Why Strategic Wealth Management Is More Important Today Than Ever Before – The Problem And The Outlook

Our financial and monetary systems as we know it are collapsing because the premise on which it was built is not sustainable into the future. That is why we saw, in 2007, the collapse of the sub-prime market and subsequently in September 2008, the collapse of Lehman Brothers, one of the biggest banking houses. We have now come to refer to this as the beginning of the Global Financial Crisis.

This crisis is a symptom of the underlying problems that are now all reaching their limits within the same window in time. This means that we can no longer keep on doing what we’ve always done because using the same “wealth rules” as in the past will no longer bring us the same results. The rules have changed and are changing. And that is why it is more important today than ever before to have your own personal Strategic Wealth Management plan that is aligned with the new rules. If you don’t already have one, then it is an opportune time right now to put one in place.

This page sets out as simply as possible, the main items you need to be aware of, to understand:

• how money is created;
• why relentless borrowing and growth are needed;
• why this is no longer sustainable;
• how we are accelerating toward a probably financial collapse and a new scenario that none of us have yet experienced before;

The crux of the issue is this.

Money Is Created Out Of Nothing

Money is created, out of nothing, by being loaned into existence, in 2 ways. (1) By banks lending it and (2) by the Fed “printing” it in the form of paper money or by itself lending money to the banks. This is something that we saw firsthand during the economic bail-outs in 2008/09.

The following two videos show exactly how this happens.

However, the problem with creating money through lending is that there is no limit to the amount of money that can be created, AND the loans carry with them a charge for interest. What this means is that more and more money is needed as time goes by in order for the interest to be repaid.

In order to be able to put more money into the system, our economy has needed more and more growth, even to the extent that growth is deliberately built into our system by building products that become obsolete in a relatively short space of time. Ever wonder why your equipment often breaks down after 3 years when your grandma’s went on for 20 years? That’s because its breakdown has been built into the item itself. (You can learn more about that at The Story Of Stuff).

For Every $1 Earned, $1.05 Is Spent

Now, here’s more fuel for the fire. We spend more than we earn. In other words, we are borrowing as a matter of course, to finance our day to day spending. What’s more, this borrowing has been encouraged, through easy extension of credit.

The cumulative effect of this relentless growth, lending and interest charging with the need for more money in order to repay the interest, has been happening consistently and increasingly since 1933. The compounding of continually needing more money has gathered more and more momentum over the years and is now like a runaway train.

Take a look at this.

Source: http://www.babylontoday.com/national_debt_clock.htm

In short, we have reached a point where we simply can’t grow quickly enough (or work hard enough) to generate enough additional income in order to repay the debt with interest. To put the figures into some context, consider this.

(14 September 2009) James Bianco, former researcher at UBS Securities and equity technical analyst with First Boston and Shearson Lehman Brothers, figured bailout spending was equal to the inflation-adjusted cost of the Marshall Plan, Louisiana Purchase, Race to the Moon, S&L Crisis, Korean War, New Deal, Iraq invasion, Vietnam, and NASA – COMBINED.

All that spending originates as borrowing, and there’s no way it’ll ever be repaid. It will be inflated away by the Federal Reserve’s dollar printing… eroding the value of the money in your pocket, in your bank account, and ultimately in the value of your stocks.

As a result, in late 2008, we started to see the impact of this growth in borrowing and the ease with which credit was extended. People started to default on their loan payments.

Because there were so many people who defaulted at the same time, we saw a crunch and the sub-prime mortgage market collapsed, along with 140 banks in the US, and further money being created to shore up the crisis. Iceland declared bankruptcy, and AIG – one of the largest companies in the world – had to be bailed out to the tune of $85 billion.

Side note: Where do you think this money would have come from? Also as an aside, an article in the Financial Times on January 8, 2010, states in relation to the AIG bail-out, “Unresolved in the e-mail traffic between lawyers and regulators is whether the New York Fed, regulator to much of Wall Street, acted out of concern for the market or for its own political position”. We are not here to say what’s right or what’s wrong, but merely to encourage you to read between the lines of the news you see in mainstream media and to take personal responsibility and therefore appropriate action.

Now, think about the impact of this on the future. Even if our financial system does not collapse under this pressure, how will all this ever-increasing debt be repaid? Are we depending on future generations to repay debt we have incurred today? Will taxes have to rise significantly in the future so our children can repay our debt?

The bottom line now is that we CANNOT CARRY ON AS IF NOTHING HAS CHANGED. The trends point to hyper-inflation and the existing financial and monetary system will not cope with it as it might have done in the past, because there is no where to go along the same path.

To get a sense of what hyperinflation might mean to us, here’s a quote from the article Hyperinflation Special Report, written by John Williams of Shadow Government Statistics:

In terms of hyperinflation, there have been a variety of definitions used over time. The circumstance envisioned ahead is not one of double- or triple- digit annual inflation, but more along the lines of seven- to 10-digit inflation seen in other circumstances during the last century. Under such circumstances, the currency in question becomes worthless, as seen in Germany (Weimar Republic) in the early 1920s, in Hungary after World War II and in the dismembered Yugoslavia of the early 1990s.

Relentless Unsustainable Growth

We are in the exponential part of our growth curve, which means that we are accelerating towards resource and environmental problems. The following video is part of a lecture given by Dr Albert Bartlett that explains the basic concept of compounding. It cuts out suddenly at the end, but there is enough in this video to illustrate the trend that we are on and the impact of continuing growth.

Already we have experienced what has been referred to as a crisis. There will be more to come, more than likely deeper than what we have already seen. For example, in 2009, we saw 140 bank closures in the US. Experts predict that in 2010, we will see a further 200 such closures.

Whether from the perspective of energy (peak oil), environment or economics, the picture is the same. We are heading towards unprecedented change, the likes of which we have not experienced before. While we can’t predict exactly what changes will take place, we can see that, from an economic perspective, we are heading towards hyperinflation and depression.

If we take what lessons we can from the Great Depression, we can see that there will be a transfer of wealth. Essentially, the rich will get richer and the poor will get poorer, and because of the scale of what is ahead of us, it is anticipated that middle class will be wiped out… that is, if you are not prepared. That is why we deem it important enough to tell as many people about this, so that you can put together a strategic wealth management plan right now, that takes into account these factors.

Now, here’s the thing. We are not advocating creating wealth for the sake of greed, but rather to take positive steps today, in the knowledge of what the potentials are for tomorrow. In this way, you can ensure that are still in a position of relative wealth and are not caught out when the time comes. It is through helping yourself first that you will put yourself in a position to be able to help others – others who are perhaps unaware.

No matter where you are right now, even if you don’t think you have any wealth at this point in time, remember: Wealth is relative and you can be in a significantly different position to where you’re at today if you begin right away, even with small steps.

Action You Can Take Today

One of the most powerful ways in which you can take action today is by enrolling in appropriate financial education and be part of a network of like-minded people where you will have private access to strategies, and powerful concepts once only reserved for the ultra wealthy and well connected…to be able to build wealth for you and your family … so you can be in the best position possible for you and your family, which will enable you to help others, and make a difference in your community.

We are not financial experts, nor are we financial advisers. But we have been doing our research.

If you’d like to know how you can be a part of this growing network and be able to access strategies previously unavailable to “ordinary people” like us, then complete the form below and we’ll send you an application form right away.