Tricks to Beat Inflation
Ways to manage uncertain times with techniques that might surprise you.
You may have heard of the “Big Mac index”, a technique derived by The Economist to measure the purchasing power of a given currency and thereby evaluate whether the market exchange rates for different countries’ currencies are overvalued or undervalued. Have a look at this chart of global Big Mac prices in 2022:
Fast forward two years, at US$8.17, Switzerland currently has the most expensive Big Macs in the world (it has been sharing the top spot with Norway for several years) which seems a lot when compared to the price in the US at $5.69 — but is the Big Mac index really a good measure of so-called “purchasing power parity”1?
Obviously it isn’t error proof and certainly has its limits2. Factors like tax rates, wage regulations, whether components need to be imported, and the level of market competition all contribute to price variations between countries.
However, it does tell us an overall trend in the world: prices are going up (and have been doing so across the board for years3) — even for supposedly cheap items where one would probably least expect it.
In fact if you bought one ounce of Gold in the form of an American Eagle coin4 in 1986, you paid US$50 back then. If you’d try to buy the same quantity of Gold contained therein today, you’d end up having to spend at least US$2,000 (or more)5 to get the same value in today’s US dollars. Why is that so?
“Gold has worked since the time of Alexander the Great. If anything lasts for more than two thousand years, I don't think it's because of prejudice or a false theory.”
Bernard Baruch, American financier (1870-1965)
It looks like we’ve been on an ever expanding trajectory of inflation6 latest since the gold standard was totally abandoned in 1971 (and it’s currently not being used by any country after Britain officially ceased using it in 1931 and the United States had followed in in 1933).7
Despite massive public relations efforts to make it look otherwise (just think of the Inflation Reduction Act signed into law in the US8 in 2022), the reality of such initiatives often produce quite contrary results:
Inflationary Times
Unfortunately whenever the world moves close to inflation driven bankruptcy, major wars start to mysteriously appear in our midst, hurting normal people the most.
Perhaps that’s one of the reasons why the current geopolitical climate can hardly be explained rationally and that its actions seem to benefit the bankers the most9.
So what to do when such geopolitical madness hits and how to beat inflation in the process? Is it even possible?
Disclaimer: I’m not a financial expert nor a certified investment advisor, so please consider my writing as a piece of fiction and do your own research or consult a professional. However, historically people (who were smart and/or could afford it):
reduced their costs and spendings wherever possible;
tried to avoid taking up new loans or responsibilities that carried a variable interest rate — instead worked to quickly clear off existing ones that had such a variable rate;
invested in land, especially in rural areas (even if just for having some fruit trees) — thereby avoiding city traps;
started growing own vegetables — my grandmother for instance used to be able to calculate and show me exactly how much she was saving every week by simply having her own salads and potatoes in the garden (don’t do this for mere financial reasons though — she worked super long and hard hours but we all knew what it was that we were eating!);
took to gold, silver and other (more tangible) commodities — especially in small denominations (as bigger ones may be hard to liquidate efficiently should the need arise).
They would then hope that such precautions were enough to get them through tough times of great uncertainty.
Unfortunately and given the size of the problem with a possibly (well designed!) incoming financial crisis, this may not be enough any more.
Anyone who isn’t quite sure how to manage a possibly dire financial situation under such inflationary tendencies could consider the present moment as an opportunity though.
I don’t neccessarily mean to simply follow the good old Samuel Benner’s “Periods When to Make Money” chart10:
But I do think now is a fortune moment to invest some time (or money with the help of an expert) into good forecasting and personal wealth preservation and planning.
Three people I follow keenly in this respect are:
who kindly shared some recommendations as follows:
Split your assets into different asset classes. Your foundation should have at least three pillars.
Get a clear picture of your monthly expenses and divide them into budget blocks. Differentiate between costs that make you richer (investments) and costs that make you "poorer". Then set yourself goals.
Your current account should only serve as a transfer tool for your monthly income and expenses. Any unused budget ideally get transferred to a savings account immediately.
You can request more suggestions and tips free of charge by writing to Helen on her website.
“How do we start saving? The average household in Europe owns over 10,000 things. But how many things are actually used? AI-driven and highly personalized advertising on social media and streaming channels is becoming increasingly sophisticated. Being aware of manipulative consumerism helps us to again focus more on the essentials. Saving doesn’t have to mean suffering.” — Helen Barth, Investlotse
Hyperinflation Risks
In my current view of the world there is a fair chance that many generations will see one or more events of (possibly global) hyperinflation in the coming 5-10 years.
So far the US has typically done everything they can to prevent this from happening to themselves, but over the course of action, other countries didn’t fare so well. This time however and given the Shift in Global Finance that’s currently going on in the world, they may be far more affected than what they think they’re bargaining for11.
Just over a century ago, my grandparents lived through a time with the highest monthly inflation (29,500%!) one could possibly imagine. They eventually needed millions and billions of the German papiermark to just buy a loaf of bread. Prices doubled every 3.7 days with the papiermark not being worth the paper it was written on.
“The currency (which was introduced in 1914 when the country’s gold standard was eliminated) began with an exchange rate of 4.2 per US dollar at the outbreak of WWI up to 1 million per US dollar in August 1923. By November, that number had skyrocketed to about 238 million papiermark to 1 US dollar, and a psychological disorder called “Zero Stroke” was coined, after people were forced to transact in the hundreds of billions for everyday items and were dizzied by the amount of zeros involved.”
We all know what can happen when people lose their livelihoods, their savings and (often with it) a grip on life at large — though typically once the masses realize it, it’s too late to change course, so the only way forward is “to prepare now”.
Tricks to Beat Inflation
In our modern times, the recipes to beat inflation are more versatile (yet often hidden) than the aforementioned ones as new lifestyles and opportunities have emerged.
Yes, precious metals are always good choices and land still seems to be a good option, however it’s completely “immobile” — which isn’t a forte under the current geopolitical uncertainties, especially in Europe.
Given the constant degradation in food quality it could therefore anyhow be a good idea to beef up on access to locally sourced nutrients or start growing a “victory garden” — if not for wealth, then at least for health reasons:
That said, nowadays one may also want to consider the technological developments over the past two decades — be they linked to the internet and our constant mobile connectedness, blockchain and crypto related currencies such as Bitcoin, the Pi network12, or just certain business models that have come along with those trends.
I have good friends who are genuine experts around Bitcoin for example and am happy to refer you to them for a more detailed analysis of this opportunity. So far I find it hard to really grasp the intricacies of most digital assets and investing themes, mainly because I couldn’t fathom what a possible black swan event13 (e.g. in the case of crypto) would truly mean and how it could look like.
Therefore I’ve tried to find my own ways of dealing with the uncertainties of our current financial world and their respective geopolitical slaves.
(The following section is for premium subscribers as it contains certain tricks that only work for as long as they’re kept to a smaller audience, thank you for understanding or signing up!)
For instance:
Keep reading with a 7-day free trial
Subscribe to Modern Times Opportunities to keep reading this post and get 7 days of free access to the full post archives.