Inflation Is Coming, Do This Now! | Summary and Q&A

TL;DR

Learn about inflation, its relationship with the money supply, and discover potential investment options to consider in a higher inflationary environment.

Key Insights

• 💱 Inflation can be defined as the average change in the price of goods and services, or as a measure of changes in the money supply. Both definitions are interconnected.
• 🤑 The relationship between the money supply and the price of goods and services is complex, with an increase in the money supply potentially leading to higher inflation.
• 🎚️ The significant increase in the money supply during the COVID-19 pandemic is likely to cause some level of inflation beyond the current expected level.
• 😚 Investments such as real estate, growth stocks, and TIPS can be advantageous in a higher inflationary environment, while fixed-income investments like bonds may lose value.
• ✋ Stocks, in general, tend to perform well with higher inflation, making them an attractive investment option.
• 😘 Dividend stocks with both growth potential and low dividend payouts can provide a double benefit in an inflationary environment.

Transcript

hi i'm jimmy in this video we're going to look at inflation the possibility of inflation moving higher and what investments could do well if inflation does in fact begin to move higher and then hopefully we can use this information to improve our investment portfolio and ideally get us closer to our goal of achieving financial freedom okay so let's... Read More

Questions & Answers

Q: How is inflation defined and why is there debate about its definition?

Inflation is commonly defined as the average change in the price of goods and services, although some argue it is also dependent on changes in the money supply. Both definitions are intertwined and can help understand different aspects of inflation.

Q: What is the relationship between the money supply and inflation?

An increase in the money supply can lead to higher inflation. When there is more money in circulation, each individual dollar has less purchasing power, resulting in an increase in the price of goods and services.

Q: How is the money supply related to the price of goods and services?

While an increase in the money supply and the price of goods and services may not happen simultaneously, they are closely connected. The government can manipulate the money supply more quickly than changes in the prices of goods and services can occur.

Q: Which investments tend to perform well in a higher inflationary environment?

Real estate is often a good investment in higher inflationary economies. Investing in real estate investment trusts (REITs) can provide exposure to the real estate market without directly buying properties. Growth stocks, particularly in technology and energy sectors, also tend to perform well during inflationary periods.

Q: Should fixed-income investments like bonds be avoided in a higher inflation environment?

Fixed-income investments like bonds may not be ideal in a higher inflation environment since inflation erodes their value over time. However, Treasury Inflation-Protected Securities (TIPS) are bonds that adjust their payments or value based on inflation and could be considered as an option.

Summary & Key Takeaways

• Inflation can be defined as the average change in the price of goods and services, although some argue it is also linked to changes in the money supply.

• The relationship between the money supply and the price of goods and services is intertwined, with an increase in the money supply potentially leading to higher inflation.

• Inflation is expected to rise due to the significant increase in the money supply during the COVID-19 pandemic, and certain investments like real estate, growth stocks, and Treasury inflation-protected securities (TIPS) could perform well in an inflationary environment.

• It may be wise to avoid fixed-income investments like bonds as inflation erodes their value over time.