 Once you realize that there are different systems of play, what you really need to do with your personal wealth to be able to preserve your wealth or increase your wealth when it comes to wealth on a tangible level is appreciate that there are different systems at play and once you understand that there are different systems at play, what you need to do is be diversified. This is Shijuo. Welcome back to my channel and welcome back to our little discussion about personal finance and we're going to continue on for where we left off regarding automation, regarding timelines, regarding some of the most important things which should always keep in mind before we decide to participate in any type of system, maybe you know putting in our time, putting in our energy, putting in our finances and that system and that project, right? So basically when it comes to personal finances, right? When it comes to us trying to manage our wealth because that's what it really means when we're trying to, when we're thinking about personal finances, what we're trying to do in general is think about how we're going to either preserve our wealth or we're going to increase our wealth and our, you know, wealth is so subjective, right? It's so subjective because some people only consider tangible objects to be wealth or that's the way the programming has been set to think about wealth as either increasing your assets that you have or the money in the bank that you have or whatever it is but wealth to many people means many different things, right? So what we're going to do specifically in this video is talk about more of the tangible assets, tangible items in regards to wealth but please keep this in mind that, you know, we talked about this in the first video, some of the things you should keep in mind when you're thinking about your personal finances and number one on the list was health, right? And health, you know, only becomes tangible, something tangible that you can actually use in our present economic system to a certain degree when you have problems associated with your health because you have to spend money, right? So there's no price tag that you can put on certain things that certain people consider to be the most important things you should always achieve for, right? Try to work towards when it comes to managing your wealth, when it comes to personal finances, right? So that's my little intro to this video, to this talk that we're going to do because, you know, I want to make sure that you do appreciate that this isn't financial advice, this is just looking at the different systems that play in our current society and quantifying those systems because that's what mathematics does. Mathematics, one of the powers of mathematics is that it allows us to look at different types of systems, right? If we can quantify those systems, quantify those systems and in general, we can quantify anything, right? Really, we can quantify anything. We've talked about this in the past and, you know, the simplest way you can quantify something that most people think that you can't quantify is you can ask someone on a scale of 1 to 10 how much they love something or they love someone, right? And right away as soon as that question is posed, you're trying to quantify a system and as soon as someone replies with a number, then they've quantified it as well, right? So in general, mathematics, you can use it in the most rudimentary way to be able to quantify things, right? And that's what what the power of mathematics is. And once we are able to quantify things, what we can do is create visuals, create graphs to be able to understand those systems. And what we're going to do before we can have a full appreciation for this, what we have to do is sort of define some terms, okay? And there's a couple terms that we need to define because let me read the working title for you again, right? Personal finance, currency and money, diversify and invest in what you know, keeping in mind the systems at play, right? So the first thing we have to do is define the terms currency and money, okay? Because the rest of that, this video, diversify and invest in what you know, keeping in mind the different systems at play is the visual we're about to create. So what we're going to do is define these two terms for us, okay? And the terms are going to be, the meaning of the terms is going to become more and more clear what the difference between them is and which one you want to give more emphasis to, right? Once we, you know, start talking about the different systems at play, but here's the definition, right? So let's talk about currency first. Currency as a direct translation means something in circulation, okay? So currency is something our society, community uses. That's in circulation for us to be able to do trade, right? On a fairly rapid level. And we'll talk about this, right? So there's, personally, there's three types of currency. I don't know if this is set absolute or not, because after all this research sort of broke it down into three forms of currency. There's the first type of currency which is backed by a commodity or a collectible, okay? And we'll talk about collectible. I'm going to point you towards that an article that is definitely worth reading, right? So currency for me can be backed by either a commodity or a collectible. That's one type of currency. Another type of currency could be backed by faith, trust, or power, military might, right? When it comes to governments, right? Okay. The third type of currency that is in play that I can see playing