You Are Manipulated by the Money Supply!

Now think about this, this is something most people never, ever think about, that they are being manipulated by the money supply. Let me explain what I mean. There's three ways that a government manipulates its citizens. Two of them are pretty obvious. The first is through the military, you get out of line, the military is going to come in and crush the uprising, they're going to crush the revolution. The government uses the military, not only to defend itself from others, but to defend itself from itself, from its citizens. The government manipulates through the military. But this is very messy. It's out in the streets, everybody can see it, it makes the populace incredibly angry, incredibly fearful, incredibly emotional. The government does not want to do this unless it absolutely has to, unless it's trying to make a statement. Okay. Now, the second way is through the legal system, and the law enforcement system. The government manipulates the population through the laws it passes, and then how those laws are enforced. Illegal setup, the legal system is set up to preserve the power structure of the country. This is one of the things about the United States, it's actually so different than so many other countries. The United States was set up in a system that was not designed to protect the power structure, it was designed to create a new and different power structure. Once the power structure is set up, then a law enforcement is put in place to punish the behaviors that go against the legal system. This is why something can be illegal in one country or one state and totally be legal in another country or another state. One great example of this is Bitcoin. In some countries, it's illegal to have Bitcoin, totally illegal, other countries is totally fine and then, in some countries like the United States, there's heavy, heavy reporting requirements. If you have Bitcoin, you need to report it, you need to track it and this is going to get into the third point in a moment, because the government wants to know everything about why you have it, and what you do with it. We all see other examples of this, like marijuana, marijuana is illegal in some states and legal in other states. It's pretty frustrating that you can have the same behavior in two different places, it'd be interpreted entirely different. This is the way the government manipulates its citizens. 

Okay, those two are pretty obvious, people see that. The third, though, is the money supply and this is the element that nobody thinks about. When the government is able to create its own currency, it is able to control the populace through the money supply. This includes the recent concepts of digital currencies, you see all these governments now want to go to digital currencies, they want to get rid of cash and why they want to do that, because they want to track every single thing you do. They want to everything you do, because if they know everything that you do, then they can keep tabs on you and make sure you stay in line. But in a bigger sense, when they control the money supply, one of the things that allows him to do is it allows them to control the economy. If you don't control the money supply, then the economy is really going to run by supply and demand and we're going to talk about this a little bit today. But it runs on supply and demand and the government can't really control that, they can control the supply a little bit, they can control the demand a little bit, but they really can't control that and a bigger issue is that when you do not have your own currency, when you borrow money, guess why? You got paid back and you have to run essentially a balanced budget. You cannot spend more than what you have. Because if you do, you will not get any credit. It behaves for them just like it does for you and me. If you spend more money than you take in, eventually people won't loan you anymore because you're a bad credit risk. Okay, but if you control the currency, then you can sell bonds and you can sell bonds to borrow money and it allows you to set up a system in which you can pay much slower or in some cases not even pay, you can make it all an illusion. If the government doesn't have any restraint in spending, then the government can do so much more, at least in the short term. They can buy votes, they can be bought by influence, bought by special interests. Because they can do whatever they want. If they do not control the currency, if they're let's say, using a gold standard, they cannot do this. Because eventually, people just say, give me all the gold, I don't trust you. Right. This is big and we're going to talk about this day, because when the government controls you through the money supply, there's all kinds of negative consequences attached to this and what I want you to get from this today is I want you to begin to understand one, how you're manipulated, and two, what these negative consequences are because they actually really hurt you. They hurt you in the long run. Let's get into it. 

