Doesn't it seem strange?
The news said the government was "easing monetary policy".
The banks are lending money, and it seems like there's more and more money available.
But your own wallet doesn't seem to be getting any fatter.
Instead, life is getting tighter and tighter?

Today, let's use a simple story...
This will make you fully understand what's going on.

#A Village Story
There is a small mountain village,
200 households
The village chief distributed 2,000 "water tickets" to everyone.
10 tickets per household.
You can use your ticket to draw water from the well at the village entrance.

A carpenter can exchange a chair he makes for 5 water tickets.
Farmers can exchange baskets of vegetables for 3 sheets of paper.
A schoolteacher can earn 20 cards for teaching for a month.

Everyone uses water tickets for transactions.
Life is going pretty well.

One year, there was a sudden and severe drought!
The well water is low.
Reduced crop yields
Many people are out of work.
Income plummeted.

The village chief saw that this wouldn't work,
We need to find a way to save the economy.
Therefore, the decision was made:
Issue another 2000 water tickets!

But here's the problem.
—Who will receive these 2,000 new water tickets?

The village chief handed the new water tickets to the money exchange.
Money shops can lend money out.
But interest will be charged.

💢The different fates of three people
🚩The wealthy landlord Liu:

He owns 100 mu of land, three workshops, and more than a dozen houses.
I borrowed 500 water tickets from the money exchange.
Using land and workshops as collateral

The interest rate is only 8%.
Just return 540 copies a year later.

🚩Ordinary carpenter Li Xiaosi:
He wanted to borrow 100 water tickets to buy timber for his business.

The money exchange said:
You only have the ancestral tools; the risk is too great.
In the end, I only managed to borrow 20 loans, with an interest rate of 15%.

🚩Mr. Zhang, the teacher:
He wanted to borrow 50 water tickets to repair his house.

The money exchange said:
You only earn 20 bills a month, I'm afraid you won't be able to pay it back.
Maximum of 10 cards, interest rate 18%.

Have you noticed the problem?
Both are newly issued water tickets.
The rich took the lion's share.
Ordinary people can only get a small fraction.
They couldn't even borrow a single one.

What do rich people do after they get their money?
Liu, the wealthy man, held 500 water tickets.
Will you expand production?

He did the math:
There is a severe drought now.
Nobody has any money.
Who will I sell more of what I produce?
Will accumulating inventory lead to losses?

💢He came up with a smarter solution: buy assets!

Originally, one mu of land was worth 10 water tickets.
He issued 15 acquisitions

Originally, one room was worth 50 tickets.
He offered 80 bids to acquire

He also bought shares in several shops.

Six months have passed,
Because someone offered a high price to buy it.
Asset prices have been driven up:
Land prices rose from 10 to 25.
The price of the house rose from 50 to 120.
Shop shares doubled

Liu the rich man did some calculations:
The assets he bought with the 500 water tickets he borrowed.
It's worth 1200 pieces now!
He sold some of them, getting 400 tickets for cash.
540 debts were repaid.
I still have a net profit of several hundred yuan.
Furthermore, it holds a large number of assets whose prices have increased.

💥How are ordinary people doing?

Mr. Zhang, the schoolteacher:
Still earning 20 water tickets per month
But the price of vegetables rose from 3 to 5.
Oil prices rose from 5 to 8
Want to buy a house? Prices have risen from 50 to 120.
Even if I didn't eat or drink for a year, I still couldn't afford it.

Carpenter Li Xiaosi:

I borrowed 20 sheets to buy timber.
As a result, timber prices rose and labor costs also increased.
The cost of making the chairs increased from 4 to 7.
But the villagers had no money, so the chairs couldn't be sold.
After a year of hard work, there was hardly anything left after paying off the interest.

Those villagers who farm and work odd jobs:

I still have the same number of water tickets.
But prices have all gone up.
Previously, 10 water tickets could last for a month.
There's only enough for half a month now.

⚠Why is this happening?
The answer is simple:
The number of water tickets has doubled.
But the amount of water in the well remains the same.

