The Great Reset | Richard Florida

Summary of: The Great Reset: How the Post-Crash Economy Will Change the Way We Live and Work
By: Richard Florida

Introduction

In the wake of the Great Recession, the U.S. government took extraordinary measures to avoid another depression. However, concerns remain about the long-term consequences of such extensive spending and inflation. ‘The Great Reset’ by Richard Florida examines these implications, focusing on the ‘Great Reflation’ – a period of massive government intervention to stabilize the economy. The book explores the connection between inflation and historical examples of fiat money, the balance sheet recession, and the potential risks to investment and capital preservation.

The Great Reflation

The US government’s massive spending during the Great Recession of 2008-2009 averted another Great Depression, but the long-term effects on the economy remain uncertain. The excess money in the system could lead to inflation and create bubbles like those of the past few decades. This excess money has been dubbed as the “Great Reflation”. Though the government has shown that it can halt an economic meltdown with money, it has not been able to ensure a steady, progressive economy. The “Great Reflation” could ultimately lead to instability due to enormous public and private debt, a shaky global economy, and a suspect dollar. To preserve your capital as an investor during and beyond this time, closely monitor signals that indicate wise investment decisions. Ultimately, only wise and, perhaps, painful economic and political decisions in the next few years can put the US economy on a more stable path.

The Risks of Fiat Currency

This summary discusses the historical and contemporary risks of fiat currency. When nations delinked their currency from a measurable asset such as gold in the modern era, inflation inevitably followed. Fiat money, not rooted in any anchored standard, leads to excess credit and deficit spending. The Great Reflation aims to boost asset prices and corporate and personal balance sheets, but unchecked inflation could occur. The US government’s stimulus plans and tax credits to encourage borrowing and spending pose risks of inflationary forces and credit and asset price bubbles. Easy credit access has left Americans with a debt hangover, and the US is converting private debt into public debt, having implications for fiscal deficits. Crowding out would inhibit private investment growth.

Wealth Preservation in the Great Reflation Era

As the Great Reflation experiment unfolds, change is inevitable. Investors must focus on wealth preservation by planning, exercising judgment, persistence, and caution. Avoid herd mentality while carefully choosing assets, determining proportions and timing to adjust the strategy. The recovery of the American economy is certain, but its sustainability and pace are uncertain. Adopting proper asset allocation and diversification principles are crucial to selecting and safeguarding investments.

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