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How to save your portfolio? | Understand the difference between hard and soft assets - YouTube
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so you just got bankrupt by 14 even
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without you realizing it hi everyone
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welcome to today's video so let me start
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today's video by asking you a very
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interesting question about silver and
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gold you might have read in the history
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books that several kingdoms and
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countries in the past they used to use
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both silver and gold as their currency
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or coins but as the years transpired
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fewer and fewer silver currency used to
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be used but gold did not lose its value
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even till today silver has lost a lot of
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its value in real terms compared to gold
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why is that the case both are rare
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metals both are very difficult to
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extract but why is it that gold has
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stayed prominent in its value but silver
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has lost insane amount of its value over
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the years
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more importantly how does that entire
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scenario is playing out when it comes to
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fiat currency because you would have
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seen charts like that india is losing
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four percent of its value compared to us
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dollar u.s dollar itself has lost like
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97 percent of its value over the last
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hundred years so this type of data is
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strongly related to the story of silver
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and gold now i would really want you to
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pause this video and type out your
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answer in the comment box as to why do
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you think that gold has state prominent
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but silver has not to that extent i
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would love to know your answer so here
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is the very quick explanation while
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there are several factors at play for
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this phenomena there is a very important
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point regarding this explanation so let
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me do a very quick comparison and then i
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will relate this to today's stock market
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and how you as an investor are likely to
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lose a lot of money if you do not
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understand the concepts that i am
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teaching you on this particular video so
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just to help you quantitatively
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understand the decline in the prices of
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silver take a look at this chart this is
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the last approximately hundred year
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chart and it shows that back in 1915
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silver used to be priced at 14.6 dollars
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in real terms today if you adjust for
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inflation and bunch of other different
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things the price of that same silver
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dollar is roughly 24.83
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what it simply shows is that over the
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last 100 years silver has not even
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doubled in its value so let us take a
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very quick look at the gold chart also
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so for example if you consider 1915 gold
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was at roughly 556 dollars in real terms
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today gold has almost four eggs in price
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so silver did not even go 2x but gold in
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real terms has become 4x so what is the
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primary reason for this now this
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particular price growth difference
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between gold and silver can be easily
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understood through something called as
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the mining ratio so take a look at this
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particular chart it says that the mining
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ratio of gold versus silver is eight is
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to one so which means there can be a
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tech supply of silver that can be added
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compared to gold so for example if there
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are 8 kgs of silver that can be added
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into the economy every single year then
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only 1 kg of gold can be added into the
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economy every single year which in other
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word means that it is much harder to
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mine something like gold or create gold
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wizard with silver this brings us to a
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very simple concept of something called
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as hard currencies so hard currencies
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are very difficult to produce for
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example gold is very very difficult to
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produce compared to silver if you go to
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copper it is much easier to produce
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compared to silver if you go to money
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for example us dollar or inr they are
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probably the easiest to produce i'm not
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trying to criticize anyone just think
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about it logically is it easier to
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produce gold or is it easier to produce
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money so this is the precise discussion
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that we are going to have on today's
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video that why do i feel that fiat money
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is the easiest to produce and how that
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is kind of bankrupting us and even if
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you keep 100 crore rupee in your bank
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account magically even then you are not
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really safe since we are on the topic of
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safety this brings us to the sponsors of
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today's video which is ditto insurance
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you can buy health and term insurance
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from ditto i have personally purchased
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my insurance from ditto and the best
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part is that you get to speak with an
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insurance expert absolutely for free so
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you can check the links in the
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description box and avail that free
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service so let us get the discussion
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started and there are three specific
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parts in which i will help you
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understand this topic more one is that i
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will help you understand the history of
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fiat money that how is it that the fiat
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money has evolved over time was it
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always the case that it was getting
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devalued at a crazy rate second key
