Financial Freedom Report

The first key to understanding inflation is to recognize the difference between real and nominal. If you think about a physical $100 bill, it is easy to understand that 50 years ago, it was still a $100 bill. We called it the same thing, it looked (mostly) the same when you held it in your hands. But it was the same in a nominal way—in name only. A $100 bill did not buy the same amount of things 50 years ago. Instead, the value fluctuates constantly. Recently, you may have noticed examples of fluctuating prices in places like shopping malls. While holiday sales used to happen after the holiday, retailers now offer price saving opportunities before the holiday, despite the fact that it cuts into their bottom line.  We’re entering a different economic time. It is also important to distinguish between price and value. Temporary appreciation of money is great—but it should be taken advantage of with an attention to time. Money that is more valuable in the short term should be immediately exchanged for packaged co