Send this article to a friend:

June
21
2023

Would you honestly hire the Federal Reserve to manage your finances?
Simon Black

On August 4, 1964, two US Navy destroyers were conducting intelligence patrols in the Gulf of Tonkin off the coast of Vietnam, when the task force commander grabbed the radio and reported that they were under attack by three North Vietnamese torpedo boats.

The news traveled very quickly all the way to the Pentagon, and Defense Secretary Robert McNamara briefed President Lyndon Johnson on the situation.

They demanded retaliation. And only a few days later, Congress passed the Gulf of Tonkin Resolution… which essentially authorized full blown military conflict in Vietnam.

The only problem, of course, is that the supposed August 4th attack in the Gulf of Tonkin never actually happened.

McNamara himself admitted decades later that the attack was made up, and a declassified report from the National Security Agency showed that there weren’t even any North Vietnamese patrol boats in the area.

Despite the complete fabrication, however, the US went on to engage in a long and costly war. And the man who headed up the effort was a four star general named William Westmoreland, a career officer who had been described by his Pentagon bosses as “the best we have, without question.”

Westmoreland aggressively expanded the war, increasing the number of American troops on the ground by nearly 50x. And he was constantly on TV telling the American public how great the war effort was going and predicted victory by 1967.

At first, everyone believed him. The government still had credibility back then, so few people questioned the commanding general’s assurance that the war was going well.

Westmoreland himself became wildly popular; Time magazine made him the “Man of the Year” in 1965, and his name was even thrown around as a potential candidate for US President.

Little by little, though, it became clear that the war in Vietnam was NOT going as well as Westmoreland had claimed. And in 1968 when the North Vietnamese launched a ferocious assault known as the Tet Offensive, it was obvious that America was losing.

People were shocked; Westmoreland had over 500,000 troops, vastly superior weapons technology, and nearly infinite financial resources at his disposal. And yet he still couldn’t win.

America’s reputation for invincibility was tarnished. The consequences for the US economy were devastating. Social chaos at home was rising– in large part because of the failed war effort.

And the government’s credibility would never recover… also in large part to Westmoreland’s fabricated claims of success.

You’d think that a guy whose leadership had caused so much damage would have been fired swiftly. But Westmoreland not only kept his job… he was actually PROMOTED to Chief of Staff of the Army.

Sadly this is a common theme in government: failure is rarely punished. It is often rewarded.

The pandemic is a great example. There were so many colossal policy failures at every level of government, resulting in trillions of dollars of debt, supply chain dysfunction, a broken labor market, severe educational losses, a mental health crisis, and much more.

And yet there have been practically zero investigations, zero apologies, zero public inquiries. Most of the key architects of the worst policy ideas got to keep their jobs or retire with distinction on their own terms. Everyone else is still suffering the consequences.

The same can be said for the Federal Reserve and its handling of inflation.

Remember, as America’s central bank, the Federal Reserve was responsible for slashing interest rates to zero and flooding the US economy with a tidal wave of money in 2020 and 2021– a time when the government was literally paying people to stay home and NOT work.

Even a high school economics student with a basic grasp of supply and demand could have seen inflation coming: when you pay people to NOT work, supply falls. When you give people free money, demand rises. Falling supply and rising demand mean higher prices. Duh.

I was one of the many people who predicted inflation as far back as April 2020.

Yet the Fed completely failed to anticipate it.

Then, when inflation started becoming a problem in early 2021, they failed to even acknowledge it.

Then when they finally acknowledged inflation, they failed to properly diagnose it… and instead labeled it as “transitory” (meaning that it would resolve itself and go away on its own).

Then, even after they stopped pretending that inflation was “transitory”, they failed to take any action to do anything about it while there was still time.

Then, once they finally did take action by aggressively raising interest rates at the fastest pace in decades, they failed to anticipate any negative consequences from doing that.

We’ve discussed before that one of the most important (and immediate) consequences of interest rate hikes is that banks tend to suffer heavy losses on their loan and bond portfolios.

And yet, just THREE DAYS before a wave of bank failures swept across the US financial system a few months ago, the chairman of the Federal Reserve insisted that everything was just fine.

Silicon Valley Bank went bust 72 hours later. And the Fed failed to see it coming.

This is especially problematic given that the Fed is one of the top regulators in the US banking system. One of the Fed’s key roles, in fact, is to supervise and monitor US banks for signs of problems.

Silicon Valley Bank’s problems didn’t pop up overnight; SVB had been reporting its losses to the Fed for several months prior to the bank’s collapse.

Yet the Fed STILL failed to anticipate any problems in the financial system.

It’s been three months since that debacle. US inflation is still way too high.

The underlying problem that caused the bank failures to begin with (major bond losses due to high interest rates) hasn’t gone away. In fact the FDIC recently estimated that banks’ unrealized losses now amount to more than $1 trillion.

Debt levels have gone sky high. The dollar is at serious risk of being replaced as the global reserve currency. And there’s more risk in the US financial system than there’s been in years.

So in short, the Fed failed to anticipate any problems. They haven’t solved any problems. And they’ve managed to create more problems.

But not one of them has been fired. And when the Fed meets tomorrow to decide what do with interest rates, the core leadership team will be largely the same people who have been consistently wrong for the past few years.

Ask yourself a serious question: would you really hire those people to manage your finances? Because if you hold 100% of your savings in US dollars, that’s essentially what you’re doing.

If your answers is “no”, then you may want to strongly consider owning some real assets… and especially gold.

 Simon Black, as James Hickman is more commonly known, is the Founder of Sovereign Man.

He is an international investor, entrepreneur, and a free man. His daily e-letter, Sovereign Letters, draws on his life, business and travel experiences to help readers gain more freedom, more opportunity, and more prosperity.

Hickman is a lifelong entrepreneur and investor that’s traveled to more than 120 countries on all seven continents. In addition, he’s started, invested in, or acquired businesses all over the world.

He is a graduate of the United States Military Academy at West Point and served in the US Army as an intelligence officer during Operation Enduring Freedom and Operation Iraqi Freedom.

Hickman founded a South America-based agriculture company that has become one of the leading producers in its industry. A few years ago, he acquired a prominent retail brand in Australia, purchasing the business from the former 1980s era rock star who founded it.

His other business ventures have included starting a boutique, private investment bank that boasts some of the highest levels of liquidity and solvency in the world, and investing in companies from Colombia to Uzbekistan. He also serves on numerous Boards of Directors, and previously served as Chairman of company listed on a major stock exchange.

Writing under the pen name Simon Black, he has also written extensively on business incorporation and tax residency establishment in Puerto Rico, and is a proponent of investing in gold and silver as a hedge against inflation.

He is a also a prolific writer on topics ranging from second residency and citizenship, Golden Visas and portfolio diversification, to estate and retirement planning, asset protection, tax optimization and US Opportunity Zones.

 

 

www.sovereignman.com