out a lot more right now in our current economic system is mainly due to, in a big way, to the advent of the technology of computing power, right? It's basically goodwill, credit, karma if you want to think about it, sort of, you know, and you can build credit in multiple different systems, right? If you've done banking a lot with a certain type of bank or certain type of investment company and they've seen you've been successful in your endeavors, right? You've basically built up a lot of credit with them and they'll be more inclined to loan you money. This also works on the same level when it comes to a community and in a big way it's working out on the internet right now when people are creating a lot of work and there's a lot of user viewer supported, user supported content coming up, right? So for me there's three different types of currencies that I'm thinking about and there's certain type of currencies that bounce between all these three, okay? Commodity back, collectible backed, right? Faith, trust, power, okay? And goodwill and credit. Keep that in mind. Okay, regarding currency and currency is basically something in circulation that's being used by the majority of people that is used to do trade, okay? And what we're going to do right now is I'm going to read you a little quote regarding currency and I really like this quote, the sentence, defining what currency is and it's a quote from the same person that we talked about in the previous video when it comes to what we have to keep in mind, the implications of automation or current economic system, right? And the automation played out really well. One of the places that's played out or rolled out fairly rapidly is Wall Street and the article that we talked about we did some reading of in the last video which is Behind the Curtain, the Full Monty by Martin Armstrong and I highly recommend people reading this article. It's sort of an insider's behind the scene look at how the stock market Wall Street works. So it's a quote from Armstrong and that article he wrote in 2010 and this quote is from July just a few days ago 2017, okay? And quoting Mr. Martin Armstrong quote, currency is the medium of exchange which sits on the opposite side with tangible assets, okay? And I really like that definition of currency. Currency is the medium of exchange which sits on the opposite side of the scale with tangible assets, right? The only thing I would change with this sentence, I would take out the word tangible. I would say currency is the medium of exchange which sits on the opposite side of the scale with assets and assets kicks us into the term money, okay? Because money is larger than currency. Money encompasses everything because anything can be considered to be an asset. Anything could be money, right? And let's define the word money first and I'm going to read you a quote from Dawkins regarding money which you know I'm not a huge fan of but it sort of shows the scale of what money can be, right? So money basically serves three functions, okay? By definition that's what money does. Money serves as a medium of exchange which is really currency, right? So money has to serve as a medium of exchange. It has to be a unit of account and a store of value, okay? And that's really important, the store of value for our conversation right now, okay? For the visual that we're going to create, for the graphic we're going to create when it comes to trying to appreciate this table of data, right? So money is a medium of exchange, a unit of currency, and a store of value, okay? Now when I say anything can be money, really, anything can be money, right? Your time is money as the saying goes, right? Love, you know, for someone that's not involved in that may not be tangible, for people involved in that interaction, it is tangible, right? Can we quantify it? How much do you love something or love someone on a scale of one to ten, right? So anything can be money, compost is money, right? If you need, if you're a farmer, right? There's a amazing, once you think about it on that level, it really expands the different types of systems that you can participate in when it comes to your personal finances, right? And I'm going to read you a quote regarding money, and it's, I took the quote out of this article, so I haven't read the article that Dawkins, or listen to the lecture that Dawkins made, which this quote is taken. And the quote is from this article, and let me read you the quote first, and then I'm going to talk about this article a little bit, because it's, well tell us what money is. Once you read this article, it's a very important article, historically anyway, but he used a quote from Dawkins, and I'm not sure when he made this quote. The quote from Dawkins is this, quote, money is a formal token of delayed reciprocal altruism, okay? I had to read that a few times. I had to look up what the word altruism meant, and altruism means selflessness, right? It means concern for the welfare of others. So if we do a little substitution and read that sentence again, paraphrasing, I guess Dawkins right now, money is a formal token of delayed reciprocal concern for the welfare of others, right? And this quote is taken from this article, and this article is absolutely a must read. If you want to appreciate the role of money in our society, in our human evolution, and the article is shelling out the origins of money by Nick Zabel, okay? And this is, sorry about the print quality, my printer is acting up, right? Let me do this straight so you can see it. Oops, zoom in, right? And you