By Josh Haddon
(WINDSOR, ON) – We get paid in fiat currency, we buy in fiat currency and we borrow in fiat currency. Year after year this cycle will continue until the very predictable and cyclical collapse of our fiat currency occurs. In the meantime, inflation increases year after year. When inflation happens, your currency becomes less valuable, thus, deflating your buying power.
The first dollar you earned in your life buys much less than it did when you earned it. That is the simplest definition of inflation. When my grandfather was living, he loved telling me how he bought his house for $14,000 cash. It is worth about $700,000 now. That’s more than a 100% increase per decade.
The U.S. Central Banks, which we in Canada generally fall in line with, have targeted inflation at 3% per year. That means, the banks are confiscating, if compounded, over 34% of your wealth every decade, and that’s being generous. In Cyprus (which is part of the civilized European Union), 40% of private deposits were taken by the banks to get them out of their recent crisis. The word taken is interchangeable with the word stolen. In order to provide a semblance of normalcy in my writing, I however, opted to use the word taken.
The deposits that are left in accounts in Cyprus are frozen and Forbes reports ‘may be returned if the banks do well’. However, they also reported that only about one third of private deposited currency will be returned. To bluntly summarize, in a civilized nation, like ours, the banks and governments were in trouble because of over spending and lending, so they just took people’s money in order to not collapse.
So what does this mean for us, here in glorious and free Canada? Well that remains to be seen.
The bottom line is that your hard earned fiat currency, sitting in the bank, is vulnerable and losing its buying power every single day. Instead of using 3% per year that the banks have targeted to be the inflation number, let’s look at a used daily commodity such as gasoline.
Ten years ago today, according to gasbuddy.com, the average price per litre of gasoline in Canada was $0.75 per litre. As of April 24th, 2013, the average price per litre of gasoline in Canada is $1.28 per litre. That’s a 75% increase. When using a much relied upon commodity such as gas as the gauge, inflation has taken nearly 75% of your wealth in the past decade.
Inflation is essentially a tax. You do not notice it because when you look at your bank balance the number is the same as it was when you last used it. The $10,000 you had ten years ago, still sits in your account and today still says $10,000.
The way you need to start seeing your fiat currency is going to take some adjustment. The $10,000 you saved for a rainy day 10 years ago is really worth somewhere between $2,500 and $6,500 today. Makes you wish you bought a bunch of gasoline and saved that instead doesn’t it?