How Inflation Is Stealing Your Wealth: The Audacious Tool To Fight the Wrong Narrative
Common people don’t usually understand high they are losing purchasing power, but they should learn it.
Inflation is when you’re money worth less over time.
Goods and services go up concerning your money; that’s called inflation. Deflation is the opposite. Your money worth more over time, and goods and services go down against your money’s value.
The entire world we know today is based on an inflationary system. Meaning, the money is devalued, with goods and services going up over time.
For example, my parent’s house grew up in value over time, and they paid it back with cheaper money, and that system sounds normal.
Yet, one day, the inflationary system started to fight against technology. And that’s when things started to get different.
What does technology innovation really do to the monetary system?
Technology does more for less.
No CEO from any tech company builds technological products to the markets for prices to get higher. They do it to give you more for less.
But what happens when we can’t count on a system of growth and inflation anymore? What if a more powerful force renders most of our efforts to create inflation irrelevant? And what if, by desperately trying to cling to an outdated inflationary model, we drive more wealth inequality, more polarization, and more discord into our societies?- Jeff Booth in The Price of Tomorrow
Focus on being productive instead of busy.
Goldman Sachs contributed to one of the worst financial crises in our recent history. American citizens contributed 125 billion dollars to rescue Goldman Sachs. Yet, in 2009, Lloyd Blankfein, president-executive of GS, said:
Goldman Sachs employees are among the most productive in the world.
The bank laid off more than 3,000 employees in the two most difficult years of the Great Recession. Goldman Sachs and some of its competitors were fined. But despite everything, no one was arrested, and the party continued, betting against the same speculative instruments they had created.
Until the 60s, banks were not considered “productive” for the economy.
It was seen as important for transferring existing wealth, but not for creating new wealth. Indeed, economists were so convinced of the merely facilitating role of the financial sector that they did not even include most of the services that banks provided, such as taking deposits and making loans, in their calculations of the number of goods and services produced by the economy.- Mariana Mazzucato, professor at the University College.
However, in the 70s, things started to change. National accountabilities began to include the financial sector into GDPs calculations. And coincidently, the deregulation of the entire financial system started, loosening controls on how much banks could lend, what interest rates they could charge, and what products they could sell.
That was the first day of a party that hasn’t ended yet.
Today, the financial industry outpaced the growth of the non-financial economy, such as the production industry. The financialization of the entire economy brought in dubious activities, such as the famous stock buybacks.
I know it’s debatable, but in a fading economy, with the financial system producing more inequalities than ever, I assure you that these issues are more important than we can imagine.
The discussion about the value of everything and the production chain has to return to the negotiating table. A better example than the last G7 meeting is impossible.
G7 leaders just recently agreed on a 15% minimum global tax rate for big tech companies.
German finance minister Olaf Scholz said the deal would “change the world.”
He said a 15% rate would help pay back debts that have built up during the pandemic — and that he was “absolutely confident” there would be an agreement.
“If we agree on the minimum taxation for corporates, this will help to go out of this race to the bottom we see with taxes today,” he told the BBC.
“And this will help the countries we live in to finance their tasks, and — especially after the Covid crisis and all the money we spent — to defend the health of the people, and to defend the economy.”- Faisal Islam in bbc.com.
The debts keeping rising and the bond markets getting pressured, it’s time to start raising taxes on those who have always benefited from the system. It seems a desperate initiative, doesn’t it?
Yet, these companies benefited from state benefits since the early days. And the narrative that businessmen are good and the State is bad is, to say the least, inappropriate.
In reality, these themes will be discussed more today than in recent decades. In fact, when Google shares with us the narrative that our citizen data is in better hands at Google than it is at government hands, let the Devil come and choose.
Both options are inadequate. The data must belong to the citizens, period.
That’s why a new industry is creating wallets and tokens.
Even the ancient Plato recognized that narratives create the character, the culture, and the behavioral ecosystem of a society:
Our first task is to supervise the production of stories and choose only the ones we deem appropriate, rejecting the rest. We will envision mothers and nannies telling children the stories of our choice and, through them, shaping their minds and characters rather than their bodies. We will have to repudiate most of the stories that are told today.
Why did we believe in this straightforward narrative of the bad against the good, the private sector against the public sector?
What if this narrative is wrong? What if there is no scientific proof that this narrative has any sense.
Can the next ecosystem create a more equal, decentralized, and eco-friendly world? Big Bill still whisper in my ear, almost 100 years from the past:
The barbaric gold barons did not find the gold, they did not extract the gold, they did not work the gold, but, by some strange alchemy, all the gold belongs to them.- Big Bill Haywood, founder of the first industrial union in the US, 1929
The dollar is currently the principal reserve currency in the world.
