Consequences of inflation and what to do about it from a TPM perspective
Most of us in the Western world don't understand inflation. In fact, most humans don't undertand money (at all), and inflation is a superset of understanding money as a concept.
But it's not hard to guess that high inflation will remove power and agency from your life:
During Weimar Germany’s period of hyperinflation in the 1920s people’s savings evaporated, eliminating the middle class and paving the way for the rise of fascism
Assuming that you understand inflation, what can you do from a TPM perspective?
This is a super relevant question. TPM focuses on inter-personal power, not so much on more 'meta' power situations (where power could mean millions of Euro/USD changing hands, or some other major power shifts). Looking at 'meta' things like geopolitics, economics, etc to inform your day to day actions may look far fetched. What do you think?
Hey LOF,
Yeah that's true that TPM (so far) focuses more on interpersonal power dynamics.
And for a specific reason, too: that's where you have the biggest impact, usually.
Plus, we focus a lot on individual self-empowerment (individuals who in turn can then shape the bigger systems).
Still, the way I see ALL power dynamics is relevant and within the scope, and maybe TPM will expand there once we finish to properly map the interpesonal aspect (will take quite a while though :D).
Mental empowerment is also relevant.
Which leads me to this:
Quote from leaderoffun on June 14, 2022, 1:18 pmBut it's not hard to guess that high inflation will remove power and agency from your life:
Do you really think of inflation as potentially "removing power and agency from your life"?
Do you really think of inflation as potentially "removing power and agency from your life"?
Hmm, yes. I see myself as flexible and resilient enough to adapt to whatever scenario comes my way. Still, a poor economy can remove choices, power and agency from you all things considered:
- You wanted to go on vacation? Turns out your currency is devalued, the flight is impossibly expensive or cancelled, and the location you wanted to spend time in is flipping cars on the street and setting them on fire. So long vacation.
- You wanted to hire someone good. Except due to poor economic conditions, they emigrated to a better country (hard to know where right now), or will never leave the cushy corporate job to join your startup in uncertain times
- You wanted to do X, which requires technology. Supply lines went to hell, and it's had to get that piece of tech that would make your X rock. You use Y instead, which is clearly substandard
- You wanted to practice your martial art, dancing, or hobby. But the studio next door closed because their clientele didn't have discretionary income that could go to them, and the Gov could not save them because an stimulus package with high inflation is like trying to stop a fire with gasoline
Does this make sense? That's what I mean.
Yeah, it makes a lot of sense.
What you describe sounds like an economic collapse following runaway inflation -ie.: constantly accelerating with nobody trusting there's an end in sight-.
Where I don't necessarily see the link between inflation and loss of power and/or lifestyle is that inflation doesn't necessarily lead to a downturn, and also not to runaway inflation and a semi-collapse.
If inflation is high, but constantly high, things move on as usual.
And if your income and returns on savings are close to the inflation rate, you're good.
If your income and returns are higher than inflation, you're better off than being in a low-inflation, but zero income and returns growth.
Those are big IFs of course, but I don't see inflation as a major threat unless it turns into runaway inflation.
And if it doesn't, and odds are higher that it won't, there are plenty of steps you can take to tackle inflation.
Hey leaderoffun, hey Lucio
What I do is save money, invest, and hope for the best lol
Jokes aside, I believe this is a case in which we are disempowered by reality. Even people in power can't do much about it personally, they can only deal with it - and it always involve some kind of tradeoff.
If anyone from Poland is reading here, the prime example (pun intended) would be the Prime Minister Mateusz Morawiecki: the guy bought over $1 million dollars in treasury bonds at the same time his government was blatantly dismissing any concern for inflation. If TPM is planning some kind of Machiavelli Awards, I'd give him the statuette .
I also think it would be a great idea to have more in-depth articles on financial education (as well as nutrition, style, exercising, self-defence usw) on the website - . But given the breadth and intricacy of these subjects and the fact that they need to be constantly updated, I think it would be better if they were outsourced to specialists. That way we wouldn't need to search for this complementary information outside TPM; it would be superhelpful to find it all in the blog.
I would advocate, however, that the core of TPM should continue to be interpersonal dynamics - the specifics of interpersonal dynamics are always evolving and there is nothing like in the market, and I don't think we can one day map all of it (I wish you were immortal, Lucio LOL).
That said, I do get a lot of value from PU's Wealth Guide (and potentially from the other guides, which I'm yet to read). It has been tremendously helpful in planning my financial life.
Quote from Kavalier on June 15, 2022, 4:49 amWhat I do is save money, invest, and hope for the best lol
That seems a good mindset actually: "do my best to put myself in the best of the situation, then see what comes, and I'll take it from there".
Quote from Kavalier on June 15, 2022, 4:49 amIf anyone from Poland is reading here, the prime example (pun intended) would be the Prime Minister Mateusz Morawiecki: the guy bought over $1 million dollars in treasury bonds at the same time his government was blatantly dismissing any concern for inflation. If TPM is planning some kind of Machiavelli Awards, I'd give him the statuette .
You mean that he bought treasuries in USD knowing that the Zloty was going to lose value against the USD?
Quote from Kavalier on June 15, 2022, 4:49 amI would advocate, however, that the core of TPM should continue to be interpersonal dynamics - the specifics of interpersonal dynamics are always evolving and there is nothing like in the market, and I don't think we can one day map all of it (I wish you were immortal, Lucio LOL).
Maybe we'll come up with a TPM-shared power move to live forever one day :).
He bought Poland's government bonds in złoty ( 4.6 million zł; that's the value in US$). But increasing one's investment in treasury bonds so abruptly, especially if you don't do this kind of investment often, usually means someone is expecting bad times. As PM, he has priviledged information and this action contradicts the official discourse of low risk of inflation. That is why he is facing scrutiny in Poland.