Inflation is at 5% — Here’s What to Do and Not to Do About It

Inflation is at 5% — Here’s What to Do and Not to Do About It

by Ras Vasilisin
6. July 2021
Inflation is at 5% — Here’s What to Do and Not to Do About It

In case you missed it, May’s inflation jumped to 5% from 4.6% in April. The Fed claims that it’s transitory, but there is no such thing as transitory inflation. Once producers raise prices, they keep them high. 

But the biggest issue is that the dollar is being devalued. In other words, it’s not the prices of goods and services that go up. And what happens in the U.S. matters because 90% of all transactions occur in dollars or currencies pegged to the dollar. 

That means that the euro also collapsed.  And so did yen, yuan, Singapore dollar, or Swiss franc. They’re all tumbling in tandem with the dollar. 

So the question is, what do I do if I don’t want to own Bitcoin?

Suppose we buy into the notion that the dollar and euro are collapsing 20-30% against scare assets. You wouldn’t want to own cash nor bonds. The M2 money supply is up 20% a year, S&P 500 Index is up by 30%. So the read inflation rate could be efficiently at 20%. In this case, bonds have a negative 15% real yield. 

High Inflation
And what about gold? 

Gold investors often view it as a way to hedge against inflation risk. However, history suggests otherwise. If we look at the results, gold has been a huge underperformer in the last decade with a 3.6% average return. 

High Inflation
And for instance, since 1980, it didn’t even cover the official inflation rate. 

High Inflation

S&P 500 Index is a definition of inflation

So if you don’t want to own Bitcoin, my best advice would be to buy U.S. stocks. 

The S&P 500 index is the very definition of asset inflation worldwide. To demonstrate, the index may have hit a new all-time high last week, but if you compare the index with the Fed’s balance sheet, it is trading at the same level as in 2008. That is to say; stocks have traded sideways since 2008, basically counteracting the Fed’s money printing.

High Inflation

They can’t print away your home 

My second best advice would be to buy the residential real estate you want to own for the rest of your life. Housing is going up in lockstep with the Fed’s money-printing program. For example, as the M2 money supply expanded 20%, the single-family housing in the U.S. went up 20% as well. See the chart below. The central banks can’t print 20% of your house away each year. 

High Inflation


In addition, you could also consider buying collectibles. What are collectibles? Think of them as something that might hold an appeal for the affluent in ten years, for example, fine art, baseball cards, antique furniture.

Bitcoin is the only solution in developing countries

It’s undeniable that you can’t buy stocks or a Picasso painting in countries with disastrous monetary policies. For example, the Lebanese pound lost 90% of its value in a year. Their central bank has already seized and frozen almost all foreign currencies held in banks. And if people in Lebanon don’t want to lose the rest of their money, the only solution is to convert whatever they have left to Bitcoin. 

In conclusion. regardless of your preference, stay away from cash, bonds, and gold. 

It’s a simple life or death decision. If the M2 money supply expands 20%, you’re losing 20% of your money a year. In other words, when your ship is sinking, and you are worried about whether you got the best seat on a lifeboat,  you’re going to be dead in two hours. 

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