of the effect inflation can have on future wealth, and the methods we can take as investors to protect against it. Inflation can be used to an income property investor's advantage with the right strategies. But first, it's important to understand what inflation does and how you can harness it's power to increase your financial independence.
Real and Nominal Value
Action (or inaction) of the U.S. Federal Reserve will ultimately determine how badly we're hit by inflation. To completely understand inflation and what it can do, it's important to understand the difference between real and nominal value. Take a one hundred dollar bill. It's still called the same thing as it was fifty years ago, but has it's value remained constant? The answer is no, it's value is nominal, meaning it's one hundred dollars in name only. Jason Hartman would call it a fake currency. Real value, on the other hand, dictates what it's really worth.
Right now we have what Jason Hartman calls temporary appreciation, or strength in fake money. Now is the time to exchange this money for packaged commodities, such as income property. This will allow you to acquire another asset, a mortg
age. Take hold of the mortgage now, and you get to lock the price down for another few decades.
The Hidden Tax
Inflation is what Jason calls the “insidious hidden tax.” However, many people focus on taxes and not inflation. Taxes
aren't a great way to redistribute wealth because they're too obvious. Raise taxes on the population too large of a degree, they'll get upset, and they'll revolt. We'll have another Boston Tea Party. There are already quite a few groups who are against taxes, and actively fight them.
Inflation is significantly less obvious than taxation. This is because inflation actually destroys the value of savings, bonds, stocks, and equity. Real estate can provide great protection from inflation with the right strategies and many people who believe in this concept own a million dollar (or larger) real estate portfolio which they've worked very hard to pay off to be free and clear. The bad
news is this probably isn't the best approach.
Jason Hartman believes investors can take advantage of inflation with the right strategies. Unfortunately, saving money won't protect us anymore. We're going to have to implement proper income property investment strategies to secure a safe financial future. (Top Image: Flickr | 401(K) 2012)
The Young Wealth Team