Warren Buffett’s Recent Explanation of How Money Now Works Is the Most Important in History

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[–][deleted] 3 insightful - 1 fun3 insightful - 0 fun4 insightful - 1 fun -  (10 children)

Excellent article. It goes (almost) without saying that raging inflation coupled with negative interest rates is going to be insane. We already have negative real rates for a few years. Now we're going negative nominal AND high inflation, way above the stealth 5-6% annual we've been having, but underreported as 1.5% or so.

This trend favors inflated real estate valuations, where a million-dollar house with a -0.5% mortgage rate means your mortgage reduces by $5,000 a year before any payments you make, and those all go to capital.

It also favors precious metals. A crashing stock market usually has even these metals crashing with everything else, only to bounce back very strong. MAYBE precious metal mining stocks will be OK. Maybe not. Make sure you aren't in a position to have a margin call!!

[–][deleted] 3 insightful - 1 fun3 insightful - 0 fun4 insightful - 1 fun -  (1 child)

I invested in metals of the https://en.wikipedia.org/wiki/Platinum_group . Not just any paper or something like that. I have them laying around.

They are excellently reusable on https://en.wikipedia.org/wiki/Breadboard s .

[–][deleted] 3 insightful - 1 fun3 insightful - 0 fun4 insightful - 1 fun -  (0 children)

Yeah some ounces of platinum will go a long way.

Much better than mercury anyway... ;-)

I'm a big fan of silver, and currently invested in silver mining among others.

[–]hennaojichan 2 insightful - 1 fun2 insightful - 0 fun3 insightful - 1 fun -  (7 children)

I like metals too but would never take a piece of paper saying they owe me Xoz of silver or other metal. Some of those metals are still in the ground. In the event of a major crash it might take a long time to get your metals or you might never get them. I recommend only physical metals and a safe to keep them in. But don't tell anyone you bought a safe. :)

[–][deleted] 2 insightful - 1 fun2 insightful - 0 fun3 insightful - 1 fun -  (6 children)

I agree about that, but a retirement savings account cannot be converted to physical precious metals. For that part at least, the best I can do is own mines.

[–]hennaojichan 1 insightful - 1 fun1 insightful - 0 fun2 insightful - 1 fun -  (5 children)

I did not know that and I don't understand the need for this restriction. Yes, buy as many mines as you can. :-)

[–][deleted] 2 insightful - 1 fun2 insightful - 0 fun3 insightful - 1 fun -  (4 children)

It's not really a "restriction" per se: retirement savings accounts ("RRSPs" in Canada, 401(k) and IRA I believe, in the USA) are special accounts you open at a securities firm (or bank). As such, they are for holding securities as retirement investment, not physical objects. I guess it would be theoretically possible for somebody to hold metals in such an account, but the bank would need special individual safety deposit boxes that can only be opened and closed conjointly with the investor and the bank, together. A complex and expensive process for the infinitesimal minority of investors who would look into this.

[–]hennaojichan 1 insightful - 1 fun1 insightful - 0 fun2 insightful - 1 fun -  (3 children)

I've had a couple of IRAs so we're on the same page. Never use Capital One for such things. They really tried to rip me after my IRA had matured. Long story deleted. This place will ship to you and are totally reliable . They also sell CDFs (?) that say you own this much gold or silver. In the current climate, stictly physical for me and maybe some of the new, cheaper cryptos that I do not really trust but I will try in a small potatoes way. (I have no idea of your expertise so I just put that in for anyone looking for a lead on a good company. I do not own it or work for it.)

[–][deleted] 2 insightful - 1 fun2 insightful - 0 fun3 insightful - 1 fun -  (2 children)

Yeah, Kitco is very solid. In the crypto space, I own Bitcoin and Ethereum. GRIN looks like a nice speculative play right now. My level of expertise is up there pretty much as high as it can go, at least for stocks and derivatives. Crypto is not my thing, but I know enough to know it's the future.

