Episode Transcript
Speaker 0 00:00:00 In this episode, I am joined with my good friend Roman Pushkar, an authorized infinite banking practitioner. Roman and I discussed this scary thing called inflation and our personal experiences with it as well. As we dig into Nelson N's experience from the stories he used to share when he would teach his live Becoming Your Own Bankers seminar, I hope you enjoy. So you're pissed off about inflation going up cuz you can't control any of it. It's driving you nuts, you're seeing it in the headlines, you're watching YouTube clips, and you're seeing it on the Tic Tacs and the tweeters and the, and the Instagrams and all the things out there about how inflation is kicking us in the nuts, uh, proverbial nuts. That is, uh, it would be pretty amazing if in, if inflation was a physical person that could kick you into the nuts, but you're tired of it and you wanna know what you can do about this, and, you know, how can you protect yourself to some degree?
Speaker 0 00:00:52 Well, we're don't gonna have all the answers, but I'm here with my friend Roman today, and we're gonna talk a little bit about what has happened in the past, and we're gonna talk about a real world example of our mentor r Nelson Nash. And one of the stories he used to relate and share to us about how inflation showed up over his years in, in, on Planet Earth. Now, Nelson, he lived to, uh, the ripe age of 88. He would say 88 revolutions around the sun. Uh, that's how he would describe it. And in that timeframe he experienced so much. You know, he was born in the thirties. He lived through the Second World War, uh, amongst many other, you know, wars that followed in that whole timeframe. He experienced all kinds of ups and downs and ups and downs and hills and valleys and mountains of financial good and a lot of financial bad.
Speaker 0 00:01:42 And so he had a huge level and breadth of experience to speak about what was consistent in his life and how he saw inflation play a role as he lived his life. So I think Roman, you know, we, I'm glad I'm talking to you about this today because you also have a lot of unique perspective to bring. And you and I have had a few conversations in the past about, you know, your journey coming to Canada and your, your past living over in Europe and how you saw things happen in the financial system there. And the, the concern maybe that, especially folks you know, who are, who have immigrated to Canada find maybe their perspective on things like inflation is a little different because they've had a different experience than most living Canadians today. And I'm excited to have this conversation with you.
Speaker 1 00:02:28 Yeah, thank you so much, Richard. You know, inflation was one of my biggest fears when I came to Canada because when I experienced inflation back in my country, we just had the same inflation. The same thing was just more zeros attached to it, right? It's pretty much, uh, it works the same way. So the currency is depreciating in its value, losing its purchasing power every day or every year. And, uh, the citizens just have to deal with it. They have to embrace it, have to accept it, because all the, like when you wake up and then all the goods and services, uh, went up in, in in price, you just need to do something with it. And then, so people are actually looking to hedge the, the capital against it, right? Somehow you need to find a way to either over pace inflation with, uh, something that is growing better than inflation or do something else, right?
Speaker 1 00:03:20 In the country where I lived, you know, one of the hedges was, uh, US dollar, right? So US dollar, we would just buy US currency and then keep it in cash or keep it in a bank account. This was our hedge. But guess what? US dollar also has its own inflation, right? US inflation. And, uh, there's no real protection from inflation. We're just going from one currency to another currency from one zone to another, another inflation zone. So, and, uh, yeah, we, we just wanted to talk today about inflation and how the policy holders, how the Canadians can make sure that we protect our capital from inflation.
Speaker 0 00:04:00 Yeah. And the idea is to try to give yourself every chance or opportunity to have a hedge. And there are multiple ways that you might be able to do that. And for some people watching, you've probably already taken some of those steps, you know, and, and, and good for you on that. You know, Roman and I, we had another video that we did, uh, a little while back and we talked a little bit about, you know, silver and gold to a degree, and that being a bit of a hedge. And a lot of people believe that that's the case. But again, the purpose of doing that is isn't so much a matter of, uh, you know, as an example, I go and get silver coins and then I have a stack of those, you know, on a little sleeve of silver coins and I'm sitting on them.
Speaker 0 00:04:41 They're just sitting there and they're doing nothing. They're just sitting in a safe. Essentially the idea is, okay, at some point in time if we, if we really start to see a, you know, a really big economic type collapse scenario, whatever that is, and in your geographic area, so, so us in Canada, and maybe it'll happen, it'll start happening in different places. And, and so you have a little bit of a, something to that's physical that if you needed goods and services, you are more likely to be able to now negotiate or, or have a conversation with a vendor, a supplier, a business owner about, Hey, I, I need your service. I know that you don't wanna take my pink Canadian money today because for whatever reason it's, you know, it's been manipulated too much and it's no longer worth its value. So this, you're not gonna accept this a hundred dollars or $50 bill, but will you accept one of these silver coins in, in exchange instead?
Speaker 0 00:05:34 And then there's that physical, tangible nature. And so now you're in kind of this, you're almost like back to a barter system. Ultimately everything we do is a barter system. Yeah. We're just using the currency denomination to add speed to that barter aspect. And, and we don't need to barter with the, you know, like when I ordered something on Amazon today, I didn't have to barter with Jeff Bezos to get, get the delivery to my door and then have to barter the delivery guy to just show up magically and leave it on my front doorstep. So we, we've, we've been able to utilize the currency method and, and, and computer technology to add, you know, lightning speed onto trans transaction activity where I can now buy from anyone in the world without having to really physically speak to someone or go and negotiate with that individual.
