In today's video, we're going to talk about the weak dollar
and what it means for real estate investors.
So most of you might know that the U.S.
dollar has declined in value significantly.
In fact, the dollars have lost over 90% of their purchasing power since 1950.
As politicians and the Federal Reserve continues to print more and more and more.
And like anything, when you increase the supply of something,
then the dollar becomes devalued.
As you can see in this chart.
So in this video, I'm
going to talk about why that might not necessarily be a bad thing.
Or real estate investor.
The one thing that people ignore the most
and one of the greatest benefits of currency devaluation
is that a weaker currency actually makes it easier to pay off debts.
And as real estate investor as most of us are currently
using OPM or other people's money in the form of debt.
So why am I talking about that now?
Because the dollar has just recently gone
below the 100 mark on the x Y, which is the U.S.
dollar index.
And so for those of you who might not know what that is,
the US dollar index, it actually measures the value of the United States dollar
relative to other currencies around the world, including the currencies
of some of the US's major trading partners.
So this would be the euro, the Japanese yen, etc..
And the dollar index actually rises when the dollar gains strength
compared to the other currencies in the basket.
And then of course, falls when the dollar weakens.
Right now the dollar has gone below the 100 mark,
which has got a lot of people wondering why did you guys know this last week?
Inflation got into the 3% range, which is great.
That's what the Fed wanted.
But on the other side of this, the dollar weakened at the same time,
which is not what they wanted,
though there's all kinds of currency about the U.S.
dollar.
And I can't get into all of it now, but they're talking about will the U.S.
dollar lose the reserve currency, which currently it is
Right now we are the world's reserve currency to.
Will it continue to be devalued as we continue to print, which is why
the other countries are upset at us because we're paying them in dollars,
yet we're devaluing them by printing more and more and more.
And the third thing, of course, is digital or central bank digital currency,
which is what a lot of central banks are looking at right now, including China.
Now, these are
just some of the various articles that I just pulled off the Internet this week.
You can see that top economists are warning that the U.S.
dollar will no longer be the dominant currency.
The U.S. dollar is on the verge of being dethroned.
The U.S. dollar could go digital.
It's super confusing, but for the purposes of this video,
what I want you to see is as we continue to print more and more and more money,
we're actually going to devalue,
create a little bit of inflation, which we've seen.
And it's actually going to be good for real estate investors.
So what happens when currency is devalued?
What happens when we continue to print?
I'm telling you guys what the entitlement programs, the bank bailouts
that are coming and all these things, we are going to see more money
being printed, especially with the homelessness problem
and the UBI or universal basic income and all the things that the politicians
are looking at.
It's going to require money and they just don't have the cash.
They're going to have to get the money to pay for these things.
So what happens when there is a devaluation of the currency
like there is right now?
Number one?
Imports actually become more expensive.
In other words, we're now buying from other countries.
That becomes more expensive.
Unfortunately, that's inflationary.
That's out the Fed.
What's on the other side of that, which is what Trump wanted,
is exports actually become cheaper,
so our goods become cheaper for people outside of the United States.
This is actually good and it can help grow GDP.
So currency devaluation could be a strategy that the Fed's using right now.
And let me show you a couple examples that I just did in my last video.
So if you're the Fed, you are somewhere in the $31 trillion of debt.
There's also $1.5 trillion
of commercial debt coming due in the next 18 months.
There's also almost $2 million in student loan debt and of course,
consumer debt, which is credit card debt, is in the 16 to $17 trillion.
What does this mean?
This means that as currency gets the value, that actually becomes cheaper.
So this is the case for actually devaluing the currency,
which is going to upset other countries.
So the government is in a very unique spot where the countries are upset
and doing all kinds of things like Brexit to try to decouple from the U.S.
currency.
At the same time, the Fed is going to continue to print more
and more money
to take care of all the entitlement programs that I just talked about.
Those entitlement programs are not going to go away and the U.S.
tax base is not going to be able to pay for them.
So what does all this mean for real estate investor?
What this means is that you need to be like the Fed.
Here's a great example that I point out in this slide.
If there's 1 million number of goods and $10 million in money
supply, the average price of a good is $10.
If we double the money supply from 10 million to 20 million,
then of course the average price of goods goes up to 20.
That's inflationary.
And in this case it's 100% because there is more money.
But the same number of good prices will increase.
And when we saw the money being injected into the economy, specifically
during the pandemic, which it was needed, and that became the inflationary
ripple effect of what we're seeing today and what the Fed is buying today.
So if you're a real estate investor, you want to think like the Fed,
you want to be the Fed.
You want to take advantage of the money printing that is going to continue.
And of course, the inflation, because that is going to result
in a continued currency devaluation and a weaker
currency devalues all that.
Just like I pointed out a minute ago, if you are a real estate investor
and you are in fixed rate debt and cash flows,
hold on to what you got because the government is going to largely
solve your problem because they're going to have to print more money.
We're going to see our currency devalued even more than it has been.
And your debt is going to become cheaper over time.