Yes, we’re silly like that.
Not everyone was in the Rock Star offices on Monday but for those that were…we decided to dress up for Halloween.
And in our team meeting this Monday we spoke about spooky subjects like interest rate trends, housing prices, Canada’s population growth and even global M2 money supply.
Money is a strange thing…
Almost everything complies with the standard “supply vs. demand” principle.
If there’s a lot of demand and a fixed supply of something…then the value or price goes up.
Modern money doesn’t behave like that at all.
Everyone is after money. Heck, people today, right now, are working 8-hour shifts across the country to try and get some.
There’s a ton of demand for money.
So it’s so weird that the value of it keeps going down, no?
And there’s an obvious reason for that.
No matter how much we all work for our money the government and commercial banks in Canada just create more and more and more of it.
The supply of money goes up so fast that it loses value every year.
A strange anomaly in the world of supply and demand.
And heck, Canada has been at it again. Check out this chart of M2 in Canada that we recently posted on Twitter:
Rising rates are supposed to squash M2 growth.
As more dollars go to pay off debt, those dollars are extinguished out of the system.
It’s strange, but that’s what happens.
So how, in a higher rate environment, are new dollars being created so quickly?
You can see in both July and August of this year, Canada’s M2 money supply began trending back up.
And although it’s super geeky to track this stuff we need to.
Because if your income doesn’t increase faster than M2 is created you’re actually falling behind financially.
Sad, but hey, it’s true.
And here’s how much M2 has been created over the last few years:
So getting back to the question, “How are all these new dollars being created in a high rate environment?”
We’ve been digging around and there’s a concept in the monetary world called, “fiscal dominance”.
The Federal Reserve, just this quarter, released a brand new paper on it.
It has a very spooky sounding title, “Fiscal Dominance & The Return of Zero-Interest Bank Reserve Requirements”. (Source)
And here’s the scary line in the abstract of it:
“This article considers fiscal dominance, which is the possibility that accumulating government debt and deficits can produce increases in inflation that “dominate” central bank intentions to keep inflation low.”
And the conclusion has this line:
“Ultimately, it seems likely that the US will either have to decide to rein in entitlements or risk a future of significantly higher inflation and financial backwardness.”
We don’t see a world where politicians slow down on promised spending (entitlements). Which would mean, according to this paper, we’re all looking at significantly higher inflation ahead.
Or said differently, even MORE M2 created.
Even MORE debasement of the purchasing power of your money.
An even FASTER decrease in the standard of living of the majority.
It’s why, even in a world of difficult interest rates, we keep turning back to real estate.
There are only three things we’ve found to outpace M2 growth.
The money system is weird.
More demand for money doesn’t increase its value. The banks and government are just too good at creating more of it.
People don’t understand this and don’t understand why they aren’t “getting ahead” financially.
If you’re going to live life on your terms you better figure out what you have in your life that goes up in value faster than the dollar goes down in value.
Your income alone likely isn’t going to cut it.
We don’t make the rules of the game…but we understand them, and it’s allowed us to live a pretty fun life!
We all can!
Until next time…Your Life! Your Terms!
Tom & Nick
p.s. Almost forgot!! We have an AMAZING new YouTube video out with Matt James. This young guy has managed to buy about half the houses on a street!
You won’t believe it until you see it…you can check out the brand new video we released where Anthony chats with James who shares what he’s been up to: https://youtu.be/CqSeTwHPg08