Everybody keeps talking about the rich getting richer, the middle class shrinking, and the poor barely surviving. This is all true, and I want to briefly explain it all to you, so it makes sense, and clears up any questions you might have. Because everyone in America faces these issues, but not everyone understands them.
K shape recovery
Look at the letter K on the right one line goes up and the other goes down. This is exactly what is happening now. The rich are getting richer and poor are getting poorer. The politicians are right. But what they’re not telling you is the reason why. The poors purchasing power is being reduced daily due to inflation, from the years of money printing and the most recent 2020 and 2021 stimulus totaling almost $4 Trillion. The rich are having their net worth increased because when we have periods of inflation, assets also inflate.
Look at the housing prices in your neighborhood, the stock market, bitcoin, precious metals. All of these assets have gone up since the pandemic. They have all inflated due to the high demand and from the constant money printing.
People who own these assets are experiencing an increase in their net worth. Assets hedge against inflation. Especially our newest asset, Cryptocurrencies i.e. Bitcoin. People who don’t own assets are losing out, because all they have is a paycheck, or worse, a check from the government. Those that do have an income their purchasing power is dwindling and has been historically. Remember how much things cost as kid or teenager? Prices always increase for assets, goods, and services. (There are some exceptions). The working class are trying to buy the same goods and services with the same money that is less valuable than it was 2,3,10 years ago
If you’re not getting a raise every year to outpace inflation your purchasing power goes down due to the hidden tax of inflation. If your investments/cash aren’t outpacing inflation. You are losing money.
The government, treasury, federal reserve all know this. They don’t care. They want to inflate the currency and make assets rise. They want to inflate because their debt will be worth less as well. And the politicians will look good because they “saved” the economy.
Closing small stores
The virus has caused many small businesses that the government deemed “non-essential” to close. If you own a small business, no matter what it is you do, it’s essential to you. Unfortunately, theres not much a business owner can do. He is forced to close his store but the big box stores can stay open. Your gym is closed, but you can buy a treadmill on Amazon. The movie theaters are closed but you can watch Netflix. All of those small stores are losing their customers to the large players. This is wealth flowing up.
15$ Minimum Wage
A proposal that didn’t go through (yet) in American politics is to raise the minimum wage to $15 an hour or roughly $30,000 gross income a year for a full time job, usually including benefits. My guess is it wont stop there, and there will be demand for a higher wage in the future.
This is just basically another form of welfare. Economically what will happen is the small companies that can’t afford to pay their employees $15 will either fire part of their workforce or the owners will close because the risk of owning a business and putting up the capital to start a biz just doubled. (The current federal min wage is $7.25/hr.) Or simply go out of business due to razor thin profits. Why would you open a small brick and mortar store and hire a large staff if its too expensive. Think small book store, antique store, hobby shop.
The large national and global conglomerates will benefit. Amazon is already paying their workers $15. They are the ones that can afford it. A perfect example is a rug store in Chicago where I bought a small living room rug. Not hand made just nice modern design made by machine. The old Turkish immigrant that owns it won’t be paying his employees 15 + benefits. But you know who will? Target, WalMart, Amazon.
If larger companies need to pay $15 they will just raise their prices and still make the same profit margin. So low end workers will be making more but the prices will inflate to keep the same profit. So they are no better than they were before.
This basically removes the small competition from these global conglomerates and the money will flow up.
Free Stimulus Money
The first $2T in stimulus. People only received $1200. What did they do with that? A lot of people speculated on stocks and crypto. And a lot of people paid rent (Own a multi-family outright. The rent will flow up to you.) and bought things that they need, online. (Again, money flowing up to the online retailers)
There was so much money issued even non citizens received a stimulus check. As long as you have a social security number you received money. I personally know 4 people in Beijing that received money. One just owns a rental property in FL. and he received a check!
This printing of money was so ridiculous and now the new administration is going to be sending another stimulus. And the same thing will happen. When we have inflation assets will inflate too.
Most people are ignorant on how this works. They have no idea how the rich stay rich. It’s because the own assets. A great example of ignorance was years ago when I was working at a bank, this was just after the mortgage crisis. Everyone was questioning the bail outs then and the feds QE policy. I remember I was talking to one prospect at the bank and we were discussing the money printing and the bail outs, and he said, “yeah I know the government can only print a certain amount of money based on how much gold they have or whatever but these bailouts are getting out of hand.” This idiot still thought we were on the gold standard! Most people have no idea on whats really going on and how economy works and how assets rise. They are stuck in a 1960s dream land.
Just remember. The government doesn’t care. Corporations don’t care. The more the government inflates the currency, the less the debt they owe is worth. It helps them. The higher the wages go the higher the prices go, and the more jobs go overseas. It’s all a scam, you just have to be smart and understand whats going on. You have to buy assets. It’s the only thing you can do.