I had a friend of mine ask me a question that I needed some time to think about and this is my answer.
We are both in similar situations financially and age-wise, so we are generally on the same page. I would also like to point out that any thoughts that I may present here would apply generally to everyone at any age.
The question: “We all hear about the economy falling apart and we can see it but is it really affecting you- if so, how”?
Initially the question took me by surprise, so I didn’t have a great answer. Like him, I am able to easily afford the inflation that is taking place -SO FAR. The reality is that I have a strong balance sheet with NO DEBT and an income that is more than sufficient. Again -SO FAR.
Unfortunately for many, they have been forced into going into debt to keep the lifestyle they have become accustomed to. Why? Because prices have risen so substantially, and wages are not keeping up.
I got quite a surprise on a Youtube video where a young (20 something) woman was complaining about not wanting to work. I expected to hear a snowflake story but got quite a surprise when she said that she works and works hard- as many of her friends do. Some have multiple jobs just to pay rent, eat and if they are fortunate enough to afford private transportation. She said that they don’t want to work because they work hard and can’t afford to “do fun things”, can barely pay the rent and buy food.
Remember, that most problems start with the weakest in society and work their way up the food chain. More and more people are getting hammered by inflation and this is simply a manifestation of a dying currency. Basically, the young people are seeing, for themselves, that they are working harder and harder and getting nowhere as debts and deficits rise and the answer is to conjure up some more cash out of nowhere and pretend that we are still prosperous. This ultimately leads to more inflation and lower living standards. DEBT DOES NOT EQUAL prosperity- it equals SERVITUDE.
Another important point is that all of this new debt and dollars, Yen, Euros, etc. have NO COLLATERAL to back it up. I have often asked what happens when the assets used as collateral fall in value, but the debt remains? Possibly more important is what happens when someone can’t pay their debts, their collateral is liquidated or changes hands, and the debts are so large that the equity only covers a small fraction of the debt? Who is eating that loss? WHAT IS THE VALUE OF A PROMISE THAT CANNOT OR WILL NOT BE KEPT?
It is likely just a matter of time before all but the top 1% will not only feel the pinch of higher prices but will also likely see major losses on those “assets” that have a promise to repay attached.
This affects me in a way that makes me leery of retirement because of the fragile state of our currency, the promise of a CBDC that can expire or be programmed to work or not work at the whim of those “in charge” and the uncertainty surrounding the economy and national debt.
Personally, I am debt-free BUT the government has me on the hook for around $1 MILLION. You too, as well as every one of your family members! This includes Federal debt and unfunded liabilities.
Now as interest rates are rising, and the debts are mounting MANY are in deeper trouble than they are aware of. They are being fed propaganda 24/7 that all is well, and inflation won’t last. Interest rates will come down and the economy will boom again.
Don’t hold your breath. The likelihood of this economy even growing at all without MASSIVE government spending (more debt) is a fantasy. Even when GDP numbers are released, they announce that growth slowed because defense spending was down. We are in a situation where we have no choices other than to inflate (destroy the currency) or allow a catastrophic deflation by changing course. It appears that either way we are in for some major damage before we can expect a rebound and rebirth of our economy. Keep in mind the words of Ludwig von Mises that have proven true throughout history “There is no means of avoiding the final collapse of a boom brought about by credit expansion”. This is the largest of all time.
There are many ways that this is affecting me even though it is hard to see unless you sit down and think about it. The frog in the boiling pot came to mind. Since things have been going in the wrong direction for decades the changes have been minor enough (outside of 2001-2002 and 2007-2009 and even then massive interventions took place to mask the actual damage done) so that the masses have remained largely clueless.
If there were large gyrations everyone would notice but that appears to be being managed. Prices have risen relentlessly for the past 52 years since we left the anchor of a gold standard. While everyone noticed in the 1970s, those “in charge” did what they could (18% interest rates) to bring inflation down. We haven’t seen a real DEFLATION in all of this time. It is important to understand that if there is not a deflation then all of the inflation that has manifested itself is still intact and is compounding from the higher amount. Keep that in mind when you hear inflation is coming down. That is just a statement that the rate of dollar debasement is rising slower than it was previously, but the inflation is still rising. Wages have NOT been keeping up.
Another way that this is affecting me is that many of our great-paying jobs have been shipped overseas. This goes for manufacturing AND services. How many times do I wait 15 minutes to an hour to get information only to find out that I can’t understand a word the “service provider” says? How come EVERYDAY there are more calls coming in than usual to explain the long wait times and LACK of service?
This is all about corporate profits above service and all else. How many hundreds of thousands of people have lost their jobs to lower-paid and lower qualified competition? This leads to less economic activity, less retirement savings and less funds to invest for our futures.
Another way we all suffer is to see the rampant crime and violence taking place. Because of a weaker currency, things that were easily paid for in the past like mental health facilities, police, etc. have now become luxuries. Many are discouraged because of the cost to get an education to get ahead is prohibitive for many with no guarantee of any future results.
Too many young people today are debt-slaves before even getting their careers off the ground. In many cases this leads to a frustrating future because the indebted can’t necessarily do what they love (and likely become great at it) because they have to earn enough to cover not only living expenses but also the debt albatross they are carrying.
Another problem is litigation. As things get tougher many see a way to “get ahead” would be to sue someone else. Many use car accidents, slip and falls and all other manners of being a victim to get a lump sum of “money”. Many look at these suits as a lottery ticket. In this case, as the insurance companies do most of the paying- so we ALL pay- just indirectly.
Since this is getting a little long, I will send out PART 2 shortly.
*TO BE CONTINUED
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