce government spending and or raise taxes on middle class voters. And neither of those choices are politically expedient. And so politicians now are under more pressure than ever to continue to finance their spending through inflation. So the inflation tax is going to get bigger and bigger and bigger every year. And the reason that that’s such a problem is it’s really the worst possible tax because it impacts the people the most who could afford it the least. It’s the middle class, the working poor and the retirees who are living off of fixed income. They end up paying the inflation tax the most. They have some savings. They have a pension. They have an annuity, cash value and insurance policies. All this stuff gets destroyed. And it’s the people who tend to own assets and who have more good debt. Bad debt is consumer debt. You go out and you borrow money and you spend it. You buy a consumer good. You buy a TV with your credit card and that’s bad debt. Or you take a vacation and you pay for it on a credit card. But if you buy an asset, particularly an income producing asset, a piece of property, a business, a stock, if you borrow money and you buy an asset and that asset is appreciating and generating income, inflation is your friend. Inflation helps you out because it wipes out the value of your debt and you still have the asset. So wealthy people, very wealthy people, if they invest the right way will benefit from inflation. Whereas ordinary people are going to get hurt. So inflation is particularly hard on non-entrepreneurial savers. So people who’ve put away a certain store of value, maybe that’s in a pension, who aren’t invested in some active enterprise that could be generating revenue, it just devastates them. And if it’s 4% a year, they lose what? What does that mean? They lose half the value of their investment in like 4% a year, it’d be something like 10 years. Yeah, and unfortunately it’s going to be a lot higher than 4%. Yeah let’s talk about that for a second. So two questions about that that come along with what you’ve already laid out. The first question is, how is the inflation rate calculated? That’s mysterious, right? Yeah, that’s it. Because it relies on the consumer price index. That’s another big part of the fraud. Certainly in America, and I know a lot more about the US CPI, let’s say, than I do about CPIs in other countries, but my assumption is that the politicians are being dishonest everywhere. Because the inflation rate, it’s like a report card. And if our kids were responsible for grading their own report cards, it wouldn’t be as shocker if they came home with all A’s, right? So that this is the problem that we’ve hired the government to grade its own success in the economy, because high inflation would be bad. So the government, again, when they’re measuring inflation and they’re looking at prices, they’re looking at an effect. They’re not looking at the thing itself. But over the years, governments have changed the methodology for measuring price increases. So the CPI that we use today is nothing like the one that we used, say, in the 1970s. Yeah, that’s exactly what I want to focus on. So the CPI for everyone listening, that’s the consumer price index. And it’s in principle, please correct me if I’ve got any of this wrong, it’s the average cost of something like a standard basket of goods. That’s what it used to be. The question then is which goods? Yeah, okay, so let’s go into that. It used to be there was the basket didn’t change. They picked a basket and they just measured the same basket year after year. And so you could see the changes. Now the basket changes. The politicians decide what to put in the basket and what to take out. And generally, they take out stuff that’s gone up and they put in stuff that hasn’t gone up as much. There’s all this substitution. There’s a lot of other indexes that they use where they have hedonics or in a CPI, there’s hedonics. And so what hedonics is, is the statisticians who compute the CPI, they look at a product and they don’t use the actual price. They subjectively decide if they think that product got better. And if they think it got better, they adjust the price down. Now maybe it didn’t get better. And a lot of times, stuff gets worse. And they don’t adjust for that. Like let’s say they’re looking at airline prices and they just look at the ticket price and they say, wait a minute, but you’re charged extra for luggage. You’re charged extra for a blanket. You’re charged extra for food. Oh, they just look at the price. A lot of quality has gone down and a lot of things that hasn’t been captured. You know, I did this exercise, I did this a long time ago in 2013 and I made a YouTube video about it, but I just did this for kicks. I looked at the CPI in 2013 and according to the CPI, over the prior 10 years, the price of newspapers and magazines had gone up about 30%. According to the CPI, in 2013, magazines and newspapers were 30% more expensive than they were in 2003. Well, I decided to check because it’s easy to do. You could just go on the internet and you could see a picture of those magazines because they put the price right on the cover. So I took about 20, I took like 20 of the most circulated newspapers and magazines in the country. I just looked at what the price was in 2003 and then I took the exact same magazines and I looked at the price on the cover and I just compared it over the 10 years. What I found was that the actual increase in price wasn’t 30%. It was 130%. So the question is, where did that extra 100% go? Because those are the prices. So obviously, the CPI is rigged in such a way as to have a number. It’s not that people lie when they calculate, like they get a certain number and they say, oh no, that’s too high. The methodology that is used has been engineered to mask the real degree to which prices are rising. You also pointed to something else that’s a fundamental flaw, if your reasoning is correct, which is that if inflation is best construed as ratio of money to goods, merely calculating inflation as a consequence of price increase doesn’t capture the essential element of the inflation.