What is inflation?
Inflation is the steady increase in the general level of prices for goods and services. During inflation, your money buys a smaller percentage of a good or service (Investopedia.com).
The value of money is measured in terms of purchasing power – the amount of tangible goods that money can buy.
The exact cause of inflation cannot be determined. However, these are two theories that are generally accepted:
- Demand-Pull Inflation: Inflation resulting from the demand for goods growing faster than supply. This cause usually occurs in growing economies.
- Cost-Push Inflation: Companies’ costs increase when they need to increase prices to keep their profit margins steady.
Variations on Inflation:
- Deflation: When the general level of prices decreases. This is the opposite of inflation.
- Hyperinflation: Unusually rapid inflation. This is an extreme case of inflation, which can collapse a country’s monetary system. For example, in 1923 Germany experienced the shocking yearly inflation rate of 325 million percent, which meant inflation was causing the cost of goods to increase every two days (Mint.com).
- Stagflation: A situation where inflation is high, the economic growth rate slows, and unemployment is steadily high. This has occurred in industrialized countries during the 1970s, when a bad economy was combined with inflated oil prices (USeconomy.com).
The Creature from Jekyll Island by G. Edward Griffin goes into great detail on inflation, the history and the affects inflation has had.
How do we protect ourselves against inflation?
Now knowing that inflation is not controlled by us and can affect our lives, how do we protect our capital? Always be prepared. However, having liquidity during inflation and keeping our money safe during deflation can be a difficult balance. A great solution to maintaining this balance is Whole Life Insurance.
Whole Life Insurance policies offer the best of both worlds
In a policy, nothing has to be sold to generate a capital – the capital is already liquid and can be used at any time. Using the Infinite Banking concept with your Whole Life Insurance policy gives you an advantage over traditional investing.
There are multiple nations affected by hyperinflation, but they survive because humans in nature have always figured out how to produce. Taking control of producing your money by generating money through your own Infinite Banking will save you in those times.
The more capital in your control, the more opportunities there are to produce your own future. Using a whole life insurance policy to have gains, dividends, and cash flow – plus being able to deploy it to real estate, commodities, business, etc. offers you the best protection against inflation.
Listen: Inflation 101