We are living through an inflection point in history.
The world is about to change… forever. And the sequence of events of the next several years will shape the new world that comes into being.
I suspect most of us already know this to be true. We can “feel” it. We’ve probably felt it for several years now.
This week we’re going to talk about what’s happening on the world stage. We’ll also talk about the major players… and what their incentives are. If we can understand the incentives, we can also get a feel for what’s coming next.
Now, I approach this matter from the macroeconomic perspective. I strive to keep my finger on the pulse of the macro. And that’s because the macro informs how we manage our finances. The two go hand-in-hand.
To make sense of the macro, we have to start with this: the world is not as simplistic as we’ve been led to believe.
Painting with a broad brush, two general worldviews have been prevalent in our society. The first is the Pollyanna worldview they taught in our high school civics classes. The second is the “it’s a big club and you ain’t in it” view. Hat tip to George Carlin who used this line in his skits.
The Pollyanna view says that governments are benevolent institutions that work the way they are supposed to work on paper. If a government program produces poor outcomes, it must have been a mistake… probably because the initiative needed more funding.
And if there’s ever a scandal in government, it’s because of a single bad actor. The Pollyanna view admonishes the idea that there are factions within the government that have ulterior motives.
Then on the other extreme is the view that there’s a big group of insiders working in the shadows. They run the world according to their own interests. And their interests are often at odds with those of us regular folks. This is the “big club” worldview.
These two worldviews exist on both the “left” and the “right” side of the political spectrum.
From the Pollyanna camp, those on the left and right simply disagree about what the government should be doing. And in the big club camp, those on the left see the big club as a conglomeration of evil corporations. And those on the right see it as the Deep State – secret government operatives working against national interests.
The problem is, neither of these worldviews can explain what’s been happening over the last eighteen months or so. And that’s because reality is far more nuanced.
It has become evident that there are multiple factions at work within the highest levels of the current power structure. These factions each have different interests and incentives. Sometimes they overlap with one another… and sometimes they are at odds. Right now they are at odds.
The two primary factions at work right now are what I’ll call the globalist power structure, for lack of a better word, and the New York banking interests. There are certainly smaller factions jockeying for their own interests as well, but these are the two primary players at the moment.
The globalist power structure is what those in the “America first” camp call the Deep State. It appears to be driven by the old-world European powers that have been in place for centuries.
Joe Biden and Janet Yellen very clearly work for them. As does much of the national Democratic Party… and some high-level members of the Republican Party.
This faction controls the United Nations (U.N.), the European Central Bank (ECB), and most of the other western globalist organizations. The World Economic Forum (WEF), the World Health Organization (WHO), and the Centers for Disease Control (CDC) are three great examples.
And they have been very transparent about their desire for a “Great Reset”. They want to overthrow whatever’s left of our traditional economic system and replace it with what I can only describe as a version of neo-feudalism. Their slogan is “you’ll own nothing and be happy”.
The New York banking faction consists of the key players within the New York banking scene. JP Morgan CEO Jamie Dimon appears to be the mouthpiece for this group right now.
In addition, the Federal Reserve (the Fed) under Jerome Powell’s chairmanship is in this camp. Powell himself is deeply connected on Wall Street.
What’s interesting here is that the Fed was staunchly in the globalist camp under both Ben Bernanke and Janet Yellen. But under Powell the Fed changed its allegiance. This is why most western media outlets are being so critical of the Fed right now.
If we think back – the media absolutely loved the Fed for decades. This dynamic goes all the way back to Alan Greenspan’s chairmanship. It started in 1987.
That love affair continued under Bernanke and then Yellen… but not Powell. Now everybody is piling on the Fed publicly. And it’s all because the western media is generally controlled by the globalist power structure.
We will break this dynamic down a bit more tomorrow. But I want to close today by explaining why it’s so important that we understand these things…
The Fed began its aggressive rate-hiking cycle with a small 0.25% hike in March 2022. That bumped its target rate up from zero.
The Fed followed that up with a 0.50% rate hike in May 2022. Then a 0.75% hike in June 2022.
At the time, the financial media and most analysts were touting the same message. They told us that the Fed couldn’t afford to raise rates much further. And they said that the Fed was going to “pivot” at the first sign of stress in the stock market.
The media was spouting this message because most of it is in the globalist camp. And the globalist faction does not want higher rates. That’s why the U.N. was shouting that all central banks needed to stop raising rates last October.
Meanwhile, most financial analysts didn’t realize that the Fed had broken ranks. They were thinking the Fed would go along with whatever the current administration wanted… and therefore they thought the Fed would pivot and cut rates again.
The fact is, the Fed is no longer in league with the current administration. I don’t think it’s a stretch to say that the Fed is at war with the U.S. Treasury. We can see that clearly in the current debt ceiling struggle.
Simply put, the New York banking faction does not want the “Great Reset”. Largely because the banks derive a lot of power, wealth, and prestige from the current system.
This is why Jamie Dimon is suddenly calling himself a red-blooded, patriotic free-market capitalist. These are all dirty words according to the globalist rhetoric.
And notice how Dimon has also ditched the globalist “environmental, social, and governance (ESG)” meme. He’s even been talking up the need for more oil and gas investment. Again, that’s a no-no from the globalist perspective.
This shift in rhetoric shows us very clearly that there’s a power struggle happening right now. It’s the globalists vs. the New York banking interests.
This is the lens through which I assess the current macroeconomic climate… which also informs my approach to asset allocation and investing.
The globalists want their reset. They want to eliminate cash and force us to use central bank digital currencies (CBDCs). They want to herd all humans into 15-minute smart cities.
And they want to transfer control over the engine of finance to their own institutions. That way they can finance their pet ESG projects, despite the fact that they are uneconomical. This would hamstring the commercial banking system tremendously.
On the other hand, the Fed wants to save the current system. The only way to do that is to get back to having “normal” interest rates set by market forces. And we’re going to have to go through a recession. That’s what’s needed to clear out all the bad debt and malinvestment that was fueled by artificially low interest rates.
The big takeaway is this: if we want to make our personal finances as bulletproof as possible, we have to understand what’s happening at the macro level. The macro is going to drive the micro in the years to come.
More to come tomorrow…
-Joe Withrow
P.S. I know this kind of talk isn’t everyone’s cup of tea. But for those who would like to take a deeper dive into what’s happening on the macro stage, we’re tracking all the major developments each month within our investment membership The Phoenician League.
The key is, we use this understanding to inform our investment decisions. It’s not about the politics of it all. It’s about how we can craft a superior wealth strategy that will help us achieve financial independence, even as the Age of Paper Wealth fades away into the dustbin of history.
If you’re interested in learning more about what we’re doing at The Phoenician League, please sign up for our wait list right here: https://phoenicianleague.com/
We’ll be opening our doors to new members soon.