Dear reader,
The pandemic is far from over still. In some countries the cases are rising and the vaccines don't always seem to be as great as they should be. We are not heading back to "normal" or so far we know normal is going to be. Talking about a new normal, the stimulus checks. Free money from the government. Who has to go to work when the government sends you a check?
This week I am talking about my economic concern with regards to the stimulus check, the way people are investing this money and what the most effective use of investment the stimulus check can be. I live in the Netherlands so I don't get a check but the government is paying for my salary while all restaurants are closed. Kind of the same principle but it is not "free money". There are no extra handouts but also in Europe this money has to come from somewhere.
Stimulus check:
The stimulus check is a government handout because people have been suffering from income reduction or loss. Due to the corona virus, a world wide pandemic and lock downs everywhere in the world people have been loosing there jobs or income. To make sure there is not mass unemployment, mass eviction or homelessness the government has been giving out stimulus checks to help the people that need it the most to survive these hard times.
The checks should help you to pay for your bills, food and other emergency costs that you have at that moment. In the meantime you should be looking for a new job is you have lost it to cover up for the other expenses that you have. The world and governments need to help their citizens survive. Without help from the governments many people would have been in serious financial trouble at the moment.
What not to do?:
The stock market and the crypto market are being over hyped at the moment. Young people are putting their stimulus money to work in markets that they don't even understand. On Reddit people are bragging about where they are going to invest their stimulus in hopes of that they will become a millionaire. In January we had an interesting month with stocks as GameStop, AMC and Blackberry being hyped for no reason.
Also within the crypto markets a lot of stimulus has been flowing in with massive repercussions. The market is a volatile one so prices can swing up or down 10% in a matter of minutes or hours. The reason people are doing this is FOMO, Fear Of Missing Out. If your friend or colleague puts his money in the market and turned his $1400 check into a $10.000 check then you are missing out on the same.
What should you do?:
There are many ways to make sure that your check has the most effect. First make sure that you have paid your bills and you can provide yourself and your family with the food you need. Then you can start with investing. But invest in your financial education, buy a few books on investing, take an online course or talk to an investment planner. The price you can pay for knowledge pays you way more dividend then to just gamble your way like the market is your casino.
Don't follow the crowed when it comes to investing. Do your own research and invest in things that you know something about. By doing enough research you are able to find the right information that is needed to gain the best and most effective results. But do remember that with every investment their is a risk involved. If you can't afford to loose the money then do not invest.
What would the future look like?:
Until the pandemic is under control there will be more stimulus. Maybe one or two more rounds will follow until everything get back to a new "normal" where people are able to do what they want to do. Unfortunately all the money has to comeback in someway or another. Because of the governments creating massive debt, giving out "free" money and running their economy into the ground there is going to be a time when it will all come crashing down.
The most important instrument to measure the economy and the money supply within the economy is the velocity of money. This means how often the currency trades hands, this is also the important to measure the economic stability of a country. In a good economy the velocity should be around or above 2. At the moment we have a velocity of just above the 1.1. Ever since the crash of 2008 this number has been dropping. Due to more and more money being printed and the turnover has to stop at one moment in time.
Not to scare anyone but it can't go on like this anymore. In the future we will have an economic crash that no one has ever seen. Whether we will have hyper inflation, mass deflation or stagflation I don't know. What I do know is that the economic machine is out of control and that it needs to be fixed before we loose it all. So invest in your financial education and based on your own analysis do your research to see how you can use the most out of the stimulus check the government gives you. Look at each side of the story before you make your final decision.
Thank you for reading and see you next week.
Franklin, Moments 2 Success
Photo by Blogging Guide on Unsplash
Photo by Tech Daily on Unsplash
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