Right now is literally the most important time in history for you and me to be buying assets.
Let me explain why…
The Government Just Kept Printing Money
Let’s talk about this. Allow me to put on my economics nerd glasses and explain a wrecked economy.
Here’s the timeline so far:
- March 2020: The Fed announces $1.5 trillion of money printing, then another $500 billion more.
- April 2020: The Fed announces they will buy $1 trillion of small business and government loans, funded by… money printing? And another $500 billion of new stimulus loans.
- December 2020: Another $1 trillion ($900 billion, but who’s counting) of printing. Because why not?
- March 2021: Doubling down with another $1.9 trillion
Honestly, I’m not even sure if that list is 100% accurate since there’s so much money flying around you’d need a forensic accounting degree to track it all.
The point is – the government’s printed A TON of money in the past two years or so.
As it turns out, printing 80% of all the money ever printed in just two years has some impact on the economy, after all.*
*Interestingly, I think part of the reason we’re starting to see inflation now when we hadn’t the last million times the government printed money, is not just the amount that was printed, but also what was done with it. The printed money never really got loaned out like The Fed planned, whereas large portions of the recent stimulus package were injected directly into the economy, either through stimulus checks, emergency Paycheck Protection loans, and other programs.
(Note there are also broken supply chains and a whole lot of other factors, which some people are blaming as the inflation causes. As usual, multiple factors can lead to an outcome, but I’d put my money on the biggest driver being what we can call “The largest money printing experiment of all time”.)
The Dirty Truth
As the experiment played out, it’s becoming clear that the danger of unlimited money-printing didn’t sit well with the economy as a whole, the banks that comprise it, or the ultra-rich that dominate it.
The danger of unlimited government money printing lies with everyday wage earners, like you and me.
As more money was printed and flowed into the economy, that increased money supply chased the same limited number of assets.
- The same number of stock shares
- The same number of houses
- The same ounces of gold
This hits everyday wage earners the hardest.
When more money is printed, and the price of assets rises, that price becomes more and more unattainable for the average wage earner. Throw in some stagnant real wages, and their stable salary simply buys less and less of the assets.
What happens next will be important
There are only two main ways The Fed can deal with all the money they printed into existence:
- Start doing the opposite of printing money. To get technical, this would mean they stop buying government bonds and start selling them instead.
- Let the economy grow (or inflate) its way out of the problem.
Evidence in favor of strategy #1
In their January meeting, The Fed announced a plan to stop inflation. Specifically, they will stop buying bonds and start raising interest rates. they will start fighting inflation by raising interest rates and stopping their bond-buying.
Translation: they’re saying they will turn the money printer off, but aren’t promising to go so far as actually removing any money from the economy.
BUT, they did plan to raise interest rates (and here we are). Which through a technical process way too detailed for this piece, has the effect of depressing asset prices and curtailing inflation.
Evidence in favor of strategy #2
In three words: 8% percent inflation.
The more the government allows inflation to stay at record levels, the more they’re choosing the path of “inflating away” the country’s debt problem.
Most people might not get too worried about the difference between 2 and 8 percent, but you all are astute money wizards, so I know you understand The Rule of 72.
- 2 percent inflation means that your cash will lose half its value every 36 years
- 8 percent inflation means that your cash will lose half its value every 9 years!
The clock is ticking!
But here’s the good news: I was careful to say inflation erodes the value of your cash. It often has the opposite impact on your assets.
So, per usual, the most damaging move is to not invest in assets.
A year ago was the most important time in history to buy assets. The only thing that’s changed since then?
It’s probably even more important now!
Why you have no choice but to buy assets as fast as possible
Make no mistake. In the current environment, people like you and I can’t sit around hoping that strong wages, affordable real estate, and high-interest savings accounts will let us float to freedom.
Those days are long gone. The boomers took that raft and ran…
People like you and I are literally in a race against the clock to accumulate as many assets, as fast as possible, to break through the plane. To build up enough momentum to reach financial lift-off, that magical moment when the compound interest starts driving our wealth.
Simply put: you have to jump that chasm from “wage earner” to “asset holder.”
If you don’t, you will continue to fall behind the pace of the fed’s money printer. Your annual raises won’t keep up with the increased money supply. And you will watch from the sidelines as investments, all across the board, continue to rise out of reach.
Ask yourself this. If 80% of all the money ever printed entered the economy in the last two years, did your salary increase by 80%?
If not, you probably fell behind. (Sorry to break the bad news, but please don’t shoot the messenger!)
We’re only left with one option.
We have to start buying assets as fast as possible.
It’s the only way to make the jump and get on the right side of the Fed’s money printer. To start swimming downstream, instead of fighting against the current.
While there might be some market bumps, crashes, and corrections along the way, the trend is clear.
But here’s the good news…
Eventually, as you accumulate more and more assets, you will reach a point where those assets can work harder than you can. You will reach a point where the increased money supply, and its oversized inflation of the financial markets, far outweighs anything you can earn at your 9-5 job.
This is known by another term – living off your assets.
Or as we usually call it – financial freedom.