The Greatest Wealth Transfer Is Here (How To Profit)
Summary
TLDRThe video discusses the current wealth transfer era and strategies to 10x one's net worth in the next decade amidst high inflation. It delves into the 2008 financial crisis, the role of the Federal Reserve, and the impact of quantitative easing on asset prices. The speaker shares insights on diversifying portfolios with inflation-hedging assets like gold, real estate, stocks, and cryptocurrencies to protect and grow wealth.
Takeaways
- 🌐 We are in a period of significant wealth transfer, and individual reactions to this will determine financial security or struggle in the future.
- 🚀 There is a potential to multiply wealth significantly over the next decade by positioning well in the face of high inflation.
- 📚 The speaker is sharing insights based on extensive research, reading, and discussions with knowledgeable individuals, not just trying to sell something.
- 🏦 The 2008 financial crisis was a turning point, with Alan Greenspan's policies leading to risky bank behavior and the eventual collapse of major financial institutions.
- 📉 The crisis led to a massive intervention by the Federal Reserve, which printed money and bailed out banks, setting a precedent for future actions.
- 💰 The Federal Reserve's balance sheet expanded dramatically post-2008, leading to a rise in asset prices but not traditional consumer price inflation.
- 📈 The stock market has been propped up by quantitative easing, with the S&P 500's rise closely tied to the Fed's balance sheet growth.
- 🏘️ Real estate and commodities have also been influenced by the financial economy's influx of money, with real estate seeing support from mortgage-backed securities purchases.
- 💡 The speaker emphasizes the importance of diversification and investing in assets that can act as inflation hedges, such as gold, real estate, and certain stocks.
- 🔑 The key to wealth multiplication in the next decade is understanding and leveraging the inflationary environment, with a focus on assets that historically perform well during inflationary periods.
Q & A
What is the main thesis of the video regarding wealth and inflation?
-The video suggests that we are in a period of significant wealth transfer due to inflation, and how individuals react to this will determine their financial security in the future. It proposes strategies to potentially increase one's wealth by leveraging high inflation.
What role did Alan Greenspan play in the early 2000s financial landscape?
-Alan Greenspan, as the chairman of the Federal Reserve in the early 2000s, lowered interest rates and stimulated credit growth to deal with the fallout of the tech bubble bursting. This led to an explosion in over-the-counter derivatives and excessive risk-taking by banks and financial institutions.
How did the 2008 financial crisis change the monetary system?
-The 2008 financial crisis led to a significant change in the monetary system, with the Federal Reserve stepping in to save failing banks and insurance giants like AIG. This marked a shift towards more aggressive monetary policies, including quantitative easing and money printing.
What is the difference between the real economy and the financial economy?
-The real economy refers to the tangible goods, products, and services that people consume daily. The financial economy, on the other hand, involves assets like stocks, bonds, private equity, and commodities. The video suggests that the money printed by the Fed primarily flowed into the financial economy, causing asset inflation rather than traditional inflation.
Why did the Federal Reserve's balance sheet increase dramatically after the 2008 crisis?
-The Federal Reserve's balance sheet increased dramatically as a response to the 2008 financial crisis. They engaged in massive money printing or quantitative easing to stabilize the markets and prevent further collapse, which led to a significant increase in their balance sheet from $800 billion to $2.2 trillion.
What is the 'debt paradox' mentioned in the video?
-The 'debt paradox' refers to a situation where high levels of debt to GDP make it difficult for central banks to effectively control inflation through interest rate adjustments. Raising rates increases government spending on interest, while lowering rates can lead to more inflation, creating a feedback loop that exacerbates the problem.
How did the COVID-19 pandemic impact the U.S. economy and the Federal Reserve's actions?
-The COVID-19 pandemic led to a significant economic downturn, prompting the Federal Reserve to embark on its largest quantitative easing program yet. This, combined with increased government spending, led to a surge in the money supply and a rise in inflation.
What is the 'Buffett Indicator' and what does it suggest about the current stock market?
-The 'Buffett Indicator' is a measure of the total market capitalization of all publicly traded stocks divided by GDP. It is used to assess whether stocks are overvalued. The video suggests that the current ratio indicates that stocks are significantly overvalued, which could be a sign of asset price inflation.
What are some strategies suggested in the video for protecting and growing wealth in an inflationary environment?
-The video suggests diversifying one's portfolio with uncorrelated assets and owning assets that increase in value due to inflation, such as gold, real estate, stocks (especially in sectors like energy), and cryptocurrencies. It emphasizes the importance of rebalancing the portfolio regularly.
What is the potential impact of the Federal Reserve's actions on the next decade or two, according to the video?
-The video predicts that the next decade or two will see significant generational wealth transfer, driven by inflation and the Federal Reserve's monetary policies. It suggests that being on the right side of this equation, through strategic investment in inflation-hedge assets, could lead to substantial wealth growth.
Outlines
💰 The Wealth Transfer and Inflation Strategy
The speaker introduces the concept of a significant wealth transfer happening in the current era, driven by high inflation. They emphasize that the response to this economic climate will determine financial security in the future. The speaker outlines a plan to increase wealth by leveraging inflation, promising to delve into the monetary system's history and current state, and how these factors will shape future wealth creation. They clarify that they are not predicting market crashes or engaging in fear-mongering, but rather sharing insights based on extensive research and discussions with experts.
