Thirty-seven Cents for a Loaf of Bread

I just got back from an overdue long weekend.  My family and I went to one of those quaint New England towns with shops and pretty flowers lining the streets.  It was like one of those towns seen in the classic movies with cute little boutiques and an old movie theater that always plays an “oldie but goodie” but never the movie you want to see.

Sure, my goal on this trip was to enjoy my vacation and be with my family. That’s all well and good, but I also had a business goal—  to find a specific item of kitsch that might help me explain the concept of inflation.

I bought a “Back in the Day” book that recounts the culture of the year I was born, including prices for everyday items. Why was I so set on purchasing this novelty? This souvenir is now my textbook for illustrating the destruction of unchecked inflation. Everyone must understand that the repercussions of inflation are devastating, and we are in for a lot more challenges over the next two years.

Inflation is terrible— probably everyone in the world agrees, but some folks don’t understand there are two kinds of inflation— that which we see and the inflation we don’t see.  The inflation we DON’T see can kill us in the long run. Therefore, I’m hopeful this article will help you strap in for the bumpy ride over the next few years.

The bottom line—those who take action early enough will be able to protect their hard-earned savings.

Tightening Fiscal Policy

The US dollar is a critical asset that must be maintained, period.  If civility still exists, it should be protected at all costs. However, inflation and the devaluation of the dollar threaten this coveted civility. As we enter another age of worldly relations where war isn’t off the table, the US dollar is under attack.

From all angles, the US dollar’s dominance is waning in world trade, and new payment methods are being put in place. It’s true—  there’s no reason why all the world’s trade needs to be conducted in one currency.  Russian, Chinese, and Indian currencies are being used more and more, and honestly, I believe this model is more of a free market and should sort itself out over time.  Most likely, the USA won’t be the same nation in this new world; its fate lies in the hands of those managing the value of US currency—- and it’s no secret that Americans and our lifestyle may be in for a rude awakening.

The problem with the US dollar isn’t the attacks from the outside. The dollar, unfortunately, is under attack from the inside, which affects users like you and me in a much more hidden way. Even though we cheer for the dollar to succeed, as users, we don’t have the tools to make it happen. 

I’ve seen notices with similar vibes from Venmo, Paypal, Celsius, BlockFi, Nexo, and Crypto.com. It’s apparent that those who control the US dollar are trying to lay in some protections going forward and limit the number of returns we can receive overtime, which is both encouraging and concerning.  Limiting the amount of liquidity that can transfer between siloed cash storage companies is one of the first actions I see happening.  Presently, rules are being put in place to prevent money from moving quicker than the regulators can track it, so eventually, more rules will be instilled. Perhaps a digital dollar may grow out of this; who knows.

It’s long been a pipe dream to consolidate and organize the transfer of USD (also referred to as cash or FIAT.)  From our perspective as users of this financial system, there is a massive mess of separation in the order.  For example, we can have several bank accounts spread across numerous banks, many brokerage accounts, and multiple 401ks and not have one interface to look across them simultaneously.  You can also own stock for the same company in various accounts, but you can’t see the total of all those accounts or transfer assets from one account to another.  Lastly, it’s also complicated to determine what stocks cost you if you have more than one stock account or purchased them years ago.

Certainly, things are more straightforward than when I started investing in the early 2000s. Yet, just a fraction of the money-moving world has grown since the underlying technology—called monetary rails— hasn’t been improved to embrace a new age of digital cash.  It takes three full days to settle a stock trade. And don’t even get me started on wire transfers.  Have you ever tried to do an international wire before?  If not, consider yourself lucky.

According to the FED and those in charge, it seems the controllers of the US dollar see the potential for a downturn.  A downturn in the dollar’s value means that goods will get more expensive, but the question is, why?  Why is there such a hike in prices lately?  Is it Russia’s war on Ukraine or the stock market? Or is the situation caused by something completely different?

I can explain something here that might help folks who have these same questions understand what I see.  It’s not prophetic or even a fancy conversation, but it’s a critical one, and I encourage you to share this article if it helps you.

My Kitsch

On my recent family getaway, I was in search of a piece of US culture that is usually available in five and dime stores.  One of those stores that looks like a house and has a rickety wooden floor, and everything has handwritten price tags instead of scannable barcodes. I found my item on a large spinning shelf with books for each year going back to 1930.  This 22-page card-sized book cost me over $6 with taxes and all! Ouch! But this was a small price to pay to validate my suspicions regarding inflation.