Speaker 0 00:06:22 But ultimately what we're doing is the same thing. It's just, it's just happening on this mass scale now. And so when the, when the value of the currency comes down and or it's a combination of, you know, value of currency comes down, or price of goods go up, they're really the same thing that's taking place. Yeah. Mm-hmm. <affirmative>. And where you, where you see that happen is often in, in specific areas. So like, you know, people would talk about certain staples that you put in your fridge, you know, you buy groceries, okay, well, the price of fruit went up, or the price of milk went up, and, and there could be a higher degree of price change. Like, let's say I wanna buy a gallon of milk, you know, yesterday and it's four bucks, and today I want to go do it's $7. Well, that's a pretty dramatic increase in that one, one spot.
Speaker 0 00:07:08 I might not see the same increase on let's say a can of piece. Okay? So, so there's a variable there, and that has to do with supply chain dynamics and supply and demand. Now, I'll give you, I'll give you a direct example of this. So where I live in chill whack, I, I love it here. It's fantastic. Chill BC is a, a beautiful, wonderful place. And, uh, one thing I really love about it is something that's like, reminds me of growing up. So growing up in Alberta, in a small town in the Alberta area, we used to literally just drive down the road to a neighbor's house, and we used to get our milk there mm-hmm. <affirmative>, we would just go get a jar milk. I remember, like I, we would separate the cream off and that's how we got our milk. We didn't go to the store to get it when I was, when I was a, a young boy.
Speaker 0 00:07:46 And it was fantastic up until the point where it didn't, it just wasn't sensible to do that anymore, because sometimes it was a, the timing didn't work out. Now, today in Chiwawa, I can actually go and do that in, in local places. There's a, there's a place, it's about maybe six, seven minutes down the road, they actually have a vending machine where I can go and I can bring my own jug and I can basically get milk right outta the jug and I can put like, loos into it. So that's kind of thing, right? But also one of the things that we do is we buy a lot of local produce and, and things like eggs mm-hmm. <affirmative>. So I can walk down the road, I can take my dog and go for a walk and it's about a five minute walk, six minutes, and I can, I can literally drop money in a little box, an honesty box, you know, that's $7, and I can get a dozen eggs and I can walk home with them.
Speaker 0 00:08:28 Mm-hmm. <affirmative>. Okay. So that's pretty cool because I'm, I'm happy that I don't have to pay, uh, the GST government slavery tax, um, and, and some other things. And I get to give my money directly to the farmer who made those eggs and, and did all that stuff. I'm really happy about that. Now, what's interesting though is about, say six months ago, roughly, maybe, maybe seven months ago, those same dozen of eggs were about four bucks or four 50. So the increase on 12 eggs has gone up pretty substantially. Now I know the reason for that, or part of the reason for that is because the, the farmer, that local farmer, they've had a dramatic increase in chicken feed. Yep. So the, the cost to feed the chickens is now pushing the price up on the consumer because they, they can't keep their chickens, they can't feed them unless they do that.
Speaker 0 00:09:17 They have to. So, again, it goes back to the situation of the consumer. The consumer pays for everything. So we are always, as a consumer for everything we do in life, we're paying the top level price that has to happen that's absorbing all the supply chain problems and costs and, and all the manipulation of money supply that, that governments and central banks are doing in shenanigans that are happening on the global basis. We are paying that price. So goods are getting exported from another country, whether it's, you know, China or wherever. And it comes to, to our shores, well, you gotta pay for that. And then there's import fees and duties on the, that stuff that comes into the country. That's a tax, that tax gets added to the price, then it goes to the wholesaler. The wholesaler has to send it to the retailer.
Speaker 0 00:10:01 There's a, they have to get a profit that, that gets added in. And then mm-hmm. <affirmative>, it's like, it just levels up and levels up and levels up, and then we pay the price, and then on top of that price that the business needs so that they can try to earn a profit or keep their employees employed mm-hmm. <affirmative>, then we have to pay tax on top of that price. Yeah. So the, these combination of factors really amplify the inflation problem because we see it at the consumer level, at the daily goods that we buy. We're seeing the valuation of the dollar, or in other words, what our dollar can purchase is going down. I'm gonna give you one more example, sorry, I'm on a soapbox a little bit here, Roman, and I'll, I don't know, when you were growing up, if you had vending machines that you could go buy like, like soda or pop or like coke and that sort of thing.
Speaker 0 00:10:44 Yep. Now, when you used to go to a vending machine, you could go put in a certain amount of money and you could get a coke. And I remember it being, you know, I could, there was places I could go, like I could go to the hockey where you can get it for like 50 cents. It wasn't Coke, it was like RC Cola, it was a, it was a knockoff, maybe it was 75 cents for a Coke, and then it went up to a dollar and now, and it was there for a really long time, as far as I remember. In fact, I used to, at, at my local school, I used to be the guy that filled the vending machine and I had to take, you know, collect the coins and, and all that sort of thing. And then I remember as a age, okay, now it's a dollar 25, then it's a dollar 50, now it's two bucks. Now you want to go and buy one and you go to the airport and buy one, it's like $3 for the, pretty much the equivalent Coke. It's not in a can anymore. It's in a bottle. Maybe there's a little bit more volume of, but you're paying like $3 for that sometimes more. So that's a pretty dramatic difference in a, let's call it a 30 year timeframe. And I'm curious, what was your experience growing up where you were when you would do something similar?