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thing is that how this excess printing
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of money impacts your stock market
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investments impacts your savings rate
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impacts your entire wealth so to say and
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third and finally what is it that you
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could consider doing considering the
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macroeconomic scenario this is going to
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be a fascinating story also a humble
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request if you like these type of videos
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do press the like button it will
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indicate to me that you would want me to
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make such topics so let us start by
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understanding a very brief summarized
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version of the history of fiat money so
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the history of fiat money can be
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understood in three simple parts so the
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first part is regarding the british
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empire because it became one of the
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modern countries in the world that kind
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of set the gold standard and it was the
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first country that moved away from the
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gold standard and kick-started the fiat
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economy the second phase or the catalyst
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was world war one and this is a very
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very important war you need to really
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know about world war one from a finance
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point of view because the repercussions
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of world war one on financial markets
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exist even till now i'm going to prove
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it to you third and finally that what is
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the impact of fiat in the contemporary
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world and how do i see things evolve so
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we will understand the story in these
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three phases so united kingdom or the
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british empire became the first major
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economy in the world so as to adopt the
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gold standard in 1777 by 1821 it became
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the first country to officially adopt a
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currency bagged by gold so what does
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bagged by gold in simple term means so
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before having a currency backed by gold
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what used to happen was that if you
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wanted to trade with anyone you had to
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give your gold coin in exchange for
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other gold coin for example if i simply
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wanted to buy a horse then the only way
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for me to trade in that horse was that
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if i gave that horse trader one of my
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gold coins and that person gave me his
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odds with currency backed by gold what
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used to happen was that there was a
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government or a bank in the middle and
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you could give your gold coin to the
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government and they will issue this
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receipt called as the gold deposit or
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gold receipt and there used to exist a
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one-on-one pegging ratio so it simply
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meant that every time the government
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issued this particular receipt they used
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to keep an equivalent amount of gold in
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their tijuri or locker so that was a
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simple point about one on one pegging
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with gold now this can be further
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understood from this particular graphic
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now you can clearly see that gold
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certificates were used as paper currency
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in the united states also from 1882 to
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1933 these certificates were freely
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convertible into gold coins what it
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meant de facto was if i owned a gold
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certificate and if i went to the
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government bank or government and told
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them that you know what give me my one
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gold coin back i'm holding the
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certificate then they would have had to
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do that so that was a simple basic point
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regarding gold backed currencies then
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comes the natural question that was the
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system working well the short answer is
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yes then comes the another natural
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question then okay then what happened
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that the world had to move away from
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this goldback currency system and create
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so much of artificial wealth that we see
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existing today so the answer comes up in
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1914 that is when uk jumped into world
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war one so world war one was one of the
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major events that reshaped our history
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from all spheres especially finance and
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in 1914 one major event that happened
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was that the british empire declared
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that he that we are going to jump into
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world war 1. now wars are extremely
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costly and how do you finance war you
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finance for in simple terms buy gold
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because till 1914 gold was the major
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currency that existed you might have
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seen game of thrones i'm a big fan of
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that show and every time there were
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mercenaries that were hired in what
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currency they used to get paid gold
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every war that was fought before 1914
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how the mercenaries or armies were paid
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they were paid either in gold or silver
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or in some rare commodity so to say so
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this system changed in 1914 and the
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financial instrument that led to this
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change was something called as war bonds
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so how do war bonds typically work so
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they work in the following manner so in
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simple terms war bonds work in this way
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for example the government will issue a
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bond to the uk citizens and they will be
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asked that you know what we are fighting
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a very bloody war would you like to
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finance this war it will display to us
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that you are patriotic etc etc so the uk
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citizens will say that okay no problem
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i'll give you all these gold coins you
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take these gold coins and whenever the
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war gets over please pay me a certain
