In the video, a guy loses his house, and his American Dream is crushed. He is then taken back in time by a guy with a horribly fake African-American accent, to witness the source of his problems. As it turns out, everything is the fault of bankers, who steal people's money through fractional reserve banking. Eventually, banking power is concentrated in the hands of a shadowy cabal headed by the Rothschilds, to whom even J.P. Morgan must kowtow. Thomas Jefferson and Andrew Jackson temporarily hold off the evil bankers here in America, ushering in a huge boom "with real money, backed with real gold." But eventually the bankers get in, and end up forming the Fed, which proceeds to steal people's hard-earned money even more via inflation and collaboration with the IRS.
Anyway, for now I'll ignore the oddity of anti-semitic video makers latching onto an economic philosophy (Austrianism) invented by a Jewish guy and a movement (the Ron Paul movement) inspired by another Jewish guy. Anti-semitism has always been a bit weird like that. I'll also put aside the thing about fractional reserve banking (a subject for another post). Instead, I'd like to talk about inflation.
The classic simple example of inflation is this: The Fed (or the banking system, giant Rothschild robots, whatever) doubles the money supply. So money becomes only half as valuable as before. Therefore, the price of everything doubles. So:
Price of a gallon of milk: $4 --> $8
Price of a gallon of gasoline: $4 --> $8
Price of a new house: $200k --> $400k
..and so on. BUT, inflation also doubles your salary, in exactly the same way:
Salary: $40k --> $80k
However, (unless you own a special kind of bond called TIPS), inflation does not change the size of your bank account:
Your savings: $80k --> $80k
So while prices and your salary double, the number of dollars in your savings account stays the same. This makes you poorer, because you can't buy as much stuff with your savings:
Your savings: 20,000 gallons of gasoline --> 10,000 gallons of gasoline
So inflation steals your money, right? Well, sure. BUT, wait a second. What if you have a mortgage? Suppose you already bought a house, but you haven't paid off your mortgage yet. You have debt! What happens to this debt when inflation happens? Does it go up? Nope! Just like your bank account, it stays the same:
Your mortgage debt: $160k --> $160k
Now remember, your salary went up when inflation happened. So now, it takes you much less work to pay off your mortgage:
Your mortgage debt: 4 years of your salary --> 2 years of your salary
Inflation stole money from you by shrinking your bank account, but it put money in your pocket by shrinking your mortgage debt!! Notice that the way I have the numbers here, your net worth went up, because your mortgage debt was bigger than your bank account.
So if your net worth goes up and the purchasing power of your income stays the same, as in this simple example, inflation makes you richer. Inflation hurts people who have more savings than debt, and helps people who have more debt than savings.
Who has more savings than debt? Old people and rich people. Who has more debt than savings? Young workers who are paying off mortgages. In other words, the video has it exactly backwards - inflation will not take your house away from you, inflation will prevent your house from being taken away from you. It will save your American Dream. If you don't believe me, go back and look at my example again. It works.
And that hyperinflation that people on Zero Hedge are always screaming about? Well, first of all, it's not coming. But if it did happen, it would mean that your mortgage would be paid up instantly. Really. If our money turned into Monopoly money, you could just pay off your mortgage with a wheelbarrow full of Monopoly money. Perfectly legal!
(Now, you may say "Inflation is still bad, because it punishes saving and rewards reckless borrowing." Well, you're right. That's a danger that the Fed thinks about when they are trying to decide whether to print money in an attempt to boost GDP growth.)
Anyway, what's interesting is that inflation was not always seen as the enemy of the common people. When Thomas Jefferson railed against banks, he worried about deflation as much as inflation. And in the 1800s, the Populist Movement - basically, a bunch of small farmers in the South and West - fought for inflation! At that time, farmers owed a bunch of money to big banks on the East Coast (including J.P. Morgan, who was presumably busy kowtowing to his secret immortal Rothschild masters). Without inflation, they would have to sell their farms to the banks and go be factory workers. So they fought for the United States to go off the gold standard and go on the silver standard - debasing the currency in order to reduce their debts!
Actually, the big banks defeated the Populist farmers. The gold standard was maintained, inflation was prevented, and a lot of people lost their farms. So maybe the robotic Rothschild octopi had the last laugh after all. But they didn't do it through inflation! Quite the opposite. Time was, inflation and currency debasement were seen as the savior of the common man.
Just remember: Inflation hurts people with savings and helps people with debt. An awful lot of Americans these days fall into that second category. Before you go embracing the hard-money, Austrian, gold-standard stuff, think about which category includes you!
(Then again, why should you believe me? After all, I am a Jew. I could be working for...THEM...dum dum dummmmmm...)
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