Let’s talk about the devaluation of the dollar and how it is going to affect us. (Look, I’m older and in “instruct the young folks” mode. Humor me, as this s relatively short.) Financial currency like the US dollar is simply an agreed upon means for exchange. It has no intrinsic value. Humans must say, “this has value, I can use it to exchange for goods and services.” Essentially, we’ve made it up as a convenience.
Scarcity stabilizes, or “backs” a currency. If we used river pebbles for currency, for instance, there would be no way to set a value because everyone could just go get more pebbles. The backing resource has be rare. The example that comes to my mind is because I grew up on Long Island, where the Montaukett nation of Amerinds (as well as tribal nations from Connecticut, Massachusetts, and Rhode Island) made wampum beads out of the rare purple interiors of Quahog clams. Wampum was treated as currency in most of the Eastern native American tribes. It had no intrinsic value other than consensus, and was back by it’s rarity.
When a currency falls apart it is often because it is no longer rare. Governments may attempt to print their way to prosperity, and producing lots and lots of currency, but this lack of rarity dilutes the backing asset. With a fiat (fiat means “because I say so”) currency it becomes a matter of believing in the backer’s word.
Printing too much currency works for a while. Unsuspecting people get their money, do their business and don’t realize that the money is getting less and less valuable as they go. It’s a gradual slide, hard to see.
People wake up to the reality when in the span of a few days the cost of a cup of coffee goes from two bucks to 200 bucks. This can happen when large amounts of the “believe us, it’s good!” fiat currency gets returned to a country when the rest of the world no longer wants it because they’ve lost faith in the word of the backers. This happened to the Wiemar Republic. It happened to Zimbabwe. I happened to Venezuela. And there is absolutely no reason it cannot happen to America.
Understand this: We tend to get the explanation backwards. We call it hyper-inflation, but it’s really hyper-devaluation. The cost of the cup of coffee did not change, nor did its value. The money lost value. In simpler terms, in this situation the coffee is backed by more stability and scarcity than the currency.
I’m getting to my point, I promise.
The reason people invest in precious metals, land, original art, and blockchain currency (Bitcoin etc.) is because governments can’t just print more of it. Rare items’ values are like the cup of coffee: stable and predictable. When the fiat currency gets blown asunder these things maintain their value.
I’m tell anyone to buy anything. I don’t care how you invest.Personally, I’m buying actual coffee.
But I’d be less than kind not to warn you that fiat currencies like the Federal Reserve Note usually, historically, only last about 50 years. And it looks like time is running out.