know, it's been about a week that I've been going through this article and doing a lot of research and putting all this data together, a little bit longer actually, going through some of my notebooks, notes as well, and stuff like this, right? But this article is a must read as it, you know, along the same lines as the previous article by Martin Armstrong when it comes to understanding Wall Street, that's a must read for understanding Wall Street specifically. And automation, if you want to appreciate what it's about to do in our current economic system, this article shelling out the origins of money by Nick Zabel and that he wrote this in 2002, is a must read if you want to appreciate human evolution, because this guy took it to the level of human evolution, right? So keep that in mind that money is going to be everything. Anything can be money and I've, you know, while I was going through the data I was going through and going through this article, I sort of tried to take a nice sample of some of the stuff that I came across, some of the stuff that I'm personally invested in, some of the stuff discussed in this article and the previous article to try to give you a good representation of this, okay? So that's what we're about to partake in, create. Okay, I'm just doing a little scan of my notes, I'll mention as well, is what we're about to talk about definitely overlays with series four of the language of mathematics, because that stuff is, you know, we're talking about units and ratios and graphs and functions, right? And units and ratios as we talked about in one of the videos for the language of mathematics series four is once you're thinking about, once you appreciate units and ratios, then what you can do is take a look at different systems and be able to jump from one system to another system as long as you have the conversion factor, right? We sort of drew that as a Venn diagram where they overlap and as long as you have one link from one system to another system you can jump, you can do a conversion from that system to another system, which is what we really need to be able to do when it comes to managing our finances, right? So what we're going to do first to create this visual is put it on a Cartesian coordinate system on that x and y axis, right? And what we're going to do is put time on the x axis, okay? So we're going to go from here, I have to add a little bit more to it as well. So we're going to put time on the x axis. On the y axis we're going to put value, okay? As we talked about in the previous videos, right? The y axis is value. Now value again, depending on what you're interested in, what you consider wealthy, what you want to maintain or grow, right? Your value, your y axis is going to vary, right? So this is going to be a value, okay? Now for our purposes, because we're going to do a visualization, we're going to create a visual of multiple different systems, we have to standardize all those systems, right? We really need to standardize something because for us to be able to compare one thing to another thing we need to have some kind of relationship between those two, right? This is something that has played out throughout human history, right? When one civilization met another civilization, if that civilization had some type of currency or money, something they gave value to, and this other society had a different type of currency and something different they valued, then they had to come to compromise, right? To be able to do trade, to be to be able to do commerce. And for us what we're going to do to simplify matters, we're going to use US dollars as the currency that we're going to compare everything to, okay? So we're going to use US dollars, USD, that's going to be our currency. And my apologies right off the bat if some of the stuff is going to be on the little bit small, right? But we're not really, again, we're not really concerned about the absolute values of the things, we're more interested in the trend, right? From the difference what's happening between one system and another system, just get a visual of that, right? So for us to be able to use the US dollars as basically the currency that we're going to communicate in, right? I mean the reason we're using US dollars because one thing about currency is the currency is sort of the form, it's not money, but currency is basically the thing in circulation that we're using to do trade. And when it comes to the US dollars, US dollars are accepted everywhere in the world, right? Right? So almost everywhere in the world. There are some places if you go to certain small tribes and the jungles of somewhere, if you go into the deserts somewhere, if you go to isolated communities, if you give them US dollars, I don't care what the denomination is from one to, I don't think they make a thousand dollar currency or they might, if you give them a thousand dollars, they'll look at those things as having the same value because to them that has no meaning, right? They might be able to trade you something for that, right? But they won't give it the same value, same worth that we do, right, in our current economic system. But US dollars is a good measure to do our comparison and because it's accepted in most, in most of the world. And one thing with currency that makes it a preferred form of currency, if that currency is liquid, that means you can exchange it everywhere, anywhere, rapidly. And in general you want currency to have a good high velocity. And these are some terms that we're not going to really delve into in this video. We'll get