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The world’s monetary system has been largely controlled by the US$ for more than 100 years now since they have the world’s dominant economy. For a long time during the 1800’s money was primarily gold and silver coinage. However as trade developed over larger distances payment with this form of money became cumbersome. So a paper note was put in place where gold was held in trust and the note was issued in its place as an IOU. The paper note could be handed back in and exchanged for gold at any time. This paper note was decreed to be legal tender and had to be accepted for trading.

     The paper circulated far and wide and it was noticed that it was only ever exchanged less than 10% of the time. Therefore the greedy bankers realised they could issue 10 times the amount of paper money against the gold they held and not risk a ‘ run on the bank ‘ where they would be unable to exchange notes handed in for the gold. Thus Fractional Reserve Banking was born. Trade could now increase as it was not so greatly hampered by the available gold supply. Of course this also resulted in inflation which is always and only the result of increasing the supply of money to purchase the same supply of goods , that is not created through productive effort.

    THE  FIRST  SHOCK – 1907.  

   There was a major financial panic. To ensure it could not happen again a group of powerful American bankers led by J.P.Morgan came together and encouraged the Government to pass The Federal Reserve Act which allowed the Federal Reserve Bank ( FED ) to be formed which from then on directed financial policy and set standards for all the banks to follow.  It should be noted that the FED is not owned by the Government but rather by the larger banks of the time.

     These elites used the panic as a cover to pass a law that today we recognise as one of the biggest power grabs in American history. Since this time to today the US$ has lost 96% of its purchasing power. This has greatly enriched those who own real assets versus those  who earn and must survive on their wages.

      THE  SECOND  SHOCK – 1933.  

      The world was in a great depression. The stock market had plummeted 80%. Unemployment soared as construction and manufacturing ground to a halt. Once again the insiders rode to the rescue.  President Roosevelt signed an order under the guise of ‘stimulating  economic growth’ called the Emergency Banking Act of 1933.

       This act forced all Americans to hand in their gold savings. Each one ounce coin was swapped  for $20.67 in paper money. Failure to comply would result in a $10,000 fine or jail time.

      As soon as the government had its hands on the gold it changed the price to $35 an ounce. This effectively stole 69% of American’s savings. This allowed the government to pay for all their pet projects. To the average person at the time, this was seen as a salvation but in reality, over time, the gains were inflated away as real assets (gold) were exchanged for paper which was then not productively employed.

     THE  THIRD SHOCK.

     By 1971 the USA was struggling to pay for the Vietnam war and France under De Gaulle was handing US paper dollars over and demanding gold in exchange at the exchange rate of $35 per ounce. America was also running massive welfare programmes known as the “Great Society”.                    All these events were threatening to bankrupt America as printing of their currency was limited to the supply of gold as per the Bretton Woods Agreement.

      To fix this problem President Nixon went on air on August 15^th 1971 and addressed the nation to announce he had decided to decouple the dollar from gold in an effort to “ stabilize the dollar” ( his words). This move allowed the FED to throttle up the printing press and accelerate the expansion of the money supply which has continued to this day. Also as a result of this money printing the price of gold started to increase dramatically. We are still seeing this today.

     This move made the world’s reserve currency , the US$, into a fiat currency with nothing to back its value other than the confidence you have in the USA governance.

      Over the period from 1971 to today we have seen:

     —– the hours required to be worked to afford a new car double

     —– the hours worked to buy a home go up 2.5 times

    —— household debt has soared 4.5 times

      We have adjusted to this by:

    —– sending women into the workforce to give 2 incomes per family

    —– printing trillions of new dollars without any increase in productivity

   —— greatly increasing public debt.

   —— buying vehicles with no cash down and not even repaid at the end of the loan.

      THE FOURTH SHOCK.

      This is now unfolding before our eyes. The world is in lockdown because of a virus commonly called Covid-19 and world economic activity is in a huge downward spiral. Governments worldwide have given up any pretence of controlling the money supply and have forced interest rates down to almost zero and in many cases below zero to ensure the cost of printing money is zero.  There is also zero chance that these debts will ever be repaid from savings and taxes.

    Those older people relying on savings are struggling to cope ( as well as being locked down ) and are turning to the sharemarket and other more risky assets such as the bond market to get a return. Consequently these assets are still rising as the economy crashes. This is transferring a lot of wealth to the rich and robbing the poor who are losing their ability to earn.

