The Problem With Money
Reversing inflation & a new monetary system
People love to complain about inflation.
Most of it is fake. Wealthy people complain about inflation mostly to fit in. The flaws in the system are by design. Inflation is likely the #1 growth mechanism for most wealthy people.
I saw this post by Sam Parr that highlights the importance of what I’m about to tell you.
Years ago this was accurate. Now it is not. The wealth measurement for your cash must be denominated by the purchasing ability of your wealth. The concept is infallibly true, but must be adjusted for inflation.
Example: Let’s say you work 40 hours a week and earn $300k per year. That’s around $150/hr. In 10 years, based on an annual 4% inflation rate, here are the metrics:
You now earn $99/hr in purchasing power
To earn the same output you must work 60 hours a week
1,040 extra hours working, to support the same lifestyle
Stated differently: you are trapped. This is why people can earn a lot of money and still die broke.
That’s 1,040 hours that you should be able to spend reading, writing, with your family, doing anything you want to do. But you can’t - because the mortgage must be paid, the kids must be fed, and the show must go on.
Herein lies the problem (and the opportunity). We need to use the system to reverse the problem and create an opportunity.
Use Inflation, Don’t Fight It
In investing, there’s a strategy called “Dollar Cost Averaging.” You put a repeatable amount of fiat into a market, on a repeatable schedule, regardless of price. DCA is a great way to remove the emotion from the equation and invest based on a thesis.
Your profit = the difference between your strike price (what you bought it at) and the current market price for the investment. DCA keeps you on a “schedule” so to speak so your average strike price is always dependably lower than the market price.
Purchase $100k of BTC @ $20k price (5 BTC)
Purchase $100k of BTC @ $30k price (3.3 BTC)
Purchase $100k of BTC @ $40k price (2.5 BTC)
Purchase $100k of BTC @ $50k price (2 BTC)
Purchase $100k of BTC @ $60k price (1.6 BTC)
Total BTC: 14.4 BTC @ AVG price $34,722
Your profit = (14.4 x $60k) - (14.4 x $34,722) = $364,003.
This is why DCA is powerful (if your thesis is correct). Inflation works like DCA but it flips everything upside down.
The profit, is the difference between your dollars to buy something @ 100% buying power and your dollars to buy something @ 90% buying power, or 80% buying power, or whatever percentage of purchase power remains from the original fiat.
Here’s a quick example:
Purchase $100k of asset for $100k
10 years later, buying power of dollar = 67%
Asset purchase price now $148,024
Inflation works in reverse. You can be a millionaire and work less because your assets are pegged to the dollar (and thus, must get more expensive as dollar becomes less valuable).
This is why, politically speaking, the “wealth gap” is a big joke. Inequality isn’t because of capitalism. It’s because of inflation. Simply stated: the return on labor is far inferior to the return on capital. You cannot “work your way” to catching up.
And regardless of what you hear on television, nobody at the top expects it to be fixed with higher wages. We are too far gone.
The only way forward, frankly, is a new monetary system that cannot be manipulated. And until that day comes, you must invest in assets.
Dollar cost average your way in, and let inflation do it’s work. I have more to say on this, but I’m out of time for now.
Convert.
Always convert - out of fiat, into assets, and thank me later.
-Taylor
This stuff is amazing, Taylor. Keep the posts coming! I'm learning a lot.
I really like these posts. Short and informative. Thanks 👊