So to stop being low or middle class, a mindset shift needs to occur. The first thing that Americans typically think of when you talk about money is the US dollar. However, the US dollar is not money. The US dollar has none of the traits of sound money. Why does this matter? As long as you believe that the US dollar is a store of value your decision-making process will remain flawed. For instance, if you constantly try and increase the number of dollars you have in your account you run into two major headwinds. The first is inflation or the expansion of the “money” (it is actually currency) supply. The reason the US dollar is currency and not money is that in order to be money it must be: scarce, a medium of exchange, and a store of value. So the major difference here is that currency can easily be printed and therefore is not scarce. Because it is not scarce its value can be eroded over time.
The road to serfdom is to not have any assets and work really really hard for cash that grows exponentially weaker. Below is a chart of the USD vs Bitcoin (an asset with sound money principles)
As you can see this shows that the dollar is getting exponentially weaker against bitcoin.
So what is serfdom anyway? Serfs were tenant farmers that owned no land (Asset of the time) and worked about 1600 hours a year. They paid about a third or 33% of their income in taxes and fees to the lords. In reality, their situation was not too bad compared to the average American, who works 2260 hours a year and pays 30% in income, social security, and medicare. On top of that, the average American pays about 10% in sales tax a year. So in actuality, the average American works 30% more and pays 10% more in taxes than the serfs did. Wow, so your situation is not good (understatement of the century). Now what?
Well, if that is the road to serfdom then the road to wealth would be the opposite. Own assets and focus on productive work for more assets that grow exponentially stronger. This is like one of those word problems in grade school. In this case, we have a three-part equation: Wealth = Assets + Work + A^X. It is important to see what is in the equation and what is not. Notice there is no value to liabilities in that equation. So using this logic is we wanted to change the wealth gap (the difference between the low middle class and the upper class) we do three things.
- Own assets and not have any liabilities.
- Work on productive things that are not based on hours of labor.
- Own assets that are increasing in value exponentially.
So what is an asset and how do I own it? An asset is defined by webster’s dictionary as “an item of value owned”. The basis for finding a valuable asset is that it is: unencumbered, desirable and scarce.
- Can more of it easily be made?
- Is the total amount of it limited?
- Do other people want it?
- Will other people continue to want it?
- Are there any factors that would make this less desirable?
Examples of an encumberment would be taxes or liens if you own a property.
To own assets, you must trade currency for items that are considered assets. By thinking in terms of assets and not thinking in terms of dollars you can exponentially increase your wealth because the value of your holdings is not being reduced due to inflation (expansion of the “money” supply). Also, the assets you hold that increase in value over time, as they become more desirable.
Disclaimer: I am not a registered investment, legal, tax or financial advisor. All investment /financial opinions expressed in this post are from the personal research and experience of the owner of this account and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur. It is very important to do your own analysis before making any investment based on your own personal circumstances. You should take independent financial advice from a professional in connection with or independently research and verify the information that you find in this post to rely upon, whether for the purpose of making investment decisions or otherwise.
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This is a phenomenal article!!
The reason the US dollar is currency and not money is that in order to be money it must be: scarce, a medium of exchange, and a store of value.