So... we're finally coming out of shutdown mode after about 15 months of shutdowns, but things are still pretty weird...
Blogger's disclaimer: I'm an economics and futurist geek, I've spent most of my life studying these subjects. But I AM NOT a financial planner, CPA, accountant, or investment professional. The ideas in this blog, and in this post in particular, are my own thoughts and beliefs, and are for educational and entertainment purposes only. They should not be taken as advice or recommendations. When making financial or legal decisions, talk to a professional in those areas, and please do the necessary due diligence to make informed decisions on investments.
A year ago, about 35%-45% of Americans weren't working. Others began working from home due to the unexpected shutdowns. A hundred year pandemic hit, and the Presidential administration at the time completely blew it by not responding seriously. The health issue led to business shutdowns, and social distancing protocols, as we all know. At one point, 30 million people were on the verge of being evicted from their houses of apartments. The eviction moratoriums set in place are coming to an end. The added unemployment programs are coming to an end. Will most people be able to catch up on back rent? Or will we have a huge wave of new homeless people? We don't know.
A lot of upscale people fled New York City, and other big cities, a year ago, heading into the suburbs, and to Florida and other locations. Will most of them move back to the big cities? We don't know. Most office-type workers became adept at working by Zoom calls, and using other tech, to work from home. Will there be a mass migration back to office buildings to work? Or will huge chunks of office buildings remain empty. We don't know. In the past few months, roughly 1/3 of U.S. adults were getting some kind of "official," direct payment from the federal government (myself included). Will most of those people be able to find decent paying work again? We don't know. My educated guess is that we'll see 3-8 million people stop working, and get Social Security Disability, or some other form of assistance, to keep from working. There were already 7-10 million people in this group, former workers who dropped out of the workforce. This is one of many major societal issues not really being addressed.
There are "help wanted" signs on restaurants everywhere right now. There are at least an estimated 8-10 million people still out of work , and probably quite a few more. But they're not rushing to those low wage jobs. Will restaurants be able to find all the new (or returning) workers they need? Can people who've survived without a regular, low wage job, for the last year, even afford to work for minimum wage again? We don't know. Will low wages jobs have to start paying more money to find enough workers? Maybe. We don't know, yet.
The Federal Reserve, the non-government entity that has printed our unconstitutional U.S. dollars since 1913 (look it up, that's a fact), created more new money in the last year, than at any time in U.S. history. The M2 money supply went from under $15 trillion, to over $19 1/2 trillion, in about a year. That's like your $600 paycheck getting upped to $800. Would that help? Sure it would. That's what The Fed did for banks, Wall Street, and major corporations. This huge amount of new dollars, some printed, but most digital, has flooded the banking and investment industry, but largely avoided the real world, every day economy. This is THE reason stocks rebounded to new highs after the 2020 crash, and that real estate never crashed, like it does in a normal recession.
Very simply, every single person AND every single business in the U.S. (and most of the world), are "on welfare." Every person. Every business. The whole system is getting unearned financial aid.
The Fed has propped up a weak economy for the last 19 months, by creating huge amounts of new money. Without all that new money, the crash would have been much deeper. But that new money comes at a cost.
The problem is, when a government, or central banks like The Fed, create excessive amounts of new money, the value of every dollar (or euro, yen, pound mark, yuan, etc.) goes down. With more money around, it takes more dollars to buy the same amount of stuff. Prices begin to rise. That's what inflation is.
If a government or central bank prints way to much money, the country gets really high inflation (10%-30% a year or so), or maybe hyper-inflation (10% rise in prices a month, a week, maybe every day, or more). Every time a country has done this, EVERY SINGLE TIME IN HISTORY, the currency collapsed. There's a lag time of 1-2 years after they create the new money, until it really starts circulating, and prices start to take off and really rise. That's where we are right now. The people in charge don't want you to know that.
So, as we're all trying to find a new normal, and decide whether we work from home (OK, I don't have a home, but that's a different issue), whether we go back to the old job, or stick with the government checks, side gigs, small business, or stock trading, or whatever got us through this last year. As we're all trying to do that, prices are just starting to go up on many items. They won't all go up in unison, the price on one item will spike over here, and something else over there, sporadically. But a year from now, pretty much everything will cost you more, probably 10% to 30% more on average, that's a really safe bet. So take that into account.
