Our savings have become financialized. Most of us aren’t saving our retirement money in our bank accounts, we’re doing it through our investment accounts. This is because of inflationary money. 

To understand this, we need to reiterate how our economy actually encourages investment and penalizes saving. Since the money supply gets larger over time more, every new dollar that gets created reduces the value of every dollar already in existence. This is because there's only a certain amount of goods in the world. If you create more money there is still the same amount of goods but with more money circulating, therefore those goods end up priced higher.

What this means, however, is that people are encouraged to spend their dollars. As more money is created, the dollars that people keep in their savings accounts become worth less and less over time. A lot of people understand this intuitively, even if they don’t understand all the mechanics behind it. We’ve all heard the saying that you ‘need to make your money grow’. That’s what this dynamic is. If you keep money sitting in your bank account, it loses purchasing power over time. To prevent this, people invest their money. 

There is an unintended side effect to this, however. Our savings, what we count on to retire, have become financialized. 

Before the last decade, who could invest in the first place was pretty limited. There was no Robinhood. If you wanted to invest in equities, it had to be through professional investment advisors and stockbrokers. 

Now, it's easier to invest than ever. You don't need a stockbroker or investment advisor anymore. People can easily invest from their phones or online, and as a result, more people are investing than ever, by a considerable number. 

Because of this idea that you need to make your money grow, which comes from inflation - you need to make your money grow because the money that you keep in the bank isn't going to hold its value - people are putting almost all of their wealth into the stock market through index funds. Your investment account is really your long-term savings account.

The combination of these two factors - that there is all this new money in the economy, and so many new people are investing - stock valuations do not reflect actual cash flows, projected growth, or anything fundamental anymore. Since most people are investing in funds that track the market as a whole, the valuations of all companies are increasing whether or not they're financially sound. Index fund investing has risen all tides. 

In the past, if a company underperformed its projections - a sign that the company is doing worse than expected - it would mean the stock price of the company would go down since projected future growth is now worse than previously expected. In today's market, however, that stock might be at all-time highs again in two weeks.

Stocks, primarily through index funds, have become a vehicle for savings for most Americans. Instead of investing being a game of winners and losers, a risk, investing has now become so critical to the financial security of Americans - with most people's savings stored in markets where they don't even care what companies they're holding - that the stock market has become too big to fail. Numbers have to keep going up, or else.. The entire country is invested in a way that's never happened before. Investing has become saving.

What's really happened here is that stocks have taken on a monetary premium for filling the store of value feature of money. When a new good becomes money, its value increases beyond its general utility. As we know, gold and silver have an industrial value and are often used in machinery. The price of gold and silver, though, is much higher than their industry value would otherwise be if they were not fulfilling a role of money - in this case, to hold value. When a good acquires a monetary premium, its value exceeds its base worth. 

People often critique Bitcoin because you can't spend it in stores, but stocks function in the same role. They have become store-of-value money. A savings account that you can't spend. You may still think that stock prices are based on something tangible. Cash flows and revenues. I’m not so sure. 

Don’t get me wrong, I’m still playing the game. When the music is on, you gotta dance. But the idea that valuations reflect fundamental value is just as wrong as the belief that gold’s value is related to its use in certain industrial electronics. Monetary premium is everything.