What’s inflation? What’s shrinkflation? Why and how do they happen? Stuart Zadel explains the phenomena by using an unlikely visual aid. Check it out.

Hi, guys and welcome!

This is Stuart and welcome to this month’s Success Tip.

Today, I’m going to talk to you about inflation and a new word you may not have heard: ‘shrinkflation.’

Headline Inflation says that inflation is running at 2% or at least, that’s what the target is of most central banks around the world. Now, inflation is actually an expansion of money supply, but it also means that price is rising every year. And they tell you it’s good for the economy.

First off, I’m going to talk to you about shrinkflation and then we’ll come back to inflation.

SHRINKFLATION: WHAT YOU NEED TO KNOW

So, with this, I need to go to my trusty treat breakfast on occasion. This beautiful product. This product isn’t cheap. It’s a superfood breakfast cereal and it costs around $16.95 for 500 grams where I buy it. Not cheap but beautiful stuff. Now, here’s an interesting thing.I’ve been sitting on this for over 9 months because I didn’t know whether to tell you this or not but I went into the store once. I didn’t know there

I’ve been sitting on this for over 9 months because I didn’t know whether to tell you this or not, but I went into the store once. I didn’t know there was any difference and boom! Here’s the new box. Can you see the difference? Let me show you.Yes. One is 500 grams and one is 400 grams. Guess what happened to the price? Nothing. It stayed the same. $16.95.

Yes. One is 500 grams and one is 400 grams. Guess what happened to the price? Nothing. It stayed the same: $16.95.

SHRINKFLATION AND ITS BUSINESS IMPLICATIONS

Now, no one even noticed. They just thought it’s a new packaging. See how sly they have done? Change the packaging so no one would notice. Hey, but I’m the consumer so I noticed. Same dollars, smaller box. The shop owners didn’t even notice.Now, what has this done? This has broken my trust. Ladies and gentlemen, transaction relies on trust. The currency of business or transactions is trust.

Now, what has this done?This has broken my trust. Ladies and gentlemen, transaction relies on trust. The currency of business or transactions is trust.

This has broken my trust.Ladies and gentlemen, transaction relies on trust. The currency of business or transactions is trust.

TRUST AS A CURRENCY

Ladies and gentlemen, transaction relies on trust. The currency of business or transactions is trust. You break someone’s trust and loyalty? Then you’re dumb. Now, I like what Napoleon Hill said. The number one characteristic for a mastermind team member was honesty and loyalty. And he said, “If someone doesn’t give honesty and loyalty to those who they owe it to, they are lower than the dust of the earth.” And I wholeheartedly concur. And you know what? That little incident has broken my trust in that brand and in that product and I haven’t bought it since that time.

You see ladies and gentlemen, all the profit is in a long-term relationship with your client or customer case in point. That’s called shrinkflation. It’s when they tell you that inflation is running at 2% and nothing changes but you’re paying the same amount of money for 20% less goods in your product. So this is a way where inflation is virtually hidden from us. Not that that product will be included on how they calculate normal standard inflation.

Now, in the US, they got a thing called, Core CPI or Core Inflation and it doesn’t include fuel or food. Now, isn’t that what inflation meant to measure or the CPI, the cost of living every year? What’s more fundamental to people than food and fuel in their day to day lives? I don’t know. But here was at one time said, there are lies, there are damn lies and they are statistics. Fair enough.

INFLATION: WHAT YOU NEED TO KNOW

So let’s now talk about inflation.Central banks around the world generally are targeting 2% inflation rate. Now, what is inflation? Inflation is

Central banks around the world generally are targeting 2% inflation rate. Now, what’s inflation?

Inflation is an expansion of the money supply. Now, I’ve read a statistic that an inflation prior to 1800 was running at 1% per century. Per 100 years. It didn’t even exist. Prices didn’t rise over centuries!

Now, they rise every few months.

