NOTE FROM DAVID:
This post was originally written in October 2016 – and I never published it. Part of me was wondering if I should… because it isn’t completely “on topic”. But, as I was recently going through my post archives, I found it. And decided to publish it anyway.
The interesting thing is that even though we are now almost 3 years after it was originally written, barely anything has changed. If anything, it is just more pronounced now.
Simply put, it helps to be aware of the macroeconomic environment that we work in. So, while this post is a bit different than my usual post here at the Blog Marketing Academy, I’m going out on a limb… and hit that “Publish” button. 🙂
This post is going to be a little bit different than my usual fare.
Today, I want to talk not about making money… but keeping money. What do you DO with the money you make? How do you keep it?
Today, I wanted to share some thoughts with you about money, how it works, our economy… and how I think it affects all of us.
And to be clear, I think this applies to everybody… not just people with established online businesses. Even if you have a job, this applies.
Table Of Contents
None Of Our Businesses (Or Jobs) Exist In A Vacuum
A few days ago, I put on my full-on dork hat and spent the better part of a day just researching the subject of money.
How does money really work? How does it come into being? And what is happening to this thing we call money long term?
I’m a huge believer that knowledge gives you power. Without knowledge, it is hard to take control. And the subject of money is one which a minority of people truly understand.
What if we were all working in order to generate something which was, itself, declining in value? (Hint: We are.)
See, our businesses operate in the context of the larger economy. This economy has a lot of moving parts and, in essence, our businesses operate kind of like a boat out at sea. You have a trajectory as you drive that boat, however the direction of the boat is most certainly influenced by the motion of the ocean. Things are constantly ebbing and flowing.
If you put a boat into gear in a moving river, it is technically going forward. However, if the water current is pushing backwards, are you really going forward? If the current is strong, you’re going backwards despite working hard to push forward.
The Loss Of Purchasing Power
My older readers likely remember the days where things were just cheaper. I remember being told by my grandparents how they could buy bread for a nickel, etc. But, you find this across the board…
- The average price of a home in 1960 was $12,700. In 2013… it was $289,500.
- The average price of a car in 1960 was $2,600. In 2013, it was $31,352.
- The average price of a loaf of bread in 1960 was 22 cents. In 2013, it was $1.98.
Now, there are a lot of factors that go into all this. Markets change. Technology changes.
But, there is also inflation and the falling value of the dollar.
The very dollar that we all work so hard to make is dropping in value. The reason it is dropping in value is because the central banks continue to generate more dollars out of thin air. When currency supply increases, you get inflation.
Now, our incomes also go up so, to a degree, things seem to scale. Otherwise, the economy would simply fail. But, it doesn’t all scale at the same rate.
For instance, in 1960, the average new home would cost roughly 2 years of pay for the average US worker. Today, it would cost more than 6X the average annual salary to buy a new home. So, homes have simply gotten more expensive.
The cost of living has increased. More and more people are using debt to do things. And what savings people do have, they often keep in the bank or a 401(k) or an IRA. And while it is sitting in the form of the dollar, it is in an asset which is inherently losing purchasing power.
A Background On Money And How It Works
Below, I’m going to share some of my own thoughts on this, however during this dork monetary research day I mentioned, I came across a Youtube series by Mike Maloney. It is called The Hidden Secrets of Money.
Now, what Mike talks about in this series isn’t anything new necessarily. However, I think he does a superb job of explaining things. In fact, as an instructor myself, I really appreciate what he has done to make a complicated topic quite approachable.
This isn’t political, to be clear. The only thing to keep in mind is that Mike Maloney is a dealer of gold and silver, so one could say (correctly so) that there is some financial incentive for him to say some of the things he says. However, I would go in with an open mind and just listen to what he says. I think it is a great series. Everything he says is backed up by data and history.
NOTE: I don’t expect you will watch this whole series now. It is 7 videos long, as of this writing. However, I highly encourage you to watch it as time allows. It is on Youtube, so you can even pull it up on your mobile device, or your TV via Apple TV, Roku, Amazon, etc.
There’s a decent chance that this is new to you. Most people don’t think about it. Like I said, I’m a bit of a dork. 😉
But, my hope is that it will get you thinking about this thing we call money.
My Own Thoughts On The Economy And Our Dollar
The US economy is strong, but it is weakening. And I think we’re going into a time of change in our world and that it will certainly affect our US dollar.
Politicians talk about the government debt, which sits at about $20 trillion now and growing faster than it ever has before. But, that debt is nothing compared to the unfunded liabilities on the government balance sheets. Our social programs are not funded by a longshot. In 2016, just the interest on public debt will be $432 billion. Just on interest… never mind actual costs of running the government. To call this unsustainable doesn’t even cut it.
