jwithrow, Author at The Phoenician League

The Death of Financialization

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.

What’s Coming in 2024

Happy New Year!

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.

The New Rules of Money for the 2020s and Beyond – Part 2

The world as we know it ended in 2022.

Yet, as we discussed yesterday, our entire approach to retirement planning is based on the world that ended. This new world we’ve entered into comes with new rules of money… and these new rules require a new approach.

I submit to you that we should scrap the nest egg model completely. Because it forces us to choose between assets and income. That’s the core premise within my book Beyond the Nest Egg.

Instead, we should start thinking in terms of “financial security” and then “financial independence”.

Financial security comes first. This is how we make our savings bulletproof.

To achieve financial security, we must assess our current needs and lifestyle relative to our career, income, and family situation.

Based on these things, how much money do we need to save to provide ourselves with reasonable continuity should we lose our job, our income, or suffer a major emergency?

This number is going to be different for each of us.

If we’re young and just getting started, maybe $25,000 is enough. If we’re middle age with a family, maybe we need to accumulate $50,000 or $100,000. And if we’re in or approaching retirement age, we may want our financial security number to be even higher.

But here’s the thing – we don’t simply stuff this money into a savings account or some kind of fund. We build a strategic asset portfolio across a range of asset classes. Each asset serves a different purpose for us.

The New Rules of Money for the 2020s and Beyond

I have one more image of winter’s first snowfall for you today:

This one truly captures the majesty of the Virginia highlands. But now it’s time for a serious discussion…

The Age of Paper Wealth is over.

That’s the conclusion my research led me to last year. And it’s the core theme I’ve presented in these pages over and over again.

It all comes down to the Federal Reserve (the Fed), interest rates, and the US dollar.

The market has been trained to see the Fed as a reactionary institution. When consumer price inflation rises, the Fed is supposed to raise interest rates to get it back down. Then when inflation slows, the Fed is supposed to cut interest rates to stimulate economic growth.

That’s the Keynesian view. It’s been the dominant economic school of thought in academia and American politics ever since the 1960s. President Nixon even went on television in 1971 and proclaimed, “We’re all Keynesians now”.

Keynesian theory created the Age of Paper Wealth. It lasted from 1982 to 2022.

What comes next…

The first snowfall of the season came last night.

Just a dusting… but the mountains of Virginia sure look magical when they are covered in snow. I snapped a few photos down by the river this morning:

This is the small walking path that winds its way next to the Jackson river.

In the background you can see old Smith’s bridge. It’s a steel bridge that’s just wide enough for a truck to cross the river. It connects what was once Smith’s farm with the Cliffview Inn.

Getting back to finance…

About that pivot…

Suddenly the “Fed pivot” is all the rage… again.

Last Wednesday the Federal Reserve (the Fed) announced that it would not raise its benchmark lending rate again this year. And Fed Chairman Jerome Powell stated that we are “likely at or near the peak rate for this cycle”.

The stock market began ripping higher as those words came out of Powell’s mouth.

As I write, the S&P 500 is now up over 5% in just the last week and a half. That’s a huge move in such a short period of time.

But it wasn’t what Powell said that really kicked the markets into a bullish frenzy. It was the Fed’s quarterly “dot plot”. This is a chart that summarizes the Federal Open Market Committee’s (FOMC’s) collective expectations for interest rates over time.

Now, the FOMC is composed of 12 members. It includes the Federal Reserve Chair, the Board of Governors, president of the New York Fed, and four of the other regional Fed presidents.

The FOMC is technically the Fed’s inner sanctum. It meets eight times a year to discuss monetary policy. The dot plot is supposed to be representative of these insider discussions… which is why the market ripped higher last week.

This quarter’s dot plot shows that FOMC members expect three rate cuts next year and four in 2025. What’s more, the dot plot projects the first rate cut coming in March 2024.

But there’s a nuance here that nobody wants to acknowledge.

The best advice I ever got about building wealth…

I spent the last seven years at the largest independent financial research firm in the world. One of my mentors there had a saying he was fond of…

“When your outgo exceeds your income… your upkeep becomes your downfall.”

Wise words. But also simple. So simple…

And that’s what I want you to realize about financial freedom. You do NOT need a fancy degree… You don’t even need a lot of money to start with.

What you need more than anything else is…

A mentor to show you the ropes. Someone who can save you years of expensive mistakes…

And give you the skills and confidence to achieve financial security and then financial freedom.

After working in corporate banking (and hating it)… And seven years at the world’s largest independent publisher of investment research (and loving it)…

I finally decided to go out on my own and bring everything I’ve learned about money and finance to regular people.

And that led me to create the new Finance for Freedom Mastermind.

In it, you will find everything you need – no matter what your level of comfort or experience with money – to deal with the new economic environment we are now in.

Plus, you’ll also get something you won’t find anywhere else – access to a personal mentor who can guide you to adopt sound financial fundamentals for the days ahead.

And you’re going to need it. Because…

Is this the 8th Wonder of the World?

No lesser mind than the brilliant Albert Einstein thought this feature of money was the “8^th Wonder of the World”.

Loosely translated, what he said was…

“Those who don’t understand [it], pay… while those who DO understand [it], earn.

He was talking about compounding – the magic bullet when it comes to investing.

Now, I don’t know if Einstein actually said compound interest was the 8^th Wonder of the World. There are questions about that. But you know, it doesn’t matter.

Because the point still applies. If you figure out how to earn a compounding rate of return on your money… you win.

Over time, you not only collect a return on your original investment…

You also collect a return on the money you’ve already earned. That’s how a small stake in the right asset can go like this:

You’re being robbed RIGHT NOW… [There’s still time to fix this]

In 2022, something big happened to our money… and almost no one has noticed. The Age of Paper Wealth came to an abrupt end.

Interest rates bottomed and started heading up again for the first time in 40 years… all while government and private debt exploded to unpayable levels…

And inflation is now destroying what remains of the American Dream.

If you’ve tried to get a loan to buy a home or car recently, you know what I’m talking about…

Finance charges have more than doubled in the last few years – making it much harder for regular people to secure affordable financing.

Well here’s the truth about the US dollar and where we are headed…

Until 2022, cheap credit was everywhere. Now… it’s gone. And that’s not going to change.

If the Federal Reserve (the Fed) prints a bunch more money and drops rates, it will be the end of the dollar and the financial system as we know it.

If they keep rates high and drain excess liquidity – like they are doing now – we’re guaranteed to go through a recession. And we may even see a full-blown credit crisis if Congress can’t reel in spending.

How I discovered the fast track to financial freedom

When I graduated from Radford University with my degree in finance, I was a fresh-faced lad of 22, ready to take on the world – convinced I would do meaningful work.

Not long after, the 2008 global financial crisis hit and I was right where I felt I needed to be… the Loss Mitigation department at Wells Fargo.

I was in the right place alright. But for all the wrong reasons. Let me explain…

Loss Mitigation is a code word for “we are the guys at the bank whose job it is to modify mortgage paperwork so Wells Fargo could show the government what a fine and noble job they were doing”.

I probably don’t have to tell you this was pure theatre. The only thing being mitigated was reputational damage.

I quickly understood that my real task was to satisfy government bureaucrats at various agencies by fiddling with paperwork to make it look like we were helping…

In reality, all I was doing was making sure my employer would have a profitable quarter… while almost four million families had lost their homes!

Needless to say, that didn’t sit right with me. In fact, I started having real trouble respecting the guy in the mirror. So, I walked.

And then, the most amazing thing happened…