Why inflation is a good thing

Azeez Mustapha

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Inflation would be the greatest thing to happen to me.

I selfishly want the government to spend as much money as possible. “You can’t print money forever!” everyone is shouting.

Yes you can. And they will.

They’ve been printing money for decades, and only now it’s making the headlines.
Why inflation is a good thingThe reason I am selfishly supportive of inflation is that there is a well-known maxim in poker that “money flows clockwise.” If you sit to the left of the weakest player at the poker table, then eventually you will have all of their money.

Every time they bet, you raise them, scaring out all of the other players. So you are now “heads-up” with the weaker player. It’s just the two of you. Luck will give him some hands, but luck/skill will give you most of the money.

In inflation, the same thing happens. Print up a trillion dollars and give it to everyone… and where does it end up?

Eventually it’s all put in the stock market or in real estate. To be fair, some of it is now showing up in crypto.

Inflation of a currency occurs when goods that are priced in that currency go higher (IN THAT CURRENCY) year-over-year or month-over-month. For instance, gas — which you buy with dollars — is over $3 a gallon for the first time since 2008.

This is VERY important to understand. Gas itself is not different. Gas is not even worth more UNLESS it is priced in US dollars.

Everything you own goes up in value, but ONLY IF it is priced in US dollars.
Why inflation is a good thingWhat do I mean?

Here are things you might own that will go up if inflation goes higher:

Stocks

Real Estate

Cryptocurrencies

Collectables

Services you offer

The more you own of the above, the less inflation hurts you.

And if you own “Good” stocks or “Good” real estate, then you will make a lot of money during inflationary periods.

But what’s a good stock or good real estate?

Without inflation, it is very hard to predict the stock market. When there is no inflation, the stock market will stay the same except for stocks that are growing. And it’s very hard to know which companies will grow.

Remember this: Almost all of the growth in the stock market over the past 100 years has occurred because of inflation. I don’t give a shit about “candlesticks” or P/E ratios or what The Wall Street Journal says.

So, ok, if you own a basket of stocks — and that is the bulk of your net worth — then you will survive inflation.
Why inflation is a good thingBut how can you BEAT inflation?
It’s simple. Just own stocks in an industry that is growing faster than inflation.

Some industries are fully mature, and I would not bet on them. Sure, Exxon and Chevron will go up when gas prices are going up. But they are not interesting, and eventually their stocks settle down.

The oil industry might even be in trouble as renewable energy gets more realistic.

But just look in your life. Do you drive more? Do you use the computer more? Do you read more? Ask yourself which activities you do are “inflating.”

Author: James A.
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Azeez Mustapha

Azeez Mustapha is a trading professional, currency analyst, signals strategist, and funds manager with over ten years of experience within the financial field. As a blogger and finance author, he helps investors understand complex financial concepts, improve their investing skills, and learn how to manage their money.

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