The snow continued to fall throughout the night up here in the Virginia highlands. It was a fine, sticky snow that clings to everything, creating a winter wonderland.
Here’s a shot from this morning:
And speaking of frozen…
Between March and May of last year, the United States saw the 2nd and 3rd largest bank failures in its history.
At the time I was in touch with a tech entrepreneur who had recently launched a new company. She had $2 million parked at Silicon Valley Bank (SVB) – one of the banks that collapsed. Those funds were her company’s start-up capital.
The bank’s management told her on a Friday that they would let her know by Monday how much of her money she could withdraw – if any. She was left to spend the weekend wondering if her company was about to be bankrupt.
After 20 years in finance, I’ve learned that so much of it has to do with your perspective and your attitude. There’s an old saying that sums it up nicely: “If you know what’s happening, you’ll know what to do”.
Of course, the challenge is to know what’s happening.
We’ll come back to that in just a minute. But first I’d like to share a photo with you:
I snapped this one from behind my home office this morning. I never tire of seeing the majestic barefaced cliffs in the background covered in snow.
Getting back to finance…
One of the primary themes I’ve been tracking in these pages is a major paradigm shift in the financial markets.
From 1982 to 2022, interest rates went down consistently while US stock prices moved higher. That made financial planning simple. Buy a few funds that track US equities and then sit tight…
But the trend reversed in 2022. Rates rose rapidly while stock prices fell.
This signaled that it was time to rethink financial planning 101 – which prompted me to write a book about it.
For a while my thesis played out perfectly for all to see. But then the “Fed pivot” craze kicked back into gear and US equities went on a tear to end 2023.
According to the financial news, the US stock market just made a new all-time high in December. And in nominal terms, that’s true. So it seems like the Age of Paper Wealth is alive and well, right?
“The competitive market process promotes the efficient allocation of resources, leading to the highest possible standard of living for consumers.” -Ludwig von Mises
That’s Austrian economist Ludwig von Mises writing about the true benefit of a market-based system – the efficient allocation of resources. Mises went on to suggest that the market process is the only method of economic calculation that can be used in a world of scarcity and uncertainty.
The fact is, we must allow competitive markets to allocate resources if we want to enjoy a high standard of living. Anyone who doubts this can simply look at the difference between life in the United States and life in Sub-Saharan Africa.
In the US we enjoy comforts that the richest person alive 150 years ago could never fathom.
We live in homes that are the perfect temperature year-round. Weather is now just a talking point.
We take running water and indoor plumbing for granted. We have supermarkets overflowing with food just down the street. And we have all kinds of screens that offer us endless entertainment.
In Sub-Saharan Africa, nearly half of the population lives without electricity and running water. The local markets offer only a small amount of goods from the capital city. And many families still live as subsistence farmers.
I know this first-hand. Our foundation just drilled a new solar-powered well in rural Uganda. Previously the villagers were walking up to a mile twice a day to collect clean water from a natural spring.
It’s not about money. It all comes down to the allocation of resources.
A central bank digital currency (CBDC) is a digital form of a country’s fiat currency, regulated by its central bank. It is a liability of the central bank and is widely available to the general public.
This is the definition of a central bank digital currency according to Perplexity.ai. And it spells out exactly why the Federal Reserve (the Fed) has a direct incentive to oppose the CBDC push.
As we explored, there’s a school of thought that says the Fed raised rates aggressively to cause a financial collapse and usher in a CBDC. I think the opposite is true…
The Fed’s rate-hiking campaign was about defending the dollar and slowing capital-flight out of the US financial markets. The Fed’s incentive is to save the commercial banking system as it currently exists.
This seems ironic on the surface. If the Fed would be in charge of the American CBDC, wouldn’t that mean it gets more power and control? And wouldn’t the Fed want that power?
Yesterday we talked about how the “Great Taking” isn’t in the future… it already happened.
I’m referring here to a popular book and documentary making the rounds in the alternative finance space. It posits that the global bankers are going to set off a great depression and legally steal everyone’s wealth. Afterwards, they will force a central bank digital currency (CBDC) on us.
The book seems to suggest that the Federal Reserve’s (the Fed’s) aggressive rate-hiking campaign was part of that plan. Higher interest rates are what will trigger the crash.
I don’t see it that way.
For one, I don’t see the incentive for bankers to execute such a plan. With the fractional reserve banking system and fiat money, they control and influence the vast majority of the world’s wealth already.
