I've got to be honest with you – I used to think I understood inflation.
Ye know, prices go up a bit each year, government says it's 2-3%, no big deal right?
Wrong. So bloody wrong.
It wasn't until I moved to the Middle East and started actually saving some proper money that I realized how much BS we're being fed about inflation. And trust me, as an engineer who loves diving deep into data, what I found out about real inflation rates did my head in.
So grab a coffee (or something stronger), because I'm about to show you why those official inflation numbers are complete bollocks, and more importantly – what you can actually do about it.
Want to know one of the best ways I've found to protect against this hidden wealth destruction? Check out my guide to Achieving Financial Independence with Bitcoin – it might just change how you think about preserving your wealth.
The BS We're Told About Inflation
Here's what most people think inflation is:
- "Prices just naturally go up a little each year"
- "The government says it's only 2-3%, so it's fine"
- "My savings account interest will cover it"
- In your FIRE calculation whack in 3% there, don't worry your investment growth more than covers this
Absolute nonsense.
Want to understand why governments keep printing money in the first place?
Check out my deep dive into why money printing never ends.
What Inflation ACTUALLY Is (No BS Explanation)
Right, let me break this down in a way that actually makes sense. As an engineer, I love explaining complex things simply, so here goes:
There are actually THREE types of inflation:
- Monetary Inflation – This is when they print more money (like what's been happening at a mental rate since 2020)
- Price Inflation – What you and I notice when we buy stuff
- Asset Inflation – Why houses and stocks keep getting more expensive (thanks to the everything code)
The real kicker? These are all connected. When you understand what fiat money really is, you start to see how the whole system works against regular people like us.
The Real Inflation Rate (It's Way Higher Than They Say)
Look, we keep hearing about this magical 3% inflation rate that governments love to quote. But let me share some real numbers from official government data that tell a different story…
Food Prices Tell the Real Story
Here's something shocking from the UK's Office for National Statistics (ONS):
- Food and drink prices rose 25% between January 2022 and January 2024
- That's compared to just 9% in the entire decade before
- Even now, food inflation is running at 7% annually (lowest since April 2022!)
- The "official" 3% inflation rate
- The 25% food price increase over 2 years
- The previous decade's 9% total increase]
Let's put this in perspective:
- Government says: "Inflation is 3%"
- Reality: Food costs up 25% in just 2 years
- Previous Normal: 9% increase over 10 years(!)
Think about that for a second. We've seen nearly 3 times more inflation in 2 years than we used to see in an entire decade. And this is just food – a basic necessity we can't avoid buying.
Real People, Real Impact
The ONS data shows how this is affecting people:
- 40% of adults are spending more than usual for the same items
- 44% are buying less food when shopping
- 91% of people who say their costs are rising blame food prices
- 1 in 25 adults have actually run out of food and couldn't afford more
[LINK: Dive deeper into this in Understanding Inflation: What It Really Is and Why It's Higher Than You Think]
The Real Rate
When you combine:
- Food inflation (25% in 2 years)
- Housing costs (don't get me started)
- Energy prices
- Services (restaurants up 8.2% in just one year)
That 3% starts looking pretty laughable, right?
[IMAGE PROMPT: Create a "real inflation calculator" visual showing how different expense categories add up to a much higher real rate]
Would you like me to continue with how this higher real inflation rate combines with currency devaluation to create an even bigger problem?
How They're Cooking the Books (The Government's Magic Trick)
Right, let me explain how this dodgy calculation actually works. As an engineer, I love breaking down complex systems, and bloody hell, this one's a proper piece of work.
The "Consumer Price Index" Magic Show 🎭
So here's the thing – the government has this thing called the Consumer Price Index (CPI). Think of it like a massive shopping basket that's supposed to represent what normal people buy. Sounds reasonable enough, right?
But here's where it gets proper mental…
The Survey Says… Whatever They Want It To 📊
They run these "consumer surveys" to figure out what people are buying. Fair enough. But then they start playing around with the numbers in ways that would get you fired as an engineer.
Here's what they do:
1. The Old Switcheroo (Substitution Bias)
- If steak gets too expensive and people start buying mince instead
- They go "Look! People are spending less on meat!"
