This One Change in 1971 is Why EVERYTHING Is So Expensive Now

Did you know that a car used to cost thirty five hundred dollars in nineteen seventy one and that same car today is over fifty thousand dollars. And the question is why. Yeah, this is a question that I think some of you are aware of. But one of the reasons why inflation is so important is because it's really changed, obviously since the seventies when Nixon took the dollar off the gold standard, which is and is called the Nixon Shock. So you're gonna hear us today talk about compared to what so compared to what means? You know, when you when you decouple the dollar from gold, literally decouple it, because that's it used to actually be tied to gold. So when you decouple it, what does that do? It gives the government the ability to print And so why is that important? It's important because you now have more dollars in circulation. We created this whole credit bubble, which you guys are have all experience. And I know I'm going back a little bit here, but this is obviously fifty years in the making. But if you take a look at let's say the cost of a house back in the seventies, now you're talking they're in the twenty thousand dollars range. Now they're in the four hundred thousand dollars range. So the question you should be asking is not necessarily are you a great real estate investor? The question is why why did a house go from twenty grand to over four hundred thousand. That's the question, and the answer is because of what's been happening with the dollar. So the dollar actually has gone down in purchasing value during that period of time because there's been so much money printed. And so this is really why there's the haves and the have nots. This is why people have gotten really rich by staying in assets and others that have just been focused on wages, you know, you know, fixed income. They're getting annihilated and this is not going to stop anytime soon. Right now, And let's go back to the beginning. So when Nixon took the dollar off the gold standard. Before, in order to create dollars, you had to have gold to back in. So when that was taken off, you could print essentially as many dollars as you wanted to print. And that's when inflation really took off and really started, and that does expand the economy though, right, because when you're printing more money, there's more money to move in circulation for people to buy things. There was more jobs, so there is a benefit to it, and when he did it, it was beneficial for the economy. But with that crates inflation, which is why a house was twenty some thousand and now is over four hundred thousand. But when you were saying compared to what what it really means is compared to what wages, right, So you know, people made more money now than they made back in the seventies, So twenty five grand now is a lot less than it was in the seventies. So those also exploded too. So that's the other thing. Like the median household income in the seventies was around also around ten grand, right, Because I remember, you guys have heard the story with my mom. So my mom my dad passed away, and I had the unfortunate experience of diving into their finances, right, So if you guys have gone through that, you know that that's horrible. But nonetheless, my brother, my sister and I we had to dig in. My dad had an insurance policy it was ten grand, and he had a house that they bought in the sixties for about eleven thousand dollars. Well fast forward, that policy was still worth ten grand, and the house now is worth over seven hundred thousand because it's in the Seattle area, so it appreciated a lot. And my mom was a hairdresser and my dad was in construction, So it wasn't because they were phenomenal real estate investors. It's just because they had paid off that house. So they had done this. They had bought the house before the dollar coupled from the from the gold standard, and of course theate knew nothing about this. But the issue that we're going to keep circling back to here is that assets drive wealth. The assets drive wealth, and so that's why we keep preaching on this channel about, you know, get yourself into hard assets, whether that's gold, which is today at about thirty three thirty four hundred dollars an ounce back then in the seventies it was thirty five dollars an ounce So why is it that these hard assets have gone up? And if you look at the real wealth in this country, it's because of what Daniel touched on a minute ago, which was the credit piece. So in the seventies, the United States had five hundred billion dollars in debt right in credit, right, five hundred billion. Today it's thirty four trillion. So that's the difference. So we've got this massive credit bubble, this massive expansion of the credit, which gave roast rise to the banking, wealth management, finance derivatives, all of those things that you guys are now seemed pretty obvious to you as a kid. We didn't have all that stuff right, and what it did is just blew up this Wall Street, the financial services sector. And as a result, we also moved the financial education from the home, you know, to the school. That's exactly what happened. Yeah, so go aead and back to compared to what is okay? So say that a salary was ten and nineteen seventy one and a house was twenty five thousand. That's two and a half times the price, right, So two and a half years worth of a salary bought you a home. Today's average salary is right around eighty thousand and a home is over four hundred. So now you were at over five times the amount of a salary to buy a home. And not even just that, but you know, cars have won up thirteen hundred percent as well, and basic groceries even in the last five years, have went up, So the money you're making is not going as far. So even though people were only making ten grand in nineteen seventy one, their money was going farther. And to your point, you know, people back then didn't live on credit. Nobody I don't even know if people had credit cards then, so I were started. That's a really good point. Credit cards started. This is kind of the rise of the credit card. Okay during that period of time. And you guys know, like this, this dollar is now debt, right, the US dollar is technically debt now that it switched over. And as a kid, I remember if I ever had a twenty dollar bill in my hand, you remember, it was like I was rich. And we never ever saw a one hundred dollar bill. And now, of course these are in everybody's wallets. Everybody