Many people might have to bookmark the last 3 or so blogs I’ve written within this subject. This is a whole different way to look at money, and it may save your life if what I think is coming is actually coming.
I have never seen anyone write that “financial energy” is a thing. I’m hoping this is a unique observation, but I’m hoping someone else has written a lot on this so I can research this more. I believe I demonstrated it in the previous writings where I compared unlocking financial energy (spending) like that of a wave.
In recent articles, I compared gold to financial energy batteries. I think Steve St. Angelo put forward a definition of gold as a store of energy – and I wanted to refine his definition more. He mostly seems to refer to the energy fossil fuels provide. My overarching thesis in my last article was that three asset classes store FINANCIAL ENERGY. Gold and silver were part of what I considered the MONEY asset class, and these items were the best BATTERY in that class to store wealth long term.
I’m furthering my case here that asset classes store FINANCIAL ENERGY like batteries.
In the three asset classes I put forward, I mentioned:
- Money – gold, silver, and even commodities and treasuries. 10,000 years ago, you may have bartered commodities and they acted as money. Cash is part of this asset class, and I’d put forward that it is the worst of class for STORING financial energy. Typically, “money” is a smaller percent of your portfolio and very liquid.
- Equities – these are stocks and interest in small business, perhaps you have a few small side hustles and invest in a local pizza shop. You put money into this asset class to store it longer and grow the value. The money going in, x, undergoes processes, procedures, and the output is y. Your growth rate is (y-x)/x. You put money asset in, and you can then convert the money asset back out and then store it again in a more liquid form of money.
- Real estate – this is a long term holding. You can choose to live in a modest home and put most of your financial energy into money and equities, or you can put a lot of your financial energy into your home and rentals to store for very long times.
- Power derived from the utilization of physical or chemical resources, especially to provide light and heat or to work machines.
So you or Steve might think of energy as moving something in a physical sense. For example, you may need so many joules of energy to create the newtons of force needed to move a rock from one side of a river to another. This energy is dissipated in this process in the form of heat.
What financial energy is, in my opinion, is:
- Power derived from the utilization of financial resources, especially to provide PRODUCTIVITY and CAPITAL or to FINANCIALLY POWER PROCESSES, through either human capital, capital expenditures, or giving creation to a business or enterprise to grow financial energy for the purpose to grow financial energy
So in the traditional sense, coal may be burned and consumed, but financial energy leads to more energy as the output – when invested. Otherwise, it just sits around in a battery, like a brick of gold.
The one thing with PHYSICAL power – you have renewable or consumable energy. Everyone THINKS about putting coal in a plant, burning it, and you get power out of that. The resource is consumed. However, let’s think of energy here in the renewable sense. You build a hydro dam with energy, and then you have hundreds of years of water turning turbines. The energy output from this process is exponentially more than you put into it.
I think the “green” people have failed in marketing as making this about tree hugger stuff where it should be about the argument of growing energy exponentially – which is the winning argument for a financial case. Oil, gas, coal, even uranium are depleted in the process of creating energy. Wind, solar, and hydro are all methods of creating a LOT more energy than what you put into it.
The big knock on these “renewables” is that at current time, you cannot really store that power. I know Musk talked about a battery for a city in Texas, but if we could STORE that PHYSICAL POWER somehow in a battery….
With financial energy – it’s the same thing as renewable energy. You put financial energy into a business, home, rental, or enterprise with the intent of creating more financial energy as the output.
If you translate that last sentence – it’s what I heard in my first day of my first class of grad school for my MBA – “a business is in business to make a profit”. And there you go. You add financial energy, perform specific work enabled by this energy, and the output is more financial energy than put into the equation. This is wholly observed in what someone does when they invest in a company. A company can then be a financial energy amplifier of sorts. You put capital in, more capital comes out. You seek efficiencies in processes, just like you would an engine running on combustion. The more efficient engines have better miles per gallon. The more efficient companies have a better operating margin.
This is GROWTH.
Now, I’d like to also call this financial energy….”jewels” of energy. In physics and electronics, you call them “joules”. Which, sounds exactly like “jewels”.
So work with me here.
These “jewels” of energy are stored in three different forms, listed above. You can put those jewels into corn, but corn may go bad after so much time. You can buy meats, but they spoil over time. This is why many thousands of years ago gold was chosen. It doesn’t degrade. Silver tarnishes. But gold is the one commodity chosen that could be UNIVERSAL MONEY.
Interestingly, if you are putting cash into food, you are thus also investing in an engine of sorts. You put $300 of food in you a month to power you, and you get $4000 back per month or whatever it is in your labor. If you put more high quality of food in you, perhaps you get more money per month. You invest…but sorry for the side note here.
This GOLD over thousands of years would then buy other items in the money class, and gold could then buy businesses or real estate. It was the UNIVERSAL STORE OF FINANCIAL ENERGY.
