Categories: Stock Market
Topics: U.S. Dollar

Problems with the Fiat Money System

For the past year, I’ve been writing my monthly premium investment research letter from the second story of a house I purchased in downtown Spokane. 

It’s in an area known locally as Felony Flats — partially because the courthouse is nearby, partially because it was historically a higher-crime area in the city. 

The house, which I use as an office, is two blocks from the river. And over the past decade those two blocks have been heavily gentrified. There’s a boutique pet shop and a crêperie. 

The new townhomes built along the bluff overlooking the river go for $1 million. I can see them from where this sentence was typed, which is a 1905 single-family colonial that was part of a couples’ low-income rental portfolio before a divorce necessitated its sale. That’s how I got it, and at a third of the price of those townhomes two blocks away. 

The gentrification creepeth. 

A new brewery has opened up right across the street from me. Next door to it, ground will be broken soon for a new set of 14 townhomes. They tore down the existing homes on those lots this summer. 

Sometime in the next few years, my corner lot across from the brewery is going to fetch a pretty penny. 

But this isn’t a real estate tale. 

For now, it’s still Felony Flats. Across the street the sidewalks are new and the grass along the curb is irrigated and mowed. The sidewalks on my side of the street are crumbling, have no irrigation, and are adorned only with unkempt weeds. 

Every few weeks for the past year, a new RV or car has showed up with someone living in it. They typically stay for a day or two and then move along so as not to draw the ire of neighbors or parking enforcement.

They don’t park on the gentrified side because they fear the homeowners association that irrigates the sidewalk grass. 

Amid inflation that was recently at 40-year highs and mortgage rates now touching 8%, the homelessness issue has spiraled out of control. Maybe you’ve seen similar occurrences in your neck of the woods. 

A survey done this year by the city found that the homeless population increased 36% from 2022 to 2023. 

There are myriad causes to be sure. But this isn’t a mental health or criminology rag.

Fundamentally — and mathematically — there are not enough houses. For some of these people and families, there is simply no chair left as the music stops. 

That homeless survey this year found 2,390 homeless people (almost certainly an undercount) and 1,435 living in shelters — nearly 4,000. As of this week there are 1,335 homes for sale in the city. 

And even with higher interest rates, it remains a sellers market with 59% of homes in the city being sold at or above asking price over the past month. 

The family of three — mom, dad, and elementary-aged son — I occasionally see living in an RV outside cannot pay at or above asking price for a home like I did for one my family doesn’t even live in. 

But neither can some families who aren’t as obviously impoverished. 

Every evening I drive home to a gated 40 acres. One of my neighbors is a mortgage broker. And over the past year as interest rates have risen, he has told me about people with “real” jobs like teachers and nurses that he has to turn down for loans because they simply don’t meet the necessary debt-to-income ratios required by regulation. 

Did these people make bad choices? Are they inferior in some way? 

Or are they victims of a financial system with unelected bureaucrats in charge that first created the inflation that drove up prices, then denied that very inflation’s existence, and now have increased the cost of capital in an attempt to derail the economy and atone for their perceived sins? 

Do you think the parents raising their kid in the RV would assign them penance? 

Or are they too busy trying to afford a few gallons of $6.00-per-gallon diesel so they can move their rig before parking enforcement comes? 

Locally, little is being done to meaningfully move the needle. It’s an election year, so the incumbent mayor is busy blaming her opponent, who hasn’t held local office, for the city’s woes. And I see only partisan infighting among the city council while claiming there isn’t enough money for solutions. 

No money despite the Federal debt ballooning by $2 trillion over the past year.

No money despite hundreds of billions in aid for Ukraine, Israel, and others.

No money despite this now infamous exchange between one of those unelected officials and Scott Pelley on 60 Minutes in 2020:

PELLEY: Fair to say you simply flooded the system with money?

POWELL: Yes. We did. That's another way to think about it. We did.

PELLEY: Where does it come from? Do you just print it?

POWELL: We print it digitally. So as a central bank, we have the ability to create money digitally. And we do that by buying Treasury Bills or bonds for other government guaranteed securities. And that actually increases the money supply. We also print actual currency and we distribute that through the Federal Reserve banks.

Perhaps that fiat ability is how we got here. 

As citizens and investors, it’s time to call out and stand up against this arbitrary erosion of purchasing power and way of life. 

Gold has long been the way to do that, and still is. But crypto provides a new anti-fiat tool that must be embraced. 

This Thursday, October 26th, we’ll be launching a free educational series called the Million Dollar Crypto Club to help get you up to speed with the benefits of this new asset class. 

Make sure you’re on the lookout for it.

Nick Hodge
Publisher, Daily Profit Cycle