Last week, Presidential Candidate Donald J. Trump quietly hinted to the financial media that he would find a replacement for Janet Yellen as the Chairperson of the Federal Reserve.
While everyone in the country is up in arms about issues related to bathroom equality, building walls and other issues conveniently intended to divert your already short attention span from how broke most Americans are, this kind of talk merits your full attention.
If you were to ask 100 Americans who the most powerful person in the free world was, 93 of them would say the President of the United States.
5 would say Russian President Vladimir Putin, Iranian President Hassan Rouhani, or Chinese leader Xi Jinping.
The last two – who’ve probably read this book – would’ve correctly said Fed Chairwoman Janet Yellen.
There is an old saying, which says, “Whomever holds the gold, makes the rules.”
Today, this can be roughly updated to read “Whomever controls the money supply, calls the shots,” and we’ve seen this many, many times already.
For example, next time you hear of the United States going to war for a reason you probably don’t understand, think about who’s funding it and who stands to benefit.
Now, this is why many people such as myself refuse to watch the left vs. right, blue vs. red nightly news shows.
That “us vs. them” mentality is great for ratings and selling tickets. Politics are driven by passion It’s emotionally charged and sells a lot of gold and silver American Eagles, and reverse mortgages.
However, those of us in the group I mentioned above (and who’s members are growing exponentially daily as evidenced by the polls) believe there do exist two political wings, but they are connected to one head, which is the Federal Reserve.
And the shot that was fired across the bow by Trump last week was unprecedented and he should be commended for it.
Ron Paul has been talking about this for decades.
No one listened.
“Reason” doesn’t resonate well with people. Identity does. That’s negotiation 101. Now you’re starting to see Trump digging his heels into real issues that his constituency identifies with.
No one challenges the Fed.
There have been books written about assassination attempts on presidents in office who have threatened to challenge the Fed. Some people hold the belief that John F. Kennedy was assassinated because he wanted to reign in the Fed.
It sounds like a conspiracy theory, but there is a reason why most American’s have been in the dark about how our modern monetary and fractionalized reserve banking system works.
If you’re one of those people “in the dark,” I urge you to watch this video called Money As Debt.
But first, let’s create the backdrop here so you know where I’m going with this. There’s a lot of brain damage that went into this post, so just stay with me here.
Savers Are The New Losers
When my grandparents were saving, the government was actually solvent, and interest rates were “normal.”
You could buy government bonds and expect a decent rate of return. There was more backing there than “faith and credit” as the dollar was still linked to gold.
Technically speaking, you could have a confident outlook on your currency.
Conversely, China has been hoarding gold ambitiously and is very aggressively seeking to replace the greenback as the world’s reserve currency.
“Look at the indebted USA; they can’t manage their affairs,” they will say.
And just one cyber-based kill shot to our stock exchanges would do more damage to the confidence in our financial system, perhaps irreparably. Over time, buildings can be rebuilt — but that trust will take more than a generation to build back.
And Trump knows this.
That one cyber kill shot is the difference between our children living in a third world where the gap between the rich and the poor is as long as the curvature of the earth like (Exhibit A: Brazil ) or the United States you grew up in and love.
The book here is a great read on this subject.
Getting back to the good ol’ days, Social Security was also in good shape; you didn’t have to worry whether it was still going to exist when it came time for you to retire.
Sadly, it’s no longer the same today. Social Security in the Land of the Free has a shortfall exceeding $40 trillion according to its own annual report.
Simply put, this means that Social Security woefully lacks the funding to meet its obligations, particularly those to America’s future retirees. This isn’t a problem strictly with Social Security either; one of the major Medicare trust funds (Disability Insurance) is literally days away from going completely broke.
And, as the Financial Times reported recently, city and state pension funds across the United States have another multi-trillion dollar funding gap.
Nor is this problem distinctly American. The same conditions broadly exist across most of the developed world, especially in Europe.
In a union and think those promises – that you paid your union dues into all of those years to protect – are bullet proof?
The article here illustrates exactly why the Chicago Teacher’s Pension Fund will soon become insolvent – and is just the canary in the proverbial coal mine.
And no, it’s not the union’s fault…
Can you guess whose fault it is?
Relying on just about any western government’s retirement program is an absolute sucker’s move.
Yet, even if you take matters into your own hands and save for retirement on your own, you’re fighting an uphill battle at best.
You can’t out save the Federal Reserve’s money printing. It’s decimated the middle class and will have made retirement a privilege, not a right.
Zero (or negative) interest rates around the world have practically destroyed any reasonable expectation of savings.
When my grandfather was saving, for example, he could buy a 1-year US government bond yielding 4% at a time when inflation was 1%.
That’s a 3% return when adjusted for inflation. Not huge, but for him it was risk free.
Today, unless you don’t eat or use gas, you don’t need to know that any inflation number that is released by the government is largely manipulated not realistic.
Additionally, I’ve never met an economist or financial pundit who’s been right.
Unapologetically, those economists are like local weathermen on a national and global scale; half the time they’re right, half the time they’re wrong, but they always keep their jobs and keep the predictions coming.
I earn my living by being a Fund Manager. I share my advice and insights.
People might think I’m way off at first until they try my ideas. Then lives are changed and my audience grows. It’s win-win. I give you the good stuff, and you keep coming back.
Conversely, if I am wrong, investors lose money and that hurts my track record and I have to live with the consequences. I can’t just merely make up a “revision” to any report like an economist can.
It doesn’t work that way.
