I discussed the pandemic situation last week and the trillions of dollars that have been and will be printed to keep those of our citizens that currently have no employment and those others who have suddenly become unemployed every week since this catastrophic Covid virus hit the United States. With the continued printing of our currency and the unimaginable trillions of dollars that have and will be added to our national debt, the potential for hyperinflation becomes more and more possible.
How will Washington figure out a way to dig us out of this monstrous mountain of debt? The normal path has been to raise taxes, but on whom? The huge lowering of taxes in 2018 by the administration benefiting the high net worth individuals and businesses was a real windfall for those people and entities, but what about everyone else? Who made up the difference in those lost revenues that the government didn’t receive? I assume everyone else who wasn’t as fortunate in being mega-wealthy and having a favored huge business.
Even the reduction in the SALT tax — your local, state, and sales tax deductions to a total maximum of $10,000 — affected mainly the “blue states” with the highest real estate taxes. I believe we are or have reached a point where what’s left of our middle class is facing inequitable and unfair treatment while at the same time Washington continues to spend more than it takes in. The house of cards is at a tipping point and a massive change or potential failure of our current monetary system.
Now this fairly new unregulated non-government currency — the most popular and valuable of which is the Bitcoin (held in what is called an internet digital wallet or any of the other lesser-known cryptocurrency) — is slowly starting to take a very small foothold in the way we are currently doing business now and in the future. It could potentially be an extremely bright future, according to those professionals and experts who believe in this new way of defining how we may pay for goods and services we need and want.
As I mentioned in last week’s column, all fiat currencies obtain their value, not from gold or silver as in the past, but from the good faith, credit and stability of the government that is issuing it. However, as things change, they eventually become obsolete as people begin to perceive the inherent value to no longer have the worth and value any more than the paper that it is printed upon. The continued mass printing of our currency could eventually lead us to that latter result. However, there are also those who say it will never happen.
Nevertheless, Bitcoin could potentially replace the U.S. dollar as the world’s reserve currency, but for this to happen, the digital currency would need to make progress in several important areas. Currencies serve as a medium of exchange, a store of value, and a unit of account. Right now those new digital currencies have no intrinsic tangible value and are somewhat unregulated and transactions are private for the most part but controlled by a decentralized network with a transparent set of rules. There were some regulations that were enacted in 2013 by the Financial Crimes Enforcement Network to deter those now and in the future who would use the digital currency for money laundering, drug trafficking, and illegal weapons procurement. Also, some of the negatives are the potential hacking of accounts containing the currencies as well as the crashing of computers that could wipe out your investment.
Anytime something new is invented, it always takes time to plan and figure out where the bugs are to streamline systems to protect everyone, especially when you are transforming such an immense and critical system as our currency as well as having the international markets adapt to it. But I feel very positive that it will happen and be transformed over the next five to 10 years because our current government and central bank/Fed-controlled system allows for unlimited printing of money, which will potentially create our hyperinflation and the devaluing of our current money.
From my research and vast amounts of reading, real estate is being bought, sold, and even rented using Bitcoins (Expedia.com now accepts them) to keep gains that have been attained. They will have increased usage and greater impact going forward based on the ease of transacting using this digital currency. High-end property transactions have already occurred in New York and California because those individuals understand the intricacies and the potential value of this up-and-coming digital currency. Investors are also using these digital currencies to transact their purchase and sale of properties. Unbeknownst to the vast majority of people, these types of exchanges are occurring and will most likely increase in the future. Here are some of the uses and benefits of using digital currencies in real estate:
Privacy when buying property
Easier international and overseas transactions
Liquidity in real estate investing
Reducing the cost of real estate transactions
Avoiding tax on transferring property rights
Gaining attention in the press
Balancing the security of brick and mortar real estate with flexibility of bitcoin
Here are some more of the potential risks:
Losses due to hackers
No downside protection and hard collateral
Bad actors and entrepreneurs with no real estate experience
Control over currency prices held by very few influencers
Risk of new regulations
There is not enough space in this column to really delve into how these transactions function, but it’s no different than having a PayPal or debit card account since it is all done virtually. More and more businesses will eventually adapt to using this new digital currency as it becomes more acceptable. One needs to do their own research and reading to begin to understand, learn, and grasp the concepts of how far-reaching this new cryptocurrency phenomenon is and will be in the future. Here is a link to begin some basic understanding:
Philip A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Suite 180 in Great Neck. He has earned designations as a Graduate of the Realtor Institute (G.R.I.) and also as a Certified International Property Specialist (C.I.P.S). Just email or snail mail (regular mail) him with your ideas and suggestions on future columns with your name, email, and cell number and he will call or email you back. For a consultation, he can be reached by cell: (516) 647-4289 or by email: Phil@TurnKeyRealEstate.Com to answer any of your questions or concerns.