Something Big JUST HAPPENED To The Economy - What Banks Don’t Want You To Know

This video is going to be a bit painful to watch. We are about to enter the age of ultra high inflation. As I was reading the annual letter to the shareholders by Warren Buffett, I found something very astonishing. This is exactly what he said. And never forget that we need you to maintain a stable currency and that result requires both wisdom and vigilance on your part. He has been writing the annual letters every single year to the shareholders, but this is probably the first time that he is sending a clear sign to the dollar is not stable. And if you are not going to be wise with it, this might be the end of it. So I started digging into the numbers to figure out what exactly is happening with the economy. Should you be worried? Should I be worried? Are your savings are secure? So what I will do in this video is that I'm going to share with you all the facts, all the numbers that I came across, and you can judge by yourself whether we are actually entering a very serious period of inflation and most importantly, how that high inflation is going to impact you and how could you possibly profit from the high inflation that is right in front of us. So if you're ready, give this video a thumbs up and let's dive in. For a very long time, the United States enjoyed one of the highest GDPs in the world, if not highest. There were some periods where the European Union actually caught up with the United States, but as you can see that it slowed down. Now China is catching up with the United States. Prior to China, there was Japan's economy that was about to take over the United States, but the United States kept enjoying the highest GDP growth all across the globe. And that led a lot of people to ask the question, why am I not enjoying this super high quality of life if the US GDP is so high? And in order to answer that question, we have to take a look at how GDP is actually calculated. GDP basically stands for Gross Domestic Product and it consists of four major categories. Consumption, it's everything that you spend. When I go to the grocery store and I buy something, that's part of the GDP. If you go and buy a brand new car, that's part of the GDP. The second one is investments. Any kind of investment that is made in the United States is considered part of the GDP. When Apple opens a new plant in the United States, when Toyota comes to the US and they open a new factory. Government spending. A government spends a lot of money every single year. They fund schools, they build roads, they fund bridges, plus net exports. Net exports is simply the amount of goods that the country exports to the world minus the amount of goods that their country imports. If a country produces much more than it imports, then its GDP is going to drastically grow. And that's why China has caught up with the rest of the world and especially the United States. Over the last 3-4 decades, China started producing everything. There was a period of time when anything that you are going to touch is made in China. And if you go to the roots of American progress, you will find the exact same pattern. You can even find it in the annual letter to shareholders by Warren Buffett. If America had consumed all that it produced, the country would have been spinning its wheels. So what made America such a great country in the first place is because it was producing so much, but it wasn't consuming all of that. So it had that money in order to invest it and grow such a powerful economy that the United States is today. But let's take that and compare to what's happening today. Something fundamentally changed, and the United States started importing much more than it's actually exporting. In fact, the US imports more by almost a trillion dollars worth of value than it exports. So if the United States is importing much more than it's exporting, then why the GDP of the United States all of this period has been growing dramatically? And that's because the United States has mostly been relying on government spending. There are two ways that the government spends money. Now, in order for the government to spend money, they have to get that money from somewhere. You can't simply spend money that you do not possibly have. And the first way is, of That money is taken by the government, and the government uses it by expanding the military, funding schools, building bridges, building roads. But what if those taxes are not enough? There is a second way for the government to spend money, and that is to borrow that money from somewhere. There is no other way for the government to take that money from. It's like they can't possibly just magically get it from somewhere. They can get it magically from somewhere, but that magical place is called debt. What people don't often realize is that any kind of government spending is a form of tax. Whether you are actually paying those taxes directly to the government when you're filing your taxes, or when you're selling stocks, when you're selling your real estate, you are paying real estate taxes. But there is a second way of taxing people, and that's when the government borrows money. It makes no sense. How is government borrowing money is a tax on me. But if you literally just dig into the numbers and put the logic in between, you'll find out that it's nothing but a tax. And let me prove that to you. 2020 and 2021 were some of the periods when the government borrowed a lot of money. And now ask yourself a question, why exactly in 2020, suddenly there is a huge spike in house prices. The house prices around here were $300,000. And now suddenly they have jumped to $450,000. Doesn't that bother you that there is such a huge spike in such a short period of time? Over a very long period of time, stocks have been growing gradually. But then in 2020, something happens and stock prices tripled in such a short period of time. What happened? When the government borrows so much money and it throws it into the economy, the value of the current dollars within the economy stopped going down dramatically. And that's why even though that you have the exact same amount in your pockets, now that amount of money can buy less things. So the purchasing power of that money goes down, which is an alternative form of tax. If the government did not do that kind of borrowing, your money could have bought you more. So if you had like $300,000 in 2020, and you could buy that house. Now fast forward three, four years after that, you no longer can buy that house. The price of that house is now $450,000. Did you pay a portion of that $300,000 to the government? Well, you did not. So you think that the government did not tax you. But because the government borrowed so much money, now with that $300,000, you no longer can buy that house. And that's why the rich get richer and the poor gets poorer. Because rich people are investors. They're holding the kind of assets whose value are going to rise. Donald Trump has made a lot of promises and he's willing to cut as much