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How’s it going everybody this is beat the bush today i’m going to talk about the two trillion dollars worth of stimulus money that’s eventually gonna dilute your savings account now most people probably have a vague idea that if the united states suddenly just print money and then dole it out to a lot of people this is gonna dilute your savings in turn reducing the
Buying power of your dollar but the question is how is this done exactly we’re talking about this tutorial how does it get into the hands of people how does it really dilute anything what is the actual effect here so today i’m gonna concentrate on following where this money is going and how this actually impacts our economy the more money that you print the more
Money that floats around the system the more delusion there is and in turn this results in higher inflation the stuff that you buy gets more and more expensive whenever inflation happens generally they try to keep it around 2% every single year so let’s say if your loaf of bread is let’s say $1 and inflation is at 2% every year then after one year is $1 in two
Cents and this gets compounded every single year so after many many years you’re gonna see a loaf of bread maybe at ten dollars now right now it’s a pretty terrible situation all of a sudden there’s two trillion dollars of stimulus money suddenly appearing on the market let’s say you have $10,000 in your high-yield savings account earning you 1.5 percent apy such
As the hsbc online savings account i personally use i don’t have a referral for that so just look it up yourself if you’re interested in getting this and likely this interest rate is gonna drop to around 0.1 percent so if inflation is at 2% and you keep on holding this money in but your inter savings right it’s gonna fall to near zero so no matter what you do if
You hold on to any kind of united states dollar if you hold on to a bunch of this it’s essentially losing value every single year some people in the comments have voiced their concern over hyperinflation now i personally don’t think there’s a high chance of seeing this ourselves because the federal reserve really tries to rein in on this with their monetary policy
For example if inflation looks like a little bit too high then they may increase interest rate then this is gonna incentivize people to keep more of their money in their savings account and when people do that they’re not spending as much and therefore the inflation rate will stay down because the prices will eventually trickle down lower however this is probably
Not very good for the economy right this minute what did happen recently is that the flood fence rate lowered their interest rate to a target of 0.1% this encourages spending of businesses and individuals and in turn this may eventually lead to a higher inflation rate check out this federal funds rates graph they did indeed reduce it recently to 0.1 percent so far
The cpi which is the consumer price index is right around 2% which is technically they call it reasonable amount what is the cpi by the way the consumer price index it’s just a bunch of goods that they think the consumer is gonna use and they just put all these together transportation gasoline they need to buy bread they need to buy flour and then they put it all
Into this basket and then they look at what the market prices are after they combine all these metrics together then you get a final number the cpi this graph here is a 12-month percentage change of cpi from the us bureau of labor statistics as you look at this this is really just measuring a one-year inflation rate after one year how much does inflation change
Some people might say the cpi does not reflect real inflation because some people might buy more heavily into flour they might have a different mixture of what they actually consume for me i just use cpi as kind of like a factor where i consider and it’s not an exact science there’s also the argument where people are not always gonna buy the same number of things
In the exact percentages as the cpi follows so for example apples doubles in price you’re naturally gonna not buy as many apples and then maybe you’re gonna find another fruit that is similar to apple maybe a pear instead and then you’re gonna increase your purchases on pears so now the mixture of what you actually buy is different than what you initially bought
Because the price index moves around your preferences is also gonna change so therefore this cpi is just kind of like a fudge factor you just kind of look at it from sort of far away you just kind of school your eyes a little bit this is roughly what the consumer is paying and i initially look into this stimulus money because i wanted to know where these billions
Of dollars are going and how does this affect our inflation rate if you look at the two trillion dollar stimulus bill and how its divided you can see that individuals are gonna eventually receive six hundred two billion dollars large corporation where we would see 500 billion small businesses 377 billion state and local governments three hundred thirty nine point
Eight billion public services one hundred seventy nine point five billion so all of this totals up to about two trillion dollars now i don’t want to go over every little line item here i’m just gonna look at some of the bigger things for example cash payments of 300 billion dollars to individuals so this is money that the government just printed and then they’re
Sending the stimulus money some people are getting $1,200 some people are getting another $500 per child this is just money that they just conjured up from nowhere so this is money that’s going to be injected into our money supply and this will indeed dilute everything extra unemployment payments of two hundred sixty billion dollars yet this is again another
