Inflation: If a great number of people in the United States live in mobile homes and make on average, a family of four makes $54,000 a year. Those homes may not be going up in value at the same price as the real estate in the bay area. And so really the question when people ask me is, is inflation really 2%. I don’t think so. I think it’s really related to the market that you live in and the things that you buy. I’ll tell you what my houses that are in the area here in the Northwest. Our real estate is gone up significantly more so. And if you decide to go to a community college, the price of college has not gone up nearly as much as if you’ve gone to a private school or an institution. Those costs have gone up dramatically.
So inflation is not as easy to put your finger on, but it affects us greatly because inflation really is a tax. If I have a hundred dollars in my pocket today, and inflation is going up 12%, next year I won’t have a hundred dollars. I’ll still have a hundred dollars. It just won’t buy me a hundred dollars worth of goods. It will buy me $88 worth of goods. I’m getting taxed because as the government prints money and as the Fed creates currency or debt, it takes buying power away from those who have dollars or have savings. And that’s a really big deal. 2% inflation compounded compounds in a very different curve than a 12% inflation curve. So we in the industry cal it the rule of 72. If I’m able to make 12% on my money and I divide 12% by 72, that’s how many years it will take for my money to double. In the same way, when it comes to inflation, if you use a rule of 72, it’s how much time your money gets, how long it takes for your money to get cut in half. So a 12% inflation rate is significant and you must invest differently with that kind of inflation rate than if it’s at 1% or 2%.