I'm gonna sound kinda silly, but it crept up on me.
I live in an extraordinarily rural part of Missouri (my internet is DSL if that's any indication how rural) so we tend to be somewhat insulated from larger economic forces. Gas prices had gone up, but I work from home so I didn't really notice. Prices at the store (I thought) had stayed mostly the same, my energy bill hadn't changed much (presumably because it's a local cooperative that uses a lot of hydro-electric power), and I just didn't “feel” this inflation everyone was talking about.
It was the New York Strips that got me.
Since I can remember they'd been $9.99/pound. Then, one day, they were $10.99. The next week, $11.99. Before I knew it, they'd jumped to $17.99/pound. Okay, what in the world is going on? These were my go-to cut, so NOW I'm paying attention! Who do I get mad at? 😀
Anyway, it illustrates how inflation can be a subtle “tax” on your business and your life. An extra dollar here, another 50 cents there, another 10 cents per gallon at the pump… and before you know it, all the extra money you had left over before is gone. Or worse, you're now short on those monthly bills.
This chart shows the Consumer Price Index since 1959:
This measures the rise in the cost of consumer goods over time. Notice the jump in prices right around the start of 2020. We'll come back to that in just second, but this puts some data to what you've likely been feeling. Prices are indeed rising.
So, what's the cure? We can stomp our feet and grumble about politics (and, there's some valid points there), but I always seek to empower myself. What can I do individually to deal with this situation? So, that's what I'll cover here, but before I do that… it helps to know what we're up against.
So, it begs the question…
What Is Inflation?
There's actually a bit of confusion on this. Most people believe inflation is a general rise in the price of goods, but that's merely an effect of inflation. Inflation, actually, is an increase in the money supply of a particular currency. In most cases, a central bank (like the Federal Reserve) will, through various means, inject a greater supply of money into an economy. For example, the “quantitative easing” you've likely heard a lot about the last 10-15 years was one way the Federal Reserve in the United States injected more money into the U.S economy.
More money sounds great, but it has its problems, namely… inflation. As the supply of money increases, each individual dollar loses its value (because there are more available) and the cost of goods rise. So, inflation essentially erodes purchasing power. Each dollar (or other unit of currency) is worth less than it was before.
That's why it's so devastating. Suddenly, the income you're bringing in from your job or businesses is worth a fraction of what it was. Now, you have to work even harder just to have the same purchasing power you did before. And, oftentimes, you're mostly helpless to do anything about it. The forces that lead to inflation happen at a national level and are dictated by politicians and policy-makers that, frankly, probably don't care much about you.
Of course, that brings up another question:
Why Is Inflation So High?
Often what people mean when they ask “why is inflation so high” is “why does everything cost so much more”. Gas, energy, food, etc — they've all dramatically risen in price. Why? Well, again, it goes back to the money supply. The more money in circulation (inflation), the less each dollar is worth (reduced purchasing power), and the more prices rise. That's the basic equation.
This chart shows the supply of “M2” since 1959. M2 is broad measure of the money supply that the Federal Reserve watches closely. Here's how M2 has grown since 1959:
Notice the spike in M2 since 2020. It's no coincidence, then, that we've seen a spike in prices that last few years. It correlates directly with the dramatic increase in the money supply (M2).
Of course, we know why that spike exists — the U.S. Government increased spending dramatically to deal with the coronavirus pandemic. While many found the help the government provided useful, that kind of spending also has consequences. The inflation we're seeing now is one of them.
Bottom line: the government pumped a bunch of new money into the economy to try and deal with the pandemic and one of the consequences of doing that is inflation. That's (one of the reasons) why inflation (and prices) are so high right now.
What Inflation Means For You
I've covered this a bit, but inflation leads to reduced purchasing power, increased price of goods, eroded savings and more. Essentially, everything you buy will cost more. For an online business owner, this means your costs have likely gone up. Not to mention, the your personal costs in terms of food, gas, energy, and more. So, if you run a traditional online business (more on that in a minute), then you now have to work that much harder to live the life you were living before inflation skyrocketed.
Who Inflation Hurts the Most
Inflations hurts people who are on fixed incomes the most. People on social security, disability payments, most wage-earners, and frankly… most online business owners (given how their businesses are structured). These people's incomes are mostly fixed — meaning they don't go up very easily or quickly. Meanwhile, everything around them costs more. So, they have the same income coming in, but much greater expense going out — and they're poorer overall.
It also hurts savers. If you've spent the last 20 years saving up $500,000 for retirement, that money now won't buy you as much. So, inflation has essentially “robbed” from your savings.
Can Inflation Be Stopped?
This is a 2-sided question. Can the government stop printing money and reduce the money supply? Of course, it could. That also would have certain effects — some good, some bad — and there's great debate about whether that should be done. And, to be honest, you don't have a ton of control over that.
We'll steer clear of all that and focus on the question we think matters more:
What Can YOU Do About Inflation?
We're obviously biased here, but that's one of the reasons we're in the membership game. Membership, in our opinion, is the inflation cure. In the simplest sense, you can simply raise the price of your membership to account for inflation. Problem solved. But, it's a bit more than that.
Having a steady, reliable source of income that you KNOW is coming each month is a game-changer. For most online business owners, they're caught on a hamster wheel. Each month, they start back at zero and will only earn what they actively bring in each month. That challenge gets even harder with inflation because you now need to bring in even more to turn the same profit (because everything costs more).
But, with membership, you don't start at zero. You might start at just $100 or $500 or $5,000 — whatever level your membership is at, it's still better than zero. And, with time, attention, and patience, you can grow that “floor” higher and higher until things like inflation don't even phase you.
It's like well-known online marketer, Frank Kern says:
“It seemed like I was on this endless hamster wheel. I made the decision to only do [Kern's Inner Circle] — $522,000/month in recurring revenue and I'm having the time of my life.”
Even a guy as well-known and skilled as him was feeling the pain of constantly starting at zero each month and he used the power of membership to change that.
That's why we believe membership is the inflation cure. And, that's why we pour our heart and soul into 1) turning online business owners onto the power of membership and 2) creating the tools to help them build this kind of inflation (and recession) proof business. We could have built any kind of software. We chose to build membership software because we genuinely believe in the power of membership.
Of course, plenty still like to do things the hard way. 😀
But, we'll keep spreading the good word of membership because we know it's a game-changer for online business owners or anyone looking to get off the hamster wheel. In any case, if you're interested, our flagship product, WishList Member, helps you turn your WordPress website into a full-featured membership site so you can tap into this membership power.
If you're interested, you can learn more about it here: membership software