📈 The Impact of 2008 Financial Crisis on Monetary Policy
This paragraph discusses the aftermath of the 2008 financial crisis, focusing on the role of Alan Greenspan and the Federal Reserve. It highlights how easy monetary policy and the Commodities Futures Modernization Act led to excessive risk-taking by banks and financial institutions. The crisis unfolded as mortgages defaulted, derivatives lost value, and banks faced liquidity issues. The Federal Reserve's intervention, such as backing JP Morgan's purchase of Bear Stearns and bailing out AIG, is noted. The speaker also mentions the collapse of Lehman Brothers and its systemic impact, emphasizing the importance of these events in understanding the current monetary system.
💵 The Shift to a Financial Economy Driven by Money Printing
The speaker explains how the Federal Reserve's response to the 2008 crisis, which included massive money printing, changed the economic landscape. The newly printed money did not cause traditional inflation because it primarily flowed into the financial economy rather than the real economy. This led to asset inflation, with stocks, bonds, and commodities seeing significant increases in value. The speaker also discusses the concept of quantitative easing and how it has been used to prop up asset prices, creating a dependency on monetary easing that has become problematic.
🏦 The Fragility of the Stock Market and Asset Inflation
This paragraph delves into the fragility of the stock market, highlighting how the rally over the past years has been largely an illusion, driven by new money flowing into the financial system rather than real economic growth. The speaker points out the correlation between the Federal Reserve's balance sheet and the S&P 500, suggesting that the market's rise is heavily dependent on quantitative easing. They also discuss the overvaluation of stocks and the concentration of market gains in a few high-flying tech stocks, which can skew the overall market performance.
🌐 Global Economic Interdependence and the Debt Crisis
The speaker discusses the global economic interdependence and the challenges of managing debt. They explain how the Federal Reserve's actions, such as raising interest rates, can backfire when debt levels are high, leading to a debt paradox. The paragraph also covers the Federal Reserve's recent aggressive tightening cycle and its impact on the debt crisis. The speaker warns that the current monetary policies could lead to exponential debt growth and the need for the Federal Reserve to monetize the debt, potentially leading to more inflation.
💼 The Role of Government Spending and Inflation
This paragraph explores the relationship between government spending and inflation. The speaker explains how quantitative easing combined with government spending can lead to inflation in the real economy. They discuss the impact of COVID-19 on the economy, noting the significant increase in the money supply and the subsequent rise in inflation. The speaker also highlights the challenges of absorbing the massive amount of debt issuance and the potential need for the Federal Reserve to create money to prevent a default.
🌳 Diversification and Inflation Hedging Strategies
The speaker provides investment advice, emphasizing the importance of diversification and owning assets that increase in value due to inflation. They discuss various asset classes, including gold, real estate, and stocks, and their potential as inflation hedges. The speaker also mentions cryptocurrencies as a high-risk, high-reward investment. They suggest a diversified portfolio with uncorrelated assets and a focus on inflation hedging assets to protect and grow wealth in the face of inflation.
🚀 Portfolio Simulations for Wealth Growth
The speaker presents simulations of different investment portfolios to demonstrate how wealth can grow over time, especially when including inflation hedging assets. They discuss various portfolio compositions, ranging from conservative to aggressive, and their potential outcomes. The speaker advocates for a balanced approach that includes real estate, business investments, and speculative assets like cryptocurrencies, aiming for a 10x return on investment over 20 years, adjusted for inflation.
🌐 Final Thoughts and Additional Resources
In the concluding paragraph, the speaker offers final thoughts and resources for further learning. They mention a documentary on America's potential collapse and a platform for learning about dropshipping as a way to start an online business. The speaker encourages viewers to diversify their investments, be aware of inflation, and take advantage of opportunities in the market.
Mindmap
Keywords
💡Wealth Transfer
💡Inflation
💡Monetary System
💡Quantitative Easing (QE)
💡Federal Reserve
💡Asset Bubble
💡Debt Paradox
💡Inflation Hedge
💡Diversification
💡Speculation
💡Real Economy vs. Financial Economy
Highlights
We are experiencing the greatest wealth transfer in human history, which will determine financial security or struggle.
Positioning well during high inflation could potentially multiply one's portfolio or net worth by 10 times over the next decade.
The speaker is not predicting market crashes or promoting fear-mongering, but sharing insights based on extensive research.
The 2008 financial crisis was a pivotal moment that changed our monetary system, affecting wealth creation.
Alan Greenspan's policies and the Commodities Features Monetization Act led to explosive growth in over-the-counter derivatives.
Banks and financial institutions took on massive risks with credit default swaps, mortgage-backed securities, and collateralized debt obligations.
The 2008 crisis saw a significant shift in the Federal Reserve's role, with interventions like the Maiden Lane LLC to stabilize the market.
The collapse of Lehman Brothers in 2008 was a turning point, as it was not bailed out, causing systemic panic.
The Federal Reserve's balance sheet expanded from $800 billion to $2.2 trillion in response to the 2008 crisis, slowing market declines.
Despite massive money printing, inflation remained stable due to the money flowing into the financial economy rather than the real economy.
The real economy's money supply, measured by M2, did not see a corresponding increase to the Federal Reserve's asset growth, indicating a divergence.
The S&P 500's rise has been closely tied to the Federal Reserve's balance sheet, suggesting an illusion of growth driven by money printing.
The market has become dependent on monetary easing, with asset prices inflated by new money flowing into the financial system.
The recent divergence in asset prices and inflation is due to new ways central banks add liquidity without showing up on their balance sheets.
