The Monopoly on Money

The Federal Reserve has created a standard monetary policy (a gold standard they call it) where the currency is inflated by 2% per year. This ignores things like the Coinage Act of 1972 and Article 1, Section 10 of the Constitution that authorizes only “gold and silver coin a tender in payment of debts.” We’re obviously a bit farther in a lot of aspects in modern life to be stuck paying with hard assets and bartering, BUT the important part is the gold and silver had a more limited supply keeping the value a bit stagnant.

It was clearly harder to debase the metal value because you had to falsify an imprint of a coin OR find more gold/silver supply. It’s a lot easier with the money printer now and The Federal Reserve is in charge – yikes. I’ve shared info before on inflation and rates on the site (just hit the search bar and type it in), yet never clearly shared that inflation truly is just legal theft by devaluing the currency we use (the average joe) to the benefit of borrowers (the government). To handle their poor spending, trillions dollars of debt, and abysmal fiscal policy they just print more money destroying the value of the dollar.

The Benefits of Inflation (via quick Googling)

These are fun to read and think through because it’s just another way to reduce wealth for all us normal humans…

– Inflation Spurs Growth: The idea is that savers realize that the value of their cash decreases so they spend more today to avoid tomorrows price. So spend more spurring the economy before the value of our money is eroded by The Fed’s policy. It actually just stagnates growth by driving people towards safer assets such as Real Estate (if they can avoid it).

– Inflation Decreases Debt Burdens: Essentially if the dollar value decreases after a loan is taken out (Government loan of $14 trillion) the repaid lenders can purchase less with the repaid loan. This hurts savers (value of the dollar drops) to benefit borrowers (government wins by paying less).

– Inflation Increases Asset Values: This one really blew my mind. As the dollar falls, the perceived value of our assets increase. Sounds great, but what does the asset increase against… the dollar. So now if you were to sell the asset to realize the gain, you see an average gain and still get taxed! The government gets to double dip by printing money and then also taxing on the gains.

– Inflation Offsets Unemployment: Simple explanation is as the value of the dollar decreases businesses increase the price of goods (or goods become more expensive). The Philips Curve is an economic theory that dives into this and isn’t given the attention it deserves. At that point, more profit means that they can higher more works but really the pay is just diluted. What’s happening is the standard of living is decreasing.

How I am defending myself against the invisible thief

It is tough to completely defend yourself and assets against inflation in my opinion. As an average joe in the market you have to accept there will be some devaluation and defend against it the best you can. I’ve come to the realization that…

1) Finding an asset that is not backed by the dollar, has international exposure, and is not controlled by anyone entity is a safe bet (still a bet though). In this case cryptocurrency right now. Gold and Silver are also in that realm, but there is proven manipulation in those markets.

2) Owning something that will always have a need whether or not the government has regulations around it. In my opinion this is Real Estate. Everyone needs a place to live and if you’re a landlord you get to earn some of that rental income at the risk of capital owning the property.

3) Owning your income. This means owning your own business or source of income. As a business you’re still involved in the inflationary game, but have more control and are not at the mercy of an employer – you are the employer.

Keep your eyes, ears, and mind open. Pay attention to what’s going on in the world and read between the lines.