Today we’ve got part three of our ongoing Q&A series:
Q. How do we create financial freedom outside of the corrupt monetary system?
A. I love this question. It’s clearly coming from a libertarian angle. And in a world where price inflation is raging, it’s more important than ever before.
My answer here is a little bit nuanced. It starts with a strategic asset allocation model that includes both gold and Bitcoin.
I see both gold and Bitcoin as market-based money. Both are outside of the control of government and the central banks of the world. Nobody can duplicate or debase them.
Now, the powers that be can certainly manipulate the dollar-based price of both gold and Bitcoin. And they do. But if we hold both assets in self-custody, nobody can stop us from using them.
By the way, self-custody means we hold physical gold bullion in our possession and we hold Bitcoin on non-custodial wallets. I prefer the Edge smartphone wallet and the Trezor hardware wallet.
So we start there. But I think we have to go farther…
Obviously neither gold nor Bitcoin provide us with passive income. And if we desire financial independence, passive income is what we need.
That’s where rental real estate comes in.
If we finance our rental properties with a fixed-rate mortgage, we are effectively shorting the current monetary system. We are betting that the value of our fiat money will decline over time, thus reducing our debt burden on inflation-adjusted terms.
And for the record, I think this is a bet we won’t lose.
Now, real estate is still tied to the current system. No question about that. We’re using dollars and traditional financing to build our passive income portfolio.
BUT, we’re doing so in a manner that insulates us from inflation and the corruption of the monetary system. That’s the benefit of hard assets like real estate.
I’ll add that if you’re looking for additional ways to distance yourself from the system, I am a firm believer in home and local resiliency. We talk about these items more in our core training program.
The bottom line is that the more self-sufficient we are at the local level, the less exposed we are to corruption within the monetary system. And I think it’s easier today than ever before to achieve a base level of resilience locally.
Q. How safe is our cash in the banks? How safe is our cash in the credit unions? (high gov debt, reset to digital currency, what happened in Cypress, Lebanon, Greece…)
I am very concerned. I have cash in a solo 401K and I don\’t know how to protect it. No real estate deals right now that I am finding…
A. Lots to unpack here!
For readers who may not be familiar with the reference, this person is referring to countries that imposed bank bail-ins in the recent past.
Those were instances where the bank was in trouble so it froze everybody’s account and then siphoned a percentage of their deposits right off the top. The banks then used the funds they stole from depositors to shore up their own finances.
I’m not too worried about bail-ins here in the U.S. That’s because the banks can always borrow money through the overnight window if they are in trouble. And the Federal Reserve can create that money from nothing to make it available if needed.
This dynamic wasn’t possible in Cypress or Greece because those countries ceded their monetary autonomy to the European Central Bank (ECB), which they don’t control.
So to me, the bigger risk to our cash in the bank is currency debasement. I fully expect inflation to devalue the purchasing power of our dollars tremendously in the years to come.
At The Phoenician League, we have a comprehensive approach to address this problem.
I’m less confident in the safety of our retirement accounts – 401(k)s, IRAs, etc.
What bothers me is that there are so many rules and restrictions around getting our money back out of these accounts. And those rules could change on us at any time without our consent.
Personally, I do not invest through retirement accounts at all. I don’t use them.
Instead, I use rental real estate as my cash flow wealth vehicle. And as we’ve already discussed, real estate is incredibly tax-advantaged. We don’t need a retirement account to minimize taxes on rental income. We also have mechanisms to defer real estate capital gains taxes indefinitely.
And to your last point about not finding real estate deals – please give our program a look this week. We can match investors up with properties producing anywhere from 7% to 19% cash on cash returns right now.
More information right here: The Phoenician League Membership Page