Category: Daily Insights

Perhaps nobody shaped the modern world more than John Maynard Keynes.

Those who have studied economics are surely familiar with his name. But I’d wager most of the population isn’t… which is ironic given that his theories have directly impacted all of us.

John Maynard Keynes was the preeminent British economist of his generation. He lived from 1883 to 1946.

It was his book The General Theory of Employment, Interest, and Money that made Keynes so influential. But only because government and Academia loved his general premise.

Keynes effectively flipped economics on its head. And he single-handedly undermined the great stride of progress that had flowed from the classical economists of the 18^th and 19^th centuries.

Central to Keynes\’ theory was an idea so preposterous, even my 9-year old could quickly debunk it. He asserted that the government should issue debt and spend more money whenever things were slow in the economy. This is where the modern idea of “stimulus” comes from.

This is what made Keynes so popular with government officials. He gave them a green light to run up debt and launch all kinds of uneconomical spending programs.

To be fair, Keynes did say that government should reduce its spending when the economy was humming. He didn’t advocate the perpetual public debt binge that’s occurred over the last few decades.

But policy-makers conveniently ignored that part of Keynes’ theory. And it’s easy to see why. With intellectual cover to issue debt and later print money, governments became massive monoliths that now command multi-trillion dollar budgets.

This is what created the Age of Paper Wealth. It lasted from 1982 to 2022.

Continue reading “Keynesianism is Dead”

We are living through a period of historic change right now. And if you don’t know where things are heading… your financial plan is in serious jeopardy.

That’s because the rules of money are changing. The conventional wisdom of the last forty years has hit a dead-end.

Because for the first time in its history…

The Fed No Longer Has A Free Hand

It all comes down to the inner workings of the US credit market.

Treasury bonds are the bedrock of the US financial system. The yield paid by Treasury bonds is considered the “risk-free” rate of return.

As such, Treasury bond yields often serves as a benchmark for other fixed income investments. Thus, Treasury bonds influence interest rates across the entire economy.

This is why Treasury bonds are seen as a reliable reserve asset across the world of global finance. In fact, American banks, financial institutions, and insurance companies own roughly $12 trillion worth of US Treasuries right now.

But here’s the thing – the US government is now running annual deficits greater than $1 trillion a year. The only way to finance those deficits is to sell more Treasury bonds.

Treasuries are a simply a loan to the US government. And in return, the government pays bondholders the stated rate of return.

Thus, US Treasuries have to provide a reasonable yield to attract buyers. And financing over $1 trillion a year requires a lot of buyers.

Continue reading “Why there will be no big Fed pivot in 2024… (Part 2)”

If you care about protecting your hard-earned money for the rest of the 2020s and beyond…

This may be the most important email you read all year.

In our last few emails, I shared what’s really happening in our financial and monetary systems.

I told you why the US is facing a potential inflation nightmare as the BRICS bloc is slowly decreasing demand for US dollars…

What I didn’t show you is how the “Petrodollar” system is on the verge of a historic change that will radically accelerate these trends. And this change will decrease demand for dollars even faster… putting pressure on dollar-denominated asset prices.

Kissinger’s Legacy Is Coming Unwound

In 1973, Henry Kissinger went to Saudi Arabia to forge an alliance with the House of Saud.

Kissinger promised that the US would supply military-grade weapons and protection for the Saudi government. In return, Saudi Arabia agreed to sell oil exclusively for US dollars.

This agreement created the Petrodollar… and it ensured steady, built-in demand for the US dollar. That’s because it required every nation to pay for oil in dollars.

Here’s the part most people don’t consider…

Continue reading “Why there will be no big “Fed pivot” in 2024…  (Part 1)”

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 2^nd and 3^rd 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.

Continue reading “What’s coming next for the financial system?”

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?

Continue reading “The truth about stock prices”

“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.

Continue reading “Destroying What’s Left of Capitalism”

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.

We’ve been diving into the macro talk this week.

On Monday we explored the idea that the “Great Taking” already happened. And yesterday we talked about how Keynesian economics has been dead-wrong on pretty much everything – including its view that recessions are bad.

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?

Continue reading “There’s more to the CBDC story…”

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.

Continue reading “The Recession is Part of the Cure”

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. 

Continue reading “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?

Get a jump on 2024 with our new financial training. We’re calling it Mistakes, Misconceptions, and Malinvestment.

You can find the broadcast right here.

-Joe Withrow