The Federal Reserve's actions have led to a debt crisis, as higher interest rates increase government spending and debt.
The debt paradox suggests that high debt levels make it difficult for the Federal Reserve to effectively control inflation through interest rates.
The Federal Reserve's current path involves creating money to avoid a government default, leading to a generational wealth transfer.
Diversification with uncorrelated assets and owning inflation-hedging assets are key strategies for wealth protection and growth.
Gold, land, and real estate are suggested as low-risk assets that have historically served as effective inflation hedges.
Equities and cryptocurrencies are identified as higher-risk assets that can offer significant returns during inflationary periods.
A diversified portfolio simulation shows the potential for a 10x return over 20 years, adjusting for inflation.
Transcripts
we are living in the greatest wealth
transfer in the history of mankind and
how you react to this will determine
whether or not you end up financially
secure in the future or if you are going
to be struggling to survive however if
you do take advantage and position
yourself well you very well could 10x
your entire portfolio or net worth over
the next 10 years and this is my plan to
10x my wealth through high inflation
over the next 10 years now the changes
that are coming that I'm going to
describe to you in this video are going
to shock you we are going to take a deep
dive into our current monetary system
and we are going to understand what has
happened in the past to get us to where
we are today and we are going to
understand and illustrate the new ways
that the riches of the future are going
to be made today now before I start
getting into the history lesson I'm just
going to say I'm not calling for any
sort of market crash stock market crash
real estate crash or anything of that
sort and I'm not going to get you
emotionally riled up and fear-monger you
and then try to sell you something
expensive at the end of this video I
have simply been very very interested in
this topic for the last 12 months
because I myself personally have a
multi-million dollar portfolio that I'm
not only just trying to grow but I'm
also trying to protect it from
inflation's erosion so what I'm doing
here is I'm just giving you my insights
my thoughts and my beliefs based on all
of the research I've done on the
internet all of the books I've read and
all of the people that I've talked to
including my friends that are much
smarter than I am now I'm going to warn
you this isn't going to be like a a very
basic video that's extremely easy to
follow so if you have a short attention
span I would highly recommend you save
this video and watch it later now in
order to explain to you guys why I think
we'll be able to 10x our entire net
worth over the next 10 years I have to
give you a brief history lesson on some
of the things that happened in our
monetary system that changed things
[Music]
forever 2008 Alan Greenspan was the
chairman of the Federal Reserve in the
early 2000s which is the central bank
responsible for setting monetary policy
in the US leading up to the crisis
Greenspan had lowered interest rates and
stimulated credit growth to deal with
the Fallout of the tech bubble bursting
the easy monetary policy combined with a
new law called the Commodities features
monetization act meant that
over-the-counter derivative growth
exploded this meant that Banks and
financial institutions were gambling
excessively on the performance of
different Securities now I know that may
sound a little bit complicated but
basically that just meant that Banks and
financial institutions were taking on
massive risk this included credit
default swaps mortgage back Securities
and collateralized debt obligations now
all of these contracts meant that
counterparty exposure exploded but this
was by Regulators unseen due to the
Shady reporting requirements now as all
of this continued lending standards
began to decline to Grant more mortgages
to lowincome and subprime customers more
and more Banks began began to gamble
with each other on the direction of the
housing market now this didn't last
forever obviously and the unwinding
began when the underlying mortgages
began to default meaning that the people
that owned the mortgages could not make
their payments anymore the derivatives
written on these Securities began to
collapse in value and slowly Bank after
Bank blew up be Sterns got into a cash
crunch on March 12th 2008 and their CEO
went live on television talking about
the firm's stability 4 days later the
Federal Reserve backed JP Morgan to
purchase bear for $2 a share with the
FED absorbing the toxic Assets in an LLC
they spun up called Maiden Lane the FED
lent $28 billion against the Assets in
Maiden Lane to help finalize the sale a
few months later AIG the insurance giant
started defaulting on massive amounts of
credit default swaps it had written on
mortgage back Securities these contracts
were essentially Insurance agreements to
cover Bank losses in case the mortgages
were not paid and once the homeowners
began fail failing to make payments it
meant that AIG incurred $25 billion in
losses so the fed and the treasury
injected 85 billion and then eventually
$142 billion to save this failing Giant
and this trend of the FED stepping in to
save the day is a very very important
key that you want to make a mental note
of here next up on the list was the
Investment Bank Leman Brothers Leman was
one of the first Wall Street firms to
get into mortgage origination and had
even bought a subprime lender called BN
C mortgage it wrapped up these mortgages
into Securities and sold them to other
Prime banks in 2008 losses began piling
up and their Hedges proved to be
ineffective due to volatility by
September they were on the brink and the
only buyers bar Clays and Bank of
America fell through they declared
chapter 11 bankruptcy on September 15th
crucially this caused panic because the
F had not stepped in to save this
systemically important bank now I know
this may sound a little bit complicated
but what happened in 2008 was very very
important to understand because that is
when things started to change in our
monetary system it's because of these
changes that makes it almost Crystal
Clear why we are going to be able to 10x
our entire net worth over the next 10 to
20 years now after the collapse of Leman
markets entered freef fall the prices of
mortgage back Securities stocks and
bonds all collapsed as a massive flight
to safety developed everything was sold
in a desperate bid to raise cash Fortune
500 firm like GE Ford and McDonald's
panicked about payroll since they used
the short-term debt markets to get cash
for employee paychecks and the markets
were frozen in fact according to New
York fed president Timothy gner we were