into more when we're talking about the economics of Wall Street, the mathematics of Wall Street. But basically, liquidity means that you can get rid of your money very rapidly without it losing its value too much, right? Because there might be different types of currency at play, but if they're, you know, everyone is not accepting it, what happens is the value of that currency fluctuates, fluctuates, right? There's a bigger range to it from the minimum to the maximum depending on how quickly you need to convert that currency, right, to different types of monetary system or a different type of money or a type of money or a different type of currency, right? So if there is high liquidity, then the price doesn't vary, fluctuate as much, you can get rid of it fast. And if there is high velocity, velocity means how quickly is the money changing hands from one person to another person, how basically, how rapid is the flow of the money supplied throughout the society, it's like a river, right? Is it a fast-running river, right? Or is the slow meandering river, right? So high velocity basically means is a fast-running river where money is changing hands very, very rapidly. And there's measures between volatility and liquidity and how rapid the money is flowing within the society, right? It's velocity, okay? And the US dollar fits that criteria for us, okay? So for us to be able to do this comparison, what we need to do is appreciate what the US dollar has done over time, right? And the US dollar over time has basically done this. The time frame we're going to go from, and we have to take a look at this thing in time frames, and what we're going to do, we're going to go from 1900 to 2017, okay? So we're going from 1900. Hopefully that comes out, that's not too small. And we're going to go 2017, okay? And basically the way I set this up is we talked about how to break a line into pieces, we put in a video for the language of mathematics on how to break a line into pieces, but what I did to make life easy for us, right? Since I have a ruler, basically I made every one inch to represent 10 years, okay? So let me put in little ticks every 10 years here. Approximately anyway, or little dots I'll expand on them, so we don't. I've got this thing taped down, I don't want it to be to break the tape, so it doesn't move. And 2017 is actually like right here, because this end line here is 2020. So this is 1900, 1910, 1920, 30, 40, 50, 60, 70, 80, 2000, right? 2010, oh did we go too far? Let's see, 1910, 20, 30, 40, 50, 60, 70, 80, 90, 2000, 2010, and 2020, that's right. I almost tricked myself. So we're going to create our visual ranging from a time span of 1900 to 2017. And first thing we're going to do is we're going to look at the US dollar, what it's done from 1900 to 2017. And we're going to use start off with $100 in 1900, right? And the $100 we're going to put, I'm just going to put up here, actually should we do this, make it more accurate, let's use the ruler, right? So I made this every inches, I'm going to go fairly high on this. So let's make, make this 100, because what I want to do, I'm going to put this on a log scale to be able to create this visual. So 100,000, 10,000. So we're going to put 100 here, I'm going to put ticks here, and here, and every two inches we're putting ticks in. So what we got is $100 here. So let's put $100 here, actually we can put this. So $100, $100 US dollars in 1900, basically before this it, you know, fluctuated as we've talked about, you can take a look at any timeline and zoom in to a shorter timeline, you'll see fluctuations, right? So we're going to smooth things out a little bit, right? So US dollar, basically from $100 in 1900, right? And $100 in today's, if you had $100 in 1900, in today's value it's worth $2,750. Okay, that would have been his purchasing power, and we'll talk about purchasing power as well, but basically $100 in 1900 is not equivalent to $100 in 2017, I should be putting ticks on this one too, right? So it's not the same as $100 in 2017 because what's happened is in that time the US dollar has depreciated, lost this value. Inflation has depleted its buying power, which is what you can think about as this graph. This graph is to a certain degree it's about the different economic systems of play. To a certain degree you could title it as purchasing power, buying power, or your net worth. There could be multiple titles on this graph, okay? So the US dollar from 1900 to 2017 has done this. It's basically had the value of $100 that depreciated a little bit. In 1920 it dropped down. It did a little dip and then it went up up to 1940 or so. It gained back about 50% of its value and slowly depreciated and right now the US dollar, $100 in 1900 is worth around $3.07 in today's in purchasing power. That's what its value is, right? Let's do this. I bought one and got myself a whole bunch of little sticky things. I hope things that we're gonna use to put on the graph here, right? Because we're gonna have a few different notes. So what should we put money in? Let's put this in green, I guess. Green back. Let's put it in green. So I'm gonna do overlay this with 100 and write this bigger so we see it well, okay? So this is 100. Actually let me do this the other way, sticking in the right side. So $100 US is now worth $3.70. And if we're doing a graph of this from 100 and this was zero, right? This guy would be like down here, okay? And the tick mark would be, well, I might as well do the tick mark. If that was 100, that'd be 50. So we're gonna break this down. So it'd be like