walks around one hundreds. So what happened from the time, you know, really what happened? Why was it twenty such a big deal when I was young? And now to my general, to my kids, let's say their generation, it's hundreds. It has very little to do with what we're doing as investors. And this is kind of the point of today's video. The dollar turned into debt and then all of a sudden, these things became worth less, not worthless, but worth less. So back in their eighties and nineties, this used to buy a lot more. Now it buys a lot less. Same thing here. So if you had one hundred dollars in your bank account back in the seventies, it bought a lot more today. Of course, you guys know, we went to I went to dinner last night with a buddy and it was one hundred dollars, just the two of us. And there was not a fancy dinner, by the way, and no balls of wine or anything like that. It was literally just dinner. Now he ordered a few things. But regardless, as you guys know, I'm not preaching the choir here. I mean, things are more expensive, uh you know, like if you go, you know, just for basic stuff now uh you know, uh, it's really really really difficult. And what what what What Daniel was trying to point out earlier is that wage growth has not followed. So just what we saw in the last fifty years, we are going to see again, right because the dollar is still decoupled. And now we have this these international issues with the the other countries being a little bit upset with US because we trade in US dollars. The world trades in US dollars. So so if we buy, if we pay for something, let's say from you, now we have all these tariffs and that's a whole different issues. But when we buy stuff from from four countries, pay in US dollars and they hold US dollars. And so that's why it's important for you guys to be watching the DXY, which is the dollar index, and the DXY right now is is something that the other countries are watching. Because if I give you a dollar, then you're in Canada, then you're holding a US dollar and I'm devaluing it. You're not happy with me, right, So that's what's happening. So as we're paying the world in US dollars and we keep printing like crazy to fun things, then we start to see the dollar lose its purchasing power and its value. And that's precisely why people are running to goal, people are running to crypto. People are also outside of the US are considering another type of a currency. Yeah, and you know, it happened from the seventies till twenty twenty five, and it's going to continue to happen moving forward, which is why it's important that you guys get out of and into assets. And you know, if you look at Trump's presidency in general, it's inflationary. Trump wants inflation. He's going to have inflation through tariffs, whether you like. It or not. Big Happy so Bill, the big beautiful. Bill going to He wants to Fed the lower rates. When he gets his new FED chair in in May, they for sure will lower rates further. All that is inflationary. So so if you know this too. But if you guys know these things and we know this is happening, that's your playbook going forward. Yeah, exactly. But if you know that this is going to happen, you have to be investing in assets. Your dollar's just going to lose value. If you're waiting to buy a home, home prices are just going to go up because it's already more expensive to build some of these houses than it is to buy them. That's what Ken's doing with multifamily. He's buying assets that would be more expensive to build. Because if people are going to build new ones and they're more expensive. They're going to have to sell them for more than what you're buying them for. So you have to take all of this into it when you're looking at what to do with your money moving forward. Yeah, and I know we're gonna talk. 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Leasing gold involves risk and return are not guaranteed. This is not an offer to buy or sell securities. Please review all risk disclosures at Monetary dash metals dot com. Is it Monetary dash metals dot com Fourth slash ken to learn more. So, there's two things that I want to talk to you guys about now as a result of where things are headed. If you have to understand that this next administration under Trump is going to be inflationary. Obviously we haven't seen the tariff inflations yet, right, but the everybody or everybody believes that we are going to see them at some point. They have to show up. As things are going to be more expensive somehow. If we're going to do iPhones in the US, they're going to be more so, you know. So there's going to be all kinds of things that are going to show up. The big beautiful Bill, for sure, is going to be inflationary. There's a zillion studies on this and so, uh, these are going to happen. And we all know what Trump feels about interest rates. So interest rates create bubbles. So if you know those three things, the key to this next little run here for all of us is going to be to get into what we would would we would call good debt. So what does good debt mean? Good debt means that you're buying that you're using debt, or you're using other people's money, or oh pm, you're using a loan or something from somebody with a fixed rate interest and you're buying. You're using it to buy something. So a lot of you, maybe that don't have money, you could you literally could borrow one hundred percent of somebody else's money, lock yourself into an asset that rises with inflation, using other people's money, using zero of your own money. Now you're still in debt, and the cost of that debt is important. Don't get me wrong, but debt is going to be really important. And here's why. As we buy all our apartment buildings, let's say we buy seventy five percent debt twenty five percent equity. Equity is the down payment. What that really means is I'm borrowing seventy five percent from somewhere else. It could be a life insurance company, it could be from a retirement plan, it could be from a bank, it could be from the government, it could be from hut. The point is, I'm borrowing that money from somebody else. I'm hedging that into an asset that's going to grow in value as a result of this inflationary cycle that we're about ready to come into. But I'm hedged. If I buy one hundred million dollar asset using seventy five million dollars of debt and twenty five million dollars of equity, then I still have that one hundred million dollar asset. And the question should be how much is that one