Personal stories about inflation

I was born and raised in Venezuela, 6 years ago I decided to leave for good.

During my time there, I witnessed inflation and its consequences first hand, and I learned a few things that helped me maintain some of my purchase power and escape. Many, if not all of the things I will point out are obvious to many of you, many here are knowledgeable and can reach the same conclusions by studying some economics and applying simple logic, I’m not that smart, I had to suffer it.

Inflation seemed to have started to be a concern for everybody in 1984-1985 during the “black friday” (no, not that one you know), a day where the government devalued the currency against the dollar by 100% if I’m correct. My numbers are not exact, I’m sure if i google them i’ll get them right. It probably started before that, I don’t know, point is, it was the day that entered into people’s radar. Things continued to go downhill ever since and, it hasn’t stopped.

“The rich gets richer, the poor gets poorer” my dad said it ever since i have memory. It wasn’t obvious, I didn’t get it, it took me about 25 years to understand that “the rich” hold onto assets and not cash, as for the rest, the story is sad. This kind of statements are true but have negative consequences as people start to resent against those who have managed their finances properly and protected themselves, people will say they cheated, it is unfair! The playfield is indeed unfair, but it is not the richs’s fault. This will usually leads to social unrest, opening pandora’s box.

“Politicians love to print money” if rich get richer, the politicians are not exempted, they will adjust their salaries according to the properly measured inflation rates, plus, their missmanaged projects will receive funding at the beginning of the year, so they will have a chance to spend it all before the prices goes up, and lets not even talk about their complicated corrupt schemes to pocket the surplus and deposit it in foreign currencies as a hedge.

Prof Huerta de Soto explains monetary expansion is usually done in a way that spreads like honey being poured on a plate, those who gets it first, gets the best of it before it reaches the edge of the plate.

“Enjoy this year, the next one will be worse.” I heard this so many times, even on TV shows. It is some sort of “positive” statement for you to cheer up now and enjoy the moment, I’m not sure if it ever worked. Inflation is a degenerative process, like a disease, it wears down your income, your quality of life, your health. Its consequences can be seeing in the society in general, everything seems to be in a constant state of decay, first people lose the power to buy their hobbies, then new clothes, then expensive food, then snacks, then cannot afford 3 meals a day. But they still have jobs, and this will lead to my next story.

“Inflation doesn’t kill jobs” it actually does but, let me explain. Is not an atomic bomb that pushes company to declare bankruptcy or forces them to fire everybody in a shocking event. Is toxic gas that slowly kills you, most companies won’t cease to exist, they will adjust their prices as their costs goes up, they will be forced to lower the quality of their products to compensate the for the lower sales, but people will remain in their desks living their normal lives, without really thinking about what’s going on, assuming that everything is just normal.

I even got used to the fact that prices will always go up, I though it was the natural course of life. It is the governments objective to feed and perpetuate this lie.

“Hedging made me a millionaire” I wish this would’ve been true in the whole sense of the word. I didn’t become wealthier, my assets simply were valued now in millions of the local currency, but I was simply able to afford the same things, maybe a bit more food, maybe a bit more entertainment, it is hard to see wether assets have more value or your pocket have less, or both. Hedging was not a winning lottery ticket, it was a shelter against the toxic gas, there was nothing to celebrate.

“CPI is in the realm of macroeconomics, not your finances” of course macroeconomics affect your finances, but doesn’t tell you the whole story of what’s happening in your pocket. The real picture of your finances is in your consumption habits and goals in life, food prices affect you, but if you are hedging against inflation, the inflation of those specific hedges affect you dramatically. If cpi inflation is at 80% annualy but your hedge is inflating 1000% annualy then inflation for you is 1000%.

EDIT: I obviously didn't hedge with BTC, I wish I did back then, now I do, I learned the lesson, again, I had to suffer it.