The Real Cost Of Inflation

One of my favourite PC games was the Massive Multiplayer Online Role Playing Game (MMORPG, or MMO in short) called Perfect World. It is an MMO from China. As with other MMOs, there was a lot of grinding to be done once you hit a certain level. I remember it starting to get difficult at level 40, and tedious at level 60. By the time I was at level 70 or 80, I numbed myself trying to grind through the levels just so I could reach the final form at level 89. I stopped there for a while before going on for level 100, where there was a soft cap and where most people remain. Level 105 was a hard cap which only the very few could achieve. At level 100, it is no longer the level that matters, but the equipment we held. Achieving level 105 was only for the sake of reputation and had no practical purposes.

Yet some years later, there were massive changes to the game, which made many old players leave the system. The difficulty of grinding was reduced drastically. Quests gave out more experience (XP), and there were more daily events which gave out free XPs. What used to be a daily grind over many days to reach level 70 now became achievable in just a matter of days. Players reached level 90 or 100 very quickly. Then the reincarnation system was introduced, where if you reach level 100 and reincarnate, you will start from level 0 again but could have higher base statistics in your ‘next life’. You can reincarnate a total of 2 times, reaching your peak at level 100 in your third life. Naturally, this became a new standard for all players.

This essentially gave new players a boost and allow them to catch up to older players, drawing in fresh blood into the pool. What older players spent in terms of time and effort to get to the levels, the newer players only needed to spend half or even a quarter of the time to catch up to them. In addition, now that everyone else has more or less the same base statistics, it is necessary to redraw the finishing line. By introducing the reincarnation system, all players now have a new goal to reach for. The game can continue, because new players can catch up more easily, and older players now have a new goal to reach for to keep their status at the top of the world, whether they like it or not. What the system did was to get rid of the major advantages the older players had and re-create a new end goal for everyone to achieve on a somewhat level playing field.

In reality, it is also the same for us. If we take the XPs gained in the game and reference it to money in real life, it makes a lot of sense. During my parent’s generation, the starting pay was about $700 per month. When I started work, my salary was $3180. Nearly 10 years later, the starting pay now is about $4500.

What took my parents’ 4 months to earn and save, I could do it in less than 1 month. What took me 4 months to earn, the new graduate could do in 3. Of course, those who started off in my parents’ generation has accumulated a wealth which will still take us some time to catch up, but with our earning power now, we do not need as much time as they did to reach what they have now.

Similarly, now that everyone has an increased earning power, the end goal must change. What used to be a $70,000 house now will cost you $450,000. While the earning power gives you the illusion that you are earning much faster and much more than the older generations, you will realise that sometimes you are even worse off when it comes to the time taken to practically reach their level. What used to take 60 months worth of salary to pay for a house now will take 80 months worth of salary to do so. The older people may lose out when it comes to the amount of money they hold, since the younger generation can earn that amount quickly. But they win in terms of obtaining critical resources, such as housing and medical care. Giving you higher XPs (salary) is just another way to make you feel good and to make you think that you are one level higher than the older generations. Because of your higher education and the progress of the country, everyone now enjoys a better life and higher salary. But in actual fact, are you?

Not only can money inflate, education level can also inflate. When everyone was not that educated, a polytechnic diploma is the standard for a higher paying job and a university graduate is highly sought after. Then as everyone gets educated, a Bachelor’s degree becomes a standard and a Master’s degree is the valuable one. China is now facing a situation where there are too many Master’s degree holder, pushing people to go for a PhD. Just as a side note, I do not encourage going straight to the PhD level without gaining any work experience. Your prized university degree is worth the same as a polytechnic diploma 30 years ago. You are not enjoying a better life and a higher salary.

You are still tied to a job, just maybe in a more comfortable cage with air-conditioning. Our parents’ generation could support the whole family with just one person working, but can we do it in our generation? Our parents retirement age is at 55, but our retirement age is now at 62 and set to increase even further. You may have a more fanciful house or a bigger car, but our generation is definitely worse off, despite earning a higher amount of money. Simply because the money we are earning is worth lesser.

Inflation, in essence is something that shave off your purchasing power over time. An inflation of 2% per year means that every year it will take 2% more money to buy the same thing. While economists and experts all around say that inflation is good, but that is something that we have to think critically. The theory given is that slight inflation allows for more spending as things will cost more the next year, which leads to more production to meet the demand, creating a healthy cycle in which everyone has more money.

