Time is money. Put differently, the money in your wallet represents time; it is stored human labor. What gives money value is its scarcity, whether real or perceived. But the scarcest resource is not money; it is actually human time. Those who have achieved ultimate financial success understand this point well, especially as they age:
Money has no utility to me. Time has utility to me. —Warren Buffett
What is it that we seek when it comes to finances? Once you get past the luxury toys that new money often chases, when pushed, I think what we ultimately seek is freedom. Freedom from having to do something that takes you away from what you actually want to do, or perhaps what you’re called to do. Freedom from working 40, 50, 60 hours a week for decades, sacrificing the prime of your life, for something you would not choose to do otherwise. Ultimately, we desire freedom to choose how to spend our time in whatever way we choose.
It is for this reason that I find the pillaging of time by those in power to be a particularly profound injustice. And the most insidious type of pillaging is inflation, for the main reason that it is sneaky and poorly understood. No one really notices it, or even understands why we’re supposed to believe higher prices every year is a good thing, especially when technology and efficiency are responsible for massively pushing costs and prices down.
Recently, the Federal Reserve has announced a major policy shift, from trying to prevent inflation to trying to prevent deflation, and as a result will target higher inflation. The recent balance sheet expansion of over $3 Trillion by the Federal Reserve has had the effect of increasing wealth inequality, mainly by inflating asset prices such as stocks and real estate (via artificially suppressed interest rates).
“We are certainly mindful that higher prices for essential items, such as food, gasoline, and shelter, add to the burdens faced by many families, especially those struggling with lost jobs and incomes,” Mr. Powell said. “However, inflation that is persistently too low can pose serious risks to the economy.” —Fed Chair J Powell
Meanwhile, the Fed claims they are struggling to keep inflation above 2%, but this is using their own twisted definition of inflation, which measures things like TVs, computers, and other things that have benefited from the deflationary effects of technology and globalization. Most Americans who need to pay for housing, healthcare, education, childcare and other necessities intuitively feel that number to be closer to 5-10% annually. The Chapwood Index is a fascinating counterpoint to the traditional inflation measures, giving credence to what most of us already feel to be true.
For those with hard assets, such as real estate, equities, gold, or bitcoin, rising inflation has been a tailwind, pushing prices into the stratosphere, even as small and mid sized businesses fail, and unemployment goes off the charts. I suspect this trend will continue, leading to a windfall for large corporations and households with a healthy amount of assets. The Fed is driving an enormous wedge between the haves and the have-nots. At some point I expect the tide to turn, from loose monetary policy, which helps the asset owners, to loose fiscal policy via UBI, student loan forgiveness, and additional household-focused stimulus packages.
For now, those without assets, a group that necessarily includes the poor, get screwed. Those who are living paycheck to paycheck will see rising expenses, but not rising equity to counterbalance that. They will find themselves trapped, running faster and faster on a treadmill just to stand still. It is their fault, they are told, because they don’t save enough, or were too risk averse to buy equities or a home.
In fact, some may have their savings all in cash, waiting for the day they can buy their first home. But inflation means their cash is losing value, while the value of their future home keeps running away from them. And because there no longer remains a tenable risk-free rate vehicle (e.g., boring savings accounts or bonds), they are forced to find increasingly risky investments to catch up.
To be clear, this appears to be an intentional design of the system, based on the Fed’s actions. Without projecting intent on the Fed, what is happening is a deep injustice that is keeping the poor poor, and giving the ultra-wealthy the largest market bull run in history. It’s deeply and profoundly unjust, and I would go so far as to say it is the dark underbelly that is fueling the rioting and looting we’re seeing today on the streets. Not everyone understands or can articulate the economic injustice, but we all can feel it when we see businesses shuttered while markets have a historic melt-up.
An unplowed field produces food for the poor, but injustice sweeps it away. —Proverbs 13:23
There are many who are poor through no fault of their own. Indeed, they may have done their part, owning unplowed fields ready to be harvested. But before they can get to it, it is swept away—stolen from them. As a result of monetary policy, our most scarce and valuable resource is being stolen from us. A deeper dive into this idea has been explored in other books.
How do we combat this? I think we have to understand the system, and bend it not to our own will, but to justice.
Be as shrewd as snakes and as innocent as doves. —Matthew 10:16.
In other words, the way to combat this injustice is to understand the cynical perspective without being a cynic. Truth often manifests itself in seemingly paradoxical ways.
And so this is the purpose of this effort I am beginning. The mission is to help get my thoughts in long form, for my own benefit and growth. Perhaps this is useful to some. But due to the complexity of the world today, I do not and cannot understand the entire macro environment. In fact, there may be instances where what I say is completely wrong. But while we cannot always say with certainty what is True, we do know when what we are saying is a lie. I seek to avoid the latter at all costs.
I will continue seeking Truth, as it relates to life, finances, faith, and share my observations here. Hopefully you find this (at the very least) entertaining.
Cheers.