Assets vs. Things vs. Dollars

Marginalization is real!

This is not a new concept, but it is an important one. The rich get richer, and the poor get poorer. This difference always amplified "when the going gets tough", but it has gotten out of hand recently..

The Pressure of a Poor Economy:

Thus far in the economic meltdown, we have seen record setting high levels of unemployment, lows of GDP, and the rapid expansion of currency as we know it. This introduces pressure on the lower class, and facilitates growth of the upper class. Lets talk about the specifics.

Things Vs. Assets

One of the principle problems at hand is that "poor people" tend to buy liabilities and rent their homes out of necessity. These individuals are not financial or socially secure - as in, their stratification is fluid. 

This introduces a problem because it means not only are they struggling to save up cash (a depreciating asset), they don't have much equity (subject to appreciation).

Here is a visualization of this problem:

Takeaway: Average American has more liabilities than assets, and not much saved in the bank account.

Cash Vs Assets:

Inflation targets are officially out the window. This is as per a recent press conference with Jpow and the goons at the Fed:

Here is the problem with that.. Cash is becoming worth less everyday. This exerts a upward force on assets because there is more dollars in circulation. If there are more dollars, things will cost more. However, this doesn't mean the dollar distribution increases (ie: wage increases). 

This increases the average cost of living for marginalized people, but their wage doesn't inflate with the fiat currency. However, this increases the wealth gap because it inflates the assets available (typically owned by "the rich").

See the problem here? An inflationary economy in crisis favors those with a position.

Rent Vs Owning:

This is another problem within the modern dumpster fire. If you rent, it is logical that your landlord increase the amount of rent you pay. Inflation is hurting his bank account, and that buffer is typically burdened by the consumer. 

However, as the consumer loses their job and cash purchasing power, there is going to be a fiscal limit to their liquidity.. Eventually they won't be able to pay their rent:

Many states are experiencing delinquency rates >50%. This means that more than half of all tenants are not paying their rent, and are actively facing eviction. This crisis will get a LOT worse before it gets slightly better because of the pressure on low income individuals.

The Gap Increases:

Wealthy Individuals..

Have more assets that are subject to inflationary appreciation because of cash devaluation, and from speculation. These are two separate forces that compound their effective value.

Own assets that produce increased amounts of income. Further, their access to liabilities has never been higher/"lower risk" because of the cheap cost of borrowing money (interest rates). This interaction between rich people and low interest rates is a dangerous combination for the marginalized American.

Live in houses they own, or rent properties to others. Property appreciates, and is at the core of a fundamental human need. Rent is subject to increase with inflation, just compounding the value of their speculation.

Wages aren't increasing.. But that is fine for wealthy! Very few of the people above upper middle class truly trade their time for money. Wealth is made through investment instruments and equity - not trading hours for money.

Financially Insecure Individuals..

Own liabilities, or have debt for their liabilities. Perhaps the car is not paid off yet. Credit card debt piling up. This exerts pressure on the consumer because you can never escape these kinds of debt as the asset you're paying for loses value.

These individuals also experience job insecurity. Unemployment reached almost 15%. Even if you do have a job, there is a real threat you started to be paid less/have less hours. Failing to mention that your wage is never adjusted with yearly inflation targets.

No Job? Can't pay off debt. Can't afford rent. Can't afford what is needed at the very fundamental level of human's biological needs.

What is next?

I really do not have an answer. Capitalism is a economic machine that favors the top by marginalizing the bottom. This disparity is amplified during economic turmoil. We're nearing a critical turning point in a couple different aspects. Here is what I mean:

  • Inflation targets are officially out the window. Fed reserve can expand the currency as much as they want.

  • Sovereign balance sheet is over 2 Trillion dollars. Its expected that the USA debt amount will exceed the value of the economy.

  • Interest rates are 0, and there is no reason for them to go up. Negative rates are coming.

  • Tech stocks are skewing all major indices to all time highs, despite piss poor economic fundamental factors.

All I can say is that my plan is to have as little cash as possible. I want to hold equity and own assets. Sound money (crypto/silver/gold). Real estate. Dividend paying funds. Simple as that. 


Leave a comment