Liu the rich man held a large number of water tickets.
Every day, I fill more than a dozen buckets with water to water the flowers, take a bath, and raise fish.
Ordinary villagers can only produce one or two buckets a day, and they use them sparingly.

More importantly:
Liu the rich man received the new water tickets first.
The asset was purchased at the old price.
When prices rise,
He's already made a fortune.

Ordinary people either received water tickets (or didn't receive them at all).
You can only buy things with new, high-priced items.

This is the "contiron effect" in economics:
Those who are closer to money are more likely to benefit from increased money supply.

📌Four truths for investment novices

🚩Truth #1: Money is not equal to wealth
Many people think that having more money means being rich, but that's wrong.

Money is merely a tool for exchange, not wealth itself.
True wealth is the water in the well, the grain in the field, and the house you can live in.
Printing money is just printing more paper.
In reality, wealth has not increased.
The result is that you can buy fewer things with each bill.
This is inflation.

🚩Truth #2: Whoever gets the new money first earns.
After the money supply increases, not everyone receives the money at the same time.

The first person to receive it buys things at the old price.
By the time the currency circulated further, prices had already risen.
This time lag is the channel for wealth transfer:
From the person who received the money later
It was transferred to the people who received the money first.

🚩Truth #3: Inflation is a hidden tax
You have 1 million in savings, and the inflation rate is 5%.
One year later, you still have 1 million.
But the purchasing power is only 950,000 left. Where did the other 50,000 go?

It was diluted.
It was transferred to those who received the new money first and bought assets.
You didn't pay taxes, but the effect is the same as if you did.
This is what Buffett calls "the hidden tax on savers".

🚩Fact #4: It would be worse if you didn't drain the water.
You might ask:
If printing money has so many problems, why do we still print it?

Because not printing money would be worse.
If the village chief hadn't issued new water tickets during that year's severe drought
Nobody has money to spend, so the shops are closing down.
More people lost their jobs, and the economy completely collapsed.

The purpose of releasing water was to save the economy.
But the cost is an exacerbation of wealth inequality.
This is a difficult choice.

📌What should ordinary people do?
Complaining about unfairness is useless.
All you can do is adapt to the rules:
1. Don't hold too much cash.
Cash is a hot potato in times of inflation.
The longer it's kept, the more it depreciates.
Proper asset allocation is essential for preserving and increasing asset value.

2. Learn to allocate assets
What constitutes a good asset?
Those things that can appreciate in value as the money supply increases:

🌈Real estate in prime locations of core cities
🌈 Safe-haven assets such as gold
🌈Stocks of high-quality companies
🌈 Broad-based index funds (S&P 500, etc.)

These assets tend to appreciate during periods of monetary easing.

3. Enhance your indispensability
If you rely solely on a fixed salary
They can never escape the fate of being diluted.

You need to make yourself more valuable:
Learn new skills, accumulate industry resources,
Building a personal brand
Make your income rise with inflation.
From a replaceable cog in the machine to someone with pricing power.

4. Avoid taking on debt blindly.
Debt is a double-edged sword.
Liu, the wealthy man, was able to get rich through debt because he had assets to leverage.
If ordinary people borrow money for consumption or for speculation at high interest rates,
They will only be crushed by debt.

Think carefully before taking on debt:
Are you borrowing money to buy assets that will appreciate in value, or for consumption?

Money supply increase is not a conspiracy theory.
This is the underlying logic of the monetary system.

You can be angry,
You can complain, but you can't change the rules.
The only things you can change are your own perceptions and actions.

⚠Remember this story:
The money increased, but the water in the well didn't increase.
The closer a person is to the well, the more buckets they can fill.
Those who are far away can only watch helplessly as the water level drops.

All you need to do is get closer to that well.
—By learning about investing, allocating assets, and improving oneself,
Instead of just holding onto cash and waiting for it to depreciate.

This is the cruelest and most realistic survival rule of our time.
Now, do you understand why your money hasn't increased?
Feel free to leave a comment and let me know your thoughts!