a few days away from the ATMs not
working in the depths of the crisis the
fed and the treasury worked together to
launch new programs to save the failing
system the treasury launched tarp TP
which aimed to purchase huge amounts of
toxic assets from the banking system it
dispersed over $443 billion to stabilize
the markets however this paled in
comparison to the massive wave of money
printing or money creation that was done
by the Federal Reserve now prior to the
crisis the Federal Reserve had $800
billion on their balance sheet but as
Bank after Bank began to fail and fed
liquidity injections began to ramp up
their balance sheet went from 800
billion to $2.2 trillion markets which
were in freef Fall slow their Decline
and began to bottom March 2009 slowly
the cracks in the system were papered
over and stocks began a slow and steady
Ascent hundreds of banks failed because
they were too underwater to be bailed
out and FDIC came in and put them into
receivership before winding them down
the markets had seen the largest burst
of money printing since World War II and
many were terrified of the consequences
many economists particularly those with
a Libertarian bent such as Peter sh
immedi mediately decried this Reckless
Behavior and predicted hyperinflation as
early as 2011 from August 2007 to August
2011 Gold ripped from 660 to a record
$1,840 per ounce and silver from $13 to
$41 per ounce and this was all because
of the fear of inflation around the
corner now take a mental note of that
because that is also an important part
of this video the fed's balance sheet
exploded to 4.4 trillion by 2016 as
program after program shoved more and
more money into the banking system
however the inflation that many
economists feared never came now despite
the massive stimulus programs and bank
bailouts the CPI which is the Consumer
Price Index remained relatively steady
around 2% for the next decade so how is
that possible how can they print
trillions in trillions of dollars but
inflation or CPI stays relatively stable
I mean how could that make sense just a
few years ago they printed trillions of
dollars and we saw inflation rise up to
9% which is what they report but
inflation was definitely here and it's
still here so why didn't it happen last
time well in reality there are two
economies there's the real economy and
the financial economy the tital wave of
new money that the FED printed did not
cause inflation in the traditional sense
because the money did not flow into the
real economy The Goods the products the
services all of the things that you and
I consume on a daily basis the money
instead float into the other economy the
financial economy this is going to be
your stocks your bonds private equity
and commodities so in reality inflation
did happen but a majority of it was not
in goods and services it was in assets
when the FED does QE or quantitative
easing or money printing or money
creation whatever you want to call it it
is essentially creating Bank Reserves
this is essentially cash for financial
institution and allows them to trade and
transact with each other easily by
printing more Bank Reserves the Fed was
putting trillions of dollars in the
hands of the banks who turned around and
either lent this new money or invested
it soon after this the S&P 500 began its
biggest bull market in history the FED
slammed interest rates down to zero
helping to boost asset prices as
borrowing to speculate in the stock
market now became very cheap the Fed was
also trying to manipulate the real
economy with low interest rates
stimulating credit creation and thus in
theory improving consumer spending
however this creates a black hole of
debt as interest rates plummeted every
single sector of the economy began to
borrow heavily student loan debt
mortgages auto loans credit cards and
even the national debt of the government
began to rise quickly something had
changed permanently since 2008 although
economic growth
stagnated over the next decade the
markets continued to grind higher week
after week with each QE program each new
liquidity injection spy Rose upwards
despite the economy going further into
debt and growth not keeping up now
shockingly if you divide the S&P 500 by
the Federal Reserve balance sheet that
chart has been flat since the great
financial crisis the entire rally that
we've experienced for the last 16 years
has been somewhat of an illusion it is
simply the result of a vast amount of
new money flowing into the financial
system now this isn't to say that there
has been no growth in some sections of
the economy just that the long running
bull market is heavily due to the
quantitative easing or money creation
that has been going on and you can see
this a little bit more clearly if you
put the global liquidity chart on top of
the S&P 500 chart these charts are
almost the same and they certainly
behave in the same way now the recent
Divergence is due to new ways that the
central banks have found to add
liquidity but these additions don't show
up on their balance sheets so it's hard
to track the truth is is that the
markets have become very very dependent
on monetary easing addicted to the
heroin of quantitative easing and low
interest rates Banks were bidding up the
price of equities every single day the
massive wave of money that the FED
created was trapped in the financial
economy pushing the prices of everything
higher the S&P 500 we can see here has
increasingly run ahead of real economic
growth this process began in 2008 and
was occurring during the 2010s but this
process accelerated even more after Co
another fun chart to look at is this one
where you have the Dow Jones in US
Dollars on top of the Dow Jones in grams
of gold over time which is very commonly
an inflation hedge if you remember from
the beginning of this video If if you
look at the price of the Dow Jones in
grams of gold over time it looks flat
like it looks like it's been in the
exact same spot for the last two decades
the market overall has become fragile
and the Magnificent 7 which are those
high-flying tech stocks like Facebook
Google Amazon are an increasing share of
the S&P 500 Index and their
outperformance has been pulling the
market higher now they make up almost a
third of the index which has 500 stocks
in total this can increase with time as
the S&P is market cap weighted so these
few equities alone can pull up the index
by themselves we can further see this
overvaluation of stocks via something
called the buffet indicator named after
Warren Buffett this tracks the market
cap of all equities divided by real GDP
or gross domestic product as you can see
the average for the last 50 years has
been 95% and whenever we go above this
ratio stocks began to get overvalued in
2007 we were at 102% but now we have run
up to shocking
185% and I want to reiterate this again
