Most people don’t understand how money works. People figure that if they have a greenback in their wallet, it can buy something. Have you ever wondered how the system works? When you find out, it might terrify you to find out that your money in your wallet is backed by debt and that no real assets back the US dollar. In fact, if you don’t believe me, open your wallet and look at a dollar and read what the “bill” says at the top. It reads “Federal Reserve Note”. For those of you who were not taught some basic economics in school, a Note is a debt. You take a note out when you borrow money to buy a car, house, student loans, etc. So why does your money, which is used to buy everything in our economy, work? It all boils down to belief, believing that the dollar in your wallet or bank account will be able to be traded for goods and services.
We have all grown up with the notion that the money you have worked for will be able to be traded for goods and services. This system works until the belief goes away or other countries stop believing in the dollar as a means of trade. The system is so complex intentionally that the average person won’t understand it, and if you graduated from high school, you know you were never taught this for the simple reason of keeping you believing in the dollar to make you go to work to get dollars to spend and live life.
Other countries like Russia and China (the two other biggest economies) know this and have been backpedaling from this debt-based system for decades. These counties have bought our debt in the form of treasury bills that pay a yield to the holders of these bonds. For those who don’t understand how bonds work, it is basically a debt. You buy a US Treasury bond; you are buying the US government’s debt. In essence, the government issues Treasury Bonds to finance the operations of the country. Thus, the debt created is now over 38 trillion dollars and growing every day as the Government has to pay interest on that debt. In fact, the interest paid on the debt annually is almost as much as the government collects in taxes from all of the citizens of the country (and non-citizens if they pay taxes). This function of governing is unsustainable, and we have reached the tipping point where other countries are looking for alternatives.
Where does this leave the US? If something is not done soon, we will lose economic dominance. So how can the USA get out of this debt-based system without declaring bankruptcy and becoming a third-world nation? This boils down to the interaction with another antiquated system that is used by all Western nations and that is the central banking system. Here in the US, we have been forced to use the Federal Reserve, which is a private banking system that was created in 1913 by a group of international bankers. There are all kinds of stories that go along with this creation, including the sinking of the Titanic in 1912, which had bankers aboard who were against the creation of the Central Banking system, a story for another day. The Bank for International Settlements (the BIS) was created to oversee all the other central banks in all Western countries. This banking system has financed both sides of every war since World War I.
I would suggest more reading and diving into the creation of the central banking system to learn more about how money has been working for over 100 years. I want to explore how the US could pay off the debt-based system and start a new system that is actually backed by assets. I believe that this can be done without the average worker even knowing it is being changed. I also believe it is being done as I write this blog.
How can this be done without disrupting the world’s economy? I believe that with the invention of digital assets like cryptocurrency, it can be done. This is not just some fad that kids use for gaming; this is a true economic powerhouse, and we are only at the very infancy of how these assets can be used. It is not that far-fetched to think of how it can be manipulated to pay off the United States’ debt and change over to an asset-based dollar again. The US was on the Gold standard starting in 1933 and moved to a silver-backed dollar in the 1950s. In 1973, Nixon quietly took the US off the silver standard to a debt-based dollar. Shortly after that, the US made the rule that all oil transactions would be in US dollars, effectively making all nations convert their currency to the dollar to buy oil. This was what we call the petro dollar. As of today, that system of buying oil in dollars has changed, and this is why we have seen such high inflation over the last decade, as more countries’ currencies have become stronger against the dollar.
The question is how the US can regain its dominance in the currency markets. I believe it is going to be done through the use of Cryptocurrency and Blockchain technology. Quietly, even the Federal Reserve has adopted Blockchain as a better way to transact business transactions. The blockchain they are using is the XRP ledger, as are all the central banks and even the BIS. Logic would have it that this digital asset would be a great asset for the US to hold. The price of an XRP coin is right around $1.30 a coin as I write this. As a financial guy for the last 40+ years, I believe that if you want to make money off an asset, you need to hold it until the asset price moves up. Basic investing logic is to buy low and sell high. In the case of the government, they could easily buy this digital asset now when the price is low and keep buying to push the price of the asset even higher. This would be a government pump without the dump.
XRP coin has the potential to be the next Bitcoin and more in the digital asset world, but more stable for the long term. I say this as all banking transactions will be done on the XRP ledger, thus creating a demand. If the US government acquires XRP when the price is low, similar to gold in the 1930’s, it could almost control the price by controlling the supply that is out of the public's hands. In other words, if the US government and other governments around the world accumulated the majority of the XRP coins, then the price of those coins would rise to a level of Bitcoin in price and maybe beyond. What this means is that if the Government is a buyer and holds XRP as an asset to back the dollar, and they can push the price up to $1,000 a coin or even $100,000, it could pay off the $38 trillion debt. The math actually works with the right number of coins held.