One thing I thought was really interesting was that Aristotle, Aristotle, came up with what he called the four characteristics of good money. He said, for society to really blossom and flourish, it needs to have good money, it needs to be able to exchange. You cannot live in a system where everything is barter, you need to be able to move money quickly. He outlined what he called the four characteristics of good money. The first is money must stand the test of time and the elements, it must not fade, it must not corrode, and it must not change through time. Okay, so you can't set it on fire. It can't fall apart over time. It can't corrode, things like this, it needs to be durable. The second characteristic is it has to be portable. We have to be able to put it in our pocket, put it in a backpack, be able to send it quickly on the internet, whatever the case may be, it needs to be portable, it needs to be able to move freely and easily. The third thing is it needs to be divisible. Money should be relatively easy to separate, and put back together. This is why we have everything from a penny, a nickel, a dime, a quarter, to $1, bill, $5, bill, $10 bill, $20 bill, $50 bill, $100 bill, because it's divisible. Okay and lastly, it needs to have intrinsic value, whatever it is, it needs to have value on its own. You can think of it as a three part equation, you have, let's say you and I are going to do a transaction and let's just say that, I'm going to buy a pair of shoes from you. Okay, so we need to have an element of exchange. Let's say I'm going to buy a house, okay, I can buy the house from you and I'm going to exchange with you money for a house. Okay, this makes it all these other elements, it makes it portable and divisible. Okay, but there's a third part of this is the money itself has value. It's not just it's getting exchanged back and forth. At any point, if the money stops, the money alone has value. If I exchange gold for a house, okay, I get value in the house, you get value in the gold and both of our assets, actually, if they pause and hold still, they each have intrinsic value. Real estate has intrinsic value. Gold has intrinsic value. These are the four characteristics. 

What's interesting is if we now look at how the money system is now, we have what's called a fiat currency system. A big chunk of the world, particularly developed nations have gone to fiat currencies. What a fiat currency is, is it's a currency that is backed by nothing. It'll say it's backed by the good faith and credit of the government itself. Essentially, the government has the ability to collect and raise taxes and these tax receipts will essentially backup the value of the money. Also, the intrinsic value of the economy will backup the money. Okay, but the reality is, it's not backed by anything. There's never been a fiat currency that's been combined with a democracy that's ever lasted through time. They always, always fail and it's because it creates an unsustainable combination, which is you have something that can be printed on demand and you have voters. What inevitably happens in a fiat currency system combined with a democracy is a democracy always votes itself more money, essentially votes itself money it does not have and this creates all kinds of problems. This is where we live today, we live in a fiat currency system. Now, day in and day out. This is why you never realize you're being manipulated by the money supply day in and day out, you don't even realize that the money that you hold is falling apart, that is debasing, you see inflation, and you don't like the inflation, you see the price of crude oil going up, you see the price of rents going up the price of airline tickets, the price of education, the price of health insurance, you see all these things going up, and you call it inflation. But what we fail to understand is, what's really happening is the value of your dollar is going down. It's not that other things are getting more expensive, it's that the value of the dollar is going down.

Ironically, inflation is a man-made concept. Inflation doesn't really exist. If we have a constant supply of money, and something goes up in price, and that can happen, right, any price of anything could go up, if it's in shortage, the price is gonna go up. If it's in excess, it's going to go down. This is law of economics. Yes, the price of certain things are gonna go up. But when we have a money system, that is finite, if we're back, let's say buy gold, or if the price of one thing goes up, the price of something else must go down. They operate, they offset each other, and net net for the whole economy, there's no inflation. Now the government controls the money supply, because they can control the economy through the money supply. If you look at what the government wants to do, if you look at the Federal Reserve, which is our central bank. It reports to the government, it's not part of government, but it reports to the government. If you look at the Central Bank, their stated objective is to have 2% inflation. That's what they strive for and that's what they want it to be normal. What this really says is that the supply of money increases 2%, every year. Now, why they do this? Because if they can control the money supply, and they can constantly be growing a little bit, they can make you feel like you have a little bit more money this year, than last year and you'll have a little bit more money next year than this year and this helps you feel good. This helps you feel good about where you're at, it helps you feel good about the government. You're on board. Without this, your money wouldn't go up, it would and stay the same. This helps you to feel good and then this gives them levers that they can pull to manipulate you. They want your vote, well, they'll print more money. More money goes into the system, businesses do better, everybody's happy, stuff gets too crazy, they rein it in. The problem is that for every time they add money, they don't pull it back nearly as often and when they do they do it for a short period of time. Now, there's a much deeper discussion here that we have time to get into today. But every time they print money, a lot of that money is wasted for non productive use and it ends up causing what we call a debt cycle, which we'll get into, we won't get into today. But this is important to understand. If I can constantly grow the money supply a little bit, I can manipulate you through that. 

