Money-printing machines are back in full swing.
And the way it looks, they’ll be running for quite a while.
Central banks around the world have printed $15 trillion since the Great Recession. Isn’t it enough already?
If that level of money pumped into the global marketplace hasn’t been able to revive the economy, then perhaps printing isn’t the answer?
With the wealth gap widening (it has reached its highest level since the 1930s), I can’t help but wonder, who are the central banks really serving?
The people or the wealthy elite?
But I don’t want to sound like a conspiracy theorist. I don’t believe the Feds are working for the elite.
The truth is, they are trying to serve the people. They just don’t know how.
As with any government institution, central banks are slow to adapt. They cling to decades-old beliefs and theories and fail to recognize that we live in a new world.
They believe that printing money will eventually spark inflation.
Alas, inflation levels remain the same.
Or does it?
You Can’t Print Money Without Creating Inflation
Perhaps inflation has been with us all along. Maybe the Feds just haven’t been measuring it correctly.
If I give you 100 Lahardian dollars… and then print an additional 100… how much is your money really worth?
50 Lahardian dollars, right?
It’s called inflation. And it works the same way with central banks.
I’m sure you’re aware that money printing created two massive asset bubbles, one in the stock market, the other in property markets.
While the former has little effect on the cost of living, you can’t say the same about the latter. We all need a roof over our heads. And the price of that roof has drastically increased in the last seven years—by 44%, or 5.42% per year, to be exact.
When you remember that the average American spends 37% of his budget on housing, the official low-inflation numbers just don’t add up.
CPI And The Fallacy Of Composition
The Consumer Price Index (CPI) is an outdated measurement tool.
Yet, for some reason, the Feds consider it the ultimate barometer.
First, it doesn’t correctly calculate housing costs. Instead of focusing on new rent prices, CPI looks at pre-existing ones. These always lag the market.
Second, it fails to consider the effects of technological innovation, which drives down the prices of goods.
Unfortunately, for now, CPI remains the central banks’ favorite inflation indicator. Meaning, you can expect them to keep printing more money… and for the real inflation rate to keep increasing.
Sooner or later, though, people are going to realize what is going on. By that time, hyperinflation could be biting at your hard-earned dollars.
In this scenario, it’s best to keep your money in gold and real estate. Both should provide both appreciation and protection in the current climate.