How can I become richer? Whether we admit it or not, this is a question many of us ask ourselves on a regular basis. Getting more money in your bank account is a good start. They say that money doesn't buy happiness, but having more money gives an individual or a family a bigger claim on the resources of our society. That can mean a bigger house or a nicer car, more education, better healthcare, or whatever other goods or services you want or need. For a society, of course, it doesn't work like that. Our society is increasing the level of money in circulation at a rapid rate. The massive amount of stimulus injected into the economy by the Federal Reserve and the federal government in reaction to COVID-19 has sent the overall money supply through the roof. The Fed's broadest measure of how much money is circulating around the economy is called "M2." That measure rose about 5.8% per year over the past decade... Until last year. Between February 2020 and February 2021, M2 rose 26% - the biggest increase in a single year since 1943. Take a look... As you can see, we clearly have more money in our collective bank account. But does it make us richer? It does if you succumb to the money illusion. That clever term was created by American economist Irving Fisher in the 1920s to describe the inability of some people to distinguish between the amount of money they have and the goods and services that money can purchase. This is an illusion in which one perceives money in "nominal," instead of "real," terms. For example, if you make 5% more next year than this year, you automatically feel that much richer. But that's a nominal increase, or an increase in name only. That's because money has no intrinsic value. It's just paper. Money's "real" value is its purchasing power. If prices rise 10% next year and your income rises 5%, you will become poorer, despite your increased income, because your money can purchase less in terms of goods and services. Central Bankers Magicians All that said, central banks often rely on this money illusion to increase employment. They inflate the economy by creating more money. Businesses then raise prices along with inflation while keeping wages for current workers about the same. Higher prices bring in additional money to hire new workers. Of course, this leaves already employed workers with lower real incomes, though many of these workers - and central banks hope most of them - don't realize it. Voilà! New workers are hired and unemployment falls. Nobody - or very few people - is the wiser! This trick can work for a short while, though the dangers of runaway inflation are very real with this kind of magic (just look at Venezuela or Zimbabwe for a horror story). The lady in the box might just get sawed in half for real. But in the long run, societal and individual wealth both come from the same source: technological innovation. Allow me to quote the same Federal Reserve that is telling you to ignore the man behind the curtain: "Technological progress is the key to a country's long-term increase in its material well-being." Fortunately, this new decade looks poised to deliver new technological developments in multiple fields, including artificial intelligence, robotics, genetics, alternative medicines and many more. Moving those innovations from the lab into the economy is the actual, lasting way to raise our living standards and really make us all richer. And being an owner of the companies that develop and commercialize those technologies - by owning stock in them - is the true way to becoming individually richer in the long run. Enjoy your weekend and stay safe, Matt | 
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