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rate of interest on it and we are good
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to go till then i will hold these bonds
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bonds are nothing but a receipt that you
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as a citizen have given the government
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your gold and in return you will get a
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certain rate of interest plus some
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principal amount payment at a certain
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future date so back to 1914 the british
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government jumped into this bond
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financing and they were able to raise
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only 33 percent of the money that they
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could have raised now that's a problem
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if they needed 100 gold coins to fight a
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war they were only able to get 33 gold
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coins it's a huge deficit and it's a
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huge problem so that is where the first
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steps of quantitative easing as we know
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today started being exhibited so in
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england back in nineteen hundreds there
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was a central bank called as the bank of
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england it had a lot of gold in its
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tijuri how did it get all that gold
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again go back to the previous section
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they procured that gold by issuing gold
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back currencies to people people gave
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away their gold to the central bank so
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bank of england ended up purchasing 66
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of this bond now here is the crazy part
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if you think about it from a philosophy
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point of view this was the first
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instance that the gold standard was
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somewhat destabilized and this was the
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first instant that the government ended
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up using the gold that it did not own
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for its own gains and it was great for
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the government they were able to finance
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the entire war but the economic
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repercussions of the war someone has to
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bear it but by mid-1920s the inflation
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was very high why high inflation because
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government ended up spending money that
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it technically did not own and that led
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to high inflation and every time there
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was high inflation a justification was
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there that hey it's because of war
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therefore we have high inflation true it
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was because of a war but you fought that
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war on a debt so that led to a very high
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inflation and a full-blown depression by
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1930s but hey majority of the
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governments in the world are arrogant i
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am saying it in the nicest possible
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manner that governments are actually
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very arrogant they rather than admitting
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their fault they adopted something
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called as keynesian economics in
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practice now i am not speaking against
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kenzian economics if you want i'll make
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a separate video on that but the road
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map from 1930s became really simple that
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hey if we can get away by printing money
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and using money that we don't own then
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we can do it forever so many countries
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after 1930 1940 they started abandoning
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the gold standard why because they could
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print free money and use it for their
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own political gains and that system has
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become full blown as of now in fact if
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you check the data in 2020 approximately
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eighty percent eight zero percent of the
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currency in circulation in the u.s has
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been printed post 2020. what is the
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simple roadmap that governments across
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the world are following now it's very
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simple it has existed since 1914 that
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every time there is a problem print and
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print and print more money when the
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inflation goes high blame it on pandemic
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blame it on world war one blame it on
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the great depression but many of these
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things one could argue i am not saying
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this is 100 correct there are pros and
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cons to it and it requires more
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elaborate economic explanation so i will
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not give a verdict there but many of
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these problems one could argue have been
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created due to excess printing of soft
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money so before explaining how this
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entire dance is bankrupting you and i
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let me share four key concepts with you
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which will help you wrap around your
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brain as to what the truth behind the
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modern day financial system is so four
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key points so first and foremost you
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need to understand that what are hard
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assets what's a soft asset now soft
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money is very easy to produce one could
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argue that the fiat money be it
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singapore dollars inr us dollar they are
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the easiest thing to produce on earth
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any other asset compare it to property
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compare it to gold compare it to silver
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compare it to platinum copper whatever
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all these things very difficult to
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produce but fiat money is probably the
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easiest thing in the world to produce
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and now the situation is such that the
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interest rates are close to zero that
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governments can borrow from us at zero
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percent rate so that is what the
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situation currently is hard assets on
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the other side for example if you
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consider gold silver copper anything
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else it is much much harder to produce
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therefore it has somewhat of a tangible
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value so to say again go back to the
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example of gold versus silver gold
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really difficult to produce has lot more
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value compared to silver silver lot more
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value compared to fiat money so this is