Speaker 1 00:11:43 Like I said? Yeah, so we had inflation on a different scale. And uh, normally the inflation was not lower than 10% in the countries where I lived. It was, uh, really, you know, hard to keep up with inflation sometimes, especially I've seen inflation at, you know, a hundred percent, even 200% even more, right? So it's really hard to, to, um, you know, describe how we would feel about that. But, uh, the prices would just double in a month period or in, in, in several month period. And then they will double again, and then they will double again in, in a year or two. So the inflation really was a big factor when I lived, you know, I remember the prices when we lived in, still in, in Sr right in USSR times when we, we could buy like, uh, some groceries, let's say like a big sausage for I guess 84 cents.
Speaker 1 00:12:34 And then after this US Sr collapsed, after the, you know, there was Russia, Ukraine, the prices just went up like crazy. Like, uh, we had like, so big inflation because of bad economy, bad, you know, management because of bad government and, uh, everything just quadrupled in, in, in just overnight in, in the price. Just to give you an idea of what the inflation looks like when we look back, I'm gonna be talking about Canada, not about Russia or Ukraine. So where I live, I live in Steinbeck, uh, Manitoba. So, and we have something called a, uh, Mennonite Heritage Museum here in which is a museum of, you know, how the first settlers came to Steinbeck from Germany, how they started, you know, living and there's like a small shop with, uh, still prices on, on the wall for how much you can buy food for, right?
Speaker 1 00:13:28 Like, uh, you can buy like a, a cup of tea for like 24 cents, right? So when I go back to that store, it always reminds me of inflation, of how the inflation works throughout the years. You may not notice inflation in the, what it was in, in the last month or year. It may not be that significant, but when you look back for centuries, you will see that inflation created a huge problem where the money devalued in like many, many, many times. And, uh, for example, when we came to Canada for the first time in 2009, I remember that I could go to a big store and then just, uh, for $100 I could fill the whole cart, book cart of groceries,
Speaker 0 00:14:15 Almost overfilling it, probably It's fallen outta the car. Yeah,
Speaker 1 00:14:18 Exactly. The groceries will, will fall off the cart for 400 bucks. Now I can only, you know, cover the bottom 400 bucks, right? So this tells me much more about inflation than anything else. I can feel it, I can feel that I can't really buy as much as I did, uh, 13 years ago.
Speaker 0 00:14:37 Yeah, I mean that's, that's the real world example. And I would imagine people, you know, they're experiencing that in, in many ways. And it's, it's interesting when you start to think about like the individual products or you wanna really start to kind of grasp how inflation's showing up in your life, specifically, think about specific things. I think the grocery store is a really good spot, cuz that's, it's a fundamental need. We need food on our table. We have to feed our family. And so this is an area where we really get squeezed a lot. And there's many reasons that cause fluctuation in, in food prices. A lot of it, a lot of it has to do with the supply and demand, and the supply chain has been because of the whole covid scenario, supply chain has been really, really, you know, hit hard in many areas.
Speaker 0 00:15:22 You know, we saw it in a huge spikes in like lumber prices and construction materials for the same reason. And another thing that has, has impacted that, of course, in the supply chain is fuel. So you're noticing it when you go to the pump to put, you know, put petro and gas into your, into your tank of your vehicle. But think about now the trucker or the truck driver that's, that's delivering those goods and they have to fuel up well, whether they are a private truck driver or they work for a large company that's you. That's, that's what they do as a large organization. So they have a huge amplified cost, which means they must charge more for their delivery services. There is no other option or they're gonna go outta business and then all those employees are gonna be unemployed. Like it's a huge ripple effect.
Speaker 1 00:16:05 Exactly. So, and, and all the businesses need to raise prices now because everything is tied on delivery, tied on transportation. Transportation is a blood of economy. When the gas prices go up, guess what? Everything will go up eventually. Not just, not just, uh, groceries it, I mean all the prices and all the services, uh, building, uh, you know, building materials and uh, everything. Literally everything will go out.
Speaker 0 00:16:32 You know, I've never seen someone riding a pedal bike hauling a giant trailer behind them filled with all the stuff that shows up at a Canadian tire or a Home Depot. You know, that, that's not how that stuff's getting to the store. <laugh>, it's getting there on a truck. Okay? The fuel prices are going, okay, well what is that? Okay, well there's, there's obviously pricing in the actual cost of oil was a barrel of oil, those kind of things. But then it's also, where is that oil coming from? And then it, and then further to that, it's what is the tax on getting it in there? And then what is the surcharges and the fuel taxes and all those kind of things. And then, you know, now we also have, and again, not to make, I'm just thinking about what are the things that are driving things up.
Speaker 0 00:17:08 And so then there's also now a carbon tax that's added and that's gonna be escalating over the next number of years, you know, based on the current plans of the government in Canada. And so it's a tax on tax, on a tax, but it adds a little, it adds another layer. And that's a layer that's chipping away at your money and it's making you have to work harder or trying to do whatever you can to try and increase your income and your revenues so you can keep pace Now thinking about, you know, uh, income and revenues when, you know, talk, we're gonna talk a little about Nelson and what are the things that Nelson experienced when over his, you know, history on 88 years on the earth. And when he was talking about, when he first started working, and he was married as a very young man, he was in his, you know, uh, late twenties and he was working, uh, at the, uh, I'm trying to remember, it was like a, a national guard, uh, kind of a situation.
