You Need to Invest in Hard Assets

We are living through a period of unprecedented currency debasement. Since January 2020, the United States has printed almost 80 percent of all the US dollars that exist. COVID presented the United States Treasury with a unique opportunity. It gave them the green light to run the money printing press red hot in order to inject liquidity into an economy that had been brought to a standstill.

When there is a dramatic increase in money supply you have more money chasing a finite amount of goods and services. This causes inflation. In an inflationary environment, the best investment strategy is to borrow money and invest in hard assets. Who stands to gain the most from inflation - the world's biggest borrowers of money? Who is the world's biggest debtor? The United States has total external debt of $31 trillion - more than three times more than the second-placed United Kingdom. The United States is not concerned about the debasement of the dollar because the majority of its debt is in it's own currency that it is able to print. This means it is technically impossible for the United States to go bankrupt. They are also not too concerned about inflation because it devalues their debt. They are able to repay their debt with inflated US dollars. They don't want inflation to get out of hand. It sends a message to the world that they do not know how to manage their economy. Interest rates increase to stem higher prices which also means that future borrowing becomes more expensive. In this higher inflation environment, you want to mimic the United States government as closely as possible.

Firstly you want to owe the bank more than they owe you. I am not saying you should leverage yourself to the hilt, but you definitely don't want to be holding large cash balances in your bank. Most banks are technically insolvent because they are run on a system known as fractional reserve banking. For every dollar that is deposited in a bank, only a small fraction needs to be held in reserve - the rest can be lent out. Given that bank customers deposit for the short term and borrow for the longer term, this creates a mismatch in duration. It is the bank's job to carefully manage that duration, but in moments of extreme stress, cracks in the banking system emerge, If every depositor demands their money back at the same time, it would be impossible for the bank to honour these demands. They would need to go to every creditor and demand they pay back their loans. What happens if you used the loan to buy a house, build a factory or invest in plant and machinery? These are not transactions that can be turned around in a couple of days or weeks. There are also social implications to forcing people to sell their houses to pay back their mortgages. Fractional reserve banking works well until it doesn't. When there is a run in the bank, it is impossible to manage the duration mismatch, and the bank is forced into liquidation. This happens more often than you think. To read more about the most recent bank failure which took place this year, click here.

Secondly, you need to invest in hard assets. When inflation occurs, investors need to adjust their investment strategies to preserve their wealth and achieve their financial goals. One strategy that investors can use to protect their wealth during inflationary times is to invest in hard assets.

Hard assets are physical assets that have tangible value and can be seen, touched, and used. Examples of hard assets include precious metals like gold and silver, real estate, commodities like oil and gas, and art and collectibles. Investing in hard assets during times of inflation offers several benefits. Hard assets offer protection against inflation During periods of inflation, the value of money decreases, but the value of hard assets tends to increase. Hard assets have intrinsic value, and their prices tend to rise with inflation, as they become more expensive to produce or obtain. This means that investing in hard assets can provide a hedge against inflation and protect investors' purchasing power.

For example, gold is often seen as a safe haven during inflationary times. The price of gold tends to rise when inflation increases, as investors seek to protect their wealth by investing in a tangible asset that is not subject to inflation. Real estate is also a hard asset that can provide a hedge against inflation, as the value of properties tends to rise with inflation, and rental income can increase to keep pace with inflation.

1. Hard assets offer diversification benefits Investing in hard assets can also provide diversification benefits for investors. Hard assets have a low correlation with traditional financial assets like stocks and bonds, meaning that their prices do not move in sync with these assets. This means that adding hard assets to an investment portfolio can help to reduce overall portfolio volatility and increase the chances of achieving a positive return.

2. Hard assets offer long-term growth potential Investing in hard assets can also offer long-term growth potential. Hard assets like real estate and commodities can generate income and appreciate in value over time, providing investors with a source of long-term returns. For example, real estate can generate rental income, which can increase over time as rents rise with inflation. Commodities like oil and gas can also provide income through royalties and appreciation in value as demand for these resources increases over time.

3. Hard assets can provide a store of value Hard assets can also provide a store of value, meaning that they can retain their value over time. Unlike money, which can lose value due to inflation, hard assets can provide a stable store of value that can protect investors' purchasing power. This makes hard assets an attractive option for investors who are looking to preserve their wealth over the long term.

4. Hard assets can be a tangible asset that you can enjoy Finally, investing in hard assets can provide investors with a tangible asset that they can enjoy. Art and collectibles, for example, can provide investors with aesthetic pleasure, while real estate can provide a place to live or vacation. This can provide investors with a sense of satisfaction that is not possible with financial assets like stocks and bonds.

Bitcoin is often referred to as a "digital asset" rather than a "hard asset" like gold or real estate. This is because it is intangible and exists solely in the digital realm. However, some people do consider Bitcoin to be a hard asset due to its limited supply and the fact that it is decentralized and not subject to the control of any central authority.

Bitcoin is often compared to gold because it shares some of the characteristics that make gold a desirable asset, such as scarcity and durability. Bitcoin's supply is limited to 21 million units, which gives it a similar scarcity to gold. Additionally, Bitcoin is decentralized, meaning that it is not controlled by any government or central authority, which makes it less vulnerable to inflation or other forms of manipulation.

Ultimately, whether or not Bitcoin is considered a hard asset depends on the definition of the term. While it is not a physical asset like gold or real estate, it shares some of the characteristics that make those assets desirable to investors.

#bitcoinusa#cryptocurrencies#binary#bitcoinminning#forexlifestyle#investing#binaryoptions#bitcoincash#crypto#cryptotrading#bitcoin