#323 - Why THIS Is Worthless

The $100 note in your wallet is worth less today than it was yesterday. Most people think it's just normal inflation, an unfortunate side effect of a growing economy. But the reality is every government in the developed world runs a monetary system that deliberately and intentionally, mathematically and economically erodes the purchasing power of your money. I'm Lloyd J. Ross, seven figure investor and entrepreneur, and I've helped thousands of

everyday people get out of debt and build real wealth. And I'm here to show you in this video exactly why The Australian dollar is losing value, why the system is designed this way, and what you can do about it yourself. Firstly, let's dive into what is fiat currency, where did it come from? So let's go back to the basics. Because this is where you'll understand why

we have this system, the fiat system, okay? And why it fails and when it's abused, well, it fails when it's abused, okay? It doesn't always fail, but when it fails when it's abused, To date, it's not gone too bad, right? So for most of human history, money was either a commodity itself, so gold, silver, or was backed by a commodity. It was a little bit like barter. But

you could take your paper note to the bank and exchange it for a fixed quantity of, let's say, gold or silver, right? That was the gold standard. You could exchange a US dollar for a certain ounce of gold, right? And the idea was pretty simple. The government can't just print more money than it has gold, yeah? The gold supply acted as a bit of a natural ceiling on money creation. Supply of gold dictated the supply of money, right?

But then came Great Depression. Great Depression was a big factor that shifted that, and then World War II, right?

And the reality is that the gold standard was Effectively, it kind of constrained growth. It was like a straitjacket on the economy, and they realized that. It wasn't growing. In fact, the gold standard was a big cause of the Great Depression. I don't know if you knew that, but they couldn't release credit fast enough, and that's what caused a lot of the Great Depression.

And then it couldn't grow beyond World War II. And so the reason why, in 1971, Richard Nixon took the US off the gold standard is because they wanted to

grow the economy faster than what they were. So basically, the modern fiat era began with President Nixon when they shifted off the gold standard in 1971, right? They call it the Nixon shock. And it started to remove the anchor that precious metals enabled on monetary expansion. It's kind of what happened, right? So fiat money, which basically, fiat

is this Latin word It means let it be done. that will be done or by decree, right? So it's money that the government says, it's money because the government says it's money. So it's an agreement and a belief, right? Not because it's backed by anything physical, although you could argue that the US military is what backs the US dollar, and also oil, the petrodollar, right? Because you have to buy and sell oil in US dollars. That's the petrodollar. So really, I think that oil

and the military backs the US dollar. That's just what I think. But it

has no real intrinsic value. It's a piece of paper, right? So it's more about the law and the trust in it that is what makes it valuable, right? And we all believe in it and trust it, which is by and large how any currency is formed, to be honest with you. Like even with gold, it doesn't do anything. It's just a piece of thing out of the earth. We

all believe that that's the currency, that'll be the currency. So it's just really what we trust and believe to be is how we barter is really what makes a currency, okay? So what I want to explain to you now is why inflation is actually a good thing. Right? And people often think, well, let's go back to the gold standard. And I'll come to that in a second why that's not a good idea. But here's why inflation is a good thing and why the fiat currency system does work pretty well when

inflation is low. And 2% inflation is the target that they go for. And it's genuinely smart because Whilst the episode is called why fiat currency is worth us, I want to go into the facts of why it does work as well, right? Because the concept of design inflation isn't stupid, it's quite elegant as to how it helps the economy grow and run, and why deflation is worse. So, I'll explain it.

Let's say, for example, that it's the opposite. So if your money was worth more tomorrow than it is today, So anti-inflation, called deflation. If prices fall every year, what do you do? So inflation's where prices go up each year, and the value of your fair currency falls against the prices of things growing. That's what we do now. But imagine it was different. Just for a second, flip it. What if it was disinflationary? So if prices fall every year, what would you do? Would

you spend the money? Uh-uh. No, you wouldn't. No, you wouldn't. You would wait. You wouldn't buy a car today because it'll be cheaper next month, right? You won't invest now and buy equipment for your business because the value of the equipment next year will be less. So you'll hold cash, which is the worst thing you can do for an economy, right? Because the velocity of money stops. An economy runs on the spending and investment of money, right? So if everyone was

waiting for things to get cheaper, then nothing gets built. Nothing gets bought, businesses fail, unemployment rises and GDP contracts. That's what happens when you have deflation. And it's not a theory, it's actually what happened in history. Let me explain it. If you go back 200 odd years to the Napoleonic Wars, when Napoleon was still around with the British, it's

one of the most important economic cases in history. So 1790 to 1815, Britain was, when there's these Napoleonic Wars, Britain was forced off the gold standard to fund the war effort. So that's what happened. So history, whatever. They printed money. and inflation ran hot. Yeah, sound familiar? But the economy kept moving, right? There was industry, trade, there was

industrial revolution, then the war ended. And then they established, so they returned back to the gold standard, the pre-war parity, like the gold to fiat parity, yeah? And when they returned to the gold standard in 1819, guess what? It resulted in severe deflation.