All right. Let's just look at some different assets under this idea of the characteristics of good money. Gold is the universal currency, it is the ultimate currency, it has lasted the test of time and because gold essentially meets all these characteristics. It's one of the few assets that does. Is gold durable? Yes, that's one of the great things about gold, it always looks like gold. It might get a little dirty or whatever, but it lasts, it doesn't corrode. You can just clean it and it's nice and shiny again. It's durable, it's portable. You can take gold down to really small pieces. You can buy gold coins that are 1/16 of an ounce, right? It can be tiny or it can be a brick, it can be incredibly valuable. It's portable. It's divisible like we just said you can chop it up into little, little, little little pieces and it has intrinsic value. That's why it is considered to be the ultimate in good money. Now, if we go through and we look at fiat paper, like we just discussed, right, we go create the dollar, we go look at the dollar. The dollar is not durable, you can set it on fire, you can destroy a data file that has somebody's ledger in it, you can do things like this and it's gone. It is portable, which is great. It is divisible, which is great. But it has no intrinsic value. In fact, the perceived value of it is getting worse. Okay, let's look at land. Land is durable, it's always there, but it's not portable, you can't pick your land up and take it somewhere else. It's not divisible, you can divide it down sure to smaller plots, but you can't divide it down to a tiny, tiny, tiny piece of land. Nobody cares and then intrinsic value, of course, land has intrinsic value. Let's look at a business. Businesses are not durable, you can have the best business in the world and 10 years later, it's gone. It's not durable. It's not portable. It's not divisible. But it does have value. Let's look at oil. Oil is somewhat durable, but you can set it on fire. It's not totally durable. It's definitely not portable, we're not going to carry an oil drum around. It is divisible and it does have intrinsic value. Okay, so you can see, looking at some of the major types of things that could potentially hold value, only gold meets all four characteristics. Now, one of the amazing things of human ingenuity is humans solve problems. Anytime that you are down in the doom and gloom, just step back and just think about human ingenuity. We are freaking amazing creatures and so one of the things humans are doing is humans are actually figuring out more and more ways to create and sustain value. We talk a lot about this in our workshops. 

We've already talked about the gold and the dollar, well now let's look at a real estate investment trust. Yeah, land is not portable, but we can create what's called a REIT. A real estate investment trust, which is basically an entity structure that holds land and then can be sold off into little shares. When we look at a REIT, it's durable because it's backed by land. It's portable, well, you can't carry a REIT around in your pocket. You can digitally sell off small amounts, but it's not portable, like you can put it in your backpack. It is divisible though, unlike land, REITs are divisible. You can buy a single share for five bucks or 10 bucks or 20 bucks and it has intrinsic value because it's backed by land. REIT is an improvement upon land, which is great. Okay, now we look at businesses, we said businesses fail in numerous categories, but we can buy an S&P 500 ETF, we can buy SPY. Now when we buy SPY, Spy, it's digital, so it potentially is not durable because something could happen and the system crashes or whatever. It's not portable, you can't carry a SPY around in your pocket. But it's divisible. Right and now if you go to something like Robinhood, you can buy fractional shares. So it's not even like you can buy less than one share of SPY you can buy fractional SPY and then it has intrinsic value because it's backed by 500 of the best companies in the United States and it's constantly rebalanced to make sure it's always the 500 best. It does have intrinsic value. If we look at an oil ETF like USO, well, it's durable, because it's backed by oil and there's lots of oil. Even if it got set in fire in one place, the rest of oil would still be there. It's not portable, though, you can't carry an ETF around. It is divisible because you could buy one share of USO or a fractional share and it has value. It's backed by all the oil. We look to the right through financial engineering, we've created several assets that actually are much better forms of good money than the underlying asset that makes them up. But none of them still are as good as gold. 

