Issue #8 | August 27, 2026

Throughout my lifetime — more than 50 years — I've heard about, studied, and pondered the seriousness of the national debt. Generations of politicians on both sides of the aisle have campaigned on "fiscal responsibility," "balancing the budget," and other hollow words and phrases that resonate with concerned voters.

Then the election ends, and they go right back to spending the taxpayers' money like drunken bank robbers.

Now the national debt has passed $40 trillion.

As a lifelong student of economics, I've studied inflation and hyperinflation events in different countries, and one question has always intrigued me: Why doesn't inflation affect the rich in the same negative way it affects the poor and middle class?

You would think it would. If wealthy people control a disproportionate amount of the money and inflation destroys the purchasing power of money, shouldn't they have the most to lose?

But that's not what happens.

And once you begin looking at what they own — and how they finance what they own — you begin to see something hiding in plain sight.

Inflation doesn't happen in a vacuum. When a government continually spends more than it collects, it has to finance the difference. It borrows. The debt grows. Interest expense grows with it. And eventually the government faces an uncomfortable reality: today's enormous obligations have to be serviced with tomorrow's dollars.

It's easier to service a huge debt when tomorrow's dollars aren't worth as much.

A government carrying $40 trillion of nominal debt has something in common with a homeowner carrying a fixed-rate mortgage: inflation reduces the real value of yesterday's debt.

Think about that for a moment.

The government benefits when yesterday's obligations are serviced with tomorrow's cheaper dollars. Wealthy investors understand the same arithmetic. They frequently own assets that can rise in value while using fixed debt that becomes easier to repay in inflation-adjusted terms.

And if you own a home with a fixed-rate mortgage, whether you realized it or not, that same arithmetic is working for you.

Most people experience inflation through prices. Food costs more. Insurance costs more. Cars cost more. Labor costs more. Building materials cost more. And, over sufficiently long periods, real estate generally costs more too.

That's the part everyone sees.

But there's another side to the equation that receives far less attention.

Imagine you bought your home years ago with a 30-year fixed-rate mortgage. The price of almost everything around you has changed since the day you closed. The replacement cost of your house has changed. The cost of the land underneath it may have changed. Your income may have changed.

But the interest rate you locked in didn't.

And inflation doesn't call your mortgage company and increase the amount you originally borrowed just because today's dollar buys less than it did when you signed the note.

So something unusual can happen over a long period of ownership. The asset you purchased can become more valuable in nominal dollars while the real purchasing-power burden of the debt used to buy it becomes smaller.

That's not two separate phenomena.

They're two sides of the same machine.

It has two pistons.

Piston #1: The Asset

Inflation erodes the purchasing power of money. Hard assets such as real estate tend to reprice upward over long periods as the dollars used to measure their value become worth less and the cost of land, labor, materials, and replacement rises.

If you own the asset, you participate in that repricing.

Piston #2: The Debt

A fixed-rate mortgage works differently. The dollars you agreed to borrow are fixed in nominal terms. Your interest rate is fixed. Inflation makes future dollars worth less, but it doesn't retroactively rewrite your original loan balance to compensate the lender for that lost purchasing power.

You're paying yesterday's debt with tomorrow's dollars.

Now put the two pistons together.

The asset can become more valuable while the real burden of the fixed debt used to purchase it becomes smaller.

That's the engine.

And this is where the top 1% have understood something worth paying attention to. The advantage isn't some secret investment available only behind the gates of a private bank. One of the fundamental tools wealthy investors use is surprisingly ordinary: own assets that can appreciate and finance them intelligently with long-term fixed debt.

A homeowner with a 30-year fixed-rate mortgage can have access to the same basic economic mechanism.

You don't need to be in the top 1% to understand how the top 1% thinks.

Last week I wrote about The Two-Ledger Test — the idea that your home can look like a liability on your monthly cash-flow ledger while simultaneously building wealth on your equity ledger.

Inflation adds another dimension.

It can make groceries, insurance, repairs, taxes, and almost everything else feel painfully more expensive today. At the same time, it can increase the nominal value of the assets you own while reducing the real burden of the fixed debt attached to it.

That doesn't mean every house is a great investment. Real estate values can fall. Markets differ. Maintenance, taxes, insurance, financing costs, purchase price, and holding period still matter.

But it does mean there's a better question than simply asking whether inflation is good or bad.

Which side of inflation are you standing on?

If most of what you see is rising prices, inflation feels like an enemy. If you own assets that can reprice upward while carrying intelligently structured fixed-rate debt, you begin to see the other side of the equation.

And once you see it, you begin to understand why some of the people with the most to lose from inflation have spent generations learning how to use it.