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Thoughts on the Economy Featured

Written by Posted On Tuesday, 25 August 2020 23:53

I read an article in the Wall Street Journal yesterday about the difficulty the World will have paying back all of the debt being accumulated by governments worldwide, and it prompted me to write the following.

Money Supply, Inflation, and equity assets...a case for real estate.

Where to invest/preserve your assets and why.

Real Estate is booming, the stock market is reaching all-time highs, and precious metals are through the roof.

These are the types of assets, equity assets, that you want to hold during periods of inflation, when the currency becomes "worth less." Around the world we have seen historically, some currency actually becoming "worthless."

Too much money chasing too few goods" is the traditional reason given for inflation.

One of the major functions of the Federal Reserve is to control the "Money Supply," money flow and credit.

Recently, with no corresponding increase in production, the Federal Reserve has "dumped" Trillions of Dollars into our economy. That dumping comes in the form of more government debt, and is not free. Someone will have to pay for it. We can only emerge unscathed at this point with a great, growing economy. Anything else will result in major economic issues, maybe economic catastrophes.

We are now going through the "second dumping" in the last 12 years or so, and we have not yet seen the inflationary results that economists have warned us about.

The first recent dumping of cash into the economy is referred to as "Quantitative Easing" and was part of the solution for the "Great Recession" of 2008. No adjustment was made for this after we pulled out of that recession. The few times the Fed tried, the markets reacted negatively and so the Fed pulled back. This issue is still with us.

Of course our country has been running a deficit for many years now, but the last 12 years have really added to the debt significantly.

Now, we have made it worse (a necessity) with the Corona Virus Relief programs, the second recent great dumping by the Fed, and it is not only the US, it is countries around the world.

Government debt worldwide has soared to levels not seen since World War II. Among advanced economies, debt rose to 128% of global gross domestic product as of July, 2020, according to the International Monetary Fund.

In 1946, after the War, it came to 124%.

The economic boom after the War is largely what saved the world from economic collapse. We need that growth again, and we need policies that will stimulate the needed growth, including less regulation and less taxation.

Personal Solution:

Acquire Equity Assets, and hold them...Real Estate (I do have a concern with certain types of real estate right now as a result of changing world after Covid-19), Stocks (at all-time highs), and Precious Metals (also now at record levels).

Strategies to acquire these types of assets are essential to securing your financial freedom, and the financial freedom of your clients.

With interest rates at all-time lows, it is time to buy that home, or refinance your existing properties, setting you up for the growth (and probably the inflation) to come.

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Saul Klein

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