It’s one of those books that gives an overview of the world in the year you were born.  I won’t tell you the year I was born, but I’d like to explore this book to hopefully bring to light a hidden danger within each of our savings accounts.  One that’s easy to feel but hard to see and even harder to understand.

If you keep large amounts of money in a USD savings account, CD, or any other cash derivative, your buying power decreases daily.  When I first ran across this phenomenon, the information presented cognitive dissonance in my brain.  Living in today’s world, we don’t see the problem because these books make inflation seem funny and exciting rather than dangerous and eroding.

I believe inflation isn’t seen as a problem because our culture has normalized these losses, and I’m hopeful I can use my new book to shed some light on why we should be concerned now.  At this point, the decrease in buying power is getting greater by the month and will ultimately lead to a recession that most economists believe will begin in the fall or winter of 2022.

Because people use the US Dollar worldwide, the fear is this calamity could spill into a potential world recession if we don’t react accordingly.  But that is not on us to repair since we don’t have access to the “tools” to fix the dollar.  Instead, we all need to ensure that our friends and families make it through this recession with their buying power intact.

What Is a Recession?

Investopedia defines a recession as two-quarters of a back-to-back decline in “general economic activity.”  That definition is not much help for most of us, is it?

Let’s forget that word for a moment and focus on what happens in a recession.  It’s a relatively straightforward flow:

1.) People have to stop spending because the things they spend on will be too expensive to buy.

2.) High prices lead to downsizing and company lay-offs.

3.) Fewer people in the workforce means less money in our hands and less spending power.      Hence even less spending occurs.

The circular nature of this potential future is why a recession can be so dangerous. Economists fear most that this possible recession will expand outwards to other countries as the 2008 recession did.

Therefore, we all need to be prudent.  Rather than hiding the message behind fancy words, I want to use my new book to explain buying power and why we should be watching what we can buy with the dollars we have and NOT be so focused on how many dollars we have.

This measure of wealth is called “buying power.”

What Is Buying Power?

Buying power indicates what your US Dollars are worth in goods and services.  We were taught that it’s ok if our buying power goes down yearly because we get interest from the banks to offset our depletion. But, if you haven’t noticed, that interest has dried up lately— 0.01% in my savings account.

Without oversimplifying, buying power is a fancy word that represents how many goods and services you can buy with your cash.  Let’s take my parents on the day I was born.  I’m sure they had $10 in their pocket or wallet.  Please hold aside if they had dimes, quarters, or half dollars. They’d be worth a ton because they were all made of silver back then.  If they had one crisp US ten-dollar bill and were going to the store, according to my quaint little book, they could have bought:

• a dozen eggs for 82 cents
• a half-pound of butter for 64 cents
• a loaf of bread for 37 cents
• a pound of coffee for $1.30
• 5 pounds of potatoes for 75 cents
• a gallon of milk for $1.67
• a pound of bacon for $1.19
• 5 pounds of sugar for 76 cents
• Two postage stamps for 13 cents each

And still have enough left over for one movie ticket!

Try doing that today with ten dollars.

My Book Pricing Page Scan

The inability to make our dollars stretch like the example above is the loss of buying power and NOT a pleasant discovery in my “Remember the Day When” book.  We work too hard for our dollars to let hidden inflation strip their buying power over time, and we MUST strive to understand this concept to protect our hard-earned wealth. 

If my parents had put aside that 10-dollar bill for me later in my life, I’d barely be able to buy two or three items on this list.  Yet, eggs then and now are no different, and potatoes are still potatoes— grown the same.  Additionally, today’s machinery that helps automate actually makes it less expensive to produce some of these products, yet they cost more now.  Why?

Quantitative Easing

Quantitative Easing is a fancy name that means “to print more money,” and it usually means to print a lot more money.  You and I don’t have the control to print as much money as we want, but the FED does.  The FED is a private entity NOT controlled by the US government but funded by it.  The FED can now control when and how much money they create out of thin air.

Rather than say they have ordered the printing of more money, the FED says they have instituted a round of quantitative easing. It’s kind of like a code to keep us in the dark.

In the crypto sphere, we refer to this as “BRRRRRRR”  because the “money printers go brrrr.”  It’s not original, but hey, you’ll cry if you can’t laugh.

The FED Orders New Money Every Year, So What’s the Big Deal?  

