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The truth about inflation

by Sam Perren

300 words (1.5 minute read)

Originally Published: 2015-02-20

 
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I got an email from Stats Can this morning detailing how the consumer price index “basket of goods” (used to measure inflation) has changed again.

I am not a conspiracy theorist, but I have found it interesting that conventional wisdom traps people in mediocrity.

Check out this recent release from Stats Canada.

We would be led to believe that inflation has averaged 3.2% per year for the past 100 years.  If a basket of goods cost $1000 in 1914, today it would cost 319.7% more, or $4,197. This “basket of goods” gets changed all the time, so this is not the most accurate measure of inflation.

 

Real inflation is much higher.

For instance, “a loaf of bread that cost 6 cents in 1914 now goes for $2.92″ (Source), a 4866% increase. Much higher than the CPI of 319.7% we would be led to believe.  It’s hard to know what is acctually happening when they keep moving the bar.

In any event, whether you believe the CPI to be accurate or not, inflation is the obvious trend over the past 100 years and will continue for the next 100 years.  

 

I don’t want to leave you feeling depressed, so here is the answer to this problem:

1. Buy income producing assets that rise in value with inflation

2. Use as much cheap money as you can get your hands on

3. Enjoy the fruits of your smart move after someone else paid for it(your tenants).

 

Till next time,

 

About the author: Sam Perren has helped dozens of investment partners aquire real estate, representing over $16Million CAD in purchases with rental income of over $100,000/mo. If you'd like access to Sam's "deal of the week" please click here.