Speaker 0 00:17:58 He was making about $10,000 a year. And he said that at that time that was better than the average bear. In other words, he was making a very good income at that point. And this is back in like 1959, $10,000 is a US a a year, and now today the average person or middle class, average Canadian, maybe upper middle class, they're earning, you know, somewhere around 80 to a hundred thousand dollars a year. You know, in, in general. Now because of the cost and the, the pricing of everything, a lot of households, they're also now need to be, they required to be a dual income household Yep. In order to have enough revenue coming in that they can support all the stuff that's going on. So, so again, that's a big change. Now the incomes have gone up. If we were to look at, you know, Nelson in 1959 at 10 grand, and let's just just, you know, take the Canada US dollar out of the situation and we shoot forward today where, let's just say the average income is about a hundred thousand, and I'm, I'm, I don't know those numbers, I'm just using it as a barometer here, then we're 10 times greater on the income.
Speaker 0 00:19:01 So incomes have gone up. But how is that related to all the other formats where we're paying? So if you think about the cost of a vehicle, the cost of the fuel, the cost of the insurance, the cost of the housing, the cost of the, this, the cost of that. Like it used to be you could buy a vehicle for like $2,000 and that would be the, the brand new vehicle. And yeah, that was a large portion of the $10,000 of income, but you would have it paid for in like two or three years and now, but that vehicle wouldn't last as long because they didn't have the quality of materials and knowledge and construction and and engineering that we have today. But, you know, everything has a relevance point. And so yes, incomes have gone up from at least Nelson's story of 1959, but have they gone up to keep pace with the inflation and, and the rapid inflation that we're seeing, which my belief is, and you know, I did just did a video recently, uh, with our friend Henry on this, talking about the Bank of Canada and some of the manipulation of interest rates and money supply and that sort of stuff.
Speaker 0 00:19:58 There's underlying factors that have happened, and all those factors are already history. In other words, they've already taken place, they took place 1, 2, 3, 4, 5, 6, 7 years ago in a combination of events that's led up to the problem that we're now dealing with. So these are, these are things that happen that have an unintended consequence. We as a Canadian citizenship, as a population, we're dealing with the unintended consequence presently and whatever is gonna be done. So this is really important. I want people to think about this, whatever is going to be done by the top level people. So we'll just, we'll just put a blanket statement on, we'll say, we'll say government and maybe it's Bank of Canada, maybe it's this or there's a, this the top layer of who's gonna make decisions about this problem, that solution solution that they create. You know, it's also gonna have an unintended consequence.
Speaker 0 00:20:55 So just keep that in mind because there's this thing called the business cycle that Austrian economists talk about. You can learn a lot about that by, you know, great book to get as, uh, economics in one lesson by Henry Haslet. And if you understand a little bit about the Austrian mindset of economics and the business cycle, the boom bus cycle that is created has a huge amount to do with the manipulation of interest rates and the fractional reserve system and the manipulation of the money supply. And we're seeing that in massive quantities, and especially because of the aftermath of covid, the amount of money that has been manufactured or, or, or added into effectively circulation by the, the federal government and, and et cetera, is, we, we don't know how that problem's really gonna show up. I mean, we can, we can make assumptions, we can use some logic to think it through, but we're not even seeing the real impact of that problem. Now we're starting to see a portion of it, but I don't think we're gonna see the real impact for, for a while yet. I dunno, Roman, I I'd love to get your thoughts on that.
Speaker 1 00:21:53 Yeah, absolutely. Richard. Uh, I totally agree with, uh, what you said. And uh, also I wanted to mention that inflation is not a huge problem if it is going both ways. On, on one end, there's an income coming to the family, and then there's expenses. So money flowing in, money flowing out. The biggest problem with inflation is that it only affects the expenses side most of times, right? So because think about it, when, when the price of goods and expenses, and especially gas and you know, groceries and bills, um, everything goes up, then it affects your cash flow. Because if you have, uh, some, some sort of discretionary income, let's say your income is, uh, 50 K, and then your expenses are let's say 44 K, right? Including taxes, including more mortgage and groceries and everything, and your discretionary income is about six K, which is five, $500 per, per month, right? So when inflation hits, what happens is that the expenses go up, expenses go up, and then it shrinks your ability to save, shrinks your ability to grow your, your capital because the income doesn't go automatically in value, right? So you don't real automatically get raise at work when, when the prices go up, you all don't, right? So normally citizens get, you know, income raise from time to time, but does it keep up with inflation? Richard? What, what do you think?
Speaker 0 00:23:27 I agree. It's squeezing the expenses up and, and if the income isn't to keep pace, if inflation went up yesterday, all of a sudden increase the prices on every item that you sell out of your business or, or whatever you do, whether you're a consultant, you have, maybe you, you have a big business where you do, you have hydrovac trucks, like whatever it is you do, you can't just send out a memo and an email to all of your clients that are paying you per hour on contracts that you've signed and say, oh, by the way, hey, because fuel went up and inflation went up and this and that, Hey, we're gonna increase our price by 20% for everybody. Sorry. Like, it doesn't work like that because you're gonna irritate your customers and you'll lose customers. No more customers means your business shuts down and all the employees don't have a job to go to anymore.
