We live in a time where bubbles in the economy are commonplace. Most recently, we encountered the dotcom bubble in 2000 and the real estate bubble in 2008. Both caused havoc on the US economy and the latter causing one of the biggest financial meltdowns in our countries history. Not only did it have implications on our economy, it had global ramifications.
What’s been the underlying cause of these bubbles? Simply, it has been the Federal Reserve’s easy money policy. Keeping interest rates at zero has perpetuated these bubbles as well as its quantitative easing policy. To make matters worse, it is no secret that Central Banks across the globe have followed the US Fed’s lead and have kept their Countries interest rates artificially low too.
No time in world history have countries performed this form of monetary policy at the same time. There have been examples of one or two countries engaged in this policy, but never the number of countries currently embracing these policies. And we have evidence that the outcome is never good.
So how will wealth be transferred due to these easy monetary policies of printing money and artificially low interest rates? Once confidence is lost in our system, people will flee to hard assets. Recognizing that one’s currency is worthless will panic individuals to move to other asset classes (i.e., gold, silver, land, etc.). Wealth is never lost, just moved from one asset class to another.