In his famous novel “A Tale of Two Cities,” Charles Dickens wrote: “It was the best of times.” Dickens novel is set in the years leading up to the French Revolution. The struggle of people against the entrenched power structure feels familiar to many. It seems to describe our current social and political climate. Despair and opportunity are swirling beside one another. This is creating a tale of two futures for the US economy.
The government has become a monstrous spending machine. It depends on the purchase of votes with public funds and entitlement spending. This is inevitably going to result in an economic catastrophe. At some point, the liability becomes so large that it cannot be financed with taxes or borrowing. At this point, the government must resort to monetary expansion. Rapidly increasing the amount of money in circulation without a corresponding increase in productivity results in price inflation.
The rapid escalation in prices will erode the standard of living for people in the middle class who depend on income from their jobs. Prices for food energy and housing will all rise faster than their average income. For the people who are ‘on the edge’ of financial ruin, this phenomenon may push them off the economic cliff.
These people will rapidly find that the necessities of life become nearly impossible to attain in their current economic state. Contrast this against the people in power who “make the rules” for our economy. The political class never seems to encounter financial difficulty while enacting the policies that will bankrupt the country.
Your Opportunity for the Future
In the midst of this dark cloud, there is a glimmer of opportunity for those who are astute and decisive. The way tto overcome the forces of ruin that are converging on the economy is by acquiring economically productive assets that are purchased with fixed-rate debt. An example of this is income-producing real estate, which is purchased with a fixed-rate mortgage loan. As prices escalate from inflation, the rent and value of your investment property will increase. During this time, your mortgage payment stays flat. People who astutely recognize the opportunity can cement their financial future.
The current environment is truly a tale of two futures. Many ‘regular people’ throughout the nation will be economically devastated. Astute people will be escalated to wealth and prosperity. For the unprepared, the future looks bleak and dismal. For those who act with intelligence, the opportunities have seldom been greater. The only question for each of us to ask is which of these people we will be?