For the last 4 decades, the dollar standard worked pretty well for the western world. Unfortunately, it didn’t for the rest of the world. At least, not the same way.
Why do I want my money to worth less each year? This question deserves an answer, but no one has ever asked it or has ever answered it.
No single person on earth would like their money to worth less over time. But when we see it in our system, we believe it’s for a higher purpose, even when we don’t really understand what purpose it is.
Inflation is a hidden tax, but this tax affects mainly the most vulnerable citizens.
For someone like me, a real estate investor, it’s a win/win situation. The debts get less valued, and my assets go up; easy game, isn’t it?
What about my friends, my family? They don’t know about investments; they don’t know about the stock market, the real estate market, the gold market, or the Bitcoin market.
Usually, they have jobs, families, and bills to pay. I’m talking about 99% of my country’s population, 99% of Europe’s population, 99% of the US population, and 99.9% of developed country’s citizens.
When the dollar is devalued, people that have assets are automatically benefiting from the system. Those who don’t have, are paying the more brutal price.
Devaluating currencies is stealing lifetime to 99% of the population. Why? Because time is money, and money is time. You need eight hours a day to work your ass for your company to pay you, right? So, you are paid for your time, your energy, your knowledge, and your dedication.
However, who says that inflation is required?
The problem right now is if Biden tomorrow go to CNBC and says:
Guys, we’re going to stop printing money!
Suddenly, the banking system would collapse, the institutions like hospitals, schools, everything would collapse. So, it’s too late for governments to stop printing money. It wouldn’t work, and it would be chaos in the streets.
Central banks and governments are tucked in a corner.
You’re in a macro deflationary world with central banks trying to stop it. And wrong incentives on the existing system turned it into a frenetic spiral of pumping easy money.
The Great Recession was our last great opportunity to let deflation take place. It would be painful and unpopular, but it would be a plan B for what we see right now.
It’s challenging to imagine a world where things would get cheaper, your wages would fall, but you would be able to buy more stuff for less. And it’s difficult to imagine because we never worked under that premise.
Technology is not moving slower, so the difference between the deflationary pressure and the inflationary balloon will exponentially increase- until it explodes.
Nobody is a bad actor here. We’re just in a system that can’t fix itself, but it’s doing everything to survive until it bursts. And that day will come like the 2008 crash, or the 2000 bubble did. It will be in the most fashionable way when nobody expects.
Final Thoughts
Why didn’t we ask these questions before?
Why didn’t we manage to ask about inflation 10 or 20 years before? Because technology deflation moves quietly slow.
Debts are rising, but they didn’t start increasing last year or last decade. Deficits have been slowly rising over the years at a steady pace.
If we think about artificial intelligence, we’re talking now, but for decades scientists and developers working at a quietly slow pace, and then, suddenly, we almost have self-driving cars picking people at home and driving them wherever they want to go.
History taught us to reset a system, we have wars and revolutions. Can we shift this time without those two options?
This monetary system that we live in can perpetuate itself until it loses morality, political radicalization, or central banker’s absolute control. Whichever the way, it will be painful.
About morality, look what’s happening in the 5th most prosperous state in the world, California?
Far from only clustering in the tent cities of San Francisco, or along Los Angeles’ skid row, both in California, homelessness is a national problem that touches every state in the union. Yes, even that darling metropolis Austin, Texas, which has been singled out as the rightful heir to the riches squandered by California’s inability to manage its own crisis, is no exception.- Coby Lefkowitz in We Can End Homelessness Today. We Just Don’t Want To.
About ESG (Environmental, Social, Governance) concerns, do you really think an inflationary system will fix climate change when you’re in a fast growth and a fast demanding system?
We don’t know what the future holds, but wars and revolutions are things that worry the most. We don’t want that to happen anymore. But as history taught us, there never has been a significant shift without painful wars.
The Bitcoin network’s most robust digital defense makes it potentially the most powerful reserve globally. From a violent analog world to a peaceful digital one, the Bitcoin network can be the first one not to use violent episodes in the history of humankind.
Having an impenetrable digital network that makes its defense the most offensive is an innovative weapon worldwide.
Can it be true?
This article is for informational purposes only, it should not be considered Financial or Legal Advice. Consult a financial professional before making any major financial decisions.
Sign up for my email list and join the happiest readers on Medium. (This is where you get exclusive access to my daily activities, experiences, and daily thoughts)