Secrets of the Ancients for True Wealth and Freedom
Category: Insights
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If the conventional financial playbook is broken — and if “retirement planning” was never a strategy, but rather a lucky passenger riding a four-decade tailwind that’s now gone… well, where does that leave us?
Let’s explore that question more together today.
Have you ever noticed that certain institutions seem to endure no matter what the economy does?
We’re talking about the institutions that survive the same crashes that wipe out so many others around them. They’re still standing after wars, currency crises, depressions, and decades of inflation.
Meanwhile, we read about bank failures every few years… and we watch fortunes that took a generation to build evaporate in a single downturn.
So it begs the question – what separates the enterprises and families that last centuries from the ones that don’t?
After being immersed in the finance space for two decades, I’ve come to the conclusion that it isn’t luck. And it isn’t picking the right stocks at the right moments, either.
Here’s the secret you’ll never hear on CNBC: the world’s most time-tested financial model is actually quite simple. It rests on three basic planks.
Let’s talk about the conventional retirement planning model. And let’s suppose it’s the only paradigm somebody knows.
It calls for 30+ years of discipline. That’s 30+ years of doing exactly what the financial planner told you to do — max out the 401(k)… hold the index funds… and wait.
Let’s suppose you went that route and you had socked away $1 million in your retirement accounts by 2020. You were a millionaire. Do you know what that same one million dollars buys today?
Roughly $680,000 worth of the same goods and services that it could purchase six years ago.
Your account balance didn’t fall. But $320,000 in purchasing power disappeared. Silently. Without a single line item on your statement to explain it.
That’s the insidious nature of inflation – the invisible tax. And it’s the most consequential concept in personal finance that the mainstream financial industry will never show you on a slide.
And that’s because explaining inflation honestly would require admitting something the industry cannot afford to admit — that the conventional financial playbook was never actually a strategy. It was a lucky passenger riding a four-decade tailwind of falling interest rates.
It’s been a warm one up here in the mountains of Virginia, but I’ve quite enjoyed it. We have spent quite a bit of time down at the river. Here’s a shot of our little access point:
It’s funny – summer doesn’t quite feel as special to the Withrow kids, who have been homeschooled from Day One.
I’ve explained to them how, to me, summer represented my only childhood experience of pure freedom. It was a temporary reprieve from the government school that insisted upon regimenting and surveilling every aspect of my life from early September through early June…
But it just doesn’t register with them. They cannot imagine a world in which they did not have nearly complete agency in their own life and their own decisions.
I’m thankful for that. And I’m forever grateful for those brave homeschool pioneers who blazed the path forward for us here in the United States – back when homeschooling was much more of a dicey proposition.
And speaking of American history, we’re going to take a short break from our American System essay series for the next two weeks or so. We’ll resume – and hopefully complete – the series shortly thereafter.
But in the interim, I want to take some time to shine the light on the world of personal finance and investing… which was originally my impetus for embarking on the American System series in the first place. I’m fascinated by the history of it all, but my ultimate responsibility lies in the investment world.
To that end, we’re going to get back on the investment beat for the next few weeks. And it will culminate with our next Phoenician League strategy session on July 22nd. There, we’ll take what we’ve learned on the macroeconomic front and put it all together from a self-directed investment standpoint.
Specifically, I’m going to walk you through the complete investment framework that I’ve spent the last decade building — the one I use to manage my own money in this new financial era that we are entering.
It’s a system built on five pillars. And the key is that they work together, as one architecture, rather than the piecemeal, one-off approach most people end up with.
We’ll get into how to build a foundation in hard money that can’t be inflated away… how to generate monthly cash flow from actual assets, not paper promises… how to think about owning stocks intentionally instead of just parking money in funds and hoping for the best… and how to keep more of what you build through smart tax and protection structures.
And I’ll show you exactly how to implement all of it — including who can actually help you get each piece in place. Because in my experience, the investment framework isn’t the hard part. The hard part is knowing who to trust… and that’s a gap I’ve spent years closing.
