Where has the Middle Class gone?
by The Legacy Project
The Financial Environment is probably the last thing anyone wants to think about. The economic climate can be confusing and downright intimidating. What do we do, and who do we listen to?
Am I saving enough for retirement? Why do banks keep closing?
Should I max out my mutual funds? Should I pay off my mortgage early?
Do I have enough life insurance?
What about CDs, I-bonds, crypto, NFTs...?
All of these are valid questions, and each person’s answer is personal and will be different. While we, at The Legacy Project are not qualified financial advisors we do review data and make objective assessments on our current financial future.
Occam's Razor is a principle that suggests the simplest explanation is often the best. In the context of the financial environment, an Occam's Razor might suggest that the financial environment is simpler than it appears.
While financial markets can appear complex and difficult to understand, the underlying principles of finance are based on fundamental concepts such as supply and demand, risk and reward, and the time value of money. These principles can be understood with a basic understanding of math, economics, and most importantly, motivation to learn . In many cases, the complexity of the financial environment is the result of human behavior, such as greed, fear, and misinformation. [Pending recession, anyone?]
By focusing on the fundamental principles of finance and avoiding the distractions of market noise and speculation, both yourself and others can simplify your approach to financial planning and investing. Ultimately, the simplest strategy is often the most effective one. This month’s edition will focus on a few key pieces of data to see what we can assess and make sense of, then see how the Infinite Banking Concept compares.
Personal Savings Rate: The personal savings rate is the percentage of income remaining after an individual or family pays taxes and monthly living expenses. The average personal savings rate for Americans over the previous twelve months is 3.675% [1], a significant decline from the 8.91% historical average (see Figure 1).[2] Couple this with an inflation rate of over 8% last year and it becomes alarmingly apparent there is an erosion of purchasing power in the United States (see Figure 2).[3]
Figure 1
We have all experienced, and continue to experience, the price of basic necessities such as housing and groceries exponentially increase. The U.S. Census Bureau reported a national poverty rate of 12.8% in October 2022[4] - that is 42.66 million Americans now living in poverty! What we are witnessing is the rapid dismantling of our Nation’s backbone: The Middle Class.
Figure 2
ETFs/Retirement Asset Classes/CDs: What about retirement accounts? After the housing market crash in 2008, some retirement accounts saw a 19% decline in their retirement portfolio. While a lot of those accounts have rebounded, what is going to happen next? How much time has been lost or will be lost going forward? The chart in Figure 3 shows the distribution yields for four different ETFs, all pointing towards lower yields as they are not producing as much cash flow. It has gotten to the point where they are producing less income than almost any point in recent history (and that says a lot). Chris Naugle, someone who has been studying financial environments for decades, has a plethora of YouTube videos on his channel that discuss this topic in more detail. One of our favorites is “How to Prepare for the Worst Economic Collapse”.
Figure 3
Even CD’s continue to drop as shown in Figure 4. Chart after chart is populating decreasing trend lines while financial "experts" are yelling for everyone to buy everything “on discount!" There must be more to all of this. There has to be a simpler explanation than to do the same things and succumb to the same results. How does all of this fit into Ray Dalio’s Economic Machine theory, and what do we do about it?
Figure 4
This message is not about politics, estate planning or financial advice. Rather, we are trying to illuminate the struggles of the average American who tries to earn a living and prepare for their winter years. After witnessing the devastating effects of recent, increasingly harmful monetary policies, we created The Legacy Project in 2022 to help individuals and families take back control of their personal banking practices with a process that has stood the test of time for over 200 years. More on the solution later, as I first want to discuss a bit of history on how we as a Nation got here.
So What?
So why does all of this happen and what do we do about it? What causes this is likely a better question, and understanding that will help us dissect what we can control to avoid being REACTIVE to these markets. Being PROACTIVE is the only way to escape the macro cycles and truly capture generational wealth.
Since the Federal Reserve came into existence in 1913, the Federal Government has steadily increased not just the amount of taxes citizens pay, but has also taxed more stuff. In reference to the 16th Amendment, which gave Congress the power to collect income taxes, Libertarian thinker Frank Chodorov wrote:
“IT VIOLATED THE RIGHT OF THE INDIVIDUAL TO THE PRODUCT OF HIS EFFORTS, THE ESSENTIAL INGREDIENT OF FREEDOM, BUT IT ALSO GAVE THE AMERICAN STATE THE MEANS TO BECOME THE NATION’S BIGGEST CONSUMER, EMPLOYER, BANKER, MANUFACTURER AND OWNER OF CAPITAL.”
Shortly after Congress passed the 16th Amendment, President Woodrow Wilson signed the Federal Reserve Act, thus creating the Federal Reserve. The Federal Reserve is actually a pseudo private entity not even part of the federal government, yet manages monetary policy and even established the fractionalized reserve banking system still used today. If you are unfamiliar with fractional banking, it is a driving factor in the creation of inflation as fractional banking only requires banks to hold a portion of the money deposited in liquid cash. As a result, banks are allowed to use customer deposits to make new loans i.e. they loan you back your own money and charge you interest in the process! For each dollar deposited, banks are allowed to loan that same dollar up to ten times. So, when you learn how much money our Government is printing, multiply that figure and you should gasp at the realization of what amount of money is truly being lent!
Our current monetary policy is the culprit of the growing issues in our nation, but this policy is also the lifeblood of our Federal Government. The only solution to this impossible conundrum is to change the way people think. For those of you who have read Nelson Nash’s 92-page book, “Becoming Your Own Banker,” you will understand Nash is trying to explain how to set-up your own personal private “bank” that is not party to this fractionalized system of banking.
The Infinite Banking Concept (IBC) is merely a process of creating and controlling the banking functions in your life. IBC is a means to recapture the interest you pay to debtors and creditors. If you could recapture the money you paid others in your own privatized bank, would your personal savings rate not also increase? Would you not immediately be better off financially without adding risk from "expert" advisors?
The vehicle we use to practice IBC is specially designed dividend-paying Whole Life Insurance contracts. These contracts pre-date the 1913 Revenue Act, thus making their compound growth and dividend payments tax free. Furthermore, policy loans are NOT inflationary because fractional banking is not permitted; insurance companies must maintain dollar-for-dollar cash reserves.
It is important to reiterate that these contracts must be specifically designed by an IBC Practitioner. The policy needs to come from a mutual company, and while there are 2,000+ insurance carriers out there, only 34 of these institutions are suitable to meet your needs. These “banking policies” are merely the framework for you to practice IBC and return privatized banking to the public sector.
Want more information? Let's schedule a phone call. We're here to help! Or you can come see us live at one of the 23 events hosted around the country this year!
Works Cited:
[1] O’CONNELL, CONNIE (MARCH 31, 2023). “PERSONAL SAVINGS RATE.” BUREAU OF ECONOMIC ANALYSIS. [2] “UNITED STATES PERSONAL SAVINGS RATE.” TRADING ECONOMICS. [3] (JANUARY 17, 2023). “CONSUMER PRICE INDEX: 2022 IN REVIEW.” U.S. BUREAU OF LABOR STATISTICS. [4] BENSON, CRAIG (OCTOBER 4, 2022). “U.S. POVERTY RATE IS 12.8% BUT VARIES SIGNIFICANTLY BY AGE GROUPS.” UNITED STATES CENSUS BUREAU.
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