To understand what printing money means to the economy, we first must understand what qualifies as “money.”  Turning back to Investopedia, they explain the categories of US Dollars really well.  M0, M1, M2, and M3— gotta love a good acronym.

M0 and M1 are accounted for in the M2 measurement. M2 represents all of the “liquid” US dollars available.  The chart below shows this number is currently just over 2 trillion dollars.

Currency in Circulation Year-Over-Year Measured in BILLIONS of Dollars

Sure, every year, the FED prints new money, sometimes for legitimate reasons like the old money is disgusting or was damaged and needs to be replaced.  According to the FED, the circulation graph above shows the total amount of dollars that exist in a given year.  Around the 1970s, things started falling apart as the number of dollars in existence started growing massively.  During this time, we began dramatically losing our buying power.

You may or may not know that the actual cash we see in circulation is a only a tiny portion of the total amount of US dollars.

Like M2, M3 encompasses all of the lower levels; therefore, the measure of M3 is the total amount of existing dollars, and it’s a doozy of a chart.

M3 Chart: The “Borrowed” Money

The M3 chart highlights the problem.  M3 adds the debt we have created to M0, M1, and M2.  Yes, the vast majority of the current dollars were created as debt.  House mortgages, car loans, student loans— these all began out of thin air during the loan “closing.”  Other countries also borrow US dollars, and their debt is recognized in the M3 chart as well.  Twenty-one TRILLION dollars exist compared to 1980 when less than 2 trillion existed.  The more dollars that exist, the less each dollar will buy.

It’s important to understand that 3 out of every 4 dollars in existence today were created since Covid’s first onshoring.  We hadn’t yet recovered from the 2008 money printing to rescue the banks, and more money printing came along.  This information is not great news as inflation measures our buying power, and it’s estimated to be high for years to come; this means that your buying power will decrease for a long, long time.

At this point, it looks like there are 19 trillion dollars in debt and ONLY 2 trillion in float.  The question I have is how will this balance?  If there aren’t enough circulating dollars to pay off all the debt, how will we be able to stabilize the economy?  Given that only 2 trillion dollars actually exist, it’s understandable that the remaining $19 trillion is represented by entries to databases in banks’ server farms.  

So, the US dollar is a digital currency, just like crypto. It’s just that most people don’t realize it.  Do you know what else constitutes digital currency? Try airline points, credit card rewards, loyalty points, and coupons. We’ve been living with digital money for almost a century.  And we were all supposed to be reporting that on our income statements to be taxed.

The US Dollar Is Digital?

So, maybe you don’t believe that the US dollar is digital. Here’s a quick test you can perform.  Go to your bank and ask for all the money in your account in cash.  Depending on the bank’s size, if the amount is over $20k, they most likely won’t have it on hand and will need to order it from their money delivery service.  It’s not that the bank doesn’t house those dollars for you; they do. It’s just that your money is an entry in a database, buried within the internal infrastructure of that bank— not kept in heaping piles in the bank’s vault.

Here’s another example of how the US dollar is digital.  Imagine you have $250,000, and your goal with this money is to deposit it in your bank.  How would you carry it around?  In a suitcase?  As a check?

If it’s in a suitcase, good luck getting a bank to accept that money as a deposit. More likely than not, this money is a check.  A check is a form of digital money because the actual dollars are sitting in the issuer’s checking account. They are transferred digitally about three days after you deposit the check into your account by debiting their account and crediting yours.  

Just for fun, let’s use the suitcase example. If you go into a bank with a large amount of cash, the first thing they will ask is, “Where did this come from?”  Then the bankers need to complete a bunch of forms that certify that the money was obtained legally and may ask for receipts or invoices to prove its legitimacy.  Put all that aside, and let’s say they accept your deposit. 

Now, go back the next week and ask for that money. I guarantee the bank won’t have it. Banks transfer money up the chain of banks every night, and it eventually ends up in the FED accounts for each primary bank.  For three days, your physical cash moves to your bank’s bank account with the FED— not your account.  Once it’s there, the line in the database gets updated to show that money belongs in your account, and you will see that deposit reflected on your online balance. To get your money returned as cashback would be a nightmare I can’t even imagine since I’ve never tried to withdraw that much.

Running businesses with multiple bank accounts, at one point, I needed to carry cash in larger amounts for payroll and other expenses and spread it among many banks.  Cash is cleared on the same day and doesn’t take the three days a check would take to clear, so it was better for me to use cash to get the bills paid on time.  I’d often go into one bank, withdraw some cash, head into another bank, and deposit the same money.

