What Will Trillions in Money Printing do to an Economy and the U.S Dollar?

The answer to that question is going to either make or break investors in the upcoming months and years. Unfortunately, we are in uncharted territory, again.

The logical conclusion is inflation.

Milton Friedman, the Nobel Prize winning economist, put it this way.

 “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”-Milton Friedman

He is also quoted as saying in simpler terms:


“Inflation is caused by too much money chasing too few goods.”

Is almost $6 Trillion too much money to put into the United States? The answer is… It better be, otherwise, the Fed will print more and more.

Now,  the 331 million Americans in the U.S are going to fight for the same goods using currency that is being rapidly devalued.

Values for goods, services, and real estate didn’t go down and cause the government to react with stimulus this time.  Instead, the trillions in printed money were used to replace the loss in productivity brought one by a pandemic induced shutdown.

This is a whole different animal, and whether or not the Fed was correct is left for the historians to decide.

What happened last time the Fed through rocket fuel into the fire?  

“The U.S. Federal government spent $787 billion in deficit spending in an effort to stimulate the economy during the Great Recession under the American Recovery and Reinvestment Act, according to the Congressional Budget Office- 2010”

The below illustration shows the impact on housing when the Fed increased the money supply and the purchase power of borrowers by lowering interest rates.  

What will happen now that the money supply has been increased by trillions instead of billions?

The 2020 Pandemic changed everything.

The pandemic forced our government to print money like never before in history.  All told, we are facing close to $6 Trillion in stimulus money printing, including the newly announced $1.9 Trillion. *Source Data Lab

The illustration below, demonstrates the staggering amount of money that has been printed from March 2020 to March 2021.

The conservative approach of cash-on-cash investing is dead.

Under normal circumstances, the prudent way to protect and grow wealth when a market appears at the top is to use the cash-on-cash method to investing. This is the approach my investment group has taken since 2018, with real estate. 

All signs have been pointing to a market correction, as low interest rates have been pushing property values to unstable levels.

However, you can throw all the conservative investing ideas out the window.  

Now, investing has gone from creating a cash war chest to getting out of cash as fast as possible and into hard assets, like real estate and gold.

The above illustration is an interesting way to look at how much the Fed has devalued our currency since its creation in 1913. 

For example, one dollar in 1913 could buy you 17 loafs of bread.  In addition, it could be exchanged for equal amount in gold.   In 2021, one dollar would buy you about 1/3 of a loaf a bread! * source inflationdata.com

Cash is now trash!

There should be a warning label at your bank.  – “If you deposit money in savings at this bank, your money will be worth less when you pull it back out. ” 

Our group invests and understands the dynamics of real estate.  In my opinion, there are basically three main reasons owning real estate can combat inflation.

  • New construction costs:
    • If you purchase an existing building below new construction costs, you are already ahead of the game.
      • Buildings are made of brick & mortar, copper pipes, and lumber. 
      • Lumber has already doubled in price in recent years. Copper is heading through the ceiling along with other commodities. 
  • Location, Location, Location:
    • ​You can’t change a properties zip code very easily.
  • Low interest mortgages:
    • Those with mortgages can pay in future dollars that are worth less. That is also what the Fed and government are hoping to do as well.

There is a lot more to say about inflation and whether it’s actually good or bad for an economy and it’s workforce.  One could also argue that deflation is actually a good thing.

It’s why we have supercomputers in the form of I-phones for $600, instead of $60,000.  Productivity, efficiency, and innovation all create deflation.  No one really wants to pay more for something other than our government. 

Our government uses inflation to disguise it’s out of control spending.  It creates a hidden tax to all those that are tied to that government’s currency. 

The bottom line is inflation really only benefits those that hold assets and the means of production.  The part I can help investors with to protect their wealth, is holding an asset like real estate.

Check out the short video below for detailed charts & graphs and what factors could drive real estate much higher! 

You can’t control Wall Street but you can control Main Street. It’s time to get back to simple investments secured by brick and mortar real estate. 

Interested in hearing more? Set up a time to talk click here.

Kind regards,
Kyle Zimpleman, Managing Member

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