A year ago, almost this month, the new news was all about this novel virus. We all remember the fear, the unknowns, and yes, the forecasted imminent danger. We all did our part on the local level to stay safe. Governments around the world started pumping benefits and money into the world economies to accommodate the economic shutdowns.
Science teaches for every action there is an equal and opposite reaction. The action was governments printing trillion of paper dollars out of thin air. The reaction is why the new news is inflation, silver, gold and bitcoin. Here is how they work together.
Fiat currency: Fiat in Latin means “let it be done”. Why do we trade paper for goods and services? Because printed on that paper is “This note is legal tender for all debts public and private”. When the government floods the money supply with trillions of new money, money is worth less. In economics we call this currency devaluation. For something to be worth a lot it has to be scarce. Land is somewhat scare, so is oil, food can be, yet air is not. That’s why the only place you have to pay for air is at the gas station to fill up your tires!
Expect the byproduct of these rounds of “free money”, stimulus, the $2,400 direct deposited into checking accounts across America to not be free. At best it is stealing from the taxpayers. At worst its stealing from future generations. Inflation will be the bill. Oil, food, the cost of buying a home (things that are scarce) will rise in costs.
That is why gold, silver and bitcoin are weaving their way into more and more conversations. These three things have one thing in common: Scarcity. They all three increase in supply at about 2% per year. We just can’t simply make more gold and silver. It has to be mined and refined. Bitcoin is an opensource (publicly validated ledger) internet native money that has a stated and published supply increase. A centralized government can’t simply print more gold, silver or bitcoin.
One of the fundamentals of money is that it is a store of value. Watch for dollars to hold less and less of a store of value and things that are scare such as land/homes, gold, silver, bitcoin receive more and more attention. It begs the question, are these things really going up in value, or is the dollar simply going down in value, or is it both?
At GuideSpring Wealth Strategies, we welcome any conversations you’d like to have to learn more on how to protect yourself in this new news world.