because I'm not saying just because
things are at all-time highs like stocks
and homes and whatever else and because
they're currently overvalued by some
indicators that they're going to crash
I'm rather trying to point out the
inflation in these assets that we are
experiencing that we are seeing and this
very well may not come down unless the
FED reduces the amount of money in
circulation or unless the system breaks
this whole stock market rally has served
to enrich the wealthy people of the
world and this is asset price inflation
this is another major key that you need
to understand if you want to get on the
right side of inflation and 10x your
portfolio in the next 10 years or at
least protect yourself from it eroding
away this structural shift since 2008
meant that equities no longer followed
fundamental cycles of growth and
contraction instead now the correlation
between Global central bank balance
sheets is almost one meaning every new
cash infusion the markets Rise by the
same amount now let's shift a little bit
and talk about the real economy the real
economy's money supply is measured by
something called M2 this include
deposits at all of the banks and the
cash in the money market accounts
despite the massive QE programs since
2008 the money largely did not flow into
the real economy and you can see that
here in this graph put together by
Peruvian bull as you can see the first
time there was a massive increase in the
fed's asset price side but no
corresponding increase in M2 same as the
second time but no fiscal deficits so
only Bank lending grows and then the
third time which was the money printing
that was due to co which was bigger than
all of them you saw a blip and a larger
increase than ever before which is why
we saw inflation in the real economy
High higher than it was since then but a
lot of that flowed into assets this time
as well and even though I said this was
a little blip it was a 42% increase in
the broad money this chart shows money
flowing into the financial economy until
the third QE wave which had a much
bigger impact on M2 and thus CPI more
money chasing the same amount of goods
or assets means prices go up there are
two main ways in which the Bank Reserves
can make their way into the real economy
First Banks can lend money to Consumers
to spend this can be a mortgage for a
house a car loan or simply personal
credit this type of growth is slow and
steady and this is exactly what accounts
for the gradual growth that you see in
the M2 graph the other way that Bank
Reserves can travel from the financial
to the real economy is through
government deficits whenever the US
Treasury sells a bond it receives money
from a bank called a primary dealer and
then it can turn around and spend this
money on Healthcare Wars infrastructure
or social programs this means that the
money now moves from the financial
economy into the real economy
stimulating M2 money supply growth and
thus inflation so the real formula for
inflation is QE plus government spending
equals inflation in the aftermath of
covid the FED embarked on its largest QE
program yet as stocks and bonds
collapsed at the same time the
government ramped up spending to fund
vaccines send stimulus checks and pay
for unemployment benefits
the combination of these two meant that
one new money was being printed by the
Federal Reserve and two that money was
being moved into the real economy by way
of deficit spending M2 money supply
exploded by 6.2 trillion or 40%
inflation which had remained subdued for
over a decade now began ripping higher
throughout 2021 and 2022 as the amount
of money circulating in the real economy
Rose logically prices did as well of
course supply chain issues can also be
blamed for some of this but inflation
stayed well elevated even after the
lockdown subsided inflation Hedges
soared upwards in August of 2020 gold
skyrocketed to over $2,000 an ounce and
a year later the crypto bull market
started as well Bitcoin ran up all the
way to
$69,000 by November of 20121 now to cope
and deal with this inflation the FED had
to respond so in March of 2022 they
began their most aggressive tightening
cycle ever starting from zero they hiked
interest rates to 5.3% in just a year
and a half however this time was a
little bit different because this
created an entirely new crisis this
created a debt crisis and if you're
wondering how you're going to 10x your
money and protect yourself from
inflation we are about to get there and
I'm about to show you exactly what you
need to do but understanding this this
is extremely important and we're almost
there you see leading up to this the
government had been borrowing heavily
for years the debt was at 23 trillion
and Rising steadily presidents from both
parties Democrat and Republican had been
running deficits to fund Wars social
programs and subsidies and politicians
as they usually do kicked the can down
the road don't expect anything else from
them after Co hit the national debt
soared due to new stimulus programs that
were created to offset the Damage Done
by the lockdowns as the FED hiked this
created a massive spike in interest
expense as both the total level and the
rate paid on the debt Rose upwards in
2023 for the first time ever we paid
over $1 trillion alone on the national
debt now traditionally and it has
happened in the past the Federal Reserve
can raise interest rates to deal with
inflation effectively this worked in
1980 under fed chairman Paul vulker
because total debt to GDP was low and
thus rates could be hiked to an eye
watering 18% however this begins to
backfire when debt to GDP is too high
this is called the debt Paradox and once
debt levels get too high anything that
the FED does just makes it worse if they
lower the rates and print more the
already high fiscal deficits mean that
the money they create flows into the
real economy and causes inflation this
further increases government spending as
the cost of Social Security Public Works
and Military Rises to fund this spending
the treasury borrows more and because of
that the debt grows faster and the other
option of course is that they raise
rates which typically like I just said
does lower inflation however this time
with debt levels being historically High
interest expense for the government
starts to explode which we are already
seeing higher interest rates which again
is a protocol to control inflation
means that the government is going to
spend more on interest and they're going
to have to borrow more to spend more
which causes inflation so the main tool
that they use to fight inflation is
going to actually cause inflation this
is a devastating feedback loop and in
the long run means that our debt growth
is exponential and since there will not
be enough demand for this debt the only
other option is going to be for the
Federal Reserve to monetize it or in