taxes as possible in order to grow the US economy. But whenever you hear the word cut taxes, the first thing you have to ask yourself is that where the money is going to come from. Either the government is literally going to cut all of its expenses and it no longer needs that money, or they will simply replace that income with something else. And the government doesn't have any other sources of income, either from collecting that money from people like you or borrowing money. That is why if you've been watching the news, the government is trying to grow the debt ceiling by $4.5 trillion. That is the least amount of money the government needs in order to replace that income. Let's say you're making $100,000. A portion of that money is going to go into paying your rent or maybe your mortgage. A portion of that is going to pay for your car. A portion of that is going to pay for your restaurants, food, groceries. And if your income goes down from $100,000 to $80,000, you're either going to cut some of your expenses, such as moving to a cheaper house, maybe selling your house and getting a much cheaper car. Maybe you stop going to restaurants and enjoying all of this lavish lifestyle, or you're going to simply borrow money or use your credit card in order to keep continue making those payments. So let's ask ourselves a question. How much the tax cuts are going to cost the US government? According to different estimates, the tax cuts are going to cost the government anything between $5 to $11.2 trillion. And if you know anything about the US government, they always overspend. So over the next 10 years, the government is going to overspend by $11.2 trillion. So the government has to take that money from somewhere. Right now they have just approved $4.5 trillion, even though that it's not final yet, but they will probably approve it because the Republicans are controlling the house and the Senate. And there is a possibility that they will increase it by another $4.5 trillion by the end of his presidency, if it's going to be $11.2 trillion. How is that going to impact me? How is that going to impact the economy? So you can already expect from now that inflation moving forward is going to be much higher than it has ever been in the history of the United States. And that's why they never report the real inflation. They have created the CPI report that has nothing to do with the reality and they manipulate the numbers in ways that you cannot possibly even imagine. But the real inflation, if you want to find it out, you simply have to take a look at these two graphs. The first one is of course house prices. And the second one is asset prices. Companies are not getting so profitable in such a short period of time. There is nothing fundamentally happens that corporations started making significantly more that their valuation is such a short period of time when three times than it was prior to 2020. The exact same thing with these houses, their valuations are growing dramatically. They are cutting taxes and borrowing much more money and throw it into the economy, which means that this number is only going to grow dramatically over the next couple of years. And these stocks are also going to go dramatically. And if you know the math, stocks are growing way faster than house prices. And that only means that we have already entered the age of high inflation. The age of real inflation have already started in 2020 and it's not going to stop. And that's why if you look at the GDP of the United States, there is a huge increase in the GDP since then. Do you feel that do you feel like you live 30% more wealthier? Well, of course not. In fact, many of you, if not most of you are feeling that life now is much more difficult than it was pre-COVID. Life now is much more expensive than it was pre-COVID. Even though that many of you are making much more money five now than you used to make five years ago. And this problem actually started back in 1980s when Reagan became the president. And his idea was simple. Let's cut as much taxes as possible and grow the economy. But whenever you're cutting taxes, yes, in the long run, the economy might actually grow much faster. But in the short run, you can't simply fire the entire government just like that. You can't fire like 50% of the stuff or 70% of the stuff. So you have to replace that income with something. And that is why you're going to replace this with debt. That's what Reagan did. And that's what Trump did when he became the president. And by the time that Reagan was out of the presidency back in 1989, he left the office with a deficit three times larger. This is when Trump passed his tax cuts and the deficit was around $600 billion, maybe slightly more than that. Today, we are already out of COVID and the economy completely recovered from that crisis. And the deficit is around $2 trillion. Over the exact same period of time, as it was the case with Reagan, the US deficit has tripled by three times. So if Trump is going to pass the current tax cuts and make them permanent, and they're going to cost the government around $11.2 trillion, if they will have the exact same influence on the US budget, which means that they will grow their deficit again by three times, by the year 2030, the United States, most of the GDP growth or 60% of it is going to come from government spending. And that means that inflation is going to skyrocket. So you will see that the GDP of the United States is going to go from $27 trillion to $40 maybe trillion over the next 10 years. But that growth is not going to be real growth. The main question is that how is that going to impact you and how can you possibly profit from what's happening? What we know for a fact is that every time there is so much printing of money by the government, there is a hike in asset prices. And when you have so much borrowing that creates so much inflation, the Federal Reserve has to respond to that by keeping interest rates high. So if you look at the mortgage rates right now, they're around 7%. Moving forward, most people cannot possibly imagine to have any kind of real low mortgage rates. Forget about having a mortgage rate of 2% to 3%. So the only option that left for a lot of people is to buy the assets that they can afford. And that means not going to the stock market and investing in the right assets. To be honest, investing is risky if you don't know what you're doing. And that's why most people in the stock market lose money. But those top 10 or top 7% of investors who know how to invest in the market, who know how to analyze stocks, these are the people who will see the value of their assets, the value of their investments grow every time the government is going to borrow so much money. So if you want to become a really great investor and really be good at analyzing stocks and know which stocks to buy and which ones to avoid and grow your portfolio and take advantage out of this crisis, make sure to check the link in the description. That's it for today guys. Thanks for watching and I will see you in the next one.