Each time I went through this process, there were varying sets of forms I needed to fill out, and I learned over time to do more frequent transfers of lesser amounts because it wouldn’t kill an entire day, only a few hours at a time.  I was never opposed to the paperwork, it just became cumbersome to keep redoing, and I didn’t have the money to afford wire transfers all over the place.

Why Is This Time Different?

The FED orders money printed by the US Mint every year, and banks introduce that new money into the general supply.  Until recently, there were limits on how many US dollars could be printed each year. Once those limits got squashed, the new age of money printing was born.  Money printing has solved many problems since; however, it’s created other issues.

We need to look back to when it all started to see why this time is different.  

It is true that Covid, the Russian war, and a global shift in spending habits have led to random price hikes on cars and very soon a price spike on fresh foods.  This financial mismanagement didn’t start when Russia invaded Ukraine or when the first unfortunate person died from Covid.  The truth is, this started much earlier, during the 2008 financial crash.

In 2008, the first round of quantitative easing started and became a tool the FED used to convince us of unrealistic expectations. We believed that no matter how many US dollars existed globally, each dollar would always be worth the same amount.  But some of us know better. I don’t subscribe to this theory because I met Bitcoin.

The sheer nature of the 2008 financial crash required the FED to order printing of an excessive amount of digital US dollars DAILY. Specific markets were about to crash and cause a worldwide physical cash shortage which could have led to a bank run as seen in the original Mary Poppins movie— not the musical or the remake.  Bank runs occur when a society loses faith in its currency, and institutions set forth to protect the value of that currency by closing banks or limiting the amount of money that can be withdrawn or moved around.  I see signs of this practice now with the recent term updates from financial institutions.

To have physical money available worldwide, you must employ people to distribute, store, and guard that money.  This process brings new ways an adversary can cause damage to a physical currency; hence it’s been the work of banks to dip into the world of digital currencies for many decades.  In this case, the FED issued the new digital cash and immediately used it to prop up these markets so they wouldn’t crash.  Then the FED delivered an unlimited amount of money into these failing markets to prevent erroneous investments that would cause a bank run on the US dollar worldwide.  This maneuver is called a “financial backstop” as the FED was the “buyer of last resort” and put up a wall of dollars to buy needed market assets at any price during the crash of 2008.

A bug that ate all of the digital money in 2008 caused the problem, and this bug led to greed. Ultimately, many banks were foolish with their investments, and their poor management eventually caught up with them. The bug was that the Wall Street folks were allowed to conduct risky maneuvers with our deposits, and once that caught up with them, entire banks failed, and depositors needed to be bailed out by FDIC.  There might eventually be a way to prevent greed at the highest levels of banking that ruins innocent people’s lives, but until then, we must be aware of how their actions affect us.  

The quantity of new money generated during that time is still astronomical. Fast forward to the Trump tax cuts— they removed a bulk of the annual income from the government and set us up for another nasty problem we wouldn’t realize until a novel virus made its way onshore.

The Covid pandemic was the new catalyst for the FED to print more money, and this time, they just kept going, printing more and more dollars each month without caring about what may happen to the people who own existing dollars.

For example, three out of every four US dollars that have EVER existed were created in the past two years.  This doesn’t seem alarming until you zoom out and see the damage incurred on future dollars.

I learned from my new book that what a dollar was worth several decades ago compared to what it’s worth now makes it difficult to see a future where it will buy more than what it buys today. And this realization is both disheartening and defeating. Thankfully, I don’t have many dollars, but to those who do, I fear they may not realize until it’s too late, and their dollars are locked up in a banking system where they can’t remove them and where they continue to depreciate every year.

But why does the buying power dissipate?

Scarcity

I can’t get through this article without explaining the single most cherished aspect of Bitcoin (BTC)— its scarcity.  There will only ever be 21 million Bitcoins; this is a fact that can not change, making BTC scarce.  Furthermore, it’s estimated that about 3 million Bitcoins were lost or abandoned for one reason or another, and this means that only 18 million or so Bitcoins are available for purchase.

In addition, only a certain amount of Bitcoins can be purchased at any given time.  And the amount of Bitcoin created daily is set to decline by half every four years until after 2140, or so when all the Bitcoin will be completely mined. In contrast, the FED can print an unlimited amount of US dollars, making the US dollar not scarce and less valuable.