other words they are simply going to
have to create the difference literally
create the money into existence and if
they don't the government will default
and die so yeah ironically about this
whole thing the higher and the longer
that they hold interest rates the more
likely they are going to have to print
and the more likely they are going to
have to print more now the FED has
already chosen the second path this year
the debt is going parabolic and is
Rising by about trillion dollar every
100 days in fact we are now paying more
on interest costs than we do to fund the
entire US military if all of the debt is
refinance at the current rates around 5%
we would be paying a staggering $1.6
trillion just of interest every single
year and this is a third of all tax
revenues when the time comes to pay off
existing debt the treasury Issues new
debt to cover both the principal amount
previously borrowed and the accumulated
interest in 2024 approximately 8 TR
trillion dollar of debt is being
refinanced this means interest expense
will move up again on the debt further
worsening the spiral obviously the
longer the FED holds rates higher the
worse the problem becomes the
Congressional box office estimates that
the national debt will grow to $48
trillion by fiscal year 2034 but this
doesn't take into account the gravity of
the situation in another projection the
expectation was 40 trillion by 2027 in
February alone debt Rose by 200 80
billion and for the first 2 months of
the year it increased by a total of 470
billion at the current rate the debt is
projected to reach 37 trillion by the
end of this year and 40 trillion by the
end of 2025 surpassing the Congressional
budget offices forecast by 2 years now
this is the question that we have to ask
how is this massive amount of debt
issuance going to be absorbed in the
last great financial crisis we escaped
largely by borrowing a lot of it from
foreigners in fact they bought almost 3
quarters of the debt from 2008 to 2016
however in the recent covid crisis the
foreigners only bought a fraction of it
this Gap in financing had to be made up
somehow with the banks already stuffed
with treasury bonds and Retail investors
basically Tapped Out the FED had to
print the difference in one year the
Federal Reserve became a larger holder
of government debt than all other Global
central banks the FED is now on the hook
for keeping the global monetary system
running without added liquidity things
start to fall apart quickly not even a
year after the Federal Reserve began to
taper Banks started to blow up starting
with Silicon Valley Bank within 2 months
five more Banks had failed including a
globally systemic important Bank credit
Swiss authorities responded with a new
solution this time instead of doing QE
they would find hidden ways to stuff
more liquidity into the financial system
this started with the bank term funding
program also called
btfp which allowed Banks to borrow
against bonds at base value instead of
the market price essentially allowing
them to not realize any losses on these
Securities this program ballooned to
$167 billion at its peak another way the
Federal Reserve can quietly inject
liquidity is by drawing down the reverse
repo facility this is a place where
Banks and money market funds can deposit
cash and receive treasury Banks as
short-term overnight loans these bonds
can be used to satisfy collateral or
legal requirements at its peak in late
2022 there was over 2.5 trillion dollar
parked here any cash left here is
essentially Frozen as it is held on the
FED balances sheet during 2023 and 2024
this has been falling which means cash
is re-entering the banking system in
total around $2.1 trillion has moved
back adding more liquidity and helping
to boost asset prices at the current
Pace reverse repo could be completely
drained in a couple of months the fed's
current taper is also somewhat of an
illusion although the FED is publicly
reducing it balance sheet it is doing so
in a way to minimize the loss of
liquidity now it can do this by only
selling short-term bonds and keeping the
long-term bonds because the longer the
bond duration the more Capital banks
have to hold as Reserve against losses
swapping long-term bonds for short-term
bonds is thus stimulative as it frees up
money that Banks can use to speculate on
other assets as we can see in this graph
which breaks the fed's treasury Holdings
down by maturity during the last few
easing Cycles and especially after covid
the FED added a lot of long-term bonds
to their balance sheet in order to take
it off the books of the banks who were
stuffed with them however as the FED
began to taper in 2022 this duration
risk was not laid off meaning they did
not sell these long bonds into the
market the breakdown is even clear to
see in this rate of change chart here
where we can see the FED purchasing
large quantities of every maturity
during covid and the subsequent QE
programs and then easing up on purchases
by 2022 in fact what is shocking here is
that during the taper not only did the
FED not become a net seller of long
bonds depicted in yellow maturities over
10 years but in fact the Holdings
increased as the FED laid off the rest
of the bonds this was another way of
secretly adding liquidity to the system
without it showing up on their balance
sheet or in public announcements and the
treasury is joining the effort with a
change in its issuance schedule last
November they published a press release
stating that they were reducing the
amount of long-term bonds and increasing
the amount of short-term bonds to be
issued in fact they had been doing this
for several years and the problem has
gotten worse again since the fed's
cutting cycle this type of stuff is the
behavior of banana republics or poor
third world countries who cannot
convince anyone to lend to them
long-term so they rely on short-term
funding all of these actions have simply
bought more time and have stopped Banks
from blowing up the change in debt
issuance means that more money is freed
up so that Banks can hedge against their
losses in other parts of their portfolio
and this is stabilizing the system
despite what people may think inflation
is not a once in a decade phenomenon it
comes in waves even during the 1970s
there were multiple waves of inflation
each one being higher than the last one
this year the deficit is at 1.1 trillion
and we are only halfway through the
fiscal year which started in October of
2023 inflation bottomed at 3.1% in
January of 2024 but has slowly and
consistently been rising since then if
the government deficit continues to
remain this High we are not going to
have an option hiking up interest rates
to combat inflation is going to make the
debt worse and lowering them will just
cause more inflation the FED is trapped
in a black hole of their own design now
