My Thoughts on Stimulus and the Downstream Impacts

***Disclaimer – This post is not meant to be political. I have neutral views on both the Republican party and the Democratic party. This blog is meant to primarily discuss the impacts of bad economic policy. 

There is a famous meme that most people are familiar with both locally and globally now regarding endless money printing that we are incurring.

Powell – Money Printer Brrr Meme

We do not need to look far to see that everything that feels good, and is good to us, may not be good FOR us. To speak about the manner in an elementary way, candy makes one feel great! One may get a sugar rush and feel happy for a little. In the long run, candy is not good for us – it rots our teeth, can cause blood sugar imbalances and even obesity if not moderated. I look at stimulus as the same thing.

Initially, the stimulus feels great, one looks at their bank account and sees a larger balance. They can now have freedom without having to worry about the typical paycheck to paycheck lifestyle. We can now spend more money on activities that we normally could not! Shopping, traveling, and entertainment is likely where the money goes for many people – and it feels great. Eventually, it will rot our teeth.  

The money printing cannot go on perpetually, and sometime down the road, we are going to have to pay for this money printing. Facing reality and deciding to sober up and stand tall against unsound economic policy will help us in the medium term and long term/ alongside subsequent generations, even though it may be hard to rip that band-aid off initially.

Stimulus Payments Toward Each U.S. Citizen

Nobody wants to be the bad guy and reduce unneeded government programs; nobody wants to be the person that denies free things to those “suffering”. Do not get me wrong, some people are suffering out there who need stimulus, but I think there should be certain standards and requirements one must meet before they are eligible for stimulus. Now, let us discuss the downstream impacts.

There are countless downstream considerations for massive Government Quantitative Easing (QE). First and foremost, the inflation rate for future years is likely to occur. Inflation erodes our purchasing power, and it does not help the lower-income bracket’s economic situation. The second negative impact of this is the reliance on the government for goods and services. Think to yourself, when has the government done anything efficiently, in our best interests, and cost-effectively? With confidence, I can say seldom – that is what the marketplace is good at doing. Another thing to consider is do you want to leave your kids or their grandkids with your bill? It is like racking up a huge bill at a fancy restaurant, ordering lobster, caviar, and wine imported from the south of France, and then leaving someone else sitting at the restaurant to pay for the dinner. They did not make the poor spending decisions, but why do they have to pay for it?

Child Receiving Candy

When you were a child/teen and wanted a toy or a piece of candy and were told no you could not have it, what would you do? How would you get that thing you wanted? Option A – You could cry until you get what you wanted or Option B – You can set up a lemonade stand, sell popcorn or take on a paper route. Option A would condition you to think that the way to get something is to beg and ask, making you reliant on the whims of others and putting one in a reactive state. Option B would set up a fantastic work ethic, ensure one is responsible and develop a value for things, an appreciation per se.

In today’s day and age, many not all of us want free things. They cry in a more sophisticated grown-up way and expect the government to give them free things just because they demand it. We cannot take this approach! We need to be self-reliant and go with Option B in our economic and monetary policy. Will people hit the hard times? Yes, they will, and then and only then should the government come to help them out once determined they are facing hardship. The easy option is to always give handouts, the easy option is to cave into the crying child – there needs to be a better solution.

Off at Sea – Free

It is an exciting time to be alive, and I think there are many benefits to money printing, but I think it needs to occur on an as-needed basis. We as individuals need to send letters to our elected officials and lead without a title on policy matters. Both Biden and Trump promise great things, but at the end of the day, your success is up to you. A $1,200, $1,400, $2,000 check or above will not crack your passion. It will not bring you financial freedom, it will not create prosperity. It is a little push that can get you through a rough time (if you are going through one), and that is it. Position yourself in the best way possible so one day you will not need stimulus and you can be fully independent of the policy considerations in Washington D.C.  

Bitcoins Breathtaking Rise

Twitter Feed, The Morning of January 2nd.

At the time of this writing, Bitcoin has taken the #5 trending spot on Twitter and is edging $33,000 in price. Everyone and their crazy uncle are talking about it, and how they have made money off of it. Why do I bring up what is trending? This shouldn’t be the foundation for discussing an asset, and the adoption thereof… Well, everyone is. The rideshare drivers are talking about how great of an investment it is, the bartenders and even friends at the holiday parties. It is the hype; it is the talk and is something that people are buying into because they want to join the party and get some of the action.  