Speaker 0 00:24:11 And so, like the amount of people that you're responsible for, especially at a business owner level that are impacted by that decision, and the pressure, the pressure it puts on the shoulders often of a business owner is extremely high. And I think a lot of people who aren't in business don't really recognize that that's what happens. Um, but even again, if you're just employed with somebody, so recognize that the business owner, whoever it is that you, you're working for whatever that company is, they can't just make a command statement that says, Hey, because of inflation, we're gonna go ahead and give everyone a dollar an hour raise right now. Yeah. Because they have, they have contracts that they negotiated and all these things, like they don't have the new revenue coming in to support that decision and all of their expenses are going up too.
Speaker 0 00:24:53 So that would put them in a very, very tricky position to, to survive as a business. Yeah. Unless, unless they were extremely well capitalized. Yeah. And so that means they have cash on hand money that's available to access. You know, I think back, and I don't know the stats on this today, a number of years back at one point, uh, apple as a company was like the most capitalized business on the planet. They were just sitting on billions of dollars of money that land cash they could, that they could put to work. Yeah. Yeah. And, and so they need that sort of capital to make massive major decisions. They wanted to go do an r and d on a major project or whatever it is. They need to fork in a ton of capital. And they might have to fork in, you know, let's say they want to create the next, you know, the next best, greatest phone or whatever it's gonna be.
Speaker 0 00:25:44 And they're gonna do something radically different because they're kind of known for doing things radically different. And because they're gonna make a game changing move, they gotta invest a huge amount of capital, it might all fall apart. And so there's a possibility of a huge amount of loss. So they have to be well capitalized if it doesn't go well. And they can't make these big, massive billion dollar investment decisions on a, on a long term project that might take say three or four years of r and d and development, you know, and planning and marketing and rollout and everything to be able to make this release of a, a new product unless they can make sure that they can also keep all their employees employed and keep the lights on and that kind of stuff. So recognize that the need of capital is important for everyone, not just at the u NME level, at the, at the business level, federal government coffers level, except they don't really have any capital because the only revenue source they have is us.
Speaker 1 00:26:34 I just recently read how they deal with, uh, need to raise prices in the stores. For example, retail business in Russia, the inflation is higher than in Canada. So they need to raise prices from time to time just to keep up with inflation, with expenses, with gas prices and everything. So what they do, they actually, I've never seen this in Canada, but in Russia, what they do, it's very interesting, they actually reduce the packs, they reduce the volume of the goods. So instead of selling 10 eggs, they will sell nine eggs at the same price. Guess what? People don't really pay attention to that. They don't really think about it as inflation. Yeah. I mean, it's a total different packaging now, but they don't think about it, that inflation cost it. Or instead of selling one kilogram of let's say sugar, they sell 900 grams.
Speaker 1 00:27:26 Now guess what? That's inflation. That's, uh, basically taken out 10% of the value of the currency. Right. And, uh, this, this happened lots in the last, I would say, five to 10 years. I've, I've, I haven't seen it in Canada. Maybe it exists, but, uh, what I noticed though, Richard, when you go to a dollar store, it is far more easier to, to make a purchase of something that is costing $1 or one and a half dollars. But then when you make a calculation of, of the smaller packaging, you make a calculation that actually you're buying things for higher price than in, in a normal store. And, and also this is a great example of inflation, where inflation drives the prices up, but instead of raising the prices in the store, they actually come up with different ideas on how to make different packaging, different, you know, volume, whatever it can, may be. Yeah,
Speaker 0 00:28:21 You're, you're a hundred percent accurate. And I'd like your analogy of the Dollar store, because a dollar store used to be a dollar store. Yeah. And now a lot of things that you'll go and buy are two, $3, five,
Speaker 1 00:28:31 $5
Speaker 0 00:28:32 Or whatever. And, and I, I seem, I seem to think that even though I, I feel like there was even a dollar store that changed its name. It used to be like the dollar store. Now it's the $2 store. Like, I, I might be wrong on that, but my, I seem to remember seeing like a, like a logo of one wait a second, that's different. That's not what it used to be. Um, but another example of that is, like you say, changing the packaging. So a lot of cardboard, so as an example, like cereal boxes and, and the kind of things now. So now a lot of that is, it's, it's thinner. It's, it's not as durable. Like, like the packaging has changed. Yep. And then, and then additionally, like an area where I, I notice it more than anything else and I've, and I've seen it for, for a number of years and I'd be curious to see what other, what others, uh, will recognize this in, but bags of chips, alright?
Speaker 0 00:29:18 Mm-hmm. <affirmative>. So, you know, you go get a bag of chips now and, and you know, the, the kind of the standard small one or whatever it used to get, well that it feels like there's a lot more air in there. You know, it's, it's, it's definitely not the same. Like you go and open it up and there's like seven chips where it used to be like, okay, well there's like, okay, there used to be like 50 chips in here or whatever. Like, there's a huge difference in how much is inside the package. The package looks the same on the outside cuz it's filled with air, but the quantity that you actually receive I is different. And that's a another huge area. You know, I think a lot of people would, you know, we would often maybe, uh, I I think in my past I would've thought, oh geez, you know, boy, that big company is trying to squeeze more profits out of us.
