Does the title of this post offend you?
Good, because that means you are paying attention.
The sad truth is, most people have no clue how the economy works. Zilch, nada, zero.
And when I use the word economy, I am referring to the system used in most countries around the world which facilitates you (or robs you) in the process of earning, spending and taxing.
In 1971, The United States came off of the gold standard which means that the value of the US dollar was not derived by gold anymore.
Since the US dollar was no longer “pegged” to gold; its value was by design, allowed to change over time.
After 1971, the government could print as many dollars as it wanted to since there was nothing stopping it.
The major governments around the world (including the US) are now known to print their way out of debt.
Remember, printing dollars means they are created out of thin air.
The US dollars printed by the government are financed with debt so technically every single dollar bill is debt.
In 2015, the US dollar is not an instrument of money or equity; it is an instrument of debt.
Yet most of us have no idea how “money” as we know it has changed, right beneath our eyes.
This “new” monetary system has brought about a totally new economy.
An economy which has proven to be a dream come true for 1% of the world’s population and which has turned into a nightmare for the masses.
An economy where the masses will keep on facing booms and busts every 8 to 9 years, but aren’t really sure what is driving all this madness and uncertainty.
An economy which can easily be manipulated by adjusting the interest rates or by changing the speed at which new currency is produced.
An economy where the general public earns a lot but has almost nothing to show for it.
An economy which uses the power of inflation, debt & taxes against you without you even realizing it.
Remember, the aim of this blog is to ensure that you get wealthy & out of the rat race the “new” way i.e. by becoming smart.
Towards that end, you simply have to understand the basic process which comes into action every second of every day.
A Shock To Many:
Here are some fun facts which might shock you if you are new to the “game”:
- “Money” used in most countries around the world today is fiat currency. Fiat currency is issued by the central bank of the country & itself holds ZERO value. In other words, it has NOTHING backing it up & its value is derived simply because the government issuing it says it will honor the note. Gone are the days when the currencies were backed up by gold.
- The central banks of different countries keep on printing money every single day. This process causes inflation & results in a price increase of goods, services and financial assets alike. For the general public, inflation is a slow but sure way of reducing their purchasing power over time.
- Printing money increases the number of dollars in the economy & reduces the “value” of the dollar since more dollars are used to purchase the same amount of good and services. This is exactly why you might have thought $1 was decent money back in 1995 but in 2015, you can’t seem to buy a lot from it.
- There is no chance the central banks will stop printing money. The more dollars are printed, the more the general populace bears the brunt of it through inflation & taxes. In the coming years, you will see the middle class and the poor losing even more wealth.
- The rich will keep on getting richer and the poor will keep on getting poorer. The middle class in the US (and to a lesser extent in Canada) will shrink dramatically.
- It is almost impossible for affluent families to see a loss in net worth, even during recessions. In fact, rich people get even richer in economic downturns because they are prepared to seize the opportunities presented to them. However, the poor and middle class will definitely see a huge loss.
- The average person in US and Canada (and even in other countries around the world) will never be able to rid themselves of debt, just because of the way the system is designed.
I know I am not to a good start.
I know this information probably upsets you.
I also know many of you will find this info to be hogwash, but unfortunately, what I say is true.
Remember, printing money by the central banks & charging different interest rates for their loans is a sure way of causing economic cycles. And as you might know, the cycle sometimes peaks and sometimes reaches its bottom, causing fear & uncertainty in people.
It causes a lot of people to declare bankruptcy.
It results in huge losses in employment & at extremes can also trigger social unrest and political change.
Learn How The Economy Works:
I have just seen an exceptional documentary on YouTube which will educate you quickly on how the economy works. This is the first step to increasing your financial IQ and knowledge. Learn how the central banks and the government are involved in robbing you of your wealth & what you can do about it.
You will be glad you did.