This concept of using digital assets to pay off the national debt and move the US to an asset-based economy and away from a debt-based economy is very real. Things are in place for this to actually happen. Ripple, which is the parent company of XRP coins and ledger, has already received its central banking license. This means they can operate as a bank, which means the old banking system is in full panic mode. This is why Jammie Diamond (the head of Chase Bank) has been fighting the clarity act so hard publicly. The Clarity Act is the beginning of legislation to monitor and regulate digital assets and has been in Congress for months now, being worked on to get passed so the President can sign it into law. This concept of digital assets being the future is no longer a concept; it has become reality, and the average person on the street has no concept, and they really don’t need to know as their money still works. Another note for those watching “Data Centers” pop up all over the country: this just might be the backbone for this system under the guise of AI data centers. Do we really know what they are doing, or are we trusting the media to tell us a narrative for our comfort? At any rate, if I can see how to utilize digital assets to fix our economy, I am sure others have figured it out as well, and this is what is probably going on as I write this.
It’s Monday, August 5, 2024, and the Stock Markets worldwide have endured a significant sell-off. Why is this happening and what is driving this? How will this help Real Estate and how will this hurt Real Estate? What are the global ramifications here and how will it affect you and your finances? Those are just some of the questions I will be exploring.
The markets started the correction last week due to bad economic numbers. Those numbers were weak consumer goods orders and higher-than-expected unemployment numbers. These numbers are what the Federal Reserve looks to when they make up their minds on the direction of interest rates. Interest rates drive the flow of money for growth in an economy and they have been high for several years now. Higher interest rates have slowed the real estate market to crawl over the last several years. Fewer people have been able to afford a house with higher interest rates. So with less home ownership people are not spending money on goods and services for homes such as washers and dryers, home improvement items, and major remodeling projects. All the people who work for those support companies have been slowing down and now are laying off people due to a lack of demand for goods and services. The reporting numbers are severely lagged or even manipulated and when the markets finally woke up to the fact that things are not as great as the reporting numbers have said, then you have a correction and that is what we are seeing.
This correction is just beginning, unfortunately, as the stock markets have been held up artificially by certain big investment brokerages or bad government reporting numbers or both. The philosophy of the Stock markets of late has been to simply look to the government’s Bureau of Labor and Statistics that pump out unemployment numbers, Job Growth, GDP, and unemployment to name a few. When you don’t look out the window to see what’s really going on you can be manipulated. People and the markets are now realizing the truth and reacting to the truth. I fear that the monetary system is not far behind.
Traditionally, when the economy has little or no growth the Federal Reserve will lower interest rates to stimulate the economy by getting money flowing again. I firmly believe that the Federal Reserve will have to lower interest rates sooner than later. Although the next Fed meeting isn’t until September 18th I believe the Fed will take an emergency action by lowering interest rates before their next meeting. How much I can only guess l but I would guess by .25%-.50% to get money flowing again. The problem is that as stock markets crash and big companies have less money to work with they will have to start laying off people, which we have already seen in the large-cap companies and small-cap companies. As people lose their jobs, they will have less money to spend in an economy that has already been ravaged by inflation. Things will have to get a whole lot worse before it can get better.
The good news is that interest rates will start to come down again. This will allow people who have good jobs to refinance themselves to a lower payment. It will also allow businesses to borrow at cheaper rates to expand. This will not be immediate as Rates will not go down as rapidly as they probably should. In the meantime, we will all have to endure a correction that could be very painful for those who are retired or close to retirement. It will also affect those in the tech business with the invention of Artificial intelligence (AI) that will be cutting coding jobs for large tech companies. It will also trickle over to the monetary system affecting the dollar.
For now, sit back and enjoy the show, and don’t panic. If you are young, this will be a big deal for a short period of your life but over time everything will come back as history has shown. So, If you have a good job and stay employed through all of this you will have some of the best investment opportunities in Real Estate that we have seen in a long time. You probably will not see these opportunities until early 2025 so if you can save do so now you will need it. We are in for some very interesting times through this correction and the coming election cycle and the events unfolding in the world. Pray that our government doesn’t decide that War is the way out of this problem as that has been what our government has done for the last 100 years.