Item that could dilute our money supply loans to large corporations of four hundred twenty five billion dollars now when i looked into this these are actual loans where they actually do have to pay an interest rate and they do have to pay this back so it’s a temporary injection into the money supply but then eventually they’re gonna have to pay it back along with
These loans they have to agree to not reduce their labor force by more than ten percent and there’s all these little criterias that makes it seem a little bit more palatable but when you move on to the small business loans new loans at 350 billion dollars if you look carefully at the criteria for this three hundred fifty billion dollars these loans are actually
Forgivable which means that they get the money for free the criteria here is as long as they retain the employees through the end of june so this is like they pay their employees one or two months and then they get free money basically so if i had a small business and i happen to get this loan most likely i’m gonna try my best to meet all the criteria that they
Asked for so that i can get this money for free it just it’s just free money after that and they’re also gonna have grants at ten billion dollars this is kind of small compared to three hundred fifty billion so i’m talking about these things because i wanted to know how much money is actually going into the system and all this money just sort of appears like free
Money the government printed it and then they’re just handing it out to whoever needs it and then you also have the kovat 19 response of 274 billion dollars this is you know government spending they just printed it and then they either like oh let me let’s spend it on you know these relief packages so me going over these these are the major things right 300 billion
Two hundred sixty billion three hundred fifty billion if you add all those things up where people don’t have to actually pay back this is about a trillion dollars of money that’s just printed out and you know giving out to everybody so now if you look at the money supply m2 they basically add up certain kinds of money that’s in the system and then you can produce
A chart looking at how much money is in the entire system over time and you can see at the end over here right around march 2020 you can see it go up by about two trillion dollars now if you look at other countries that has hyperinflation this is very very concerning because the more money that you print the more unstable that it becomes now with all this money
Printing you might automatically think oh why don’t i buy gold because gold is a good store of value check out this gold price chart over here in general you can see that it’s going up but then there are a long periods where it actually did not make any games from 2012 to 2019 the gold price actually declined and you might wonder why because the federal reserve
Actually have a lot of monetary policies that sort of mix gold price out of whack with the actual money supply it does not correlate exactly with the money supply it can deviate from it for many many years but i personally think that over in the very very long term probably if you average it over ten years then yes you can kind of see that as they pump more money
Into the system the gold price does sort of float up with the current injection of two trillion dollars and likely a lot more after this this is a huge spike in the money supply so this is why in the recent few months or so the price of gold has spiked a little bit and if you ask me i personally am sort of kind of hovering around it like a shark i’m like wondering
If i should buy into it of course a lot of times whenever an asset already ran up and it’s as its all-time high it’s a little bit hard to buy into it but i want to just tell you guys this is something i personally am looking into i personally would not invest more than 10% of your portfolio probably some you know five to ten percent or something just so that you
Can have it sit there as a hedge against inflation in the short term though i do think gold could have a chance to go back down a little bit based on the monetary policy of the federal reserve so buying into gold i do not think is a slam-dunk for me personally because it’s already ran up quite a bit i think over the long term very very long term like i said if you
Look at the duration between 2012 and 2022 the money supply has been trending up this is really really out of whack if you guys are interested in trading gold the best way i think is to buy an equity in golden etf gold fun check out my weibo referral link down in the video description below where you can just sign up for this and you can also get two free shares
Of stock as long as you sign up you get one share and then you deposit more than $100 and get another share of gold and then once you’re in this thing you can actually buy an equity called gld and then you can invest in gold that way of course i still have to say this is not a recommendation to buy or sell a certain equity because these things can go up or down in
Value you certainly should not follow my advice just on the surface over here you got to do your own research check with your financial advisor before you do anything this is the typical disclaimer i have to give thanks for watching this video don’t forget to give me a like comment down below let me know if you’ve already invested in gold or do you prefer physical
Gold and as always don’t forget to push that subscribe button and ring that bell icon thanks for watching
Transcribed from video
How Your Money Will Be Worth Less Soon By BeatTheBush
