The Dangers of Inflation and How to Protect Yourself

Please let me know your questions below, there’s a lot to unpack in this one!

Why did I not care about this until I was close to retirement? Probably because I was comfortably numb whilst working! I shall be pushing my children to think about this seriously at their young age!

9/10 never give 10/10 as that makes us complacent.

Five. Step up content for more sophisticated investors

10/10 why didn't I get to learn this stuff when I was in school 15 years ago?!

Wonderful to see that men's football boots are less expensive than they were!

One great thing about buying a property with a mortgage is how not only does the balance shrink as you pay it off if its capital repayment, but also with inflation over that 25 year period. Something I've always thought was a bit unfair as the payments are most painful at the beginning when you can least afford it. Why don't they plan for your mortgage repayments to increase by 2% in line with inflation each year.

9/10. The only improvement for me would have been to explain how inflation reduces debt. I still don't quite understand it fully. 🙈

Given the NIESR has just projected inflation of 7% in April, that video was really prescient (10/10)

9/10 It would be helpful to show the compound effects of 3 or 4% inflation compared to 2%.

10/10 - I've always wondered why governments desired a small amount of inflation and you've answered it in a simple, concise way! Appreciate all the videos

11/10. This channel has taught me so much that I had no idea about previously. If only Youtube had been around 40 years ago and guys like you had been posting stuff like this then! I could have retired a long time ago.

10/10 well explained to a novice financial person, thank you

9/10 You touched on Compound Interest in this video. You should show people that greed is good eg The Time value of money.

You missed the #1 reason not to keep your money in the bank. The risk of bank insolvency. If the bank's assets ever drop in value, for instance, if house prices or treasury bond values start to drop (banks hold lots of MSBs and treasuries, and they will drop in value if yields rise). Then the bank's assets may fall below their liabilities (money owed to depositors upon withdrawal). Since asset and equity values are propped up by people buying these things using debt, a contraction of credit could push values down resulting in insolvent banks. They cannot give you your deposit back if they simply do not have the money, and do not have enough value stored in assets to cover in the event of liquidation. Another possible crisis is negative interest rates. Banks must pay out lower interest to depositors than they receive from the treasury bonds they like to buy with depositor funds. If treasury bond rates go negative, that means the bank account yields will need to go negative otherwise banks will start to lose money. This could trigger people to withdraw their money as cash and hold it themselves. They would earn a higher yield by doing this. However, banks would suffer if people did this because they would need to liquidate their reserves in order to cover their withdrawal liabilities. This liquidation would cause reserve asset values to drop which could push them into insolvency as all the banks have to liquidate at the same time while asset values are suppressed. Banks will likely attempt to lock you into the system so that they can force you to accept a negative yield on your deposit. They could institute withdrawal limits in order to achieve this. What good is 100k in the bank if you can only take out 500 per week? The big flaw in the argument used in this video is that you should invest instead. The problem here is that if you want to liquidate your investment in order to cash out profits, you must funnel those funds through your bank before you can spend them. The bank becomes a speed bump/trap that keeps you from accessing the gains made whilst investing. This is the big gotcha that most people overlook. If you have a 500 per week bank withdrawal limit, you cannot actually cash out the 20k investment account gain you just made on your favorite stock. You may think FDIC insurance has you covered. But in a crisis, it will take many months to years before you receive your payout. Obviously a crisis will be a high inflation time period, so by the time you receive your insurance payout, the value of that payout can decline considerably. This is exactly what happened during the great depression. These two risk situations are not an issue during times of great economic (and debt) expansion. But the economy needs to deleverage either via inflation or deflation. Pressure to deleverage creates an extremely risky environment for banks. This is the main reason why banks are no longer safe right now when they were in the past. Debt levels are too high and debt is a game of musical chairs. When the music stops, people cannot pay off their debts and they must default. Defaults destroy money in an instant. Paying down debt destroys money slowly. The more debt there is, the greater the risk of default, the greater the risk of using banks who hold those loans as assets on their books.

James mate, we need a house tour more than anything. The backdrops to these videos are so lovely, who designed your place? Kudos to them! 👏🏼 (10/10.)

9.9 of 10. Clear and unbiased communication without esoteric jargon or overly nuanced phraseology that is often part of economic and investment related video/material. Well done!

Its a 10 from me. Will be retiring at the end of 2023 and you have opened my eyes on how to possibly move forward

10! Helped me a LOT with how cash loses its value in bank account.

10/10. You made it so simple to understand something complex that I have pretty much no knowledge of