We all benefit from the euro. That was the political promise at its inception. In fact, it’s really great to be able to pay with just one currency throughout Europe without having to exchange money. But anyone who wants to can also benefit from the current record inflation of the euro. Here’s how to do it.
Profit from falling values with short sales
You can benefit from the loss in value of something, such as falling share prices, by selling these values short. At a short sale things are sold that do not belong to you. An asset is borrowed in anticipation of its falling value and then immediately sold.
Later, when the contractually guaranteed rental period ends, the value is bought back and returned to the lender. If the value can be bought back cheaper than when it was sold because of a fall in price, the investor has made a profit. So you can make profits even with falling prices. So you can also benefit from a falling value of the euro.
Sell the euro short and benefit from its devaluation
What sounds like a complicated financial transaction can be done by anyone with euros. It’s easy to do with loans. Not only the super-rich have access to this, but also the average consumer. Whether it’s a state-sponsored KfW student loan without any collateral or a real estate loan with little equity.
Almost everyone has the opportunity to borrow at almost zero percent interest and thus almost free of charge during ongoing operations. Interest rates below 1 percent are almost always possible. If you subtract the current inflation rate of around 5 percent, you pay negative real interest rates of minus four percent. One earns from it because the guilt is devalued.
That means you get paid for going into debt. Debts are thus transformed from a passive financing item into an active asset through the stimulating magic hand of state monetary policy.
With a debt-financed investment in a property with 10 percent equity, an investor can invest his equity at a current Price increase of almost 10 percent annually doubling within just one year, for example. This is how investors benefit immensely from inflation.
But be careful: if you invest wrongly, you can lose everything
If you take out a student loan or consumer loan, you can invest in gold or Bitcoin instead of wasting it on consumption. Because of their limited quantity, these are hard money variants that directly dig up the water for state currencies such as the euro, which can be increased at will, as competitors.
Of course, anyone who takes out a real estate loan buys real estate. Central locations in large cities are ideal here, which, unlike the euro, are strictly limited and therefore remain valuable in the long term or even increase in value. Stock loans are standardized for buying stocks.
But if the price of gold or bitcoin falls or the prices of real estate or shares purchased, even the cheapest loan is of no use. Because the loan has to be repaid one day after the end of the term and the investment made is worth less than the loan amount taken out, a loss is realized. If the expiring loan cannot be serviced from the existing assets, the borrower may even go bankrupt. He loses everything.
There is a state guarantee for currency devaluation
It is true that currency devaluation is practically certain. Because you can rely on the state. The European Central Bank’s officially declared target inflation rate is already 2 percent. The increase to 4 percent has been under discussion by the International Monetary Fund (IMF) and many other high-ranking luminaries of state monetary policy for over 10 years. In fact, the inflation rate is currently at 5 percent.
In addition, indebted EU countries urgently need cheap money for state consumption. There is little discipline in expanding the money supply. Private investors can benefit from this. Because states also take out loans. However, you don’t invest the money, you consume it.
This makes them even more dependent on cheap credit. That is why they will hardly turn off cheap money through cheap credit. Because higher interest rates or tighter money would lead to their bankruptcy and thus self-extinction.
Anyone who takes advantage of this is always a step ahead of the wave of cheap money as a one-eyed person among the blind, so to speak.
Diversification is also the be-all and end-all when investing on credit
However, it is far from clear whether the devaluation of money will also lead to an increase in the price of the investment objects individually selected by the investor. That’s why investors should diversify. Inflation, i.e. devaluation of money, ultimately means general price increases and not specific price increases.
For example, if you take out a student loan or consumer loan that you don’t have to justify for using it in an investment instead of consumption, you shouldn’t put all your eggs in one basket. Instead of just Bitcoin, it can better be Bitcoin and Ether, plus gold and silver.
Real estate on credit should not be bought according to individual desires, but according to general demand. A selection of standard apartments in highly frequented, strong and constantly in demand central locations and several small rather than one large property makes sense.
With a share loan, the investor should not just buy a share, but various values of large established companies from an index. Or the investor immediately opts for an Exchange Traded Fund (ETF) that tracks an index.
In addition, not only illiquid assets such as real estate, but also assets gold, shares or cryptocurrencies that can be liquidated at any time should always be at hand in order to be able to service due claims from loans at any time, even at short notice.
Conclusion:
Anyone who invests on credit should diversify and not put everything on one card. However, if the investor diversifies and invests on credit, he benefits from the general price increase like no other. Because on the one hand his guilt is devalued, while on the other hand the price of his wealth is increasing.
In this way, private investors can benefit from the euro as cheap money. This profit is paid out of the pockets of those who blindly lose their assets in savings accounts or with cash under their mattresses due to currency depreciation instead of trusting in the inflation targets of state central banks.
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