Okay, now remember how I said inflation is manmade? It's an artificial creation. I want you to notice something. These are two graphs and notice they're kind of inverse of each other. All right, the table on the left is the consumer price index. This is the index that everybody looks at for inflation and I want you to notice that from 1775 until 1910, right this is basically 135 years right. For 135 years, look, there was really no inflation. During war, it would pop, because the government need to borrow more money, but for 135 years, we didn't have inflation. The price of one thing would go up at price, someone else would have to go down, because the money supply was constant. But in 1913, the United States created the Federal Reserve. They tried to do this to try and eliminate runs on the bank and to make the financial system more stable, but it was also really a power play and one of the things that you can see as ever since the Fed was created, inflation has gone higher, and higher. And you can see in 1971, when Nixon took us off the gold standard once and for all, you can see inflation just skyrocketed ever since. Most people don't realize this, but it's the case. We look at the opposite, we look at the purchasing power of $1. We can see starting in 1913, the purchasing power of $1 has been falling and falling and falling.1933, FDR suspended gold convertibility and made it illegal, pay attention, made it illegal for you assistants to hold gold, unless it was like jewelry. Then in 1971, Nixon took us off the gold standard altogether. Why? Because if you go back to the 60s and we fought the war in Vietnam, and Lyndon Johnson started the Great Society. Two massive spending programs and so we were spending way more than we took in, running these big deficits, and particularly the French said we don't trust your money anymore. We were exchanging all kinds of money with the French, on exports, and imports. We were buying goods from France and paying them in dollars, and they're watching us print, print and print the French like this money is not gonna be worth anything. They said, we want the gold, give us a gold, we'll give you the dollars back. It's gold backed right, give us the dollars are gonna give us a gold and Nixon saw, there was starting to be a run on United States gold. He's like, we can't have this. So he pulled us completely off the gold standard and ever since then, the dollar has really fallen apart, you can see it right here. So the value of the dollar has fallen 96% since 1913. That is massive. Now, we don't see it. Because if you look at it versus the euro, or you look at it versus the Australian dollar, the British pound, Canadian dollar, they're all going down. Because they're all fiat currencies, they all spend way too much money, they're all collapsing. So relative to one another, you don't notice it. Where you do notice it though, is if you look at it relative to gold. Okay, so when Nixon took us off the gold standard in 1971, the price of gold was $35 an ounce. So remember, that was $35 an ounce. It's now $2,015. All right. 

Another thing that governments do is even when it's backed by something tangible, like gold, they cheat. It used to be they print gold coins and that was the exchange. But what's always been famous is that they've lower the content of the gold or the silver or whatever the case may be, even nickel. Okay, like they've reduced the amount of nickel in the US nickel. Alright, so this graph shows the gold content of the US dollar and you can see that, again, for 135 years it was constant. The gold content was about the same. But then, when Roosevelt took us off, when he devalued the dollar versus gold, you can see that the gold content per dollar started crashing. All right. Now what's interesting is you look at this chart, it looks a lot like this. This is the silver content of the Roman denarius, one of the staple Roman coins. You can see how the Romans between 64ad and 270ad as the Roman Empire was falling apart. What they did is they debase their currency and the amount of silver that was actually in a coin was going down and down. They would be essentially lying to people. And why they were doing this? Because they were spending too much money. Spending way too much money. All right and so just look at this. This is the performance in gold versus all the different major currencies. This is back over 20 years. Look at the returns of gold between 2005 and 2011. The worst year, even 2012, if you through that, in the worst year, gold was up 11%, it was up between 11 and 26% during that stretch. You can see, there's only been two years that gold has actually been down in value versus various currencies. You hear a lot of people say, Oh, gold's a waste, it doesn't pay interest. I'm long stocks, look at stocks, they always go up. But they actually miss that gold also has been going up. In fact, if you'd bought gold and the s&p each in 1971, they're worth about the same now. You got about the same return holding gold, with no interest rates, not paying any interest, just holding physical gold is paid about the same return, as the s&p has, over the last 50, 53 years, 52 years.