[–]hennaojichan 1 insightful - 1 fun1 insightful - 0 fun2 insightful - 1 fun -  (1 child)

All right, you're ahead of me then. I've bought so much gold and silver there is little money left to buy cryptos right now. I will check out GRIN and one that Jeff Berwick mentioned: LiteCoin. Do you follow Berwick? He seems quite legit but tell me if you have doubts about him.

[–][deleted] 2 insightful - 2 fun2 insightful - 1 fun3 insightful - 2 fun -  (0 children)

LiteCoin used to be the runner-up in cryptos after bitcoin, but my understanding is that the creators are scammers and pre-mined way too much of the coin before "launching" it, and other things too. I forget the details but LTC is to be avoided as per what I learned.

[–]AsInBeer 2 insightful - 1 fun2 insightful - 0 fun3 insightful - 1 fun -  (4 children)

The unanswered question is this- how much money should there be ? Because if you keep printing it but people keep earning it and it keeps moving through the economy then there's just more of everything without inflation. More money CAN lead to inflation OR it can be used to fund economic activity and new businesses and business models which would not have otherwise existed.

People who assume that there ought to be just X number of dollars ever printed , or we should peg ourselves to gold, create "more" money when they're forced to charge less and less for new goods and services. Bitcoin has this built in- it can be decomposed into tiny fractions each of which has more value as time goes on.

Yes it has happened in the past that governments attempted to solve a depression via money printing with hyper-inflation as a result. That is always a mistake!

But there's another possible narrative- there are economic actors (people lol) sitting on the sidelines unable to add new value which did not previously exist via new economic activity. In that scenario, they're starved for oxygen and the potential value they would have added is never realized.

So given an ever changing set of actors who have ever changing new ideas for services and products in a technology-scape which brings down the cost of everything even as it opens up new worlds of possibilities for making new things, enabling new services, creating new raw material which economic activity will transmute into value, just how much money should there be in the world?

What is amazing to me is that anyone ever seriously thought they could answer this question definitively. In my view, thinking you have a model which can answer this question is a lot like Communism with its top-down economic planners. No, Commies, you can't plan an economy. No, you can't think through the problem of supply and demand and tell people how much of what to make and what to charge for it. Like Hayek proved, that's a completely hopeless endeavor.

So also with trying to answer the question - how much money should even exist? Yeah, we just can't model that problem.

[–][deleted] 1 insightful - 1 fun1 insightful - 0 fun2 insightful - 1 fun -  (3 children)

I think it's a red herring: who cares if a dollar is worth a dollar or worth 0.000001$? Obviously people who hold actual nominal dollars do, but they are the only ones. The problem occurs with hyperinflation: when you are paid at midnight on Wednesday and by the time the shops open on Thursday your paycheck has already lost 25% of its value, that is a huge problem. It's happened before, and it's going to happen again, this time in developed nations.

[–]AsInBeer 1 insightful - 1 fun1 insightful - 0 fun2 insightful - 1 fun -  (2 children)

I addressed that. Hyperinflation is a problem you don't want to trigger, we all agree.

I was making conceptual theoretical space between increasing the money supply and hyperinflation. Can you speak to that?

[–][deleted] 1 insightful - 1 fun1 insightful - 0 fun2 insightful - 1 fun -  (1 child)

Well that's where the Fed is trying to head: to a place where inflation is high and debt in nominal terms becomes irrelevant. But it doesn't work, since all currency in developed countries is BORROWED upon creation. So you wanna print 100 trillion? Cute, but you'll add 100 trillion in debt foremost.

You literally can never win with banksterism.

[–]AsInBeer 1 insightful - 1 fun1 insightful - 0 fun2 insightful - 1 fun -  (0 children)

I feel like you're not repsonding to anythng I said. You're ignoring what I actually said and giving back to me some extreme consequence of something I never said.