In the real world of private money management, hedge funds and real estate, we call this an “alignment of interests.”
If our investors get hurt, we get hurt, too.
Why Rates Need To Remain Low
Imagine you had $50,000 in credit card debt.
Would you rather have an interest rate of 1% or 5%?
Political collusion, pork, bailouts and a war that America was supposed to be out of, not only increased our nation’s debt, but accelerated our nation’s debt from $6 trillion to $21 trillion in less than 8 years.
The other longer term and more important issue is that the debt levels around the world for many governments and companies is now at unsustainable levels, and once rates do rise to more historic normalized levels, there is no way these debts can be managed, and that goes for the US as well.
If the ten year bond gets back to its historic normal range of 5.5% – 6%, the United States will be consumed with paying interest and will not have money to pay for the more important functions of government, especially defense in a very dangerous world.
So what does all this mean to you?
Very likely we will have low rates for several more years.
The United States economy is not an island and cannot just continue to grow at a solid rate when the rest of the world is mired in slow growth and overwhelming debt. While it is not likely we will have a recession anytime soon, it is likely we will have some decline in the next three years.
The debt markets will remain difficult in these conditions for several more years as the world credit markets remain unstable and volatile.
So, now the question is…
(NOTE: Want access to my business vault? Right now I’m offering access to my systems, strategies, templates, trainings, and recordings. It’s all included in The Investor’s Syndicate, and is available to you here.)
How Can President Trump Pay Down the National Debt Aggressively and Realistically?
In this author’s view, the only way the United States can entertain higher rates is if the debt is paid down to a manageable level.
Whether that number is $5 trillion, or whatever, only then will it make sense to raise rates.
For example, if you’re a single parent with two children, and are working two jobs to make ends meet, would you welcome a 25% increase in your monthly mortgage payment? Of course not.
In the meantime, you’ll hear a lot of lip service that the Federal Market Open Committee and Ms. Yellen are thinking of raising rates but, as with everything politically driven, watch what they do, not what they say.
Here are four ideas that have been intimated by Trump that I think would make a good dent into the national debt relatively quickly.
These are not final solutions, but they are steps that can easily put the country back on the path towards prosperity that was enjoyed in the 1950s and 1960s, where the middle class flourished.
1. Repatriate Trillions Held Offshore
Apple has about $132 billion held offshore.
Now, to be certain, a United States President can’t force companies to repatriate cash held overseas. However, the ever-so-persuasive Trump could provide a carrot-and-stick suite of incentives for companies to bring their cash back.
From a 30,000 foot level, I would imagine that building jobs and reinstituting manufacturing jobs in America would be a priority for this businessman.
So, the conversation would go something like this:
“Tim Cook, bring your cash back to the country and I’ll tax it at a stupendously low rate. Provided you hire and manufacture here, I’ll give you credits for building factories and training low-skilled labor. If you don’t, then I’ll put a tax on all Apple products sold in the USA, and John Ma will own you by the next Presidential Election.
Besides, everyone knows that Apple is losing its innovative edge, and you need the best and brightest minds here in the US to change that awfully poor perception.”
You can imagine how those conversations might go with other industry laggards such as Microsoft, which has been more of a widow and orphan stock, and Pfizer, which loses its Viagra patent in 2020…
The emphasis: Jobs.
Jobs create payroll taxes, get people off of the government dole (a savings to tax payers), encourages people to consume and spend sales tax, and gives investors confidence that the United States, although it’s in a globally interconnected economy, may be able to operate as an island with strong leadership.
It’s not going to happen overnight, but it will make a big impact within the first 2 years or so.
2. Sell Off Government Assets
According to the United States Accountability Office, this report states that there are approximately $3.2 trillion in land and buildings that can be sold.
Not a lot, but enough to make a big difference.
3. Federal Legalization of Marijuana
It’s coming whether you like it or not.
It’s big money.
If you look at states like Colorado, they have prospered immensely off of it. And it’s sweeping across the country.
It’s not a matter of if, but when.
This tax could really be pitched as a Social Security Reinforcement Tax. Meaning, the aging Baby Boomers and the elderly could be persuaded to go along with this bill as they would be the ultimate beneficiaries.
This would plug the gaping leak in the Social Security Trust Fund and would save a significant outflow as these beneficiaries continue to grow.
4. Guaranteed Retirement Plans
This is nothing new.
In the past these were issued as War Bonds under the banner of patriotism.
In fact, I personally collect these original lithographs in my office and they are 100 years old.
Notice how interest rates were more or less the same during World War I?
If the government sold these bonds as a savings account, and not subject to the market forces where demand would drive down prices similar to a bond, and offered 3%, this would give people a lot of confidence to shift out of equity-based assets (stocks, mutual funds widely held in most 401(k)s and IRAs) and into a government-backed savings account.
Could this be seen as a Ponzi?
After all, you’re paying off old debt with new debt!
But if structured correctly, and insulated from bureaucratic hands, it’s the Americans who would benefit ultimately.
Remember, Trump is running on America and Americans first.
Imagine the pride that the debt was paid down, and people were given a passbook savings account where the government had its affairs in order, sold off some non-essential assets to very wealthy United States corporations who are hoarding cash and have had nothing better to do with it than to buy their stocks back at any price and was not putting the financial well-being of the average American first.
Today, this would never fly.
People are angry at the government and don’t trust them at all.
But when it comes down to it…
When some initiative is seen in the form of balancing this huge debt, there are approximately 16 trillion reasons why people may just invest In America again.
What do you think?
Leave your thoughts in the comments.