How Inflation is the Not So Silent Thief! (Patreon)

The chart illustrates changes in household net wealth under two different U.S. administrations, comparing nominal and real terms. Investing in the right assets can minimize this inflation impact.

The Breakdown:

• Nominal Net Wealth:

  • Under the previous administration, the increase in nominal net wealth was significantly higher compared to the current administration. 1.5x higher.

  • Nominal values do not account for inflation, showing a straightforward increase in wealth figures.

• Real Net Wealth:

  • When adjusted for inflation, the previous administration still shows a substantial increase in real net wealth, 6.4x higher, while the current administration shows a much smaller increase.

  • Real values provide a more accurate picture of purchasing power by considering inflation.

Impact of Inflation:

• Inflation destroys your purchasing power and even if you feel you're wealth is increasing the actual wealth is not by the amount that you think.

Conclusion:

Inflation plays a critical role in determining real wealth gains. While nominal increases can appear substantial, real gains are what truly reflect an improvement in economic well-being. The chart highlights how inflation can dramatically "eat away" at wealth by reducing its purchasing power.

Fun case in point - 4 years and 9 months ago I ordered a Cybertruck for $39K. I ended up paying over $115K for it - part of this is inflation and of course high demand and pricing power.