- Meanwhile, you're eating mince because you can't afford steak anymore
- But according to them, there's no inflation problem 🤦♂️
2. The "It's Better So It Costs Less" Con (Hedonistic Adjustments) Imagine if I tried this one on a construction project:
- "Yeah, the steel prices went up 50%, but this steel is 50% stronger, so technically it costs the same!"
- My client would tell me where to go…
But that's exactly what they do with things like:
- Phones ("It's got a better camera so it's actually cheaper!")
- Cars ("More safety features = lower real cost!")
- Computers ("Faster processor = price decrease!
3. The Basket Case 🧺 They keep changing what's in the "basket" of goods they measure:
- Something getting too expensive? Chuck it out!
- Found something that's not going up as much? Chuck it in!
- It's like measuring the height of a building but moving the ruler when you don't like the number
The Engineer's Take 🛠️
Look, as someone who deals with real numbers and calculations every day, this drives me mental. In engineering, if I fudged numbers like this:
- The bridge would fall down
- The building would collapse
- I'd lose my license
But somehow, when it comes to measuring something as important as the value of our money, this creative accounting is totally fine?
Want to really understand how deep this rabbit hole goes?
Check out my post on what sound money actually means – it'll blow your mind how long this has been going on.
The Real Impact 💥
The worst part? These aren't just academic games – this affects real people:
- Your savings are worth less than you think
- Your salary increases aren't keeping up
- Your retirement calculations are probably way off
And that's just the tip of the iceberg. In the next section, I'll show you the real numbers they're not counting – the ones that actually impact your monthly budget…
The Real Killers They're Not Counting (The Stuff That's Actually Destroying Your Wealth)
Right, this is where it gets proper mental.
After spending years living in different countries and watching my money do weird things, I've learned that what they tell us about inflation and what actually happens to our money are two completely different things.
Let me break this down properly – and ye know what, it might make your blood boil…
The "Average Person" Myth 🤦♂️
First off, the government loves banging on about how they measure everything through this thing called the Consumer Price Index (CPI). Fair enough, they do include most stuff we buy – but here's the kicker:
They base it all on this magical "average person" who:
- Lives in an "average" area (wherever that is)
- Buys "average" things
- Has "average" spending habits
- Can easily switch to cheaper options when prices go up
But here's the thing – I've never met this "average" person in my life, have you?
Living in Dubai, near London, and Toronto has shown me something properly shocking:
- They say housing costs are up 3%
- Meanwhile, my rent in Dubai jumped 20%
- My mates in London are paying 30% more
- But some random town in the middle of nowhere sees no change
- They average it all out and go "See? No problem here!"
The Real Costs That Are Doing My Head In 💸
Let's talk about what's actually destroying our wealth:
1. Housing Costs (The Biggest Mickey-Take)
- What They Count:
- Rent increases (but averaged across the whole country)
- Some housing costs (but not all the sneaky extras)
- A thing called "owner's equivalent rent" (proper dodgy calculation)
- What Actually Happens:
- Your rent jumps 20% because "market conditions"
- Can't just move somewhere cheaper (moving costs a fortune)
- Property prices gone mental (but that's not "inflation" apparently)
- Insurance keeps creeping up
- Maintenance costs through the roof
Living in different countries really opened my eyes to this. Check out what I learned in How Living Abroad Accelerated My Financial Independence Journey
2. Utilities (The Silent Wealth Killer)
- What They Count:
- Basic utility price changes
- Some service improvements (which they use to adjust prices down 🤦♂️)
- Reality Check:
- Electric bills up 40%+ in many places
- Water costs constantly creeping up
- Internet – "same price" but you need faster speeds for WFH
- Try telling your kids to use less heating in winter
3. The Stuff You Can't Dodge 🎯
- Investment costs (totally ignored)
- Most taxes (not counted)
- Insurance premiums (partially counted but poorly)
- Bank fees (getting more creative every year)
- All those lovely "service charges" that keep appearing
The Time Lag Taking the Piss ⏰
Being an engineer, this one proper winds me up. The timing of their calculations is mental:
- Prices shoot up TODAY
- They collect data next month
- Process it for another month
- By the time they say "inflation might be a problem"
- You've already been paying higher prices for ages!