down here, right? This is where the tick would be. It's not worth very much, right? So the US dollar is gone. That's how much is lost as a value. Now before we kick this up, let's assume this is a linear scale right now. Let's assume this is zero, okay? And I'm not putting the dollar value symbol here because we know the scale is dollars and some of the numbers we're gonna hit, they're gonna be bigger. And I want to make sure you can see them as best as possible anyway, okay? So if this was a linear scale, what we have to do now is think about what our purchasing power, right? For our currency, the US dollars has been over time because the US dollars has lost this value. It doesn't buy as much, right? And what we're gonna do, we're just gonna use the generic government measure of consumer price index, okay? And the consumer price index is basically, most governments have this, as far as I know, almost every government has this. And, you know, I don't know if any government doesn't have this, but basically the consumer price index is the government going out there doing a survey, collecting data, and looking at different components, different things that people purchase, and using a little bit of mathematics and giving a measure to that, like quantifying that, right? Because what they do is every year, they take a look at that same stuff, and they quantify it and see if the value has increased, if the number has increased. And if the number has increased, that basically means your purchasing power has decreased, right? It means you can't buy as much. And basically, the graph what it does is from, you know, basically your purchasing power has gone like this, okay, over time. So we don't have a CPI number for 1900, right? It starts off in 1913, but we could estimate it. We've got a CPI. Basically, you could do a reverse calculation. The CPI cane comes out to 8.9, okay? So let's do the CPI in pink, okay? So in 1900, the CPI would be 8.9. And right now, basically, it would mean 0.9. Basically, it means if you, an item costs 8.9 would be somewhere around here, right? If it was a linear, if we're still talking about a linear system, right? And if we're talking about a linear system, basically, what happened with the CPI is the CPI in 2017 is 244. Make sure I got my number, right? 244. 244. And the CPI again, it's, so we're going to go 100 here, and that's going to be 200. 244 is going to be around here, right? So the CPI basically means this. If an item cost $8.90 in 2019, right? If you could buy something for $8.90 in, sorry, not 2019, 1900, right? That same item would cost you $244, right? So your purchasing power has decreased. You can't buy as much, right? If something cost you basically $9 in 1900, that same object would have cost you $244, right? And this is a very, very basic measure that doesn't take everything into consideration. And for many, it's not accurate, okay? For me, being one of them, I don't consider this thing to be a good measure of inflation because that's what this is, really. This is really a measure of inflation. Government measured inflation, right? Not inflation that we see, personally, I see anyway, okay? And this measure is supposed to take into consideration. It's got different components. It's sort of as a pie chart here, right? That's the components. It sort of should be in color, but I don't really print in color. So consumer price index, it's made up of the following components, following categories. Food and beverages makes up 15% of the measure. Housing is 42% of the components, right? Of this number in the calculation. Apparel, textiles, clothing is 3%. Transportation is 15%. Medical care is 8.5%. Recreation is 5.6% and education is 7%. Okay? So even though this is the rate of inflation with the government measures, what we have to appreciate is the different components rise at different levels. Okay? So I found this, you know, this chart. Then I'll provide the links, again, in the description of this video. Hopefully, this is one of the charts from one of the links I'm going to be providing. But basically, what happens is the different components, sorry about the quality of the graph, again, you can see here, things have gone up at different rates. So even though this is the core measure, and it does fluctuations, right? It goes, right? But we can just think about it as a straight line. If this has gone up like this, the different parts of this measure, the CPI, the consumer price index, have gone up at different rates. And some of them have gone up like this. Some of them are like this, right? So if you look at this thing from, this graph is just from 2000 to 2017. Okay? If you look at this thing, you can see the different lines, right? So from 2000, the, oh yeah, this isn't in color, so I can't tell which one's what, unfortunately. But basically, medical care costs, I believe, I would call it correctly, have gone up the most. And then there's housing and then different levels have gone up. And since the consumer price index doesn't take everything into account, here's another chart that's overlaid the previous chart on top of this chart. And the wiggly line up here, okay, this guy up here, that's tuition cost. So that's not taken to consideration here, okay? Or it might be part of the other components, but it's not a huge part, small segment. So keep that in mind. The different parts of the inflation measure go up at different levels and inflation really doesn't take into consideration the price of energy and that's the price of energy overlaid on top of all this thing, right? Now