Usually, folks think of scarcity relating to precious metals as they are indeed scarce.  Naturally, gold and silver are in short supply, which makes them scarce, but according to Retirement Investments, “…with approximately 6 billion ounces of gold available against Bitcoin’s 21million, it means that a single bitcoin is roughly 200 times rarer than a single ounce of gold.” 

So, what does all this have to do with the US dollar? The fact is— real investors don’t hold dollars. They look at an asset’s scarcity for their placement of investment dollars. Why? You guessed it— because the more scarce something is, the more difficult it is to buy. And the longer it’s held, the more value it should gain in US dollars since the US dollar is the opposite of scarce.

You’ll notice that billionaires keep their earnings in stocks, real estate, or private equity but not in large chunks of US dollars sitting in banks, earning 0.01% per year.  This is because dollars in savings accounts have lost upwards of 20% of their buying power in the past year.  And these losses have gone relatively undetected. Just look at my parent’s $10 and what that would buy now compared to when I was born.  Project that outcome a few years into the future, and you can see how dangerous this path can be over a lifetime.

You can do a test— find an older receipt, anything to remind you of prices – even just a year or two ago.  I guarantee that last year’s dollar went MUCH further than this year’s dollar.  If you happen to have a receipt for each year back to 2008, I imagine you would notice the price of goods appreciating at a greater rate.

The amount of buying power being sucked from our savings accounts is scary, and there is no way to quantify this loss because we are being fed heavily manipulated statistics.  While we actually have a way to measure the sad signs of inflation’s impact on the US Dollar, we have no single method that shows a proper trajectory of inflation over time because the numbers are easy to manipulate and change year by year.

I’m told the only inflation measure worth talking about is called the CPI (Consumer Price Index).  The CPI is a “basket of goods and services” that are supposed to represent what we need to buy to survive.  The most recent CPI report was published at 8:30 a.m. (ET) on April 12, 2022.  This report is an excellent idea in theory, but the formula to calculate the CPI isn’t based on an average of market prices or something easy to understand.

The CPI calculus, as detailed here, seems to have changed over the years.  Certainly, I concede the world has changed a lot, and our spending habits have changed, too.  But what if the yearly “basket of goods” grocery list of specific items and brands purchased with specific measurements were switched year-to-year?  Let’s pretend for a moment that these shopping cart contents could move. For instance, I wonder how shocked the year 1975 would be if it carted away 1945’s cart. Wow! All kidding aside, I wonder what that would do to the numbers we would have seen?  In theory, the numbers would almost certainly add up differently and alter  the CPI calculation, right?  I honestly don’t know.

So, how can we understand the problem if we can’t understand the statistics?

New Dollars

Since learning more about the world of economics, I have come to see car commercials differently.  You know, the commercials where the car is weaving through windy roads or a pickup truck is romping through the mud with the warning “professional driver, do not try” on the bottom of the screen.  Knowing what I know now, I can confidently state that these aren’t commercials for cars; they are commercials for the US dollar.

Let me explain. Start by swapping the actual car or truck for any other new car or truck out there.  The comments they make aren’t relevant to a buyer— you either need a car or don’t.  If you look closely enough at these ads, you’ll see that they are geared towards promoting an upgrade on your existing means of transportation.

This new vehicle is more efficient than the other cars on the market or has more cup holders, a touch screen, heated leather seats— and the best thing is you will have 0% interest. Woo hoo!  Most people see 0% interest as a no-brainer. How can you go wrong? More importantly, how can the bank make money? 

Here’s the real deal that should make 0% financing less attractive. If you buy a car, you work with the invisible underwriters governed by computer programs. These underwriters and their computers pull your credit information with your buying habits and income streams to determine if you will pay the money back.  It’s often not a determination founded in reality, but it’s a decision either way.  If approved, the bank sends the request to the FED, and they create new dollars to send your car company a check so they can deliver your new car.

The 0% interest incentive is a ruse that encourages more borrowing, so there are more dollars printed each year.  The FED doesn’t directly control this form of printing money unless something like an economic disaster comes along, like, say, a virus that no one understands.  Then the FED steps in and creates new pools of money for items such as PPP or EIDL loans and allows banks to create loans in these new money pools.

