Covid Crisis or the Biggest Financial Crisis the World has seen?
Updated: May 20, 2020
In 1971 Nixon took the dollar off of the gold standard. In short, this allowed the government to print as much money as it needed without also increasing the gold reserve. The gold standard was in place to keep government spending stable. Today, no country uses the gold standard.
This brings me to the topic of printing money: the issue with being able to print as much money as the government needs in order to fund policies and help large corporations is that the value of that particular currency depreciates and interest plummets because more of this currency is in circulation. The issue with this is that the rich get richer and the poor get poorer because the rich hoard assets (real estate) and natural resources while the middle class hoard money that is going down in value in savings accounts with 1% interest and in a GIC that yields 2%.
Let’s rewind back for a second. When the government prints money, someone has to pay the government's dues and that is the middle class with higher taxes and a form of currency that has less monetary value by the second. I don't know about you, but I'm not going to carry the load of poor choices made by our government. We must make a choice to become more literate in finance. The government printing and pumping money into the economy forcing interest rates to be driven down to zero means one thing: retirement investments don’t yield positive returns over the long term and anybody who has saved money for retirement is going to be asking where a large portion of their savings went.
Let’s expand a bit. The economy was in trouble before COVID-19 began. The markets showed signs of years of government negligence from past years starting in 2016 but nobody expected the governments and banks to drive down interest rates to the point they are at today. COVID-19 strikes, the governments were sweating, but their asses will be saved because they can now blame the coming - I’m predicting the WORST - financial depression on a virus that has swept the globe.
But you might be asking: “Why haven’t we seen larger signs of an economic downturn?” That is because the government just printed trillions of dollars and they’re buying millions of junk ETFs and stocks to keep the markets and economy alive so that the rich can get out of the markets and align their assets in an effort to prevent them from going belly-up. Don't think so? Warren buffet, Jeff Bezos, Elon Musk, and Bill Gates all sold off a significant portion of their portfolios in the last few months. We must pivot and create new ways to preserve and create wealth over the long term because the world is changing and we are headed for a large economic disaster...
Don't believe me? Just watch in the coming years.
This is nothing more than a formed opinion based on research of credible names in the financial world.