Wednesday, January 10, 2024

Systemic Inflation

 Systemic Inflation

Systemic Inflation is one of the greatest risks to the survival of America. The debasement of the U.S. Dollar has resulted in wholesale destruction of value. And the rate of inflation is only increasing as poor monetary and fiscal policy has resulted in surging costs for diminishing values.

What is inflation? Inflation in practical terms is too much money chasing too few goods or services. "Money" can be considered the Federal Reserve's supply of funds to facilitate the functioning of the economy. Per Trading Economics: "Money Supply M2 in the United States averaged 5163.74 USD Billion from 1959 until 2023, reaching an all time high of 21703.20 USD Billion in July of 2022 and a record low of 286.60 USD Billion in January of 1959." -Source, Federal Reserve.

Visually that data looks like this:

From a pragmatic perspective, what this means is that every dollar you have in your pocket today is worth less tomorrow, and increasingly so.
The problem with fiat currency (money not linked to a physical commodity, like gold) is that is has unlimited notional "value." The Federal Reserve, at the direction of the U.S. Treasury and Congress can literally create as much money as they need to fund whatever they want. Hence, as there is no "check & balance' on the U.S. government. There is no limit to the money that can be created.
It wasn't always this way. In fact, looking at the data it is clearly obvious when things started to change. The moment the United States went off the Gold Standard, then under FDR made it illegal for Americans to actually own gold, then finally to create money to fund Vietnam Nixon took us fully off the Gold Standard. 

The level of political corruption *might* have been as bad in the past as it is now, but at least there was some "check & balance" on the currency because it was linked to a physical commodity. Now there is no tether supporting the value of the dollar, which as we have well seen has spiked to whatever sellers are willing to charge. $10 for a gallon of milk? Sure. $100,000 for a new truck? OK. $2,000,0000 for a starter home? What a deal!

Systemic Inflation has ravished our country and there is no end in sight. Here at Invest Like A Farmer we like to provide readers with some actionable solutions. First, as a society we need to take back control over our currency. Please support The Gold Money Act, which is a first step to restoring some semblance of sanity to our monetary policy.
The GMA will be a tough act to pass, as politicians are afraid of gold; it transfers power away from them and returns it to the citizens. If you live in an area of the country where your voice is ignored and your vote doesn't count, then there are a couple other options besides seeking representational relief.

Knowing that Systemic Inflation is only getting worse, the antidote(s) can be found in several areas. Since the definition of inflation is too much money chasing too few goods or services, it would behoove the inflation weary to own those goods and services which are being pursued by ever-increasing dollars. Who doesn't like to be wooed?

Land seems to make sense as there is a finite supply and you can also live on it. And for some, you can also sustain some level of farming. Obviously gold itself makes sense as it is both finite and extremely portable, liquid, and valuable. Ownership of select companies that are increasing their profitability in real dollar terms while also decreasing the number of outstanding shares.
A couple more esoteric plays: Locking into long-term contracts with either insurance companies or city, state, federal governments in which you pay a fixed cost indefinitely and they bear the burden of Systemic Inflation. Buying tools that increase your business productivity on favorable long-term fixed debt terms.

Systemic Inflation is like gravity; it is inevitable due to the human condition (that's a nice way of me saying corruption, malfeasance, and downright stupidity.) The best we can do as financial farmers is protect our farms by taking concerted, concrete actions to stymie Systemic Inflation.