It was six o’clock in the evening on December 23, 1913 — just two days before Christmas. You could hear a pin drop in the Capitol Building.
Just an hour earlier, the United States Senate had cast one of the most consequential votes in American history. And then, in unison, the senators rushed out the doors and down to Union Station to catch their trains home.
Now the corridors were empty. The usual scuttlebutt of American politics was put on pause for the holiday season.
But a small group of men did not head for the train station. Instead, they made their way to the White House. There, President Woodrow Wilson sat waiting with their final bill in front of him and a small collection of gold pens laid out on the desk.
The bill was called the Glass-Owen Act, formally known as the Federal Reserve Act. With a few strokes of those gold pens, President Wilson signed the Federal Reserve System into existence.
When he finished, Wilson handed one of the pens to Carter Glass, the Virginia congressman whose name was on the bill. He handed another to Senator Robert Owen of Oklahoma, the bill’s Senate sponsor.
These were the “reformers” — the men who had spent the better part of a year, by their own account, writing legislation to break Wall Street’s grip on the American economy. They stood there beaming, holding up their gold pens. They seemed certain that they had just delivered a great victory for the common man.
The train left Hoboken after dark… and no one seemed to notice that a private railcar had been coupled to the rear of it.
Anyone observing wouldn’t have thought much of it anyway. Six men boarded that private car, but each separately and through different doors. To any keen observers, it would have appeared to be a random group of travelers.
But nothing about it was random. The men who boarded that private railcar had been given their instructions in advance.
They were to arrive separately at their own designated time. And they were to address one another by a fictitious first name only. There would be no mention of titles or surnames. And if anyone were to ask, they were to state that they were going duck hunting and leave it at that.
By the time the railcar reached the coast of Georgia, those six men felt confident that they had avoided detection. Stepping off the railcar, a launch carried them across the narrow sound to a private island.
“Leave the guns in the case,” the man who organized the excursion said as they stepped onto the dock. “We won’t be needing them today.”
The year was 1910, and those six men had not come to hunt ducks. They had much bigger ambitions in mind.
President Grover Cleveland asked the question with something of a resigned sigh as he engaged his guest across a table in the White House.
The man he was speaking to had not been invited. He held no office. He had never been elected to anything. Instead, the man was a private banker from New York, and he had arrived in Washington the day before without an appointment.
When John Pierpont Morgan first reached the White House, President Cleveland had refused to see him. But Morgan wouldn’t take no for an answer.
“I have come down to see the president,” Morgan had told the staffers bluntly. “And I am going to stay here until I see him.”
So Morgan had sat patiently in a corner room inside the White House, alongside his partner and his lawyer. Contemporary reports suggest that he said very little, but that he rolled an unlit cigar between his fingers reflexively.
Every so often a fresh report would arrive from New York, and each one was worse than the last. The US government’s gold reserves were being drained. Wall Street was placing bets as to the exact day the United States Treasury would default.
Given the urgency of the situation, and Morgan’s considerable power and connections, President Cleveland agreed to hear him out.
The date was February 5, 1895. And the meeting between President Cleveland and J.P. Morgan would reveal exactly who had come to hold power over the American financial system.
The miner was confused. He had walked into the US Mint with sacks of silver a dozen times before and it had never been a problem.
“It’s good silver,” the miner replied politely. “You can weigh it yourself.”
The clerk offered a slight, somewhat confused smile. He appeared to be truly sympathetic.
“Sir, I don’t doubt that it’s good silver. But I’m not allowed to make it into dollars anymore. The law changed.”
The miner was shocked.
The sack of silver on the counter represented months of his labor. He had pulled the ore out of a Nevada mountain himself. Then he had it smelted down, and he made the long trip to the US Mint – just as he always had. And just as his father had done before him. It was a business as old as the country itself.
The miner couldn’t contain his frustration.
