The money printer is operational again, so it's important to understand the implications of this development.
Money printing involves distributing small amounts of cash to the public, which distracts from the larger issue: major corporations receiving significantly more. This leads to inflation, harming those with less and benefiting those with more.
To explain: Part 1 is Money.
We can skip the extensive history of money and focus on the Specie Payment Resumption Act from 1879, when the U.S. adopted a "Gold standard," linking its money supply to its gold reserves. The rule was simple: to print more money, the government needed more gold. This system lasted a few decades, ending locally in 1933 under Roosevelt in response to the Great Depression and internationally in 1971 with Nixon.
Many only reference the latter date as the official end, although the reality is it ceased earlier. Once the gold standard was abandoned, money printing was unrestricted. The government can print as much as needed, and this process continues today at a high rate.
What occurs when there's a need to fund a war without adequate tax revenue? Print more money. Want to provide incentives to businesses? Print. Need to bail out banks? Print. Looking to influence votes? Print. The question arises: have governments discovered a way to create endless money, or are there downsides to this approach?
Consider the scenario of having the only apple tree in your village, then suddenly everyone finds their own apple tree. Your apples lose value due to the increased supply. No one will trade pies for apples anymore, as apples are no longer rare. They become less valuable because they are easily produced.
Part 2 examines how everything is valued.
Valuation is structured like this: above the line is the asset measured in value units, and below the line is the accounting unit, like the dollar. For instance, a house might be valued as 1,000 units of value divided by $1 USD, yielding a worth of $1,000. But if the dollar depreciates, it could take $2 to purchase one unit of value. The equation then becomes 1,000 units of value divided by $0.5, resulting in a $2,000 valuation for the house. This doubling occurred because the dollar became less valuable and didn't buy what it once did. This principle applies universally.
As fiat money (like the USD) loses value due to excessive printing, hard assets become increasingly valuable. This raises a crucial question: why are the wealthy benefiting while the poor struggle?
Part 3 addresses the way out.
It’s no surprise that the wealthy own the majority of hard assets. In the U.S., for example, 10% of the population possesses 70% of the total wealth. Considering this statistic globally, the disparity is even more pronounced. The rich control real estate, stocks, cryptocurrencies, and businesses—all hard assets. The less affluent are often left renting these assets, striving for upward mobility through education and hard work. This strategy was effective in thriving economies like the 1970s and 1980s, but does it still hold true?
In recent times, governments have ramped up money printing, causing inflation to soar. Meanwhile, wages for the middle and lower classes have stagnated. While families could save a significant amount 50 years ago, that is no longer the case.
