Memories…And A Warning

This week my second son Joey turns 30 and my granddaughter Addie turns 3- just a day apart. The reason I bring this up is that we took a few days and visited Disney World in Florida.

As I walked into Disney’s Main Street I was reminded of a simpler and happier time here in America that many today cannot remember. America was a place where budding entrepreneurs could hang out a shingle without much government interference and chase their dreams. Mom and pop stores could make a living and provide services that made life easier for everyone. With few regulations and few barriers to entry many could earn a living and make their lives better. This Main Street is a reminder of this. Low taxes, low interference, high growth and stable money. Life was good for most.

Those with great ideas were rewarded with great fortunes.  

I was also reminded of being able to- many years ago- walk around the corner and get a handful of candy or gum for a couple of pennies. There was a candy store in a house! I could also get a chocolate bar (2X the size of the 1.00-1.50 bars today) for a nickel. I also remember going to the gas station and having an attendant not only pump the gas but check the oil and clean your windshield. This was all done with oil selling at 30 cents per gallon. 30 cents per gallon and maybe some oil sales paid a living wage to many. How times have changed.  And no- the materials haven’t changed it is just that our “money” is only worth a fraction of its original value. This is why one person could do almost any job and raise a family with that income alone not that long ago. Today, in most households, it takes two incomes to provide what one would buy back then. This has also added to our moral demise as family units are not as strong as they once were because of this.

We have been programmed over time to think that inflation is a natural occurrence. It is not. In times of innovation and advancement deflation is the norm as goods and services get provided at lower costs because of the advancement in technology, transportation and delivery. With all of the new innovation taking place in our world today the price of most goods should theoretically be FAR lower today than they were years ago. This is a clear sign of how our “money” is losing value at a staggering pace even though it is being disguised well.

Since the US dollar is being debased right along with all of the other currencies the only thing left to do is keep the price of gold down and there is little evidence of currencies being inflated to infinity except rising prices- which we are lied to- and told don’t exist. Riots around the world tell me otherwise. People who can’t keep the lifestyle they are accustomed to- actually many are starving- are taking to the streets across Europe, in South America and Africa. I believe it is only a matter of time for North America.

Currently, our US dollar has about 4 cents left of its original purchasing power when the Federal Reserve was created in 1913. Their mandate was to make sure that the US dollar retained its value. Nice job!

I started to wonder how we could have let such a great setup slip through our hands. Not only did we have it made because of our US dollar being the world’s reserve currency but we also, for the most part, got along and worked together. That is much easier when the economic pie is expanding and there is abundance. When the economic pie is shrinking it appears that most everyone is out for themselves or a group that they identify with. It also appears that the win-win situation has been replaced with “win at all costs” and damn the other side mentality. 

Today, many are demanding a “living wage” which many deem to be $15.00 per hour. I would vehemently disagree with that because I see nowhere that $15.00 would actually provide a living wage in the first place and secondly, it is causing a “Tsunami of layoffs” according to Zerohedge as business owners cannot afford the $15.00 per hour and are shedding employees at record rates. More government “HELP”.

It is apparent that what made this country great- our moral character, our work ethic and working for the common good have been replaced with, in many cases, depravity, laziness and many being out only for themselves. This has likely been caused by people, over time, feeling that they are being disenfranchised. Many in our inner cities have known nothing but dependence. Many in our suburbs are getting a lesson in ringing up debts- once that happens you are basically a slave to the banks.

Assets that were traditionally bought with cash are now bought with debt. Think about cars, furniture, even appliances now are being bought on time. Actually, it is being reported that many are paying for medicine and even food with credit.  This is a great example of basic needs of people not being met in many cases- even for those with jobs. It also shows me a potential lack of character particularly when “wants” are financed. Needs are one thing but wants that are not put off until they can be afforded could be looked at as frivolous.

I guess back in the old days people expected brighter days ahead while today it appears our brightest days may have already passed.

The moral of the story is that if you debase your currency enough it will likely lead to a breakdown of polite society at first and then, like in Weimar Germany, Venezuela and many other places a complete breakdown in our way of life.

By “printing” money and buying assets central banks are creating massive distortions in prices and a few at the top (who likely know what will be coming next) are able to take advantage. We are rapidly becoming a society of haves (rich) and the have-nots (poor) with little left of possibly the largest and most affluent middle class ever created.

Those who feel like there is little hope for the future are far more likely to become dependent and ride on the government wagon train. In the old days it was embarrassing to accept help- today it seems many wear it as a badge of honor like they are getting something for nothing. Unfortunately, as history has proven there is ALWAYS a cost for everything. There is always a consequence for any action taken.

My guess is that the authorities can stop this and have a depression that would make 1929 look like the good old days or continue what they are doing and inflate our “money” into oblivion- which appears at this time to be the desired path.

Anyone who thinks it is different this time should really study some history. The outcome is 100% throughout history- that once you go down this path there is no painless exit. Just looking at Lyft and the IPO where a company that has never earned a profit and has spent (and is still spending) billions. It has an IPO that values the company (according to Wired.com) at $26 BILLION. By the way, that is a larger market cap than United Airlines, Hertz, Avis and American Airlines- companies with profits and assets. Sounds awfully 1999-ish to me!

I believe it pays to look ahead and examine the assets that will likely hold value and increase in value going forward. To me, real assets will likely be in high demand as the “printing” which is stunning already becomes truly absurd- (as if the near 600 Trillion Yen that Japan has “printed” and bought assets with isn’t already absurd). Or the $21 trillion that has been “printed up” and misplaced just by the Department of Defense and HUD between 2000 and 2015 isn’t absurd already.

The fact that we have NO idea what the level of monetary debasement really is it will likely come as a shock to many when the real devaluation starts in earnest. At that time having hard assets will likely make a LOT of sense. Think food, water, energy and the companies that produce them. A decent amount of gold or silver will likely make a lot of sense also since those assets have survived all of the recorded monetary experiments (that have ALL failed by the way). There is a 5000 year history of gold and silver being accepted as payment and there is no debt attached- like the debt attached to fiat currencies issued by central banks.

Of course, the central banks- the architects of this have been purchasing gold in record amounts themselves- that tells me all I need to know!

Be Prepared!

Mike Savage
Financial Advisor, Raymond James Financial Services, Inc.
2642 Route 940
Pocono Summit, PA 18346
Phone 570-730-4880
Fax 570-243-8141

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