So, they’re aiming for 2% a year but even that, I think it’s a little bit dodgy the way they’re measuring that. So, they say this is good for the economy. Tell me. Who is inflation good for? Is it good for the consumer that you pay more every single year? I don’t think so. I can’t see that’s good. There’s less money that you can spend on other stuff if that’s rising.

In Venezuela right now, the inflation rate is 185%. Now, this year’s figure is not in yet. They’re reckon its 500% inflation. These are IMF figures. And they’re predicting 2000% inflation in the next 12 months. That means if you bought an apple for $1 today, in 12 months you’re going to be paying 20 dollars for that apple. Their economy is in free fall, and people are in desperate poverty.

There are even reports of killing animals in the streets for food which is just a real shame for mismanaged economy and a corrupt probably central government as well. Not that they are all. But that’s a different question.

INFLATION AND ITS BUSINESS IMPLICATIONS

So, inflation, is it good for the business or no? Prices got up 2%, sure. If the business owner can charge 2% more and keep their cost current, they make more money, right? Or even drop their cost. But that’s not the case either is it? Why? Because second they put their prices up, the competition will get more market share and now get less money. Or if the competition will do it cheaper, they’ll make more money. So, it’s not even good for business.

So, who is it good for? Well, the only answer left is central banks and governments. Why is it good for governments? Well, government rack up all these money and debt making these promises to people to buy those. You vote for me, I’ll give you an ice cream every Sunday. So these people bite for them and then they are obligated to give them an ice cream every Sunday. And this is just how the game goes.

INFLATION AND THE PROPERTY MARKET

Now, if you bought a house in the 1970s in Sydney, you might have paid 100 grand for it. That property today might be worth 1.5 million, might be worth 2 million. That’s also a measure of inflation.The States has a new president and he has inherited a $20 Trillion debt that no one was talking about it. They’re going to be shortly let me tell you. They will either default honestly or they will default dishonestly. Now, chances are, they’re probably going to try to inflate the debt away. What does that mean? Well, again, the $20 Trillion now looks massive and enormous. They’ll never pay it back. But, it’s just like $100,000 debt for a Sydney home 40 years ago. 40 years later that $100,000 looks smaller compared to the 1.5 to 2 million it is today. And that’s what they’re going to try to do with the $20 Trillion. How are they going to do that? The only way is to expand the money supply. They’re going to print like the

The States has a new president and he has inherited a $20 Trillion debt that no one was talking about it. They’re going to be shortly let me tell you. They will either default honestly or they will default dishonestly. Now, chances are, they’re probably going to try to inflate the debt away. What does that mean? Well, again, the $20 Trillion now looks massive and enormous. They’ll never pay it back. But, it’s just like $100,000 debt for a Sydney home 40 years ago. 40 years later that $100,000 looks smaller compared to the 1.5 to 2 million it is today. And that’s what they’re going to try to do with the $20 Trillion. How are they going to do that?

THE ONLY WAY TO EXPAND MONEY SUPPLY

They’re going to print like the clappers like there is no tomorrow. Then they’re going to put QA 1, 2 and 3. And then, they’re going to put the bank of Japan and the AU to shame and their money printing exercises potentially to inflate the money supply to do away with this debt.

So, here’s the punchline and why I wanted you to stay all the way through to this. What has stayed traditionally above inflation, what asset class where John Lindeman, famed Australian Researcher, you can see him at our UPCC events this year. John says that well-selected property in Australia has struck about 3% above inflation year-on-year. Now, not always changing but over 3% above inflation.

So, if you want some insurance against what’s being done to your money supply, you might want to find well-selected property and buy very, very well. Anyway, also some benefits to being in a hard physical bricks and mortar assets as opposed to the digital one, but maybe we’ll touch on that next time.

So, that’s it for now. I hope you now know what shrinkflation is and how it disappears before your eyes and a little bit more about inflation. And until next time.

To your success.

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