Why Your REAL Inflation Rate is Probably Mental 📈
Look, here's what I've learned from my time across different countries – your actual inflation rate depends on:
- Where You Actually Live
- City? Probably getting properly squeezed
- Popular expat area? Even worse
- Rural area? Might be alright (for now)
- Your Real Spending Patterns
- Got kids? Your costs are nothing like the "average"
- Working from home? Different cost structure entirely
- Trying to save for a house? Good luck with that
- Whether You Can Actually "Substitute"
- They assume you can just switch to cheaper options
- But can you really:
- Move to a cheaper house easily?
- Use less electricity with kids at home?
- Skip your internet bill while working from home?
- Ignore those school fees?
The Engineer in Me is Losing It 🛠️
Right, this proper does my head in. In engineering, if I used averages and estimates like this:
- "The average temperature is fine, so no AC needed"
- "Most people don't drive trucks, so normal road is fine"
- "It usually doesn't rain much, so basic drainage will do"
I'd be out of a job faster than you can say "structural failure"!
But somehow, when measuring something as important as the value of our money, this creative accounting is totally fine?
Want to understand why this matters for your financial future? Have a look at my post on From FIRE to SovFIRE: Sovereign FIRE – The New Path to True Financial Independence
What This Actually Means For You 💡
Your takeaways should be:
- Official inflation numbers are proper misleading
- Your personal inflation rate is probably way higher
- The big costs (housing, utilities, education) are killing wealth quietly
- You need to plan for REAL inflation, not the official BS
In the next section, I'll show you what happens when you actually calculate inflation properly – and fair warning, it might do your head in…
The REAL Inflation Rate (Warning: It's Not Pretty)
The Truth About Real Inflation 📊
Look, here's the thing – after living across the UK, Canada, and now the Middle East, watching my money like a proper engineer, I've noticed something mental:
Official Numbers Say:
- Inflation is "under control" at 2-3%
- Everything's fine, nothing to see here
- Just a "temporary" increase
Reality Check:
- Housing up 15-30% depending where you live
- Food costs proper mental (try 20%+ easy)
- Energy bills… don't even get me started
- Real inflation? Probably 15%+ in most places
Why Inflation Feels Way Higher Than They Say 🤯
Right, let me break down why your gut feeling about inflation being mental is probably spot on:
1. The Housing Mickey-Take Look, they include housing in their calculations, but here's the proper mental part – they use something called "Owner's Equivalent Rent" instead of actual house prices. It's like:
- Your rent's up 20%
- House prices are up 30%
- They say "housing inflation" is 3%
- Make it make sense!
2. The Everyday Essentials Problem Here's what drives me proper mad:
- They track food prices, yeah
- But they assume if steak gets too expensive, you'll just buy chicken
- If chicken gets too expensive, you'll just eat beans
- That's not inflation apparently, that's you making "choices" 🤦♂️
3. The Regional Reality Living in 2020 to 2024 showed me this clearly:
- Official inflation: "Low"
- My actual rent: +40%
- Grocery bill: Mental increases
They average everything across entire countries, which is about as useful as measuring the average temperature of a hospital – meaningless for any actual patient!
4. The Psychological Impact This is what really does your head in:
- Every shop visit costs more
- Bills always surprising you
- Savings feeling proper pointless
- That pay rise? Already eaten up
The Compound Effect (With Actual Math) 💥
Right, let me put my engineer hat on and show you the actual math of how inflation destroys your wealth:
The Formula: Real Value = Initial Amount × (1 – inflation rate)^number of years
Let's say you've got £100,000 saved up, if you just leave it in cash:
At Official 3% Inflation:
Year 5: £100,000 × (1 - 0.03)^5 = £85,873
Year 10: £100,000 × (1 - 0.03)^10 = £73,742
At Real 15% Inflation:
Year 5: £100,000 × (1 - 0.15)^5 = £44,371
Year 10: £100,000 × (1 - 0.15)^10 = £19,688
The Visual Breakdown:
| Year | Official (3%) | Real (15%) |
| 0 | £100,000 | £100,000 |
| 1 | £97,000 | £85,000 |
| 2 | £94,090 | £72,250 |
| 5 | £85,873 | £44,371 |
| 10 | £73,742 | £19,688 |
Mental, isn't it? At 15% inflation, your money's worth less than a quarter after 10 years. And remember – this assumes inflation stays constant. In reality, it compounds with all sorts of other factors:
That's your money losing value EVERY. SINGLE. DAY.