What’s more, I believe the powerful New York banks are actively opposed to a retail CBDC. They have a very big incentive to do so. We can talk about that more tomorrow.
The idea I’d like to explore today is that recessions are healthy. They are necessary.
Keynesian economists have dominated Academia and American politics since the 1960s. They conditioned us to believe recessions were bad. And in their arrogance, they told us that their policies could stop them from happening.
One of the books making waves in the finance space right now is David Webb’s The Great Taking. It posits that the global elite have reworked the legal system such that they are now the secured creditors for all financial assets and all the underlying property held by publicly-traded corporations.
According to Webb, the global banking cabal plans to set off another great depression – similar to what happened in the 1930s. This will cause a financial collapse and allow the elites to legally transfer all wealth to themselves.
Afterwards, we’ll wake up to find that we don’t actually own the stocks and funds held in our retirement and brokerage accounts. The middle class will be wiped out. Then, if we want to get back into the new financial system, we’ll have to consent to using a programmable central bank digital currency (CBDC).
The book suggests that the Federal Reserve’s (the Fed’s) aggressive rate-hiking campaign of 2022 was part of this plan. It was the trigger. Higher interest rates are what will cause the collapse and set the plan into motion.
It’s an entertaining story. But I don’t think it correctly identifies the incentives.
If we look at the numbers, the great taking already happened.
Global shipping is fracturing and the new year is off to a chaotic start.
On New Year’s Eve a rebel group from Yemen known as the Houthis attacked a Maersk container ship in the Red Sea. In response, the US destroyer USS Gravely intervened and engaged several Houthi small boats in naval combat.
This event was an escalation of previous skirmishes in the Red Sea. The Houthis have been attacking ships they believe to be in route to Israel since last November. They made it clear that any cargo ships traversing the sea are at risk.
This has already impacted global shipping tremendously. To understand why, we have to look at the geography:
The Red Sea is that narrow strip of water separating Africa from the Middle East. It also connects to the Suez Canal, which provides direct access to the Mediterranean Sea.
So the Red Sea is critically important when it comes to global trade. Roughly 15% of all trade moves through it. And around 10% of the world’s oil and liquefied natural gas (LNG) moved by ship flows through the Red Sea – most of that heading for Europe.
At least it did previously.
With the Houthis disrupting shipping routes in the Red Sea, Maersk suspended all cargo movements through the Suez Canal until further notice. And 262 container ships have already rerouted around the Cape of Good Hope, which is located at the southern tip of Africa.
So all those shipments into Europe that previously entered the Mediterranean through the Suez Canal must now sail all the way around Africa to get to their final location.
That’s added enormous expense – up to $1 million in extra fuel costs for every round trip. And of course it’s causing dramatic delays as well.
No surprise, rates for shipping containers have skyrocketed. The cost to ship from China to Europe is up 80% just this week. And if the disruptions continue, we’ll almost certainly see oil prices spike as well.
But there’s a less tangible effect at work here also…
Trust is collapsing around the world. We’re seeing signs that the established order of the last several decades is splintering.
That means major changes are coming fast… and they will impact everything about money, investing, and retirement planning.
Are you positioned for what’s to come?
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The Age of Paper Wealth is over. And that means the era of hyper-financialization is going to fade away.
I see this as good news.
Financialization refers to the increasing emphasis we’ve placed on financial markets, financial institutions, and financial activity over the last several decades.
All of these items may be important… but they should not dominate our economic activity. Especially not from within a fiat monetary system where all new currency is issued with debt attached (loaned or monetized into existence).
The growing emphasis we’ve placed on finance has come to the detriment of hands-on knowledge, skilled labor, the middle class, and traditional American values.
That is to say – nobody seems to know how to do anything anymore. Myself included. Finance is all I’ve known.
I hope you and yours had a great Christmas season. It’s such a magical time of year.
Each year I take a day or two the week after Christmas just to sit in my office and reflect. I reflect on the previous year… and then I think about my goals for the year to come.
You know, this is the first time that I’m not excited about the new year. I’m uneasy about what 2024 will bring.
Don’t get me wrong – I’m an eternal optimist. But something is in the air. We can feel it.
A core theme I’ve been tracking in these pages is the covert macroeconomic battle between the New York banking cartel, the West’s globalist faction, and the expanded BRICS bloc.
These factions are each jockeying for position on the world’s stage. And their weapons of choice are politics, media, and global finance.