hundred million dollar asset going to be worth in ten years? Because that's my whole time. I plan on holding that for ten years. So if inflation is let's say five percent a year, that's fifty percent. That means just by doing nothing, that asset should be worth about one hundred and fifty million dollars just because of what inflation does. Now, I know that's not perfect science. Maybe it'll be two, maybe it'll be three, Maybe it'll be seven or eight or nine percent like it was just a few years ago. But you get the point. The point is, I'm not talking about operations. I'm not talking about how I'm running it. I'm not talking about passive income. I'm not talking about any of that. I'm just talking about getting in the game and actually using debt to buy a hard asset. And fixed rate debt is the most important thing because that's what got everyone in trouble right now. The people that are losing assets right now have floating rate debt, so fixed rate debt is really important. Yeah, and you have to remember that inflation is good for the government. The government likes inflation. They like inflation because it reduces the real death that they have. They like inflation because it encourages spending an investment because if you hold your money and it's worth less than five years, people want to go buy a house, they want to invest in the stock market, they want to invest in crypto. So it's it's good for the government. It supports wage growth because inflation. You know, you guys get a three percent wage growth every year because there's two percent inflation, right, so like if there was not inflation, you would not get wage growth. And then lastly, it prevents deflation. And the government does not like deflation because deflation actually makes their debt heavier. Like if our dollar, you know, if it takes less dollars to buy something, then we still have to pay it back in that same amount of dollars, So that's bad for the government. That makes tax revenue go down, which is also bad for the government, and people stop spending because if you know that prices are going down, just like we saw in No Weight on Housing, everybody waits. They wait because prices are going down. So the government does not like deflation. It's not good for the government. Inflation is what is good for the government, and you always have to follow what's good for the government because they're always in a do what's best for that right. As I like to say, be the Fed. So deflation, Let's give you an example of deflation, because a lot of us could get caught into this deflation period. All right. When you buy a car, a new car, I can tell you right now that new car is probably not going to be worth more than what you paid for. That's an example of deflation. When you buy a phone, right an iPhone that's going to be worthless, a computer is going to be worthless, a flat screen TV is going to be worthless. Those are going to be deflationary. Not to say you shouldn't buy those things, just understand the difference. Now let's take a look at you know, the real estate as an example, or gold or anything that actually is going to track with inflation. That's the key. And be careful of these very convenient, well marketed stocks and bonds and mutual funds that are called you know, inflation hedged or you know, these inflation type of vehicles. Be very very careful. What you really really want is are real things. You know. That's why I love Chris Martin's book Peak Prosperity. What talks about at the very bottom, it's called tier one assets. You know, lumber or timber, water, gold, silver, you know, real estate, things that are actual physical because everything comes from the ground and then it of course gets produced by a company and then of course it turns into a stock at the top, and that's paper. That's the most risky spot is it's called the derivative. So gold starts at the ground. Then there's a gold company, and then there's a gold stock or an ETF that's not gold, that's paper. And as you guys just google this, there's more ETFs than there actually is physical gold. So that's called the derivative. So you do not you want to be in physical gold, and because that's always going to be the most valual. You can throw it in your pocket, you could take off to Europe or Mexico, you could pull it out and you could go get pesos or whatever it is in whatever country. And so it's universal. That's what we're talking about here. We're talking about physical, physical assets, and those for sure are going to inflate over time, just like they did from the last ten years, twenty years before that, thirty years before that, just as we've proven you guys, and this is common knowledge, right, Yeah, I think. It's good to understand that inflation isn't just a number. It's how the US finances growth, Like the US has always grown through inflation. So just think of that when you continue to invest, you know, get in those hard assets. Don't wait, right, don't wait to invest in those things, because they're not going down anytime soon. Yeah, And just just before we wrap up, you know, the question is what do you guys think is going to happen to this in ten years or twenty years? Right? Like, seriously, what's this going to be worth ten years from now? Is it going to be worth more to you or less to you? And so if it's worth less, then why would you save these I'm not saying you shouldn't have cash reserves. I'm not saying that. What I'm saying, though, if if your strategy is to save and have money into a bank during an inflationary time period, you will be on the wrong side of this right. And you know, and I talked about my mom earlier. I was up seeing her last week. She's on a fixed income when my dad passed away. She know, she's got this fixed income, and that fixed income buys less and less and less every single year, and so what she used to be able to pay for ten years ago, she can buy less of today now. Obviously, thankfully our families you know, got her back and taken care of her. But that's actually where everything's headed. And that's why everybody's so tuned into this. If you're on Social security or you're about going to get so security at some point, that's why everybody's so turned tuned into this inflation in uh adjusted language. You know, how much is the government actually going to increase your solid security each and every year? And you guys know it just hasn't kept up. Yeah, absolutely, all right, we guys have a good one, and we'll see next, all right, guys curious