2020 has been nothing but a challenge to countries worldwide. As this pandemic languishes on, let's take a look at some numbers to see how this has affected the United States. As businesses shut down across the U.S. this caused a surge in unemployment rates, reaching around 14.7%. Earlier this year the unemployment rate was at 3.5% which is nearly 1/4th of what it was during the middle of the shutdown1. As the country begins to reopen unemployment rates have begun to decrease and are at 10.2% as of July, but this doesn’t mean we are in the clear yet1. Unemployment rates and inflation go hand and hand and can be a sign of the purchasing power of U.S. currency.
With unemployment rates being the highest they have ever been, the government's stimulus package was the largest emergency relief bill in history at $2 trillion dollars2. As the stock market began to crash, the Federal Reserve decided to inject an additional $1.5 trillion dollars into the economy3. Between that and extending unemployment benefits, the United States has been printing more money that it cannot afford. You’ve heard the saying that U.S. dollars are backed by “the full faith and credit” of the United States government. Did you catch the word “faith”?
One of the byproducts of printing paper money is the loss of faith in our paper money being a store of value. The value of the dollar has been dropping. Combine that with a surge in real assets such as gold and silver means there are trending forecasts toward rising inflation. There are certain investments that are suited for keeping pace with inflation. This may be one reason the stock market is going up in spite of our lackluster economic growth.
In addition to battling future inflation, we will be facing much higher taxes.
Nothing is free. $3.5-$4 trillion dollars spent fighting COVID will bring ramifications.
- How secure is your retirement plan without a hedge against inflation?
- What are you investing in to keep the value of your purchasing power?
- Even with the best investment plan, without a tax strategy, how secure is that plan?
If you would like to have a conversation about any of the questions above please use the scheduling button below.