jwithrow, Author at The Phoenician League

The Three Weaknesses in Retirement Planning

The rules of money changed in 2022.

To illustrate this from a different angle, let’s assess how the “traditional” retirement planning model came to be…

Modern retirement planning has its roots in the Employee Retirement Income Security Act (ERISA) of 1974. That legislation created the Individual Retirement Account (IRA). Then supplemental legislation created the 401(k) and the SEP IRA for self-employed individuals in 1978.

ERISA marked a monumental change in the US.

Prior to this legislation, it was common for employers to provide employees with a lifetime pension plan. Companies would invest in this plan on behalf of their employees. Then they would make lifetime payments to each employee after they retired.

As such, the burden of retirement planning fell to corporations.

This gave rise to the “three-legged stool” principle. It said that a sound retirement consisted of three things:

Social Security benefits
Corporate pension payments
Personal savings

ERISA changed everything. It shifted the responsibility for retirement planning from employers to employees.

The state of the American middle class

When we left off yesterday, we were examining the idea that the Age of Paper Wealth had a devastating impact on traditional American society.

As a reminder, the US government cut the dollar’s final link to gold in 1971. This removed all restrictions on creating new dollars at will.

It took most governments about a decade to realize this… but they’ve been printing money in greater and greater quantities since 1982. This drove interest rates down to zero… and it propelled the US stock market to all-time highs.

I call this period from 1982 to 2022 the Age of Paper Wealth. It certainly seemed like a prosperous period in American history – and for some it was. But the combination of artificially low interest rates and printed money financialized the American economy.

That is to say – we emphasized financial markets, financial institutions, and financial activity to the detriment of hands-on knowledge, skilled labor, the middle class, and traditional American values.

Today, very few people seem to know how to do anything with their hands. Myself included. Finance is all I’ve known. But I am making an effort to get better about this.

And look at what’s happened to our dollar…

What happened to our money?

Last week we looked at the strange de-banking trend and the history of our money.

In our brief history lesson, we noted how the dollar was not only backed by precious metals for most of its history – it was in fact defined as a specific amount of silver and later gold.

But everything changed in 1971. That’s when President Nixon cut the dollar’s last link to gold.

This thrust the world on a purely fiat monetary system controlled entirely by governments and central banks. Fiat is the Latin word for “let it be done”.

This is what gave rise to the Age of Paper Wealth I highlighted in my book Beyond the Nest Egg. Because the fiat system removed all restrictions on printing money.

It took most governments about a decade to realize this. But once they did, they didn’t look back…

The History of Our Money

Yesterday we talked about the nature of money… and we noted that we haven’t had sound money for quite some time now.

So today let’s look at a brief monetary history to see how that came to be. This is something that nearly every University in the western world has either ignored or swept under the rug to keep us ignorant – so let’s take a minute to briefly pull the curtain back today.

We’ll look at the history of money from an American perspective. But only because the dollar has served as the world’s reserve currency since 1944.

And we have to start with this – what is a “dollar”?

The Nature of Money

Yesterday we talked about a strange case of someone getting de-banked… and I asked the question – what’s going on here? Is this a trend?

I suppose time will tell. But I can’t help but think that this is a signal we need to be paying attention to. And it’s a good opportunity to tune in to what’s happening in the world of money and finance.

So today, let’s talk about the nature of money.

Now, I know that may sound a little strange. We all use money every day. We’re familiar with it. But have we really thought about it?

Where does money come from? Why is it valuable?

The short answer is that money is a unit of account that serves as a medium of exchange. But this is an incomplete view.

In order to be viable over long periods of time, money must contain several definitive characteristics. Money must be:

Portable
Divisible
Fungible
Durable

Let’s examine each of these characteristics in more detail.

How to get de-banked

“Well, I just got de-banked.”

I received a call from a gentleman I’ve known a long time over the weekend. He was chuckling as he shared with me his dealings with Wells Fargo last week. He maintained one of his business checking accounts at the bank.