But, then you go outside of the public sector and into the private sector. We have a massive debt bubble in student loans. Massive bubble in auto loans. The big banks themselves have over-extended themselves by buying up all this bad debt (basically doubling down on all the mistakes that led to the 2008 crash), so basically many of the big banks have liabilities in the hundreds of trillions of dollars. As I write this, Deutsche Bank in Germany is in dire straights and many believe it may collapse like Lehman Brothers.
Also, our current world monetary system relies on the US dollar as the reserve currency. This means that other countries have been using the dollar to trade. Thing is, those days are numbered as well because these other countries are increasingly seeing the US dollar as an unreliable currency. Countries in the east are now beginning to trade directly – bypassing the dollar. If the US dollar loses reserve status, all these countries will begin to shed the dollars they have. This increases supply (possibly quickly) and can lead to very quick inflation.
So basically, what we have is an economy which has the appearance of humming along somewhat normally, but in reality… it is operating based on money that doesn’t exist. It is operating based on zero-percent interest rates from the Federal Reserve that simply cannot last.
The US economy is like a drug addict that is only functional as long as he has a direct IV drip of drugs right into the blood system. Take the IV out and he’ll go into withdrawal.
It won’t last. We are violating basic natural laws of economics, but it simply won’t keep going like this.
Our dollar has been decreasing in value for some time now. And it will get much worse.
In due time, all fiat currencies return to their inherent value of zero. It is a 100% historical record. The US dollar will be no different.
Thinking Long Term With Your Money
Now, I want to preface everything with me making VERY clear that I am not a financial adviser. I would never even pretend to be.
At the same time, I have no financial interest at all to steer you one way or the other. I’m simply giving you my opinion, based on my own research. It shapes how I am thinking about my own finances, and for what it is worth, I am writing this post today simply because I want to help people.
For me personally, I am thinking about ways to preserve wealth long term.
As an online entrepreneur, I think that I am in a position where I have flexibility. I can adapt to things which happen. And I can operate a business internationally.
As an online entrepreneur, I realize that my income is based solely on how much value I can bring to others around the world. I’m not capped by anything other than my own ability.
Once I have earned money, however, I am thinking about ways to invest it in order to keep it through what I believe is going to be a large geopolitical and economic change in the United States and across the world.
For me, I look to not use monetary vehicles that keep wealth in the form of the US dollar. I would prefer to put money into things I think will maintain lasting value. Things like gold and silver, real estate, etc. Basically, things that are physical and will have value no matter what.
As a techie guy myself, I’m also looking into Bitcoin. Interesting new currency, although still volatile so you must exercise caution.
I’m avoiding the stock market because I believe it is in a massive bubble right now. The market is going to see major declines, in my opinion. But, if I already had a bunch of money in the market, I would be looking to place it in companies which I think will stand the test of time. Actually, I’d probably sell my stock and go into safe havens like gold. Then return to the stock market after it has dropped and start picking up bargains. There will be plenty.
One thing I would not do is rely solely on things like 401(k)’s or retirement plans because I simply don’t think the value of these plans will remain as they are today.
Doom And Gloom?
Not at all! 🙂 I am quite optimistic about the future as a whole. I think we have a lot of awesome things ahead of us.
I think I am looking at a realistic picture of a period of great adjustment and reset that we must go through, but that it will be nice on the other end. It is the effects of a dying system that must be swept away to make way for the new.
We live in a time of massive opportunity. The fact that any of us can think up and grow a business online, work it from our homes, and literally have a worldwide market. That is AWESOME.
Our technology has never been better. Medicine is advancing. Computers and technology are advancing. And you look to some of the entrepreneurial efforts going on and you can’t help but be in awe. I truly believe it is entrepreneurs who change this world.
As new as this whole online business thing is, though, we operate in an economic world which is about to go through some major changes as it shifts from one paradigm to another. I don’t know what that paradigm will be… but it will be different than how we are thinking about things today. That I believe.
With your job and your online business, I would recommend that you cast your eye on the long term. Understand the bigger picture. Look outside the box. And then make the moves that you think are best for you.
But, do it with eyes wide open.
5 Recommendations, As I See Things
- Institute a personal policy of avoiding any new debt.
- Work to pay off any debt that you have with heightened priority, starting with your higher interest loans. You may even consider refinancing certain loans, because the interest rates will likely not get any lower than they are today.
- Put some of your money into physical assets and not cash. Gold and silver have maintained value forever and typically go up in times of confusion. Real estate will always have value, however I expect a drop in values again. I would avoid stocks for now. And cryptocurrencies like Bitcoin have some potential.
- Place value on your own skills and work to improve those skills to increase your value to others. Your skills and competence is what gives you ultimate power to generate wealth.
- If you have a day job but desire to build a side business online, there is no better time. Get started.
See, I told you this post was quite different than what we usually do. 🙂