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the first key concept second key concept
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that you need to remember is that soft
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money or any type of fiat money can have
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literally infinite supply now what does
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that mean that tomorrow if the
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government decides that the total supply
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of money in our economy is 1 trillion
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hypothetically speaking they can easily
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make it to 10 trillion and if you have
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10 crore rupees save guess how much it
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will fall by you would say that do not
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accept you're just blowing things out of
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proportion such things do not happen ok
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i can give you 10 examples of nations
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where such things have exactly played
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out check lebanon check sri lanka check
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zimbabwe check mexico check venezuela
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you will see this play out over and over
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and over and over again now comes the
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third and the most important point that
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if you think about it logically that
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okay no such extreme situation is going
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to happen in india or the us you're
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right maybe not maybe it will take a lot
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of time if ever but money supply is
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definitely going up because countries
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are creating more and more and more
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money why because it is free and every
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time they turn on the printer the value
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of the money that you hold it kind of
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goes down so if you are invested in soft
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asset there is just no way that you will
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be able to save money now unfortunately
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we have reached a stage that majority of
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the population on earth do not have
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access to financing even people who are
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good at mathematics engineering bunch of
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other different things they have trouble
[823]
beating inflation and the systems are
[825]
designed in such a way that people on
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wall street they have super computers
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bunch of other different teams and best
[831]
of the research available majority of
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them are not even able to beat inflation
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so what does that mean it simply means
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that the value of your money is going
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down every passing day i'm not trying to
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scare you i'm doing a thoughtful
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exercise with all of you if you feel
[844]
otherwise feel free to comment i'll be
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more than happy to respond to you fourth
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and final point that all this can be
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tied to something called as inflationary
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politics go back to 1914 again why did
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the uk need to fight world war one there
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is no specific consensus and theory
[860]
suggests that there was literally no
[861]
need for fighting such a war but it
[863]
became a political convenience once you
[865]
fought the war you can rally people
[866]
around it stir up patriotic
[868]
nationalistic sentiments and get people
[870]
to do and agree to literally anything
[872]
that you feel like so over the years our
[874]
politics all across the globe has become
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inflationary politics which leads to one
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simple solution from the government that
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print as much money as you can and
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bankrupt normal people now you'd say you
[885]
are being extremely harsh people are not
[887]
getting bankrupted okay i'll give you an
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example for example let's go back to
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2020 if you were planning for retirement
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if you would have saved two crore rupee
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the fd rates were cut from six and a
[897]
half seven percent to let's say five
[899]
percent now that one percent change on
[901]
your income just compute and tell me i
[903]
have done a separate video on that that
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one percent change on fd rate impacts
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your per year spent by 14 so you just
[910]
got bankrupt by 14 even without you
[912]
realizing it so that is the simple
[914]
system that is playing out so now comes
[916]
the last section that what is the impact
[918]
on you and how you can save yourself
[920]
from the situation so let me speak about
[921]
it one by one so the impact on you is
[924]
many fold but i will speak about three
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prominent things one we spoke about
[927]
retirement just now that if you are
[929]
trying to save for retirement you must
[931]
try to invest in cash flow oriented
[933]
products for example commercial
[934]
properties i'm a big advocate that you
[936]
should consider investing in commercial
[938]
properties because commercial properties
[940]
generate a cash flow if the soft assets
[942]
blows up something like a commercial
[944]
real estate would be a very good hard
[945]
asset to own second key point that
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please invest in stock markets why
[950]
because think about it this way that you
[952]
might have seen that after 2020 kovid a
[955]
lot of companies gave massive return the
[957]
world was stagnant world was not moving
[959]
but stocks like google amazon bunch of
[962]
other different indian companies started
[964]
cutting their previous peak also why did
[965]
that happen it happened because of
[967]
excess money printing people keep on
[969]
debating that akshat you know what pe
[971]
ratio of this company is very high you
[972]
made an sla video pe was very high why
[975]
should we consider purchasing such
[976]
stocks first and foremost not an
[978]
investment advice please do your own due
[980]
diligence and analysis but think about
[982]
it this way that if the total supply of
[984]
money in the economy was 100 trillion
[986]
dollar then it ended up moving to let's
[988]
say 300 trillion dollar in step 2 after
[991]
2020 where is this 200 trillion dollar
[993]
of excess money will go it will go to
[995]
companies of course pe expansion is
[998]
going to happen because the price of
[999]
everything will go up except for the
[1001]
soft money that is there so please do
[1003]
not worry about pe and please learn a
[1005]
little bit about macroeconomics learning
[1007]
about macroeconomics will be the only
[1009]
way of making money again think about it
[1011]
this way that a company's stock price
[1013]
these days is less dependent on its
[1015]
internal growth and revenues or profits
[1017]
but more dependent on how much money is
[1020]
being printed how the bond market is
[1021]
behaving how many fed interest rate
[1023]
changes are going to happen whether the
[1025]
interest rate is going to go up or down
[1027]
how is the supply chain or commodity
[1029]
prices going to change it is funny to
[1031]
keep on seeing people use 500 different
[1033]
type of indicators and none of those
[1035]
indicators would work if the feds decide
[1037]
to turn on the printers third and
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finally please understand the difference
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between hard and soft asset in case you
[1042]
want me to make a part two of this video
[1044]
i'll be very happy to do it if the video
[1046]
hits 20 000 likes i'll make a part 2 and
[1048]
explain this difference of hard and soft
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money in more detail and we'll talk
[1052]
about specific positions that you can
[1054]
take to hedge against government actions
[1056]
that's a simple viewpoint to hedge
[1058]
against government actions because one
[1060]
could argue that vr is the most useless
[1062]
asset from an investment point of view
[1064]
so in summary there are a couple of
[1066]
things that i will leave you with first
[1068]
and foremost please learn more about
[1069]
hard assets versus soft asset number two
[1071]
please learn more about macro investing
[1073]
it is going to become one of the most
[1075]
powerful forms of investing going
[1077]
forward again if you want me to make a
[1078]
part two of this video and explain what
[1080]
macro investing is and also get this
[1082]
video to 20 000 likes and also check the
[1085]
links in the description box i will put
[1087]
some interesting reading material there
[1089]
thank you so much and i will see you
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next time
[1098]
you
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