Wells Fargo had sent him a letter back in January. The letter advised him that the bank didn’t believe his mailing address to be legitimate. Then it demanded that he update his mailing address… or else the bank would close his account.

The thing is – the mailing address is legitimate. So he read the letter. Then he updated his address.

But since it happened to be the right address, he simply moved the mailbox number from line two to line one. He figured this would signal to them that they did indeed have the correct address for him – and he thought nothing more of it.

Until last week, that is. He received an email from Wells Fargo alerting him to the fact that they closed his business checking account. Naturally he called the bank’s customer service right away…

The Bitcoin Vision

Yesterday I suggested that we should avoid the new Bitcoin ETFs… because they are antithetical to the big picture underlying Bitcoin.

That big picture is harder to describe. It took me a full year of reading and thinking about Bitcoin before I could see it.

Today I’ll do my best to share it with you. And it starts with this…

We all use space-age technology every single day and think nothing of it.

Text messages fly across the country. We send 2.4 billion emails every single second. Satellites bounce data all across the globe.

Now we can do video chats with each other – just like the old Jetsons cartoon envisioned. We all walk around with a device in our pockets that can access the entire store of accumulated human knowledge instantly, from pretty much anywhere.

And this device can do almost anything we ask it to. It can give us navigational directions. It can send money to a friend. It can play music and movies. There’s an app for almost everything.

If that weren’t enough, we can now buy virtually any item made anywhere in the world online, including food, and it will show up in a box at our door step in short order.

All of this would look like magic to my grandfather who died in 1994.

Yet our core civic institutions are stuck in the Bronze Age. Governments… banks… all of them. They are dinosaurs.

Why we should avoid the Bitcoin ETFs…

We’ve been talking this week about why the new Bitcoin ETFs are a misdirection play.

The Securities and Exchange Commission (SEC) approved them with two ulterior motives in place:

Funnel people into the ETFs so that they don’t buy and self-custody any bitcoins themselves.
Gain more influence over the dollar price of Bitcoin.

Sure, the ETFs will give investors upside exposure to Bitcoin.

If Bitcoin increases in value relative to dollars over time – which I’m quite sure it will – those who own a Bitcoin ETF will make money in dollar terms. They will find themselves with more dollars than they had before.

But the ETFs convey no ownership in the underlying asset – Bitcoin. They are nothing more than a paper claim to Bitcoin’s value priced in dollars.

Now let’s think about this for a minute…

The Bitcoin ETF Misdirection

Yesterday we examined the history of Bitcoin’s public narrative… and I suggested that the new ETFs are a misdirection play. That is to say, there is a hidden agenda underlying the Bitcoin ETFs.

This agenda is why the Securities and Exchange Commission (SEC) was openly hostile towards Bitcoin for years… but suddenly changed its tune. The power structure behind the SEC has two primary goals here.

The first goal is simply to funnel people into the Bitcoin ETFs so that they don’t buy and self-custody any bitcoins themselves.

It’s important to understand that these Bitcoin ETFs are cash-settled. That means investors have no ownership interest in the underlying asset.

And that’s an important point.

Bitcoin is critically important as a reserve asset in and of itself. These ETFs are just vehicles that provide dollar-based price exposure to Bitcoin.

The Real Goal of the Bitcoin ETFs

The Securities and Exchange Commission (SEC) just approved 11 Bitcoin exchange-traded funds (ETFs). So let’s talk Bitcoin this week…

It’s important to note that the SEC ruthlessly rejected every Bitcoin ETF proposal that crossed its desk over the last decade.

No kidding – the Winklevoss brothers submitted the first Bitcoin ETF application back in 2013. Since then, the SEC denied over 20 separate Bitcoin ETF applications.

So we have to ask – why did the SEC suddenly change course? Why did it go from openly hostile towards Bitcoin to approving not one or two… but 11 Bitcoin ETFs?

Simply put, this is a misdirection play.

To understand why, we have to assess how the narrative around Bitcoin has changed over the years… and why.