The Value of Money

The Crypto world still fascinates me, most likely because it has given me cause to rethink the future of money. From my reckoning, the world is in uncharted waters in respect to money and how we need to think about it.

Governments seem to recognise that too as they keep printing cash to keep the economy alive. It's like bringing more vodka to breakfast the morning after a massive party. It may delay the hangover but it won't do you any good in the long run.

But governments don't care about the long run. They have rising unemployment and huge national, corporate and personal debt  levels to think about. If they turn the money printing off, many will sink under the weight of what they owe.

That means government needs inflation by whatever means possible. This will effectively reduce the real value of money owed as each dollar has less purchasing power.

As someone who is super cautious about the use of debt, it is those who are using maximum leverage to accumulate real assets that will likely reap the benefits. As mentioned previously, this will widen the divide between the haves and have nots.

So while it seems folly to purchase already overvalued assets, it is likely they'll become even more overvalued in years ahead.

Money printing (or the digital equivalent)  suggests it's a losing proposition to keep cash. Far better to purchase anything that is scarce and useful while keeping just enough in reserve for emergencies.

At some level, this may entail large asset purchases but even small choices can make a difference. Bulk purchases of things you need and use  (soap, toothpaste etc) can not only save you money now but can also protect you from price rises down the track.

Done prudently, this can provide a very strong return on your investment. Almost certainly it will be better than keeping the devaluing dollars stashed under your mattress.

In essence, barring a calamity, the cash you have on hand is not worth much more than short term peace of mind.

This approach then causes one to consider what may happen after the inflation boom. The rich/poor divergence will have grown and I suspect that's when the equality and fairness doctrine will become even more dominant.

Once again, government will be forced to respond and the most likely way is via increased taxes .

Historically, these are targeted at the wealthy via their fixed assets because these taxes are the most difficult to avoid.

In ancient Rome, the prohibitive property taxes eventually led to people walking away from their properties because they couldn't afford to pay them. In modern days, many wealthy Americans are fleeing New York to move to lower tax jurisdictions like Florida.

In Australia, where land tax on investment property is already in place, changing the rate or revaluing the property is an easy means of raising revenue. The owner is on the hook until they sell it and then the new owner still has to pay.

I don't agree with that approach but I do think it is coming our way - because it is easy for government to do.

When that starts to happen, the wiser heads will likely move their investments into more transportable assets that are more difficult to tax. That could include crypto currency, gold and rare art.

It's clear to me that we are on the cusp of a brave new world that will reshape the West for decades to come. Our financial future will depend on how we react to the inevitable changes that are coming our way.