    This is the opportunity the Elite have been waiting for to remove paper “fiat” money altogether and replace it with digital money only. An early draft of a new act called “Take Responsibility for Workers and Families Act” contains the definition of a “ Digital Dollar” and a “ Digital Dollar Wallet”.

    There is also the “Banking For All Act“ making its way through Congress requiring all member banks to maintain pass – through digital dollar wallets for certain persons, and for other purposes. It also defines a “digital dollar”.

   The elites are also on the case. Bill Gates and Microsoft have applied for patent 060606 described as a “Cryptocurrency system using body activity data“. This is an embedded chip that can sense a person’s movement, body temperature, heart rate, eye activity, blood flow and brain waves to track the body’s activity and transmit a digital currency wirelessly.

    Visa also has a new patent which “Causes the removal of the physical currency in a fiat currency system”. This includes “The removal of the physical currency from circulation  including destroying the physical currency”.

     There is now a “Better than Cash Alliance”  to accelerate the global transition from cash to digital payments which now incudes 75 different world governments, companies, and major international organisations.

     The digital ID ( implanted chip ) as described by patent ID2020 may be required to receive the Covid-19 vaccine as a means to encourage people to accept this new technology. This digital ID will be attached to a digital dollar.

     With this digital currency there will be an end to financial privacy. The government will know everywhere you spend money and everything you buy. It could suspend your passport and driver’s licence if you owe taxes. It could also prevent you from buying sugary snacks if, by their imposed standards, you are deemed to be overweight. Retirement savings could also be confiscated if it is deemed necessary.

    In China this is partially in place already and is called a “ Social Credit Score “.

  Here at The Brokers we keep an eye on all these developments. There are ways we can help you to secure your financial future and try to prevent you from falling victim to these possible scenarios.

  We will always continue to work for you.

There was a time , a long time ago now, when interest is what you earned for lending people your savings ( also known as your capital). The amount of interest you could charge and receive depended on the risk you were taking and the demand for capital.

Now we have a Central Bank—the Reserve Bank of New Zealand (RB) — who control short term interest rates to stimulate or slow down the economy. If inflation appears to be exceeding 2 % they raise interest rates to “slow down the economy”. I knew a time in the era of Robert Muldoon when I was paying 26% interest on my borrowings!

However we believe the idea that an economy can be manipulated in this way is based on a false premise. The economy is actually the interaction of millions of human decisions, wants, and wishes. These play out in the market place of the capital system to determine outcomes. Poor use of capital means those businesses don’t survive and new ones spring up. Trying to manipulate this natural process causes growing distortions through each cycle.

Gradually we have allowed the Government to take over our decision making and with the support of the banking system they are now bailing out and rescuing most sectors of the economy and creating a huge welfare state. The productive sector of the economy is shrinking and carrying a massive burden of the costs to maintain a huge bureaucratic network. This is now so dominant and pervasive it is unlikely it can be stopped apart from having outright revolution.

However to keep the system operating governments all over the world have realised that since 1971  they can just print money out of nowhere, put it out in the economy as capital and use it to meet whatever needs there are. Up to 1971 money could only be issued against the value of gold available to back it. Money up to then represented capital and this gave it value as a real commodity was backing it. If Governments needed money they had treasury bond auctions . Now it is issued via “ Quantitative Easing “ or QE.

The situation now is that the world is awash with debt to the extent that it now represents                 ( together with promises called derivatives) many times the value of all the world’s assets and there will never be any hope of paying it back.

To keep the whole situation from imploding interest rates are continually being reduced to make the debt affordable. They are now lower than at any time in history and in some countries the interest rate on savings is now negative. We are using debt to pay for interest coming due in an upward spiral. This whole process helps the rich become richer as they can use the cheap money to buy out businesses and assets at little cost. The poorer in society are being encouraged to be consumers of money to keep retailers in business and so create employment. The idea of saving money is a distant consideration.  

Wages can remain low as the cost of borrowing reduces and ordinary workers can access cheap funding.

Therefore talk we hear from banks that interest rates will rise on the premise of controlling inflation are wrong . There could be a situation where the circulation of this printed money is so large that inflation of prices may occur but then asset prices would also fall as no one could afford the extra cost of the debt. This will result in stagflation—a situation the government, together with their banking partners will not allow to happen ( assuming they could prevent it ).

