The other day I was in the bank withdrawing $800 in cash – some Christmas money. The teller asked what denominations I wanted and for no particular reason I said, “twenties.” I was struck by how absurd it all was as I watched the teller count out 40 sheets of 6 by 2 ¾ inch green paper.
A small stack of 20s is no big deal, but it reminded me that Canada has created the electronic equivalent of billions of 20s in the last four years. In the States it’s worse. In the last 15 weeks alone $1 trillion dollars was borrowed with the backstop of the Federal Reserve.
So my $800 in 20s is no big deal, but the point to understand is that the paper dollars have no intrinsic value. It’s simply a matter of what people are willing to accept in exchange for goods and service. I think most of us appreciate that we can’t exchange the paper for as much as we could 10 or 20 years ago, or last year for that matter. But did you know, on average, $1 today only buys $0.54 worth of the goods/services it bought in 2000.
In some cases it buys even less. Our dollar today doesn’t even buy half as much gas as it did in 2000, and for the same amount of money that used to buy a loaf of bread we’d be lucky to get 1/3rd of a loaf today.
The average house price in Canada in 2000 was $163,000 – but that buys only ¼ of an average house now ($690,000). In Toronto the average house price was $243,000 in 2000 – today $243,000 would buy only 20% of the average priced house today ($1.2M). In Vancouver, in 2000 you could buy the average house for $218,000. Today $218,000 can buy only about 17% of an average home. ($1.3M)
How about gold? In 2000 one ounce of gold cost C$400. Today C$400 buys less than 1/15th of an ounce.
The Big Message
The point is the purchasing power of our money is relentlessly being eroded – and there is no reason to think it will stop. In fact, there are plenty of reasons to think it will get worse. Consider that government/central banks have dealt with every major financial problem recently by literally creating more money.
Trillions were borrowed by governments during the pandemic, facilitated by central banks. When the UK pension fund couldn’t find buyers for its bonds in September, 2022 the central bank immediately responded by creating the equivalent of $60 million US in a matter of hours. When the overnight lending (repo) markets ground to a halt in September, 2019 the Federal Reserve stepped in with hundreds of billions of newly created dollars.
And now it’s being done to support the massive war efforts in Ukraine and in Israel/Gaza.
But what does it mean?
How will it play out? A crash? Government shutdown? Big cutbacks to services?
Maybe, but my bet is that the central banks will simply continue to create money to support government borrowing and spending. As Christine LaGarde, President of the European Central Bank said in responding to worries over massive losses in the bank’s bond holdings – “The European Central Bank can neither go bankrupt nor run out of money” after all we can just create more euros.
Which is why you should pay attention to the Chief Investment Officer of the world largest hedge fund, Ray Dalio of Bridgewater, when he says, “watch the value of your money, (eg dollars) in relation to the prices of other currencies, gold, and goods and services to understand what is really going on. If you don’t do that you might fall under the illusion that the things measured in that money (e.g., stocks and bonds) are going up, when the truth is THE VALUE OF YOUR MONEY IS GOING DOWN.”
The Bottom Line
The key to all our financial futures will be to protect the purchasing power of our money. So how do you do that? The good news is that The World Financial Outlook Conference provides specific answers from some of the English speaking world’s market top analysts, individuals with the best forecasting track records in the industry.
For example, we enlist the help of Keystone Financial to create the World Outlook Conference Small Cap portfolio which has never failed to produce double digit returns; with stocks like Hammond Power Systems, which was first recommended at $9 at the Conference in 2021 and now trades at $82, and Sprott Physical Uranium Trust at $5, which is up over 500% since.
I’m excited to hear what Chief Market Strategist for Wellington Altus Wealth Dr. James Thorne has to say given he clearly called the decline in the 2nd quarter of 2023 and the strong year end rally at last year’s Conference.
We’ll spend time with Josef Schachter and Greg Weldon on the energy sector – mainly because I think oil and uranium offer some great opportunities and should be core positions in the pursuit of protecting purchasing power. And one of Canada’s top stock pickers BT Global’s Paul Beattie will share some undiscovered stocks, as well as some candidates for short selling.
The Bottom Line (Again)
The systemic credit/monetary and geopolitical problems are intensifying – the financial, economic and political stakes haven’t been this high in the last over 75 years. There will be winners and losers but significantly more losers. It is not business as usual. Ignoring the impact on your personal finances is not an option. There are huge pitfalls and opportunities that you should be aware of.
That’s why I’m so excited about this year’s World Outlook Financial Conference on Feb 2nd & 3rd in Vancouver at the Westin Bayshore. I look forward to seeing you there. For tickets go to www.worldoutlookconference.com
P.S.Can’t attend in person? Don’t worry you can still purchase access to our Streaming HD Video archive. The archive will be available within 48 hours of the end of the Conference, offers unlimited viewing, and can be accessed from anywhere in the world that has internet connectivity.