I've already mentioned this early in the
video but I'm going to restate it here
because I can imagine a lot of people
are going to leave a comment not
understanding why they have to print
more money and why there's no
alternative so if they do not run QE the
treasury is going to run into a problem
of who is going to buy the bonds the
banks and money market funds are already
stuffed and the retail investors can
only buy so much if nobody bids at a
treasury auction and gives money to the
government this means that the
government will not have the money it
needs to operate and spend money on all
of the things that it does if the
government went bankrupt and could not
secure any more money very quickly there
would be a lot of pain millions of
people would lose their jobs financial
markets would literally melt because
treasury bonds are like the backbone of
this entire system and they are
literally collateral for so many
different types of trades in the
financial system and we would surely
surely have a massive and painful
depression so the easier less
immediately painful and faster solution
is to just create the money just create
the difference and since they have no
option you know what that means it means
that generational wealth transfer is
going to happen from Savers to debtors
from bonds to inflation Hedges and if
you are on the right side of this
equation you will profit immensely and
those who are ignorant or those who just
can't be bothered are going to see their
wealth erode and slowly disappear so
this is the moment you've all been
waiting for what do we do well there are
multiple answers to that but there are
only two things you need to do it's very
simple the first thing is you need to
have a diversified portfolio with
uncorrelated assets the second thing is
you need to own assets that are going to
increase in value due to inflation these
are inflation hedging assets there are
three categories of assets that rise
during inflation you have low risk
medium risk and you have high risk
starting with low risk we have gold gold
has been an inflation Hedge for a
millennia in fact in ancient Rome
generals got paid in Gold if their
families held on to that gold it would
roughly have the same purchasing power
today a high-end tailored toga would
cost half an ounce today which would be
roughly the same as a nice Italian
custom suit the price of 1 o of the
metal has recently jumped up to $2,400
and this was a 23% gain in 6 months this
is a massive move for an asset that has
a $10 trillion market now as I'm filming
this video today at the end of April of
2024 the current price of gold is
$3,300 per ounce and I'm super super
glad that I bought gold when I started
learning about economics and investing
and diversification and all that back
when it was only $1,700 I only wish I
bought more of course and that's okay
because I actually just recently bought
a ton a ton of gold even at this price
right now land is also a great
investment there's only so much
available and it is needed for farming
housing and businesses making it a
valuable and intrinsic asset real estate
has an average rate of return of 8.6%
according to the FED has also made
significant purchases of mortgage back
Securities during their easing programs
supporting the housing market via QE
additionally if you get low rates on the
debt used to purchase the land you can
easily earn free money as you are
borrowing at a lower rate than the
return producing a positive spread now
moving on to the medium risk stuff here
at medium risk you're going to have
equities stocks are a higher risk but
higher reward play as of February 2024
the S&P 500 has delivered an average
annual return of 12.68% over the past
decade assuming Dividends are reinvested
of course when adjusting for inflation
the average return including dividends
over the same period as
9.56% of course this is not evenly
distributed and some stocks serve as
much better inflation Hedges than others
for example oil and natural gas stocks
Fidelity's select energy ETF is up 62%
in The Last 5 Years high-flying tech
stocks also outperform mainly due to
their size which draws in more Capital
as the S&P 500 market cap is weighted
the NASDAQ 100 ETF QQQ is up 33% in the
year as its biggest Holdings Microsoft
Apple in Nvidia have rallied and now we
have high- risk so for highrisk I have
cryptocurrencies these are some of the
highest risk risks plays but also the
most sensitive to inflation in 2021 as
inflation soared Bitcoin ran all the way
up to 69k before pulling back due to the
Fed rate hikes and withdrawal of
excessive monetary stimulus as an asset
Bitcoin functions like digital gold with
a fixed Supply cap and a steady issuance
schedule that is impervious to Rapid
change the price is rallying again has
spot ETFs have been approved now
trillions of dollars of institutional
money can flow in Bitcoin does have an
extreme volatility as the average drw
down from the peak each cycle is around
80% but this volatility has been
dampering with time as the market cap
grows so here's the major key and this
is what we call diversification or at
least what I call diversification you
have 30% in real estate 30% in business
30% in reserves out of which 20% of that
is gold and then you have 10% in
speculation so again I think this goes
without saying but none of this is
financial advice everyone is different
and Everyone likes to invest differently
but in my op opinion being Diversified
with uncorrelated Assets in this way is
something that I really like now for me
I'm a little bit younger and I want to
take on more risk because I have a
high-risk appetite that's just the type
of person that I am so I'm going to just
go out there and be honest and say that
I have more than 10% in speculation uh
and most of that speculation is
definitely crypto for me so now let's
run a couple simulations of a portfolio
so that we can see what happens to your
portfolio over time based on the
investment decisions you make and the
ways you diversify your money we will
assume no contributions and no
withdrawals and this will be pre-tax and
we'll make sure to rebalance this
portfolio every single year we'll also
adjust for inflation in all of these
simulations so that you can see your
wealth really actually going up your
purchasing power actually significantly
increasing over time instead of just
seeing your portfolio inflate now the
base case is just saying you do
absolutely nothing for the next 20 years
you just sit on your cash and it sits in
a bank account and does nothing if we
assume a base case inflation rate of 4%
Which is higher than the target but
probably going to be closer to the
actual rate of inflation when it's all
said and done most outcomes of this type
of investing will gain barely any
purchasing power over the long run so
this is obviously something that you do
