If I had a million dollars….
I’d pay off my debts (home mortgage, student loans) and start buying hard assets of the shiny, non-reactive elemental type.
Why?
I’ve been doing a -lot- of research on economics and banking lately. Macro, international, currency research, etc. What I’ve found scares me.
Basically, everything I was ever led to believe is a big, flaming lie. At best, it was just blissful ignorance on my behalf. That happy bubble of ignorance has been popped.
I’ve been arguing for some time now with some friends of mine that inflation can’t possibly be near 3% year on year. The money supply continues to expand (see: Lower Interest Rates) to combat the devaluation of assets, which feeds inflation of the fiat currency. Take a look at this chart. We haven’t seen deflation since the last ties of the US dollar to a Gold standard were severed with the end of the Bretton Woods system in 1971. Also note what happens near 1971. Inflation starts soaring. Sure, it has peaks and valleys, but notice that it never again goes below 0% to correct for the devaluation of the currency.
My money is increasingly becoming worthless.
I’m not saying we should stop saving, investing, etc.
But we need to take a look at how our currency is created, what backs it (your imagination!) why it’s never been devalued and why inflation is now surging. Need proof? In the last twelve months, prices have climbed 7.4%, unadjusted for currency devaluation. Not only is your currency worth less, but the cost of goods is going up in order to attempt to offset the future devaluation of the currency due to inflation.
There’s way to much to go into here. I would however, strongly urge everyone to take a look into the federal reserve system, and start to seriously ask yourself some basic questions.
Is this moral (biblical)? (fractional-reserve banking)
What’s to stop us from hyper-inflation?
Would you rather see the price of something you’ve already purchased go down due to currency being worth more instead of seeing prices always climb on everything, and your pay not being adjusted properly to compensate?
If the Federal Reserve isn’t federal, then who is printing money? What’s it backed by? What happens if the debt holders start trying to sell off our debt to someone else? How does that effect the money supply? How does that effect the cost of goods? How does that effect what is in my bank account? Are investments safe from hyperinflation?
Why should I care? What fiat currencies (not backed by hard assets) haven’t collapsed given time?
Funny Realization
I just went to a vending machine across the hall. I dropped in a few quarters. One of them fell through. I realized as I was putting it in the machine that it was Canadian. I thought, “Worthless Canadian quarter.”
Then I had the stunning realization that it was actually worth more than my US Quarters.
In fact, one US Quarter is worth 0.9982 Canadian Quarters. (Current rate as of today)
It’s not enough to change the price (in pennies) but it’s a funny thing to think about. All these years I was told Canadian currency isn’t very good… and right now it’s better than ours.