All right now, every society that's on a fiat currency is going to face what's called the inflation death spiral. Japan is starting to enter into this right now, it doesn't look like it, by the way, because the idea is in Japan, that they're battling deflation. But if you look at what's going on under the hood, you can see that this is starting to happen. Okay, so in a fiat currency system, inflation has a way of perpetuating itself. Inflation reduces your living standard, as we just said, you look into last year, price of school education going up, insurance going up, real estate going up, gas going up, all these things going up, your lifestyle goes down, because you still make the same amount of money, but you could buy less of it. This makes people upset. They push for programs that are designed to try and help out. But these programs actually create even more inflation and higher taxes. You start to see things that are proposed, like universal basic income, or raising the minimum wage, right? You see, these are common things are talked about every day now on the news. All these do is just create a cycle of inflation, the story will change, it's only a matter of time where the fight for $15, or the fight for $20 an hour becomes a fight for $50 an hour and $100 an hour. You get into this cycle, where in a fiat currency, the government prints too much currency, because they print too much currency. Or a better way of saying this is they expand the money supply. They expand the money supply and because they expand the money supply, prices rise and then because prices rise, you feel pinch, you can't buy as much. Because you're feeling pinch, then the government starts supporting socialist policies, right? Like, let's tax the rich, let's have free college education, let's have free health care, let's have free this and free that and you're like I'm getting killed on this stuff. This sounds great. Everybody says we're in. Well, the support for socialist policies then means the government has to expand the money supply even more to pay for it, they don't have the money. They go to pay for it and they expand the money supply, which causes inflation to go up even more, which causes people to feel pinched even more and then the support for socialist policies rises even more and this all happens until there's a breaking point. It's unsustainable and one of the problems is every time they do this, it gets way bigger than they think. Anytime you throw make something free, the cost estimates are always ALWAYS, ALWAYS way too low, because everybody wants it. You say, oh 10 million people will do this, we make it free., 100 million people will want it and you didn't build that into the model. We see a great example of this right now in Argentina. South America has had trouble with this for years and years and years. But look at the inflation rate in Argentina, just in the last year. It's gone from 98%, which is already frickin insane to 211% and they just keep devaluing the currency. So if you're familiar with these countries at all the wealthy people they either hold physical assets or they moved all their money out. Right? You go to Miami and Miami is filled with Argentinian and Brazilians. Why? Because they don't want to deal with this shit. So they try and get their money out of the country. That's even worse, when the wealthy people pull the money out of your country, now it's benefiting citizens somewhere else rather than the citizens in your own country. It leaves a pit where everybody gets left behind. Wealthy people can leave, poor people, it's very hard to do. 

Alright, so one of the things people don't understand is because the United States is actually not a democracy. People think we're a democracy, we're not we're a republic. The fact that we're a republic is actually helped save us and the fact that the Federal Reserve is actually independent, is helped somewhat. Obviously, it's contributed, I showed you all the graphs. But it's not as bad as it is in places like Argentina or Brazil, where they just vote themselves the money and it's gotten completely out of control. It's actually interesting if you went back to like 1915, in 1915, if you compared to Argentina to the United States, they were almost identical. Identical in the size of their economies, identical in their prosperity, everything about them was the same. Now, 110 years later, we look radically different than Argentina and why is that? Because Argentina has had socialist policies for 100 years, and they failed, and they failed, and they failed, and they failed and economy has never gotten to be great. Like it has here. 

Alright, so all this is really interesting, kind of scary. Why are we talking about this? We're going to continue on this next week and trader Tip Tuesday, but I want you to understand, first of all, we have to be aware, we can't fix anything unless we're aware of the problem. Today is really designed to make you aware that yes, you are being manipulated and yes, your purchasing power is constantly being eroded and yes, the policies that are being proposed are only going to make it worse. Okay, great. Now we're aware of this problem. Now we go solve it.

Next trader Tip Tuesday, I'll get into more specifics of how we solve it, but specifically, what I want you to realize is gold is the ultimate, it's the ultimate alternative to this problem. Because it can't be manipulated, it can't be printed and so if you can take your estate, you can take your net worth, and you can start to shift it and stop thinking of it in dollars and start thinking of it in gold. What percentage of your household right now is invested in gold assets and you can look at other assets too, but assets, if you look at other assets, they have to be assets with intrinsic value. Land is great, right? But what percentage of your household is invested in gold? Right now, less than one half of 1% of the average household is invested in gold and I can tell you that the median is much, much, much lower than that. Essentially, there's the wealthy people have a lot of gold exposure one way or the other and the poor people have zero, none. This is your way to start to change this. By owning gold, physical gold, paper gold, gold miners, this sort of thing, you start to shift, and you start to protect yourself. That when these things happen, when they're debasing your currency, your assets rise, don't really rise, but they rise relative to the debasement currency. 

This is a big, big theme for us, because in 2024, we have the belief that the potentials there, is not confirmed yet. But the potential is there for gold to explode in value and one of the things that Mark and I are really doing is we're pushing to raise the awareness and prepare people because we believe that when gold goes through 2150, it could quickly be 3000 and you could be missing it. Right now, we want to see you starting to accumulate some of it now before it goes and be ready for when gold does break out. You already know how to handle it. This is going to be big. It's gonna be big for you on multiple levels in the next 10 years. You know on Trader Tip Tuesday, we come every week with tips like this week, getting you aware of how your money is literally falling apart, to help you raise your trading performance, your investing performance to an elite level. I'll see you next Tuesday.