Speaker 0 00:29:56 You know, because they, they're putting less in there, so they must be making more money. And like, I'm really upset with them because I used to get this many chips and now I don't. And I think, you know, I know like, you know, 20 years ago, probably even 15 years ago, I would've really felt that way. My mindset has shifted and changed based on, you know, a lot of what, what I've learned from Nelson and understanding more about how the consumer is the one that is always on the hook. The consumer pays for everything, right? And you think about all the hoops that, uh, a business has to jump through and the challenges that are presented to them in these areas. Like, you know, delivery, supply chain, increasing cost of fuel, import taxes on goods, like all these roll up of things that happen that, that all has to be front loaded to the end user who's buying the product, right?
Speaker 0 00:30:40 And so that's something that Nelson talked a lot about and you know, maybe in a little bit more roundabout way, but let's bring up this image that I was talking about. So this, what we're gonna look at, this is a chart that Nelson used to have in his slide deck. And he was talking about one of his very first policy, this example, this is Nelson's, uh, state Farm policy. And this policy started in 1959, okay? Nelson was 28 years young when he got this policy and the original starting death benefit on this policy. And, and I'm, I do my best to recall here, I believe it was a $20,000 death benefit. So don't quote me on that. I, but I believe that's what it was if my memories serve me. Correct. So his annual premium was 3 88 40 a year. Now, when Nelson started this policy, he was making about $10,000 a year.
Speaker 0 00:31:26 And he, again, he indicated that that was a really good income at that time. He was slightly above maybe, you know, uh, the average kind of American at that stage. So 3 88 a year that represents a large percentage of his total annual income. Like it's a good, it's a good amount and let's look forward. He got that policy for death benefit. And that whole purpose was, you know, to protect the family he was married and that sort of thing. And those are really critical items to him. He really believed that that mattered a great deal. Mm-hmm. <affirmative>. And he always did throw out his whole lifespan. And when he got this policy, he was actually his brother that sold him this policy. He used to be work, used to work at State Farm and didn't tell him anything that Nelson, you know, ended up putting in his book, becoming Your Own Banker and all the things that we talk about on all our content.
Speaker 0 00:32:11 But he ended up getting this policy and the thought was at some point in time, the policy would pay for itself and he wouldn't have to put any more premium in. So he used the dividends that he received from the profits of the life company that he co-owned to reduce the annual premium for the first 15 years, okay? Mm-hmm. <affirmative>. So in other words, he stunted the growth potential of the policy dramatically Yep. From the beginning. And he didn't know any better be Yeah, he didn't know any better because he just wasn't taught, it wasn't really conveyed to, to him that he could do more with the policy. Nelson also talks about, especially in his second book, uh, building Your Warehouse of Wealth, he talks about a couple of deals that he did through, through this policy with policy loans. One of his most profitable real estate deals he ever did came from a $3,000 policy loan he took from this policy where he got a, he got a piece of land Timberland at a discounted price at about 25 cents on the dollar.
Speaker 0 00:33:03 So, uh, ended up being a smoking deal for him. And over his lifespan, he was able to generate a great amount of revenue and, and even cash flow off of selling that land. He sold it, he financed a new buyer for 10 years of 15% interest. So he made a great amount of money on that deal. And what I really want people to understand is we have this red bar here with a premium. So 3 88 40, if you just scan the bottom there, again, you know, this is started in 1959. We're looking at a much later period of time that that red bar is perfectly flat and level over the entire timeframe. The premium never went up. It was contractually locked in. But this is what's interesting.
Speaker 1 00:33:38 I just wanted to add that this, uh, the, the chart that we're looking at is actually not from the beginning from the policy. It's a 31st year of
Speaker 0 00:33:47 The policy. And this is a stunted policy because he wasn't applying the dividends to paid up insurance like he would teach people to do because he didn't know any better at that time. Mm-hmm. <affirmative>. And so what's interesting here with this, this example is there's a yellow line here, and that yellow line represents gcv, which stands for guaranteed cash value increase. So by age 100, the cash value must grow to equal the total death benefit. Now if his, his original contract was 20,000, so if the original death benefit was 20,000 by age 100, at the time of this policy being issued, it was age 100. Now in the United States it's age 1 21, the cash value had to grow to equal that, that original death benefit number of 20,000. Now as Nelson used that dividend to, he changed it and he had that dividend go by paid up insurance, the policy started to grow and accumulate more and more and more.
Speaker 0 00:34:37 He didn't have a flexible premium. Like a lot of people talking about pay s premiums and riders and these sorts of things nowadays. He didn't have that in 1959 with his policy. All he, all he was able to do was pay the base premium with 3 8 40. He couldn't make it any better than that. Yep. And what's interesting, and Nelson would say, you know, he, so he took checks out starting in 2006 all the way up, up to I believe 2010. So he took four checks out, he changed the dividend option and he had the insurance company send him a check. So he again, stunted the growth of the policy by doing this. This is really important to understand. He chose voluntarily because he wanted to be able to, to take a picture of a physical check that he would say, look, stop taking my dividend and buying paid up insurance.