The unemployment rate, which had hovered about 5% at the time, grew to 17%. Monetary contraction contributed to bankruptcies, there was unemployment in the early 1820s and it triggered riots, petitions to Parliament, right, from returning to the gold standard. That's what happened. So prices fell sharply and the debt burden in Britain grew because it forced people to to not want to repay their debts, right? So the gold standard delivered price stability long-term, but when it came to the

economic foundations of growth, it just doesn't work. Okay? So we don't want a deflationary currency, just so you know. When you see people go, let's go to the gold standard, they don't know what they're talking about. They're flipping, they're just gold bugs that make you wanna buy gold because if you buy gold, it goes up in

price and you seem wealthier on paper. So let's go back to the fiat system. There's a feature built into it, which is called controlled inflation, and it's gentle. It's about 2% a year. But here's how it works. If wages rise by 2%, and inflation, which is the cost of things, goes by 2%, the real purchasing power of workers is preserved. Nothing changes. Capisce?

So the notion of inflation is farce. It's not real. Because if you're a working person of society, then your wage or income goes up by 2% a year, and then cost of things goes up by 2% a year. The result is zero. It's the same. Yeah? Makes sense? So the real purchasing power is preserved. You earn a little more in nominal terms, but the things cost a little more in nominal terms

too. So the net effect is zero. But the incentive to spend still exists because your cash doesn't appreciate sitting under the mattress. So you decide to use it. You buy goods, services, investments. You spend on things, right? especially for people who are productive earning wages. So you earn money and you create value, you do things, and it works. The inflation model at 2% works. So your income kind of keeps pace with it, right? And the economy grows. Living standards rise, but more

steadily, yeah? So the Reserve Bank of Australia and other reserve banks too, they mandate this 2% to 3% target band for inflation for that reason. Because they know it means that we're not getting poorer, right? That's it in theory, and it actually, you know, from say 2009 to 2016, you know, 2020 maybe, it was pretty stable. Very elegant, that's why you probably were traveling more than, like, things

are pretty good. But it's when governments stop respecting the limit where the wheels fall off it, okay, so it's where the system gets abused. And this is where it goes from, you know, cash is trash, truly, and it does, it's true, right? So this is how the government breaks the system. 2% model is all good, and

it requires discipline, and then the governments can't resist the temptation to just pump money into the system, right? So the last 15 years in particular, the discipline has been absolutely abandoned. Since COVID, really, it's a joke, right? So let me explain to you the four main ways where the government, like intentionally eroded the value of the fiat currency beyond the 2% healthy rate, right? It's been designed. So firstly, they print more money, it's quantitative easing, been around

since the global financial crisis 2008, right? The US Federal Reserve did a meeting, it's unprecedented, the bank stuffed up, let's flip and flood the country with money,

right? QE they called it, quantitative easing, QE. And then COVID happened and then guess what? They did it again. They did it again. And so it's supplying the world with more money, right? So the Federal Reserve balance sheet went from a trillion before 2008 to nearly nine trillion at its peak in 2022, nine X, nine times the pre-crisis level. So the total Federal Reserve asset purchases during the pandemic was like five trillion.

And Australia did the same, like the RBA ran its own bond buying program during COVID, purchasing government bonds, which floods the market with money to keep interest rates at bay, right? What does this mean for you? It means basically that more money in the system. So oversupply of money, yeah? So the bond markets flow with bars, yields falls, interest rates fall, and then all

the money floods into assets effectively. So like property and shares inflate. That's why you've seen a huge inflation in asset prices like property and shares, because the QE just floods into those assets, right? Because rates are lower, artificially lower, yeah? And then of course, if you got money in the bank, it doesn't work. So the second thing that happened too, they kept interest rates artificially low for too long, right?