Food, gas, electricity, water, insurance, clothes, everything, will go up in price a fair amount, and WILL KEEP going up in price, for the next 2-3 years. At the same time, the huge speculative bubbles in stocks, real estate, and other investments (baseball cards, exotic cars, Star Wars toys, grandma's Elvis plate collection) will crash. Boom. Downhill. Pretty much everything is a speculative bubble right now, and bubbles pop. Prices on most investments will drop dramatically in the next year, as prices are going up on day to day stuff. The real solid investments items will begin to go up again, once they hit bottom. Shadier investment items may just not be worth much anymore. That's what recessions and depressions do, they shake out the poorly run businesses (except the huge ones, they get bailed out), and shady investments.
So what can we, as average people, do? Get the day to day life stuff figured out. The old job? Or the side gigs? Work from home still, or back to the office? Keep sleeping in mom & dad's spare bedroom, sharing the bathroom with Grandpa, or get an apartment? Just keep in mind, prices will keep rising for a while, so YOUR INCOME WILL HAVE TO KEEP RISING, TOO. That's just the place we're at in the long term cycle of things.
Once you get that figured out, it's not a bad idea to stock up on basic, everyday supplies. I'm not saying to hoard 150 big, 24-packs of toilet paper. But buying a couple extra makes sense. Whatever food you buy that can keep for long periods, canned food, packaged foods, stuff like that, buying a little bit extra makes sense. It's a good time to full stock the pantry (and the bar, if you drink much). All of those things will probably cost more 3-6 months from now. There you go drunks, I just saved you a bunch of money. Send your "Thank you" checks to...
As for investments... there's a reason that, throughout human history, smart people have bought gold and silver, particularly in turbulent times. As dollars (yen, euros, yuan, etc) go down in value, gold and silver tend to hold their value... over time.
For example, a 1964 U.S. quarter, that was 90% silver, would buy my dad a gallon of gas for his Ford T-Bird (coolest car ever), in 1964. One of those 1964 quarters today, because it's made with 90% real silver, is worth about $4.68 now. Fifty-six years later, the silver in one of those average quarters, will still buy a gallon of gas. Think of how much the world has changed since 1964. The silver in that 1964 quarter will still buy about the same amount of gas. That's what I mean by "holding value."
So gold and silver, in today's weird world, are good things to look at, and see if it makes sense for you. An ounce of .999 silver is $28 or so right now, and you'll pay, $3-$10 premium on top of that. Most of you reading this can afford a $31 investment. So that's one thing to consider. (I've been encouraging friends and relatives to buy silver since it was $14 an ounce, BTW).
Another thing specific to really crazy, high inflation times like these, is debt. Long term debt makes sense, IN CERTAIN SITUATIONS. Yeah, I know, debt sucks. But the people who buy something with LONG TERM debt right now, will pay it back with dollars that are worth less. Maybe a little bit less, maybe A LOT less. That's what the government, and many mega-investors, are doing right now. Robert Kiyosaki, (the Rich Dad, Poor Dad guy) writes and speaks a lot about this.
The basic idea is, find a rental property that is already a good deal (NOT totally overpriced, like most properties are now). Buy that property, so the rent covers all your expenses, and buy it with a 30 year, fixed rate mortgage, because interest rates are still (for now) historically low. As your renters pay you rent, and you pay that mortgage, and as the value of the dollar goes down, you pay off that loan with dollars that are worth less. You'll probably be able to raise rents as prices rise, and you use cheaper dollars in the future, to pay off that long term debt. In effect, it's a way to "short" the dollar, as it drops. It's like you're buying a bunch of dollars for 50 cents each, and then using them to pay your bills. That's basically what is possible in these next 2-3 years.
You'll need to do some serious research and due diligence, find the right property, and all that. But that's one of the best ways to use this crazy dollar devaluation period to YOUR benefit. Look up Robert Kiyosaki's videos, and You Tube videos on "hyperinflation," to learn the basics. And always do the necessary due diligence on any investment.
The years from 2020-2024 will provide many of the best investment opportunities that we will ever see in our lifetimes. And most people won't take advantage of them. That's a bummer. If you made it this far in this blog post, you're ahead of the curve.
I'm totally dialing back writing about economics and stuff. But we're at another one of those huge inflection points in history. March 2020 was on big inflection point, and I wrote about what was coming (the economics, not the pandemic), for 2-3 years before hand. We're at another big inflection point right now. Some of my old friends, despite my current sketchy situation, have realized that much of what I've predicted has happened. There are big opportunities in this craziness. I hope many of you will take advantage of the ones that make sense for you.
Meanwhile, I'm dialing back doing artwork (I'll just do less), and focusing on this new blog:
Check it out.
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