Ted Bauman is a financial expert. He believes that when you plan for retirement, you need to take into account more than just the price of something. You need to take into account the value. Prices can change, and that is something that you need to consider. It is more important to invest in assets that have inherent value.
However, Ted Bauman also believes that price can be important as well. Take a look at Bitcoin, for example. At the current price, one Bitcoin is worth eleven thousand dollars. Is that the real value of Bitcoin? What does this mean? Why do corporations have a price to sales ratio of seventy five percent higher than the historical average?
The point here is that inflation exists. Bitcoin does not inherently have such a high value. It is all about inflation. As a consumer, you need to get ready for inflation.
However, Ted explains, people tend to look for inflation in the wrong places. People thought that quantitative easing policies would lead to inflation. Guess what? They did not. People understand inflation the wrong way. They think that if banks print more money than the output of the economy, there will be inflation. What many people fail to take into account is that banks do not print money, but they make loans against reserves that they have. Quantitative easing could have led to inflation, if only banks would have put out loans against the boosted reserves that were caused by it. However, they did not. This is because interest levels were very low, so banks did not have a great incentive to give out loans. Many corporations that previously took out a lot of loans declined to take out loans, because there were not enough consumers at the time willing to purchase products. This caused the corporations not just to hold back from taking out loans, but to cut costs and to fire workers. Read more on talkmarkets.com to know more about Ted Bauman.
Ted Bauman says that tax cuts in the Republican tax bill can lead to inflation by putting more money in the economy. Interest levels will rise. The issues concerning the CFPB may lead to more lending and thus inflation. In addition, corporate tax cuts will lead to more money, which will just increase the stock market bubble. Currently, the economy is growing at a three percent rate and inflation is at just two percent, the desired target, but things can change at any time.
Ted is the editor of the Bauman Letter. He is a financial expert. He works at Banyan Hill Publishing.