Ask a different question.

Please consider this quote:

“If I had an hour to solve a problem and my life depended on it, I would use the first 55 minutes determining the proper question to ask, for once I knew the proper question, I could solve the problem in less than five minutes.”

– Albert Einstein

Many economists, investors, and politicians are seeking an answer to the question ‘Why is there is so much inequality in the world’, and looking at huge amounts of data over the past century in an attempt to come up with an answer. They will never find their answer, as they are asking the wrong question. The question they should ask is ‘Why did monetary inflation begin rapidly increasing in the world c.100 years ago’.

Monetary inflation benefits those that own assets, and hinders those that need those assets to live their lives. All assets are affected to varying degrees by monetary inflation, as prices reflect the declining value of our currencies.

Do you recognise the magnitude of the world’s problem? The past c.100 years have been an aberration, a period that historians will look back upon with bewilderment. They will ask ‘How on earth could this situation have been allowed to start, continue, and worsen?’ I expect they will eventually pinpoint the exact cause of the problems, and will reflect that 2016-17 was when the world finally took a decisive step back on the right path again. These matters take time to rectify, given the sensitive geopolitical issues at stake.

Here is a visual representation of the problem of the past c.100 years:

Inflation 800 years

It is clear how different the past century has been to the previous 700 years. The right-hand chart notes the date the Federal Reserve was created in America. Please do not assume this represents the answer to our question, it does not. The US suspension of gold convertibility is a good example of another step in the wrong direction, although our fate was sealed many decades before this step.

Thankfully, the period of rapid monetary inflation will come to end, due to planning and actions since the 1940s, with some significant concrete steps expected within the next 3 years, and the process should be complete by c.2035. Then we should expect to see a world where inequality between nations is reduced. There will still be inequality within our species, as we are all influenced by our genetic make-up, and some are brighter and stronger than others. To deny that is to deny our evolutionary history. I am thankful that some of the brightest amongst us saw the misstep that had been taken c.100 years ago, and were able to plot a course back to a more balanced system.

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