The Federal Reserve’s balance sheet started the year at $4 trillion, is now at $7 trillion and is on its way to $10 trillion.
Where does all this money come from? Well, let’s watch Jerome Powell, the Federal Reserve Chair, explain it.
He admits to flooding the market with liquidity and simply printing money digitally. So yes, with a press of a button trillions get printed.
Don’t be fooled by the stimulus checks; most of this money is going to bail out large companies, banks and to buy bad debt such as junk ETFs. Essentially, what we have here is a central bank, printing trillions of dollars (your future liabilities) and handing them out to large corporations that hired the right lobbyists.
For the last 6-7 years, these corporations have been loading up on cheap debt, and using this money to give back to shareholders through dividends and share buybacks. What happens when the gamble doesn’t pay off? Free money – “Printed digitally”.
In every scenario they win.
This is not capitalism. Capitalism is about the free-market, which is a beautiful thing.
This is corruption and crony capitalism, all sanctioned by the government.
Why did I mention George Floyd?
Do you know why George Floyd found himself under arrest?
Because he was suspected of having tried to buy cigarettes with a counterfeit $20 bill.
And then this
It’s absolutely horrifying. God bless his soul.
This is the face of government
Governments and those who have enough money to hire lobbyists can essentially counterfeit trillions of dollars, which you and your children will have to pay back one way or another through:
- Increased taxation
- Reduced government services
- Some, or all of the above (the most likely scenario)
But God forbid you should get caught with a fake bill! Imprisonment or worse.
Not only America
I don’t mean to pick on America, but the current situation is an astonishing case in point. Don’t believe you’re any better off in Europe – politicians will run your countries into the ground and then use the police against you. Greeks can attest to this, and Italians will soon learn themselves.
Maybe you live in a Gulf monarchy where everything is still pristine and glitzy. Rest assured, it won’t stay that way forever if oil prices remain depressed for an extended period of time. The despots will inevitably turn on the people. They always have and always will.
Or perhaps you reside in a high-end gated community somewhere in Africa? Your gates and walls will protect you from thugs, but not from irresponsible government. If anything, you’ll be the main target.
Take an honest look around you.
- Does this money printing feel like sound economic management?
- How will the tens of millions of unemployed people react? Will they grow accustomed to free money and demand more, while politicians capitulate to remain in power?
- How will people in your country react when they look at you and see that you are better off than them? Will they demand more wealth redistribution?
- All of this while state surveillance and power have grown exponentially with Covid measures.
You don’t need to answer these out-loud. Just think about it and be honest with yourself.
Don’t panic, but be prepared
If you don’t like how you feel after reflecting on the above, then you might want to have some sort of Plan B.
In a world of negative interest rates and worrying political developments, being prepared not only matters more, but has a lower opportunity cost.
- Invest in precious metals.
- Get an offshore brokerage account or quality offshore bank account to not be all-in in your country.
- Buy international real estate. Now is probably not the best time to buy real estate, as prices are likely to fall. But if you can get a good deal and a residency permit in the process for your Plan B, then why not?
- Invest in little known stock markets that have been barely impacted by the crisis and that have stocks with dividends yields of 15%.
There are still countless opportunities in this world. You just need to know where to look.
Don’t get me wrong – I’m an optimist.
But I’m also a realist. My optimism stems from the fact that I grab opportunities as I see them.
To a World of Opportunities,
The Wandering Investor