This all feels too familiar. I want the rise to $50,000, $100,000, or better yet $1M to be straight and swift with no major pullbacks, but this isn’t likely. As a HODLER (Hold on Dear Life), Investor and strong advocate for the decentralization Bitcoin is bringing to finance, when large amounts of retail investors, hedge funds, and other institutions are purchasing for the wrong reasons this is when our ears should perk.

People are beyond calling the people who own Bitcoin crazy libertarians who know there is something better than a currency consistently being debased and manipulated. If you go to Google finance, for the longest time Bitcoin was listed forefront as the currency (now moved to its tab).

Google Finance – Backing the Legitimacy of Bitcoin

I remember all the euphoria in the fall of 2017 with Bitcoin’s meteoric rise to ~$20,000. At this time, it was purely hype-driven. Specifically, you can see Google searches at this time, and it was for everyday people trying to get in on the action.

2017 to Present Google Trends Search Graph

As it can be seen the hype and hysteria are starting to take off again. Although, in my opinion now it is different. With all this crazy stimulus and money printing, we are seeing so much worthless confetti (USD) entering into the market. With this happening, our purchasing power is decreasing while concurrently our savings are going away. Bitcoin solves this, because, in its nature, it is a deflationary asset, meaning every year less and less are being mined. Everyone who is reading this article should have at least a few Satoshi’s (1 Satoshi = 100 millionths of a bitcoin). What do you have to lose, your precious infinite confetti? 🙂 Jokes aside, we want something that finite and the USD is just the opposite.

Why do I say this? 

There are many reasons, but as humans, we should be exploring things that better humanity and adopt them into our lives. By purchasing, you are essentially supporting a cause that leads to the preservation and storage of wealth. This should be something we all aim for, as it is in our best interests to move to one globally decentralized currency, where not a few rich and powerful can get ahead, rather anybody can participate without worrying about unsound money, bad politics, and being controlled.

A lot of this is complicated to understand, what should I know if I want to dabble in it or just get started? 

Bitcoin is a lot of fun, and cryptocurrencies can be addicting to watch. Seeing yourself making 30-50% daily returns is almost unheard of in the stock market. Just as we see these massive rises, we also will face 30-50% pullbacks, and they can be devastating. When people get in for the wrong reason, they sell because they are not making a return and end up taking a massive loss (Just as we see all the time in the stock market). These spectacular gains and nasty crashes can be full of euphoria and sadness, but in the end, know this. You should not day trade unless you are experienced, and it is only a loss if you sell. Invest what you can afford to lose. Do not trade on leverage or take out a second mortgage on your home to buy Bitcoin. Most importantly, buy-in consistently over a period to minimize significant price variances.

What is next? Where are we going from here? 

MustStopMurad posted a fantastic graphic that we should all look at for some of the necessary steps for a large scale currency adoption. I know many people state, “Oh well it is already too expensive, I didn’t get in at $10,000, so I am not going to be able to get in at all.” This limited thinking couldn’t be further from the truth and in fact, we are still in the early stages of Bitcoin’s adoption.

Currency Adoption Chart – Bitcoin

To reiterate what I have said in former videos, and blogs/social media posts in the past we are in uncharted waters. In the past couple of months, we have had tremendous tailwinds helping drive up the price of Bitcoin and its altcoin counterparts, and it is uncertain how long these tailwinds will last. To name a few, from big companies (PayPal, MicroStrategy, Square, Grayscale, and more) putting this on their balance sheets, Biden’s new Treasury pick, the massive money printing from the Federal Reserve, the pandemic driving people to move towards digital currencies, and the erosion of trust in monetary policy long term this asset will perform spectacularly. There will be setbacks, and likely within the next couple of weeks/months, but as we look at the long term it will keep breaking all-time records eventually to $500K per coin. Am I too bold with this statement? Calculated risk and fortune favors the bold.

Nothing stated in this article is a recommendation from Forehand Financial to buy or sell a particular security or asset class. You should wisely consider your tolerance for risk, time horizon, and financial goals before making an investment. With investing, you run the risk of losing money, always read an investment prospectus and make an informed decision before allocating capital to a particular investment.