Speaker 0 00:35:22 Send me the dividend instead in the mail. Now, when he received that dividend, he took, he took checks of them and that that dividend didn't go back into the policy to make it bigger. So again, he, he stunted growth a second time in the policy. Here's the key thing. The guaranteed cash value increase, what we're looking here, this number is each and every year. So in 1990 he had whatever, a chunk of guaranteed increase, which was greater than the red line, his premium mm-hmm. <affirmative>. And then, and then the next year he paid a premium and the guaranteed cash value increase was again, stacked on top. It's greater. And so every time that there was an increase every year that we're looking at whatever the increase is, is being stacked on top of last year's increase. Okay? So as an example, in 1990, he paid 3 88 40 a year.
Speaker 0 00:36:07 And if we look at the, the yellow bar and the blue bar combined, we add those together. That gives us the green bar, the total, well that looks like, let's just ballpark it at $2,500. So the total increase in his, in his policy was he put in 3 88 40 and he got 2,500 in cash accumulation. So he got his 3 88 back plus a a lot more than that basically. All right? Yep. Now in, as we go through this, you see each and every year, just imagine the green bar here is is basically stacking on top of the one before it. What's really cool to see, cuz you know, there was no even, like when you see like 1998 to 2000 here, it shows it's going down, but it's not going down. The, the policy didn't retreat or go down in value. All that happened is the amount of dividend he got that year was slightly lower.
Speaker 0 00:36:58 So, but this, this green bar is actually added on top of the previous green bar. Okay. Yeah. Why are we bringing this up? Our conversation today is about inflation and the impact of inflation affecting Canadians. A lot of people in the globe right now, it's, it's a real problem. Nelson would tell a story about what things used to cost back in 1959 when he would buy things at the commissary, you know, at the army base where he was located and his income being 10,000 a year. He would talk about the price of cars and all these things and the price of chicken, the price of bananas. And then he would reference it to today. And he would say he would, he would help people understand that actually from when he started to, to now the price of chicken had gone down, the price of bananas had gone down.
Speaker 0 00:37:40 Mm-hmm. <affirmative>, the price of cars had gone up. But what's changed was the, was what you can get in a car, what type of bells and whistles and things and how long that, how many miles that car would last. You know, when you were buying cars in 1959 that you might not get 10, you might not get, uh, 10,000 miles out of them, you know, maybe 30,000 miles. Now you can run a vehicle 300,000 miles. So there's a huge difference in the function of that items in that environment. He would say you're actually getting more of what you pay for, even though the, the price of a car has gone up, what you get for it has kept pace with that time, timing and analogy basically. And then he would talk about a couple of core areas where inflation has skyrocketed or the value, value of the dollar skyrocketed.
Speaker 0 00:38:23 It was, it was in, in health. So like medical costs and expenses. And a lot of that has to do with, uh, you know, we won't get into it, but like the, the insurance problems. And mostly it was focused on the United States. But then he would also talk about, about education. So like university, college education and uh, there was one other area he mentioned, I don't remember what is offhand, but there were three primary areas where, where the, where the cost of things were so dramatically higher and different than the regular basket of goods that we purchase. Here's one of the key things I want people watching this to, to see that premium of 3 88 40 that Nelson did. And he, he locked it in, it never went up. He locked it in in 1959. Well, if we think about the value of the dollar, the US dollar in this case and, and the Canadian dollar would be, you know, not, not dramatically different, I don't think at that stage of the game, the, the value of the dollar at that point, Nelson locked in the value of that dollar because he locked in the 3 88 premium.
Speaker 0 00:39:20 So he, he locked in the strongest dollar available to him and he was paying that premium now weaker dollars for the rest of his lifespan. So as his income went up, he would make the same injection of 3 88 40. But he was, you know, even though the value of the dollar was going down, the premium didn't change, but the increase in the policy was keeping perfect pace with inflation over his lifespan. And you know, he said that, you know, the, the, the dividend alone that he received, you know, in like 2006, you know, 2007 and stuff, it was, it was more than 10 times the premium that he was put in that same year. And so just take a moment and think about that. Put yourself down the road into the future, recognize that you could lock in the strongest dollar today and you could be making a, a, a premium deposit into a contract that you own and control that by the virtue of its design and by historical, you know, nature.
Speaker 0 00:40:17 We can use Nelson's history 88 years on planet Earth as a reference point. Yeah. And all the cycles and booms and busts that he experienced over his lifespan, every time that the markets crashed, for whatever reason, his insurance value still went up. And so the reference point of how that policy that won that was, I wouldn't say port of design. It was designed to do what it could do at the time, but he, he stunted the growth. So he, in the first 15 years and then he stunted it again later in the policy just to prove a point. Cuz that's the kind of guy he was. And when Nelson passed away, and I, I'm, again, I'm doing this from memory, I believe the final death benefit that paid out in that policy was somewhere about 135 and $140,000. It started as a $20,000 death benefit.
Speaker 0 00:41:02 Well, 20 times five is a hundred, you know, so it was like, it was like six times, seven times greater than the original death benefit. And at the point in time where Nelson passed the cash value would've been much closer to that death benefit line because the cash had to grow to equal the death benefit, death benefit. So it kept pace with all the problematic issues of inflation over Nelson's lifespan. Yep. Now does that mean we can say with absolute certainty that's gonna happen for every policy owner on planet Earth? The answer is no, but we can, we can utilize a little bit of logic, some history and some personal experience of people that have come before us. And I haven't been around for 88 years, you know, my experience, I don't have the the lifespan behind me to show that. But I, I have Nelson's lifespan and I can, I can leverage what he instilled in us as knowledge, but also these other impacts of things like, you know, this one policy and the other policies that he would tell us about.
