The killer of Rome is coming for us.
At the end of the first century AD, Rome had already flourished for more than half a millennium.
Its lands reached from the north of Brittania, all the way east to the city of Babylonia, and beyond. It was able to conquer almost any foe, from the rampaging hordes of Gaul, to the Celtic tribes of Arverni and Allobroges, and even the organised might of Carthage.
But every empire comes to an end. And for Rome, economics would be its downfall.
At the closing of the first century, a measure of wheat—called an artaba—in Roman-controlled Egypt cost a mere six drachmae. At the end of the second century, inflation had caused this to rise to around eight drachmae. Or in simple terms, an inflation rate of around 33% per century.
By the year 276 AD however, artabae of wheat were selling for an average of two hundred drachmae apiece. But the worst was yet to come, as less than sixty years later, the price of the same amount of wheat had exploded by 10,000 times, to more than two million drachmae.
It was the start of rampant hyperinflation that would eventually kill the Roman Empire entirely by the year 476.
With the price of wheat increasing so substantially, one would expect that the wages of a humble Egyptian bricklayer or carpenter would increase by an equal proportion, so that they might afford to continue leading a decent life.
Unfortunately for the workers, this wasn’t so.
During the Antonine period of ancient Rome, the average salary of the Empire’s workers did increase. However, the cost of goods rose faster, with wheat’s price alone rising two to three times faster than the average worker’s salary.
Over time, this resulted in citizens of Rome gradually becoming poorer, and having less power to purchase the items they needed to survive. Simply because rising costs massively outstripped the growth of incomes.
Does this story sound familiar? Well, it should. Because this is exactly what’s happening to all of us today.
Nobody will argue that the price of basically everything is going up.
Inflation is at historic highs, crises are causing a rapid rise in the value of commodities like oil and wheat, and wages are basically stagnant in much of the developed world. Leaving many of us wondering how the hell we got here in the first place.
According to official statistics, inflation in the land of bald eagles and french fries is currently sitting at 8.5%. But there are many signs that point to it being much higher than that, and one of those signs is by looking at the price of housing.
According to the Case-Shiller Index—which calculates housing prices in the United States—the cost of purchasing a home has increased by 19.2% over the last year alone. Meaning if you’re a first-time homebuyer, and have been saving up to buy your first piece of real estate, you now need almost a 20% larger deposit than was required at the same time last year.
And have salaries gone up at the same rate so that Americans can reasonably afford the higher value of real estate? Of course not. In 2022, salaries are expected to increase by only 3.4%.
In short, the simple “American Dream” of a person being able to afford their own home is fading fast.
But this rampant home unaffordability isn’t just happening in the United States. We’re seeing it everywhere.
Recently, an Icelandic friend told me that around a decade ago, she was planning to buy an entire detached house in downtown Reykjavík for a little over 35 million Icelandic krona—at the time, around $285,000 USD.
However, she didn’t buy it. Instead, she took the advice from her family not to, as they believed the house was too expensive. They told her the market was at its peak, and real estate prices couldn’t possibly rise more than they had already.
Oh, how wrong they were.
A decade later, that same house would sell today for somewhere around 160 million krona—more than $1.23 million USD at current exchange rates. Meaning that in Iceland over the last ten years, property prices have increased by more than 300%, or at an average of 16.5% per year.
This is asset inflation in action. And it’s not just affecting real estate.
The price of global commodities—things like aluminium, cotton, coffee, and oil—have become over 50% more expensive over the past twelve months. This marks the fastest pace of increasing prices in these markets for almost thirty years. Which in the end, makes everything in life cost significantly more for the end-user who is just trying to survive.
In short, you’re not crazy if you think things are becoming ridiculously expensive. They are.
The big lesson here is that if the cost of goods and real investments are increasing so substantially, but your salary isn’t, your money is simply devaluing over time. But not only that, it makes it harder for those at the bottom to enter the investment market in the first place.
Or does it?
If you’ve been following us for a while, you’ll know that Sorelle and I are big fans of real estate. It’s safe, secure, and has stood the test of time for thousands of years. However, if you’re trying to enter the property market for the first time, the numbers above illustrate how difficult this is becoming.
However, that doesn’t mean there aren’t potential opportunities to invest in things that may grow in value as fast as real estate—potentially, even faster. Things people of all investing budgets can take advantage of.
And all you’ve got to do is focus on the direction our society is moving in.
For example, sales in the global electric car market are estimated to increase by over 405% by the year 2030, which doesn’t even include the likelihood that the vast majority of trucks will also be electrified by that point.
Carbon will soon be our planet’s most-traded commodity, and the carbon capture industry is set to more than triple in the next seven years. Not only that, but almost every company on the planet will soon be forced to buy carbon credits in order to conduct business.
Or finally, you could look at the crisis generated by Europe’s reliance on Russian oil and gas, and the swift moves the EU is making to get energy elsewhere. It’s a €100 billion-per-year problem, that will result in a phenomenal amount of cash moving into the green energy sector that Europe is prioritising so highly.
These are all enormous tasks our planet is in the process of tackling. And every solution will require a very specific set of finite commodities in order to succeed.
To grow, these sectors will need to produce an ever-increasing number of semiconductors, solar cells, electronic components, and batteries. And they’ll need an equal amount of materials like gallium, gold, aluminium, silver, and neodymium to feed this expansion.
Need proof of this expansion already? Look at the last ten years.
If you’d put your money into iridium ten years ago, it would have increased around 450% in that time. Palladium would have gone up by almost 400%. And rhodium, well that’s increased in value by more than 13.5 times.
You don’t have a doctorate in economics to spot opportunities here. And unlike real estate, you also don’t need a five-figure deposit to invest in these commodities either. The metals, elements, and minerals that our world needs to transition into this new environment-focused, carbon-crazed future are available for anyone to invest in, for as little as a few bucks.
Look, I’m not here to cushion the blow; it seems as if things are going to become more unaffordable over the coming years. Especially if you’ve been wanting to buy a home.
But whatever you do, don’t let that be a reason to sit on your ass and accept defeat, and believe you have no other options in order to grow your wealth, or safeguard your cash.
Look to the future, and maybe invest in what our world will need more of.
And as always, don’t forget to diversify across as many channels as you are comfortable with. Gold, crypto, commodities, and if you are able, real estate. Or as Sorelle and I have done recently, maybe invest in some fine art (more on that below).
Just don’t let your savings sit in a bank account where their value will rot faster than a bowl of cabbage soup in the Sahara.
Remember, there are always options.
» SPONSORED BY MASTERWORKS
Inflation is out of control. In the United States, it’s currently sitting at 8.5% - the highest it’s been since 1980. And if you’re holding a lot of cash savings, it means your money is being devalued by up to 8.5% per year. Or to put it in the words of Ray Dalio, “Cash is trash.”
So, where’s a safer place to stash your cash for the future? Well for Sorelle and I, we believe one of the best options is art.
At times in history when inflation is above 3%, fine art has in some cases outpaced gold by more than 10x. For this reason, we recently started our art investing journey with Masterworks, and bought shares for a Picasso. Seriously.
There’s usually a waitlist to join Masterworks, but you can skip the queue and get in now via our private referral link.
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Thank you for the wonderful article. It serves as an eye opener for those curious as to what history shows as an indication of where we are, why we are where we are, and some considerate commentary of what may be to come.
An absolutely stunning newsletter full of knowledge. Wisdom and Knowledge, the PERFECT mix.