Inflation and the US Economy

economy inflation Apr 08, 2022
 

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In this video blog, I want to talk to you about inflation and the US economy. First, inflation is melting our money. Second, in the US, we have a mounting Federal debt. And, federal debt is going to lead to higher taxes. Third, the Russian invasion of Ukraine highlights the problem of freezing bank accounts and money confiscation. Four, the Fed is tightening and crashing the stock markets, how far will they go? Fifth, we cannot expect that the USD will be the world’s reserve currency forever. In fact, it looks like the petrodollar is coming to an end. Finally, what am I doing to protect my savings?

Are you ready? Let’s dive in. First, inflation.

Inflation is still going up! This is unfortunate and unpleasant for the world.

The Fed wants to keep inflation at 2%. But, recently, the PCE index jumped to 6.4%, the highest rate in 40 years.

  • Non-durable goods up 21.6% annualized
  • Food up 16.8% annualized
  • Energy goods and services up 44.4% annualized

CPI is also at a 40-year high.

What does this mean for you and me? It means that our money is melting. If you had $100,000, and you put it under your mattress, in three years time, that money would be worth $51,000 in actual spending. Because asset inflation is increasing at 20% per year.

So, we have to invest in assets that are going up by at least 20% every year. I need to invest in something that is not correlated to the devaluation of the USD due to the Fed money printing. And, for me that is either real estate, land or digital assets, like Bitcoin or Ethereum.

First, we have inflation that is melting our cash. Second, we have a mounting Federal debt. This is going to lead to higher taxes. And, when you combine high inflation with high capital gains taxes, then the stock market starts looking less and less attractive. I cannot make enough profit from buying tech stocks or bank stocks to offset inflation and high capital gains taxes.

Third, we have a problem of confiscation. The Russian invasion of Ukraine was very unfortunate and unpleasant for the world. But, the global response from the western world was to freeze Russia’s assets outside of its borders. Russia has $643 billion in foreign currencies in banks outside of Russia. The western world has frozen it. Now, they are saying that Russia cannot repay its $120 billion loans to Western banks. Well, of course, not. You froze all the Russian bank accounts. How is the country going to repay its loans?

The same thing happened to the Canadian truckers. They were protesting, and the Canadian government decided to freeze their bank accounts. If this can happen in Canada, it can happen anywhere.

Have you ever had your bank account frozen? I recently got a call from my bank when I transferred a large amount of money to my mother. My bank said that they needed to investigate this transfer, as if I was doing something nefarious.

Banks and governments exercise lots of control over our finances. They can freeze your bank account, but they cannot freeze your crypto wallet. Crypto assets cannot be frozen.

  • Inflation is at an all-time high.
  • The Federal reserve is tightening
  • Economic growth is slowing
  • And, Markets are crashing.

The S&P 500 rose 26.9% in 2021. But, the Fed is ready to erase these gains and to destroy the stock market to fight inflation. How far will the Fed go? Are we really looking at six rate hikes this year? If so, what will this do to the stock market?

I am not saying that digital assets are immune from the Fed tightening. But, I am saying that digital assets are more immune than the stock market. Bitcoin was created to be immune to the Fed money printing.

First, inflation is melting our money. Second, taxes are going up. Third, we have to worry about the government freezing our bank accounts. Fourth, the Fed is going to destroy the stock market to fight inflation. Finally, we cannot expect the Petrodollar will last forever. We cannot expect that the USD will be the world’s reserve currency forever.

Ray Dalio in his book, Principles, predicts the pending downfall of every major economy as we know it.

According to Dalio, the changing world order is a cycle. Dominant countries rise. They prosper for a time, and then they lose their competitiveness and decline.

The French Franc was the world’s reserve currency for 100 years, until the French revolution.

The British pound was the dominant for 105 years. From the French Revolution until world war II, the pound dominated.

The US dollar is the world's reserve currency from world war II to the present.

What gets currencies in trouble is that borrowing and spending out paces productivity. This is indicative of the fall. This is what's happening now with the US economy.

Finally, the world is changing . The world is moving into a digital age, where all assets will become digital. What's coming is the internet of value, the digital age, web 3.0.

Don't be someone who misses out on this digital revolution. In the digital age, all valuable assets will be digital assets. And, digital assets will be transferred over the internet and recorded on a blockchain. Value will be transferred on the internet of money in cyberspace.

This is the reason why I invest in digital assets.

To grow your stack, follow this crypto coach.

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