Back to what we were saying, is inflation really good? The economists and experts say it is good, because everyone gets more money. But the gaining of money does not necessarily equate to the gaining of purchasing power. If the cost of maintaining the same lifestyle increases from $1000 to $1500 (50% increase), yet your salary only increases from $3000 to $4000 (33% increase), then it is worse off for you. On paper your income increases, which should be a good thing. But in reality you are worse off because you spend a bigger portion of your salary just to maintain the same lifestyle.

Inflation is a tool created by the ruling class to ensure that the commoners stay as commoners. They increase your salary, but at the same time they increase the cost of goods and service even more, enslaving you further in the process. Once in a few decades they will do a system reset by creating a big inflation, like what we are facing now with US printing so much money. When that happens, it is like the MMO creating a system where you easily get a lot of XPs, letting new players catch up to the older players quickly (giving them hope) and at the same time shaving off the achievements of the older players (the value of the older generations’ savings depreciated greatly).

By allowing the new players to earn faster and more than the older generations, it gives them a false sense of hope, so that they could continue to chase a dream they will never achieve. Yet the older players who through years of slogging and savings, just when they finally are able to reach a state of peace and financial freedom, will see the XP boost by the system instantly make what they have accumulated over the years worthless. The XPs you have gained to reach level 100 is essentially worthless when the new players can do that in a quarter of your time, and when the end game has shifted to a further 2 more reincarnations for your game character to reach max stats. You thought your retirement savings is sufficient to cover your next 20 years till your death? Think again. Your savings now can only cover you for the next 10 years.

The above graph shows the Consumer Price Index (CPI) of Singapore for the past 25 years. Basically CPI measures the cost of a basket of goods over time. As CPI increases it means that to buy the same amount of goods we need to pay more. We take 2002 (CPI approximately 75) and 2022 (CPI approximately 108) as reference. Mathematically speaking, over the course of 20 years, the cost of living has gone up (108-75) / 75 = 44%. If you retire at 60 and live till 80, even if you do nothing you will see your retirement fund cut nearly into half.

When the elderly accumulated enough wealth over their lives to achieve financial freedom, and with the intention to leave a good inheritance to the next generation, a once-off big inflation will ensure that what they have accumulated will be made just enough for themselves, and any inheritance they leave for the next generation will certainly be not enough for their children to climb up to the next level of social ladder. That way, the bottom class will always remain at the bottom, and the middle will either remain in the middle or fall off to the bottom class, creating a healthy pool of modern slave labour (high work hours, low salary) for the ruling class and for the big corporations. That is one of the reasons why we should not give inheritance to our children after we are dead, but while we are still alive and the money which still has value can be put into good use. What we should leave for our next generation, on top of money, is the ability to survive well in this world.

Salary should not be measured in terms of dollar value, but measured in the time required to gain resources. How long does it take for me to fully pay for a house? How much of my salary is needed to maintain a decent lifestyle for my family? The value of a dollar can be manipulated, and it has been done all along. That has no wrong, for if I am the Government I will do the same thing too.

Humans cannot have 2 things – money and time. Those who have either one, or worse still having both, are usually the people who create the most trouble, be it small matters or big issues. Only by keeping the people poor and occupied with their work, making them run like a mouse on a wheel for a dream or to support their ‘luxurious’ lifestyle, that they will obediently go to work and not stir up any nonsense. For they have much to lose, and the consequences of losing a job impacts them more than they can bear. To make the people’s life easier, entertainment outlets are set up to distract the population for their stresses. From the Colosseum in the Roman Empire to the soccer leagues and endless TV dramas of today, all these entertainment outlets serve to release your stress so that you can live to slave for another day. The method to enslave the people and distract them from the things that matter has not changed throughout the years.

Yet we are not in the Government, nor are we in the ruling class. We are the common man, hence we have a responsibility to ourselves to not get trapped in the mouse-wheel. Our goals and the goals of the Government are different. This does not mean that we are against the Government. No I am not saying that. I have already said earlier, if I am in the ruling class, I will also do as they do. I am saying that we should think for ourselves. See the world for what it is. Do not just blindly listen to the experts. See past the veil of deceit and think how will the current affairs of the world apply to you, then expand the logic out so that you get a piece of what is really happening in our reality. If you want to attain financial freedom, you must first know the rules of the game.

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