Here is a simple equation to tell you we are in a hyper-inflation bubble.
In a Wall Street Journal story published Friday it stated, “there are more real-estate agents than homes for sale in the US,” according to the National Association of Realtors.
Besides real estate look at other more precious commodities like stocks, gold, silver and yes bitcoin. All are reaching new highs due to scarcity. While the Federal Reserve only has to push some buttons to create the $28 trillion deficit we find ourselves in, these other commodities are much harder to find.
While the Earth is not making anymore real estate nor gold nor silver over the last year, the Fed has created — with a couple of keystrokes — trillions of dollars in money. While the process to mine cryptocurrencies takes a huge amount of energy, which also makes it a precious material, all the Fed needs is a keyboard.
Last year at this time bitcoin was below $10,000. Today it stands at just over $60,000. Talk about a good hedge on inflation. There is an old saying that money flows where it is treated the best. Bitcoin appears to be the presidential suite right now.
Home prices — in states that are controlled by Republicans — have soared to new highs as Americans look for a better way of life in the post-CoVid-19 landscape.
For those Americans not well versed in alternative investments, the stock market is also hitting daily new highs for now.
On Wednesday Fed Chief Jerome Powell said he did not see any reason to raise the interest rates because of the economic pain caused by the pandemic. This action will only fuel more inflation in the short term.
So if money is so cheap and plentiful then hyperinflation will be our future. It is as simple as that. The dollar you earned this year is not worth anything close to the dollar you earned even five years ago, based on its buying power.
The simple equation is this. When you have $28 trillion dollars now versus $14 trillion five years ago chasing the same amount of products, the price on those items will rise. It’s supply and demand.
So here is a word of caution to all those newly minted real estate agents. Every time you sell a $900,000 home for $1.5 million you are contributing to the inflation problem. Don’t come back to me and complain about gas prices being $4.00 a gallon.
It’s all about supply and demand.