for us to, you know, we're not going to delve into the consumer price index, the CPI, we're going to look at specifically different things that we can actually invest in, right? Because we're not going to do broad measures like this because as individuals, we're not institutions to a certain degree, we're not, we're concerned with the micro, not the macro, right? Because these things, as you can tell, you know, we're going from 1900 to 2017. If you're an institution that's been around for hundreds of years, this only becomes a fraction of your lifespan, fraction of your time frame. We've talked about this in ASMR math. When we talked about how the perception of time varies with age, right? And this is really important to keep in mind. This is fine and dandy, you know, if inflation is going like this, going like this, this is 117 years, we don't live to be 117 years. We live chunks of this period, right? So if we're living a certain chunk of this period, if the graph is straight, not asymptotic or anything like this, we're okay. But if we're at the part where the graph is doing asymptotic or collapsing completely, then we don't want to be caught up in that, right? So we're going to start off with larger time spans. When it comes to US dollars and inflation and stuff like this, I'm going to slowly narrow this gap down to smaller time measures. But we're still going to grapple on this time scale. We could have just changed our scale here and put the different times, but we're going to keep on the same time scale. So we have a visual of everything at play, right? So we got our CPI on here. We got our dollars up here. So let's create a little legend because we're going to have some more stickies coming on. And we're going to call this dollars. So this guy is dollars. The bright, come back here. That's not too high. That's good. So this is dollars, our legend. And we have CPI. Now, some of the other stuff that I'm going to put on here, we won't be able to fit them on a linear scale. So we're going to change this to a log scale, okay? And a log scale, we did a video regarding exponential logarithmic functions, right? And we're going to dial into logs a lot more in the future. I'm going to create a whole series of logs the way we've done over halfway through a series on trigonometry, right? We're going to do the same thing with logarithms, right? So I don't want to go too deep into logs right now, but basically logarithmic functions are used to smooth things out over a certain period of time. So the way logarithmic functions work is each tick, each interval is a multiple of 10, okay? So if this is a hundred, this one down here is going to be 10, and the one down here is going to be one, okay? Over here we're at a thousand. Next level up is a multiple of 10 is 10,000. I should have left more room. 10,000. Up here is 100,000. I'm going to write this big so you see. Up here is a million, and up here is 10 million. I'm going to try to fit all this in. We're at 10 million up here, and I should put them on the other side as well, okay? So let's do that here as well. 1,000. So what we need to do now is place our values here, our numbers here on this graph, right? Now the zero is gone. We can't take logs of zeros any more later, okay? Our money, a hundred dollars in 1900, in 2017, was worth three dollars and seventy cents, right? So we're going to put three dollars. We're going to put this here, and the way the logarithmic scale works is it's not that it's just logarithmic from one tick to another tick, it's multiple of 10. It, you know, from one to two, two is actually like up here. It's not down here. In the middle here is not five. Logarithmic scale basically starts off jumps bigger, and it gets slower jumps as you go higher up, closer to 10 value, right? So three would be, if that's two, that's three, so three would be around here. Now again, log scales are used to smooth things out. So instead of this thing going like this, this thing's going to more do a little bit of fluctuation, and then basically be a straight line going to here, okay? So we can think about this as a straight line, and you know, I thought about putting the green line here and connecting up the line, but I don't want the stuff to get cluttered at the beginning, and what we'll do, we'll probably connect up the lines at the end, okay? But right now, I'm just going to animate that line out there, I think, right? So it doesn't get cluttered when we're talking about other things, right? When we're doing, creating the other stuff, right? Now, as far as the CPI is concerned, the CPI, right? The CPI we're about to put on here, let's put a little tick in the middle. So the CPI in 1900 was 8.9, and the CPI is basically going to be here, okay? That's nine, that's really close up to the 10. What I'm going to do is I'm going to make these ticks a little bit more pronounced, because the odds are these guys are going to go on top of these things, so we want to see exactly where these guys are, right? The CPI has gone from 8.9 to 244 in 2017, 244, again, that's 100, that's a thousand, right? And 100 jumps up to about here, so 244 be around here, that's where the CPI is. And again, this does a little jumps, but you can think about it as a straight line going from there to there, okay? It's legit, it's doable. Now, let's look at one of the other measures. I'm going to put the little stickies on the side that we end up using so I don't double use them for now anyway. There's a few that we're going to put on here. I think we have enough different colors to do this.