not want to do because you are going to
get screwed now let's start to introduce
some risk here is example of the basic
risk parody portfolio this is standard
for financial advisers to recommend to
clients and it's basically comprised of
60% large cap US stocks and 40% us
investment grade bonds including us
treasuries as we can see this portfolio
does substantially better but the median
return will only net you
$337,000 after inflation the worst case
only makes 160k after 20 years which is
a measly 2.3% real return every single
year best case scenario with this type
of portfolio puts you at around 550,000
now don't forget this is a 20-year time
period starting with 100 Grand no
contributions or withdrawals so here's
an example with some mid- risk
Investments we will include a 20% Reit
which is exposure to real estate 10% oil
ETF and 70% S&P 500 the median real
return is 7.49% netting you 422k after
20 years the most optimistic case will
return 11 .5% in real returns growing
the portfolio to
875k after 20 years with a starting
balance of 100K now so far that's pretty
decent but I think that you could still
do better now we are going to run a
portfolio with more high-risk assets but
also inflation hedging assets because we
know that during times of inflation
these inflation hedging assets go crazy
and we expect inflation to be a problem
for the next 10 years this one has 20%
Bitcoin 20% gold 20% oil and and 40% a
generic S&P 500 Index Fund the median
return on this portfolio would net you
$1.5 million after 20 years and the most
bullish case would net you 145 million
now of course this is just kind of a fun
one because it's based on the historical
returns of Bitcoin and as everybody
knows Bitcoin has gone crazy since the
Inception of it and because of this and
very obviously I hope the most
optimistic and even the median level of
optimism in this portfolio are for most
people going to be highly unlikely that
is unless of course you got in very
early however even the most bearish case
of this portfolio possible would net you
$3.2 million after 20 years and that is
once again adjusting for inflation this
represents a 32 times real gain on your
initial $100,000 and now we are going to
analyze and look at the most realistic
portfolio and the portfolio that is
closest to resembling what I mentioned
earlier with the 30 % business 30% real
estate and 30% reserves Etc now the only
difference is that instead of 30% in
real estate and business I put 25% in
each of those categories and I put the
extra in speculation because like I said
I'm younger and I have a higher risk
appetite so this is what my portfolio
looks like but in fact I may even have a
little bit more speculation but we're
not going to talk about it we're just
going to analyze the portfolio and as
you can see starting with
$100,000 never adding or taking anything
out of it investing the dividends
rebound balancing it regularly and
exposing yourself to inflation Hedges
and some speculation after 20 years we
get to $1 million
96,000 after adjusting for inflation so
this is just a clean clean 10x and this
was from the previous two decades which
as we know because we explained in this
video the next two decades are going to
be much more inflationary than the last
two decades and because of that because
of that inflationary itself and because
of the fear of inflation these assets
are going to rise more in the next two
decades than they did in the last two
decades and that's why I'm very very
confident and I fully believe and I'm
putting my money where my mou is because
this is how I'm investing I fully
believe that for the next decade or two
we are going to see some crazy crazy
generational wealth happening and now
you can really see the power of adding
asymmetric bets and inflation Hedges to
your portfolio even a small allocation
or maybe a little bit more than a small
allocation can have a massive effect
effect on it and by rebalancing the
portfolio the returns get evened out
over time and I also do want to mention
that although we did the Bitcoin
portfolio which many people may just
immediately dismiss I would urge you not
to because yes Bitcoin was a massive
massive opportunity and a lot of people
didn't get in early enough for it to be
like life-changing money but a lot of
people did and if you pay attention to
this kind of stuff then next time an
opportunity like that comes around and
it will you'll be able to take advantage
of it and I person personally know
multiple multiple people that got in
crypto very very early and they have
more money than than anyone in the world
would know what to do with it's
absolutely insane all I'm saying is you
will get your shot if you are smart
about it now you don't want to be that
guy that takes out a second mortgage on
his house and puts it in salana but you
also don't want to be that guy that
completely stays away from speculation
because somebody on the news said it was
a Ponzi scheme you want to identify
value make a plan be Diversified and
extract the value now this is exactly
what I've been doing personally myself
with my portfolio and just in q1 of 2021
I did 18% in one quarter I rebounds
quarterly or as needed because I'm more
involved in the markets uh cuz I'm
younger whatever but yeah it did really
really well shout out to bitcoin and
crypto and to speculation and including
Hedges here are very key if inflation
does return which as we all know now is
very likely to happen they will
outperform everything else and add
asymmetric returns to your portfolio
boosting your portfolio significantly
allowing you to build real wealth now I
got to give a shout out to perivan Bull
because he helped me me and him talk a
lot and we discussed these topics but he
helped me a lot with the research for
this video you can find his YouTube and
his substack with his newsletter in the
description which I read every single
time he posts he puts forth great
content on the internet and he's also
very active on Twitter which is where I
found him and he does a great job
breaking down complex topics around
macroeconomics now if you guys want to
learn more about me you can watch my
story video here where I talk about how
I went from zero to where I'm at now and
if you want to watch a video I made
explaining why I think America is headed
for collapse I made an entire
documentary on that video which there is
a link to here and I do have to mention
if you guys are interested in learning
how to drop ship which is a way you can
make money on the internet it's an
online business we just dropped our new
platform which is completely free it's
howto drop.com you can go there you can
enroll for free and you can get access
to all of our videos uh and go through
them and learn how to start your first
online business and start making money
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