When you transport joules of energy over long distance, for example, over copper wire – you get heat loss. This power is lost in heat when traveling over a distance. You are trying to send PHYSICAL ENERGY from point A to point B. With FINANCIAL ENERGY, it’s the same thing. If you want to take gold from San Francisco to New York, you put it on a truck and it shows up a few days later. It costs financial energy to do this. Therefore, transporting financial energy in batteries has a loss in transport as well. Ultimately, this is the case I have for a gold-backed crypto. It is a more efficient form of financial energy storage – and like the gold-backed dollar, it is the EQUAL to gold as a receipt for it. Meaning, with a crypto – it is the most efficient and secure way to transport financial energy from one coast to another.
People today look at money as cash, and with this, they have it all wrong. This is how they have it wrong with bitcoin as well. bitcoin is another form of cash with no value other than its relative scarcity.
If you look at the MONEY ASSET class above, cash is the least valued of all. It is borrowed into existence, and with that, the cost of its existence is more than its value. It’s value is determined by its scarcity now. It used to be valued to gold. And this is the sleight of hand that was done first with 40% backing to gold, then no backing to gold.
There is NO VALUE in the paper, now that it is no longer backed by gold.
Apparently, it’s ONLY value now is based on its scarcity, and faith of usage. This is the same as BTC. Below, you find two things with zero VALUE. These are all part of the MONEY class.
If you look at all of the items I put in the “MONEY” category above, only TWO of them has zero intrinsic value. These are….CASH and bitcoin. I’m going to use only cash for the rest of this, and consider BTC interchangeable with fiat cash for the sake of this.
So if I had CASH, and I know it is a depreciating asset because there is no real value, I would then want to take all of the cash I had and put it into other MONEY items, businesses, and real estate.
I want you to now consider the below data.
- Commodities are all 20-50% higher year over year
- Stock market is at all time high
- Real estate values are melting up, up 15% in one year.
If you understand what I’m telling you, it is that cash is being printed into oblivion, and people are ACCEPTING this cash AS MONEY and allowing you to exchange CASH for MONEY, STOCKS, and REAL ESTATE.
What if, what if so much stuff is printed, it loses its value?
I showed this yesterday, when I showed the value of the USD in grams of gold. If gold was money, it would look and behave like other items in that class – go up and down in value to gold.
Check this – in money…
Gold versus oil…
Gold versus copper
Gold versus CASH.
What you are seeing is that cash is being printed, and it is no longer backed by gold. Unfortunately, this was the only thing that gave cash its value. It was a printed receipt for gold. As good as gold. Take this piece of paper to the bank and get gold in return.
I want to ask you now about your housing purchase 40 years ago you paid $200,000 for. Today, it is worth $400,000. Did your house go up in value? Or, rather, did the value of the purchasing value of that dollar decline by half?
If you look at real estate versus gold, you can see things go back and forth over 40 years.
So did your house double in value over 40 years?
The true answer here – is this.
You know that cash is a depreciating asset within the MONEY asset class. You know that it has inherently no value. You have to find ways to take this thing out of your hands and STORE it in something else to PROTECT your SPENDING POWER. Or…..your JEWELS OF ENERGY.
You clamor to buy a house and pay $200,000 in cash for it. 40 years later when you go to sell it for $400,000, you just did an arb on cash. Your house value did not increase by a factor of 2. What you did was store the financial energy of 40 years ago into a battery that held your spending power.
Meanwhile, if someone else held that cash for 40 years, the spending power declined by a half.
So – you have options, about what to do with CASH.
- Convert it to REAL money that holds jewels of financial energy, like gold. Gold does not go “up” or “down” in value. It is the universal constant of money.
- Convert it to businesses, and use the formula above to GROW your JEWELS of energy. That is, you can grow your financial energy by investing in a company and your growth rate is (x-y)/x.
- Convert it to real estate for a long term hold.
What Mike Maloney also showed was that you can have relative value amongst classes.
In times of trouble, you may have people exiting businesses and real estate to get to MONEY. At other times, that are less risky, perhaps they put MONEY into businesses to grow it. Businesses all have different types of risks.
Above all – there are three asset classes to store your JEWELS of FINANCIAL energy. Gold happens to be the best money. Cash is worthless and you can visibly see all three asset classes inflating at once. This is the definition of inflation. You have inflated the CASH supply, and with this, it’s relative value to everything else decreases, the more CASH you print.
Therefore…getting more CASH is not the answer. Right now, the answer is finding your right mix of assets to get with your cash before the cash turns to zero.
Cash is financial energy that has radioactive decay, and its decay rate is accelerating.
Get out of cash while you can.
What you are seeing is Gresham’s law in action…
“In economics, Gresham’s law is a monetary principle stating that “bad money drives out good”. For example, if there are two forms of commodity money in circulation, which are accepted by law as having similar face value, the more valuable commodity will gradually disappear from circulation.”
That being said, I want you to try and go on a bullion site worldwide and check out their inventory. It is fast becoming “unaobtaniun” and “unaffordium” and Mike Maloney has called them.
Those in bitcoin, please find a crypto backed by gold or silver, or get into anything else. By the time people realize this is worthless, it will be too late.
April 11, 2021 at 3:53 pm
A very good treatment of Gold-to Housing is here: http://danielamerman.com/va/GHratio.html
April 11, 2021 at 3:55 pm
Good afternoon I think that today you have surpassed yourself with this great article I hope that many people read it and realize what is value and what has no value. Thank you