“Changed how!? Silver’s been money my whole life. We have made this transaction countless times.”
The clerk could only shrug and offer his sympathies. He explained that he didn’t entirely understand it either. Apparently Congress had passed a new law and the President had signed it, and it said that the silver dollar was no longer to be struck.
The clerk admitted that he didn’t know anything more than that. He was simply told that he could not accept silver bullion any longer.
“You can take it home,” the clerk offered timidly. “Or you can sell it as metal. But it doesn’t come out of here as money. Not anymore.”
The miner couldn’t do anything but shake his head. He grabbed his sack of silver and stomped out… never to return.
The miner’s name was lost to history. But his interaction, and scores of others, were recorded by the US Mint in those days.
He was one of thousands of men working the great silver lodes of the American West — the Comstock in Nevada most famous among them. The miners would risk it all to pull silver ore out of the mountains in the belief that what they mined would be converted into money.
And for the entire history of the republic up to that moment, it was. Silver was money. You could take your silver to the mint, hand it over, and walk out with silver dollars. That was the law. It had been the law since Alexander Hamilton wrote it into being in 1792.
The doors of the library were locked from the inside. No one was allowed to leave.
It was the first week of November, 1907. Outside, a crisp autumn breeze brushed through the streets of Manhattan… and a silent fear permeated the air. The financial system was coming apart, and New Yorkers could “feel” it more acutely than most.
Perhaps absurdly, the trouble had started with a failed scheme to corner the stock of a copper company. It was a bet so bad that it took down an entire brokerage and triggered bank runs throughout the Big Apple.
Now the contagion was spreading through the whole of the New York financial system. Depositors stood in lines that wrapped around city blocks, weathering the sharp autumn air to pull their savings out of trust companies that might not last the afternoon.
At the same time, the stock market was crashing. And there was genuine panic that the entire financial system would lock up.
That is, until a seventy-year-old banker named J.P. Morgan decided it was in his best interest to act.
So it was that a group of bankers sat in J.P. Morgan’s private library on Madison Avenue that crisp November day. Renaissance paintings adorned the walls and the world’s finest collection of medieval manuscripts rested on the shelves.
Morgan moved between rooms as the long night wore on—trust company presidents gathered in the West Room, other bankers in the East. He made it clear that no man would leave until a plan was in place to rescue the American financial system.
I’m neck-deep in research, and I’ll have the next installment in our essay series on the American System for you soon. But first, I do need to acknowledge something that’s come to my attention. That is, an oversight on my part perpetuated a fairly common economic fallacy in the second installment of the series.
My goal with this essay series is not to advocate… it’s to learn and gain understanding. As such, we have been trying to get inside the minds of the American System’s architects to get a feel for their perspective. And we’ve attempted to analyze the system objectively to understand why its modern proponents believe so strongly in it.
I think I’ve been fair in assessing where I think the American System ideas have merit, and I feel like I have a good understanding of why these ideas are seeing a resurgence. But I have also pointed out some glaring gaps and shortcomings, as I see them.
At this point I feel like I have a firm enough grip on the topic to see a fundamental misunderstanding about it. I’ll share that with you in a few minutes.
I’ve also developed a hypothesis that could potentially connect some historical dots – we’ll explore that in a future essay. But for now, let’s address the fallacy…
While the work of each of these men contributed to the tradition, none of them had a name for their particular views. It was Henry Clay who gave the American System its name… and he spent thirty years of his political career fighting to implement it.
Clay was a Kentucky statesman who served as Speaker of the House, Secretary of State, and United States Senator at various points in a career that spanned the first half of the 19th century.
Clay ran for president three times but never won. And he is sometimes remembered today as the “Great Compromiser” for his role in brokering political deals like the Missouri Compromise of 1820 and the Compromise of 1850. They each held the United States together as a single “Union” in the decades before it came apart.
But Clay’s core identity was as the champion of what he called, in an 1824 speech to Congress, the “American System”.