With 0% financing, you really won’t pay interest if you pay everything within the time frame. But your bank is hoping you don’t abide by the rules. Here’s why. If you don’t keep your end of the deal, you’ll be subject to a LOT of interest.  Read the small print on these contracts because, in some cases, if you miss only a single payment, you may be liable for ALL of the interest that would have elapsed since the loan took hold.

So, the spiffy car that catches your eye is just a distraction. Wait until the end of the commercial, and you’ll always see a few seconds where they disclose the loan terms.  I believe these few seconds are the actual commercial.  This part explains that you need to buy US dollars and exchange those dollars for the vehicle to get this car.  That makes sense, right?  All we have ever known about buying things is we must get US dollars first.  This process has been ingrained into our psyche. But what if you only have Euros?  OR, what if you wanted to buy Euros to buy a car?  Would that be allowed?

Go to a US car dealership and try paying with Euros. I’m sure they are required to only work with US dollars, and they usually work with a single funding company, which works with a bank, which then interacts with the central banks that get their money from the FED.

Try buying a house, and you’ll work with a mortgage broker, who will work with a bank, who works with the central banks, who then request the FED to trickle down some new funds to buy your house.

To see the impact and gain some perspective, ask yourself a couple of questions: How many cars are sold each year?  How many mortgages?  There can’t be 18 trillion dollars worth out there.

You see, the vast majority of US dollars are created as debt. And to be honest, I’m split on this idea because it’s not only US citizens that create debt in US dollars. Worldwide, nearly all countries have US dollar denoted debt.  Another hidden problem is that as those countries get hit with OUR hidden US dollar inflation, their US dollars don’t go as far. This result increases the probability of defaulting on their loans, which means a far worse disaster for their citizens.

The results— the world economy is on a razor-thin margin between working and catastrophe. In fact, the buying power of entire nations is under threat now. Countries are having a hard time paying their bills. Sri Lanka is declaring bankruptcy, Lebanon is soon to follow, and Russia is in a soft default. It seems the lineup of countries in trouble is steadily growing.

With all the cars and houses sold each year, an average amount of new US dollars is created. However, older dollars should be paid back at a normal rate, so these significant increases in money supply are unfounded.  Also, know that many foreign countries are also borrowing US dollars to support their citizens. The US dollars they borrowed are buying less and less— more importantly, the interest rates are climbing, and the buying power is squeezed out of everyone.

Why Aren’t the Rich Complaining?

Knowing what I know now, I’d be furious if I had a bunch of dollars in a bank account. So, why aren’t the wealthy people complaining?

It’s simple. They don’t have millions of dollars sitting in deposit accounts, earning 0.01% per year. Instead, the wealthy use their wealth to make more wealth.

I don’t want to dwell on this, but the main reason billionaires pay no taxes is because they have their wealth tied up in equities (stocks), real estate, cryptocurrencies, or private investments.  Those assets appreciate over longer timeframes. And ironically, this increase is created because the US dollar has hidden inflation.  It’s kind of a game of mirrors and reminds me of when that magician made the Statue of Liberty disappear.  He didn’t really uproot the green bronze statue but instead supplanted precisely positioned mirrors and used lighting effects to instantly change the vantage point of the folks viewing his show without them knowing. Finally, he reflected another part of the world in place of the statue, and everyone was amazed.

This example is similar to how the US dollar works.  We are all too focussed on the increase in quantity, worrying about how many dollars we earn per hour. And then we put those dollars away to earn interest.  The fact that the US dollar doesn’t have a set growth limit means that the dollar depreciates every time the money printers start up.

So, if you think about it– billionaires’ money is also depreciating in buying power, but it doesn’t seem to matter. As the things they buy increase in price, their ability to make money goes up. And since they own a lot of the supply chain, they are essentially taking from one pocket and putting it into another.

What Should We Do?

So, if you are still reading, I suppose I haven’t bored you too much or scared you away.  What should we do because we certainly can’t petition the FED to stop printing money or start decreasing the money supply?  After all, it’s one of their tools to combat inflation. Who am I to say that’s not the right thing to do.

The push should be to get more people’s dollars into scarce assets—assets that are difficult to produce and even artificially capped.  Artwork comes to mind. If people want to and can indulge, that’s a good place for your hard-earned money, as many of these works of art are one of a kind. Being originals, their scarcity is so great you can almost name your price as to what it’s “worth,” even though it’s only worth what someone else will pay.  These items are usually referred to as “priceless.”