Low interest rates are a tool. Buy any Federal Reserve or RBA bank. They're like tools. It's the only tool they've got to manage inflation and create price stability. So in 2012, 2022, most developed central banks in the world kept rates on or near historic lows for a long time. Yeah? So it made borrowing really cheap for a long period of time. And it fueled more of the asset bubble. So not only did they do QE and flood the market with money, but they kept rates low

so that borrowing was easier. And when you keep rates low for a flippin' decade, you create a whole generation of financial behavior calibrated on almost free money. And now you're seeing on, right, if you go now online, because they increased rates yesterday, People are getting shit. It's like taking candy off a baby. They're spitting the dummy. It's hilarious. They're getting angry, because you're taking money off them. Because they're just so

used to low rates. It's not real, though, right? So it's a little bit amusing, actually. So that's what happened. There's two things, yeah? In the last five years alone, there's been a cumulative inflation rate of 25%, right? So that means $1,000 in the year 2000 had the purchasing power of about 1800 by 2025. Isn't that insane? Like, it's almost lost half its value. So if you were on 100 grand in 2020, you'd have to be on like 180 grand and get the same value. It's mental because

the wages haven't caught up with it, right? Third thing, bureaucracy, bloating at the government level. Here in Australia specifically, Not just the bureaucracy of those working in there, but the actual spending of the government has got out of control. It's not just to build roads or train doctors or fund scientific research or anything like that. That's a good, that's a very productive use of money by the government, right? And

the economy, you get something back for that, an ROI. But when the government spends money on growing itself, which is its work, is its bureaucracy, and all these people doing dances in Parliament, not really doing what they're doing there, and they all work from home, and there's no productivity, because I've never met a government employee that's productive. I'm going to lose some fans now. But hey, there are, of course, nurses productive.

I mean, there are. But there's a lot in those white-collar jobs that aren't. But you're creating non-market jobs, right? Non-market jobs. So you're expanding programs that don't produce measurable return on investment. So the more money that goes into the system, you don't get a return for it. Prices just go up, yeah? So here's some stats for you. The Commonwealth government employees rose by 5.6% to 385,000 people. It rose by 5% in one year, from 2024 to 2025, right?

And so that means the wages paid to them surges. It's like $40 billion in wages for that year, public sector wages, incremental wages. The role of the federal government, it's not to just blow itself up. It's there to control things in the free market, right? Anyways, what's happening is they're increasing the number of non-productive members

of government, so spending without productivity, right, and it's not sustainable. Then, you know, some examples of what they spend on other things too that's not sustainable is things like the NDIS. It started out to be, I think it was $10 or $15 billion maybe initially, now it's grown out to be, what, $30, $40, $50, on track to be $50 billion I think now, and so You know, what are we supposed to do? Get it to 125 billion by 20... They're gonna be 125 billion by 2034. It's crazy. And

that's a non-ROI spend. Because if you're just supporting those that aren't productive... I'm not against it, I'm against the extent to which it's been abused. It's just, if you just spend all this money on support for non-productive members of society just on that, there's just no ROI. So if you're going to do that, get an ROI somewhere else, because we're not getting that, right? You know it's the third, NDIS is the third largest federal expense program. And,

I shouldn't be laughing, it's wild. The support people aren't 700,000, but it employs, in some respects, like 700,000 people. It's a lot. So, it's not good for productivity, yeah?

It needs a revisit, right? I think it's like, I think it's, the numbers are 10% of all Australian six, yeah, this is the number, I think it's 10% of all Australian six-year-olds were on their own NDIS in March 1925. Isn't that insane? That is insane. Where were they before? I'm sure that a lot of them didn't need that before. Anyway, I'm

probably treading on some thin ice here, but there's a real problem. And you'd have to agree, even if you're a recipient at the end of it, you'd also have to agree, right? There's some shenanigans going on there we need to stop, right? And then

we move on to how this is impacting you, okay? So we look at these things that cause the currency debasement, which is what I've just explained there in those five points. That's what's causing the debasement, right? So we know the root cause of it. So how do we shift it? What happens? Because if we don't, we get inflation growing, growing, growing. And all of a sudden, we're going to take a wheelbarrow down to the shop to buy bread and milk. That's what happens when there's hyperinflation. The

dollar has lost 95% of its purchasing power since 1960. And a lot of that's happened in the last five years. But what they don't realize is it's not the purchasing power, it's also the fact that income's also gone up. So when people say that, it's lost this, it looks like it lost it all, but the reality is incomes have gone up. So it's not a net result as bad as what it sounds, okay? If you're a productive worker with rising inflation 2%, it means you're being compensated for