Speaker 1 00:41:58 Yeah, exactly. So, and then we can learn from Nelson and see how we can do the same. And maybe we have, like, I have a a little bit lower, uh, lifespan left, uh, till I turn 100 years old, but still, if I do this, then I can capitalize my policy so that it overgrows faster than inflation. One thing I wanted to add, Richard, is that when I look at the chart, I'm thinking was it easier for Nelson to pay 3 88 per month in 1990 or later than it was in 1959? Or what do you
Speaker 0 00:42:32 Think? Oh yeah, yeah. And it was 3 88 per year. And yes, absolutely it was easier for him to pay it in 1990 than it was at the beginning because his income had gone up dramatically.
Speaker 1 00:42:41 Yeah. And because the cost of dollar was also lower back then, right? And 30, 31 years later, after the policy got started, it was much easier for him to keep paying this premium. So what I'm trying to say is sometimes I get this, this question asked, Hey Roman, how soon can I stop making premium payments? If it is easier every year for you to make this premium payment, why would you ever stop? For me, the objective is to pay for as long as I possibly can in a known for sure. That, uh, the premiums will be much more affordable to me every single year as I age and as my income potential goes up, even if I'm retired, when I go to passive income time, um, I still will have some something coming in as maybe, you know, government security, something else. Maybe I will still have some income coming in. I will want to pay at least the minimum on my policies or maybe even the maximum if I can, just to keep that momentum going up. Because the premium for me is easier to make than, than it was initially.
Speaker 0 00:43:50 Perfect thing you said that wrong because again, let's just take the chart we looked at at Nelson's example and, and walk that one step further. So if we're at a stage now where you're doing passive income mode, you know, maybe you're getting CPP and o mm-hmm <affirmative> and you've got, you're taking, you're pulling money down out of what, a pension or maybe you have registered accounts, passive income from real estate rentals, whatever it is that you have going on in your, in your bag of income goodies, okay? Yeah. Commit some of that capital towards continuing to fund at minimum the base premium of policies that you set up. If you embrace this concept and you, you are following the teaching and things that we're we're doing and you're following what Nelson walks you through in his book, you will have a very efficient machine working for you.
Speaker 0 00:44:32 Where every time you inject that base premium, just like in Nelson's example, now you're getting 3, 4, 6, 7, 10 times the accumulation in account value, in cash value in the policy, which is happening because the insurance company is on a contractual obligation to grow the cash value week of the death benefits. So as you age, quite literally, the policy gets more efficient, it's engineered to get more efficient from a perspective of cash accumulating to chase the death benefit. There's, there's no other option, there's nothing else that can be done. It must happen cuz it's a contractual requirement of the insurance company. And so I, I personally am gonna want to pay those premiums. Now I think when people ask that question and it's okay, it's, it's an okay question to ask. That's saying that you're in the discovery process, you're still just learning. There's nothing wrong with that question.
Speaker 0 00:45:23 No question. There's nothing wrong with any question, but recognize how we're thinking. I think what people just want to know because there's so accustomed to getting beat up by different costs and expenses that they wanna know they have the option, the ability to, or the choice that they might be able to stop making the premium payment. And so, you know, for, for far and wide, in most situations that will be the case. It just depends on size of your program when you get started and you know, a number of factors. But the key thing is instead of asking the question, so just change your mindset instead of asking the question, when can I stop paying? Start asking the question, how much can I put into it? The older I get, how much can I put in mm-hmm <affirmative>. And if you just adjust that question in your head, it doesn't mean that you might, you, you won't have the choice to stop.
Speaker 0 00:46:10 What it means is that your focus and your energy and your attention is going towards accumulation, towards increasing your value proposition and what you do from now to the day that you might wanna stop. Cuz you're really, when you get there, if you have that question of mind, you're not gonna wanna stop. And the amount of legacy potential and the amount of accumulated cash values and things that happen will be far greater than someone who has the mindset of when can I stop? If all you're thinking about is when you can stop, you're missing a huge component of the thinking process to what's gonna make you ultimately successful with this journey. And Nelson says it on page 85 point number two in the book, if you knew you were gonna give back every single dollar you put into a system potentially tax free, would you ever object to putting any more money into it?
Speaker 0 00:46:57 It's a rhetorical question. Obviously the answer is no. But if you really fundamentally understand that one point in Nelson's book, your brain starts to just like, if your brain's a powerful tool, it's just gonna start shifting and it's gonna start taking you down the path that's gonna provide what I believe the most successful outcomes for you. And financially speaking when it comes to this process that would be injections of premiums. You know, our friend, uh, James Anotheri with the, uh, bank of Life channel, he says that the premium solves the problem, right? And, uh, you know, the, the problem is the problem and the premium is the solution to the problem. Yes. So I think that that's, when we understand that it's a really good way of looking at everything. If you want to combat inflation, the best way that we know how to do it is to practice the process of becoming your own banker. Head on over to seven steps.ca, that's seven steps. Ca download our report and learn exactly how you can incorporate this process in your life so you can beat the pants off inflation.
