Baron's Crypto Trading Journal

hilmy83 is spot on.

Overnight, I'll give you a story as an example.

At the beginning of 2020, you had finally amassed $100k in savings to put 20% down towards the purchase of a new house. It's a $500k home in a quiet neighborhood and you're excited to finally close on it and move in. On the drive to the title company's office to close the deal, you get in a car accident and it puts you in a coma while in the hospital. When you finally snap out of it, you're told that it's the year 2022.

You're shocked to learn that the house you wanted had been sold to someone else shortly after your accident, so you go hunting for another one. First, you check your bank account to make sure that your $100k in savings is still in there, and sure enough, it is. After looking at some of the current home listings in the same neighborhood, you find that homes are no longer in the $500k range, but are now $600k - $650k. You search the listings for other neighborhoods in the surrounding areas but no matter where you look, you discover that everything is priced higher across the board.

After feeling discouraged, you get the bright idea that instead of buying a prebuilt home, you'll just buy a lot and build one yourself. But after meeting with several contractors, you discover that you can't even build a similar-sized house for $500k because the price of building materials has also gone up significantly.

The situation becomes even bleaker when you realize you'll have to save up another $20k or $30k to even be able to afford the down payment for the same size house in the same neighborhood, and that your monthly payment will be higher than it was before your accident, which is now outside of your budget.

So what just happened?

While you were in a coma, the U.S. government increased the money supply by a staggering 27%, which means there's now trillions of extra dollars all competing for the same basket of goods and services. You realize that although the government can print trillions of dollars with a keystroke, they can't instantly print more houses or more building materials to keep up with all the new money that can be spent.

So looking back on the situation, was everyone who owned a house a genius real investor whose homes became more "valuable"? No, not at all. Homes didn't become more valuable across the board, they became more costly. The $100k down payment you saved up back in 2020 is no longer sufficient to buy a home because the buying power of your dollars went down. In other words, it now takes more dollars to buy the exact same home as before because your dollars have lost their purchasing power.

And this is where so many people get a false sense of security. They think that because their dollars are still sitting safely in their bank accounts, the currency itself is strong and solid. But nothing could be further from the truth. You're never going to discover that your dollar bill says 75 cents on it one day. Oh, you'll still have your dollar bills exactly as they always have been. Although they say "dollar" on them, the amount of goods and services they can buy is getting less and less with each passing year.

And that's why wealthy people don't have money just sitting in bank accounts. Unless they invest their money in stocks, real estate, Bitcoin, etc., the buying power of their dollars will continue to become smaller, which ultimately means they would actually be losing money each year if they held their wealth in a bank account.