Does Money Even Have Value Anymore?
Not sure how this will turn out, but I sit here thinking about recent economic events.
You have the Fed creating money like there’s no tomorrow, you have a stock market that’s rebounding as quickly as it fell, and oil prices being destroyed in the wake of less demand. The theme I keep returning to is, does money have value anymore?
I’ve been thinking recently, our economy is propped up and is due for a correction. That’s nothing new as markets flow up and down. However, the variable in this whole equation is the Fed.
In 2008 the Fed stepped in to bail out big banks. In 2020, the Fed steps in again to pump money into our markets and bail out a largely shut down economy. Don’t get me wrong, there needs to be a level of intervention because when was the last time an entire economy was closed for an extended period of time?
But, where I begin to question the value of money is the Fed’s printing and continued interventions in the market. Instead of a market and economy completely correcting, the Fed steps in to save the day and prop up a falling market.
For example, if this market dropped 30% and the Fed stepped in to stop it, who’s to say the market was supposed to stop there? Maybe it was designed to fall 50%?
The idea here is the overall market and economy is no longer natural, rather a Fed driven economy that knows anytime peril is imminent the Federal Reserve will step in to save the day. Personally, I don’t agree this is healthy for natural market behaviors but maybe this is the new normal.
I believe markets and our economy is designed to flush out the weak-links and the strong will survive. Instead, if you have access to debt and are large enough, you have nothing to worry about. Even now, the government have reached out to small businesses with SBA loans.
Returning to the original question, does money even have value anymore?
Personally, no.
Yes, it has value because we still transact and buy goods and services. But if a sector or the overall economy needs stimulating, the Fed just turns on the printer and pumps more into the economy. We should be seeing increased inflation, but we haven’t and that’s a discussion for another day.
What I mean by money not having value is the Fed will step in to save the day and our economy knows that now. If I have a business or investments, I know the Fed won’t let those fail because anarchy would follow close behind. In a healthy market, should there be failure? Absolutely.
Also, you should be seeing a transfer of wealth, but now we don’t see that as clearly. In a normal market there are always winners and losers. Better businesses survive and the weak close.
But now, everyone wins and nobody fails.
That means businesses can leverage, investors can get a bit wild and there’s always the safety net of the printing press. What’s problematic is I envision this being unsustainable. I may write about it in more detail, but the issues include inflation and motivation for riskier investments.
While this may seem a bit odd, this is my perspective on the current situation. The more I read about market interventions the more I believe physical assets have increased value in the current environment. Gold, silver, real estate, etc.
The good ol’ king Dollar won’t be going anywhere anytime soon, but it is worth exploring alternatives such as Bitcoin. Would we ever go back to the gold standard? No, because that would mean a finite amount of money.
Instead, we have the wonderful pieces of paper with simple faith backing their purchasing power.
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Feel free to reach out with any comments or questions: nyoungfreelancing@gmail.com.