This is exactly why I started looking into alternatives. Read about my journey in The Role of Cryptocurrency in Personal Sovereignty.
What This Actually Means For Your Future 🔥
The implications are proper scary:
- Traditional savings accounts? Basically guaranteed to lose money
- That "safe" 5% investment return? Actually -10% in real terms
- Your salary needs to increase 15% yearly just to stand still
- FIRE calculations using 3% inflation? Completely borked
In the next section, I'll show you exactly what I'm doing to protect myself from this wealth destruction, and what you might want to think about too…
How I'm Protecting Myself (And What You Can Do)
Right, after that proper depressing look at real inflation, let me show you what I'm actually doing about it. No BS, no financial advisor fluff – just what's actually working for me as an expat engineer.
This debasement of money means that the hurdle rate—the returns you need to generate from your investments every year just to maintain your purchasing power—is 11%. Yes, that's right: not 3% for inflation only, but 8% for money debasement plus 3% for inflation (although I think inflation is really much higher than that).
I talk about this in more detail in my blog posts on money debasement, the real inflation rate, and why this means the hurdle rate for your investments is actually 11%.
1. Hard Assets That Can't Be Printed 💪
When money's getting devalued, you want to own stuff that can't be printed:
- Property (if you can afford it)
- Commodities (gold, silver)
- Things that are actually useful
2. Bitcoin Strategy 🌍
After proper research (engineer style), I realized Bitcoin makes sense because:
- Can't be printed at will
- Fixed supply
- Globally accessible
- No government interference
I keep it simple: regular small buys, cold storage, never invest more than I can lose.
In my opinion, buying bitcoin is the simplest way to front run the economic singularity and make as much money by 2030 as you can.
3. Skills & Side Hustles 💡
Your skills are probably your best inflation hedge:
- Learning new engineering skills
- Building this blog
- Creating multiple income streams
When inflation's 15%, you need your income to go up at least that much. Good luck getting that from a normal job!
4. Geographic Arbitrage 🌏
Being an expat taught me:
- Earn in strong currency
- Save in sound money
- Keep options open for lower-cost locations
Want to see how this works? Check out How Living Abroad Accelerated My Financial Independence Journey
5. Self-Sufficiency Plan 🏡
Sounds a bit out there, but I'm:
- Learning about sustainable living
- Planning for potential off-grid setup
- Reducing dependence on the system
What You Can Do Right Now 👊
- Start Small:
- Learn about Bitcoin
- Track your real inflation rate
- Build valuable skills
- Think Long Term:
- Plan for higher inflation than official numbers
- Consider your geographic options
- Start building multiple income streams
Remember, this isn't about getting rich quick. It's about protecting what you've got in a world of funny money.
Ready for more detail? Check out my guide to Building Financial Independence Through Alternative Investments
Wrapping This Up: The Real Inflation Reality Check
Right, let's bring this all together.
The truth about inflation is proper mental:
- Government numbers? Pure fantasy
- Real inflation? Probably 15%+ in most places
- Your money? Getting destroyed if you do nothing
But here's the thing – now you know what's actually happening, you can do something about it.
What I've Learned The Hard Way 💡
Living across different countries and watching my money do weird things taught me:
- Traditional savings are dead
- Government inflation numbers are BS
- But there are ways to protect yourself
You don't have to be perfect about it. Start with:
- One hard asset
- Some Bitcoin
- A solid skill you can monetize
- Options for geographic arbitrage
Final Reality Check ⚠️
Look, I'm not here to sugar coat it – this stuff is proper scary when you really understand it. But doing nothing? That's even scarier.
Want to start your own journey to financial sovereignty? Start with my guide to From FIRE to SovFIRE: The New Path to True Financial Independence