A little more mainstream, folks should consider purchasing scarce assets like real estate, gold, palladium, copper, silver, bitcoin, and other investments that aren’t as plentiful or as easy to create as the US dollar.

I like investing in bitcoin because it is as scarce as it can get, in my book.  Gold is a distant second because space-rearing companies will eventually have the ability to mine an asteroid, which sounds like a script idea for a Hollywood movie. However, such adventures are accurate plans in the minds of the Jeff Bezos and Elon Musks of the world.

Fun science fact— the large explosions that built the stars we see every night created our stores of precious metals, and humans haven’t yet mastered how to make gold, silver, and these other metals. If we did, those metals wouldn’t be scarce.  This fact means that large banks of precious metals are floating around the galaxy, just waiting for some wealthy entrepreneurs to send up robotic workers to remove those metals and bring them back to earth.

These aren’t small mines where just a little bit of gold exists in mountains of dirt.  These are hard rocks flying through space made of solid materials that will yield many millions of ounces of new precious metals when brought back to earth.  Put aside the scare that their entry into our atmosphere may re-animate millions of bacteria or viruses that have lain dormant for billions of years.  Covid 975, perhaps?

What would it do to the price of gold if, all of a sudden, millions of kilos were put onto the market?  My guess is the price would go down because it will no longer be as scarce.

I own a tiny bit of precious metals just in case, and I own some PAXG which is literally digital gold.  Paxos states, “PAX Gold (PAXG) is a digital asset. Each token is backed by one fine troy ounce (t oz) of a 400 oz London Good Delivery gold bar, stored in Brink’s vaults. If you own PAXG, you own the underlying physical gold, held in custody by Paxos Trust Company.”  It’s the only crypto I trust to have the actual gold to back the coin.

This scarcity is why I believe in Bitcoin and why so many others do as well.  Banks, investment firms, hedge funds, and now entire nations embrace the nature of Bitcoin’s scarcity.  The price now is so low it’s killing me not to buy more.  But instead of buying, I earn.  And although the USD value of my assets is depressing to watch decrease, I’ve been doing pretty well lately with the economic downturn.

Sorry to be a bummer, but as Bitcoin goes down in USD value, I can cash in my bots and realize my gains.  Plus, the price pressure of Bitcoin temporarily going down spikes my bots against BTC and allows me to bank more sats.

At the risk of sounding preachy or like I’m giving financial advice (which I am NOT doing), I really encourage those who don’t yet have exposure to Bitcoin to take the leap.

You can buy it anywhere now— Paypal, Venmo, and Robinhood offer bitcoin without the confusion.  You can buy GBTC in your 401k.  In all cases, it will look like another stock you own and can be sold whenever you want but be warned, if you go to transfer your Bitcoin out of their closed systems, it may not let you.  For those serious about buying crypto, you need only spend a few dollars: $10 is the minimum in most cases.

Dollar Cost Averaging

The best way to get into anything is to Dollar Cost Average into it. This means that with each time period, you buy a little more.  Say you want to buy $10 worth of Bitcoin per week.  This practice will give you more quantity of Bitcoin throughout a year than if you were to spend $520 once unless you perfectly time that buy-in.  It’s tough to buy into the bottom of a market. Even trained traders can’t do that, so why think you can wait until it’s “low enough” to buy in.

Dollar Cost Averaging saves you the hassle and automates your investments.  I used to do something like this with my salary when I got my first job. I had a savings account that I automatically put a portion of my salary into, and I never checked the balance.  Eventually, it was enough to make a down payment on a new car. Yes, I had to make a down payment for the car I bought back in the early 2000s, and my loan came with a 9% interest rate that I eventually paid. They weren’t giving the dollars away then.

The Takeaway

We all work so hard to make money, and it’s difficult to see it go away.  Our forced definition of money has always been the US dollar, but we need to expand our horizons and realize that better stores of wealth are available to us. 

Additionally, people who have utilized the stock market as a solid investment strategy may get a rude awakening. If we hit a recession, the stock market is expected to plummet.  And folks who have always relied on the market’s ability to right itself quickly may learn the meaning of the phrase “overbought.” 

None of us can control the spiraling devaluation of the US dollar, and all we can do is be prepared for the situation to worsen. This statement means protecting our assets by exploring other means of saving and growing wealth beyond the depreciating dollar.

Hum—maybe it’s time to explore the world of Bitcoin?