it. But if you are retired or you have a fixed income, then every year you buy less and you do get poorer. And the reason why you feel poorer after the last five years is because wage inflation's not gone up. Has somewhat, but not as much as what inflation's gone up. And that's why there's been this disparity. And that's why GDP per capita has gone down for eight consecutive quarters

in Australia. Does that make sense? So if you feel like you are poor, it's because you are, because wage inflation hasn't kept up with actual inflation, and we're not being productive as a society. We're just not. Because we're spending all our money on non-productive projects. Make sense? That's what's happening. And we're a recipient of that. So there's no such thing

as a free lunch. So next time you see, oh, we're doing this, oh, free transport, free, there's no free. It's from taxpayers, from productive workers. And if you're one of them, that's your money. And if you don't rein in the government voting for the right people that understand that, you're just

making your own bed to lay in it. And you can't complain. There's no crying in the casino. If you have caused this because of your shitty way that you vote for the people in power, because you're too stupid to figure out what their policies are, then you deserve all the poorness that's coming to you, because that's what's causing it. It's how we vote as a nation. It's who we put in power, because they create policies that do this. They put the policy in

place. They are the ones that lose control of it. They're the ones that stuff our energy for net zero. All these policies have a big impact on your wallet. And it's what causes a lot of the inflation problems. It's what causes debasement in the currency. So it's not just the fiat currency's fault. It's designed pretty well. It has worked fairly well for a long period of time. It's when you get shitty leaders at the top that make dumb decisions like Albanese that you

start to get a huge debasement. And I'd say most of it, and he's not the, He's just the figurehead of the party. But the policies of the party are just brutal for deep basement. Like, yeah, they just, it's almost like Jim Chalmers has never been to an economics class. I just doubt he even has. And or had a real job or like he, it's really, it's disturbing when you think about someone can be in power and do the policies that he does and have no real world

experience. I mean, flip a neck. Yeah, it's a problem. So would I expect that debasement of the currency to continue? Yes. Beyond the 2% that it should be, yes, which is why gold has gone up so much because people often buy gold as a hedge against inflation. I prefer to buy businesses and run small businesses that can hedge inflation through price rises. I prefer to do it that way, because businesses are more productive than gold. And you don't know when to sell gold

and get out. It's just too difficult. So I just avoid it. But that's why gold's gone up so much, and silver. Now oil. Now oil's following it, right? Do I think it's going to continue under the current government? Yes. If you vote Labor again, if you vote Labor again, and the same policies that have happened for the last, God, however many, five years, you will see the same. So if you'd like to see your Maxibon ice creams at the shop go from $6 to $12, go and vote Labor again. If

you want to be poorer, vote Labor again. I'm not joking. I didn't give a shit. I'm not aligned to any party. I'm aligned to the party of common sense who makes smart decisions. If that's One Nation, great. If that's Liberal, great. If that's Labor, great. If Labor was real, I'd vote. But you've got to look at the facts. Some of these policies, and I'm not even, I think Liberal did the same thing. I think both parties are equally to blame. And so please,

this is not a political podcast, but God damn, next time you can vote, read the policies and go, are these aligned with productive uses of our capital? That's so important because it will make us wealthier and better, right? And not poorer and poorer and poorer. Let's be honest, we want to live good lives, we don't want to live, I mean in Australia we should have, we've got a thousand years worth of natural resources, none of us should be even paying tax for goodness sake. So

who is in charge of steering this country matters. And the problem is not in the design of the fiat, the problem is in the execution of

it. And the government is responsible for that and they have a completely absolve the responsibility. They are like children in a candy shop. And the currency is not the problem. The system is not the problem. It's how it's wielded. And the only way we can stop that is to shift the leadership. So if you want to stop debasement of currency, change who's in charge, because what they're doing is wrecking it. Does that make sense? Know the difference and plan accordingly.

So if that makes sense to you, you think I'm on the right track here, leave me a comment below. If you think I'm way off track, and I don't know what I'm talking about, and I'm gonna flog, and he's just here to sell books, and I'm like, that's you? Comment below too, and I'll fight you in the comments. But leave a genuine comment if you want to, ask me questions, I'm happy to have a debate about it. But yeah, I like some of the comments, they're quite

funny. But I'll see you in the next episode. Thanks for listening to Money Grows on Trees. If you enjoyed the episode, leave a five-star review on Apple Podcasts and Spotify and subscribe to us on YouTube so you never miss an episode. And if you're serious about building wealth, make sure to check out the links in the show notes and follow me on all social media platforms, at LloydJamesRoss for