The most likely outcome is a complete reset of our financial system by issuing a digital only currency, a new international currency, and writing off all the printed money that was not created via the normal process of creating capital through productive processes in the economy.

However you do not need to fear this process. As a client of THE BROKERS  we will help to educate you and look at your own situation and put in place a plan to help you benefit from the issues we have outlined above. All the above developments will affect families, businesses , and individuals in different ways. Intergenerational wealth planning will become very important.

THE BROKERS have over 30 years of accumulated experience — why should you not learn from this real world knowledge                  

With the guidance of our team at THE BROKERS we can show you how you can progressively develop your own protection against the risks you face as you progress through life.

The key is to start young when generally you are free from financial and medical issues.

This means that time and compounding are on your side. You can never win this back later in life.

Insurance companies are available to help with this effort in the short term but you must give them your money, they want to minimise their risks, and they must remain profitable to survive. Also they invest the funds you pay as a premium to make profits on top of their underwriting profits. Apart from what is paid out in claims the balance is essentially free capital for them.

At THE BROKERS we work with all the insurance companies and lending institutions to put together tailored solutions to best suit you to keep more of this capital ( your income ) under your control.

Done with our guidance this can build a secure financial future for you, your children, and even future generations with you in control.

Most people would argue that debt is bad because you owe money to someone else and now you have to spend many years paying it back with money from your income. Plus there is the cost of interest to be added on. How could this be good for your pocket?

Well this is true if it is debt you have taken on to buy a car, a holiday, furniture, or anything that drops in value after you have bought it. Now the debt remains and it is often greater than the value of the item you purchased. Therefore you cannot even sell the item to get your money back!

These sorts of purchases should be done from your savings only. This also saves regret setting in after the purchase as you cannot get out of the debt cycle you have landed yourself in until it is repaid or it sends you broke.

Also the interest rate is very high ( relative to good debt ) as the lender knows it is risky lending and they may not be fully repaid if things go wrong so they charge more in interest. These lenders can also be very aggressive if you don’t pay on time.

At THE  BROKERS  we can review your financial situation and help you grow your wealth using good debt to buy your home, business, or other investments. We can even show you how to get rid of any bad debt very quickly.

Good  debt used wisely will grow your wealth, reduce risk, and lead to a comfortable retirement.

THE  BROKERS  are specialists in this field and their staff have been showing clients the right way forward for over 30 years. Make sure you become one of them.

By international standards NZ is a very small economy. Yet the NZ dollar is the 10^th most traded currency in the world. This is because the NZ$ is trusted as it is backed by a country with little corruption, a strong rule of law, and relatively low dept levels.

However NZ has a dilemma. Widely held economic theory shows that a country can’t have all 3 of the following:

   —- A fixed foreign exchange rate

   —- Free capital movement

  —- Independent monetary policy

   If you want two of these, you need to give up on the third.

For example to fix its currency to the US dollar, Hong Kong basically gave up independent monetary policy and instead embraced America’s monetary policy. It will be interesting to see if this changes with the new controls China is imposing on Hong Kong!

For most developed economies a desire to have both free capital movement and to control their own monetary policies has led to floating exchange rates.

For large economies the majority of commerce occurs inside their borders so it is better to let foreign exchange ( forex) rates float, and have more control over monetary policy in other ways. NZ has tried to operate this way but it has resulted in wide movements in exchange rates which can harm our exporters.

Some stability has been achieved by manipulating interest rates. A lower local interest rate causes our currency to weaken thereby making exporters more viable in the international economy on which NZ depends.

However as we approach near 0% interest rates and unlikely to break materially from these levels, the government can no longer use this tool to manage forex rates. This will lead to more forex volatility.

As per the above dilemma it is assumed NZ will want to maintain an independent monetary policy. If it then fixes the foreign exchange rate ( as floating it at 0% interest has no effect)  we will need to place controls over the flow of capital. We are already seeing this start with the requirement to report money flows. However the disguise is that this is for anti money laundering.

At THE BROKERS we believe the above considerations should be taken into account when investing and that if you are a serious investor you should diversify your investments into several countries to spread your country and exchange rate risks. Working with THE BROKERS we can show you the options available and even how this can greatly enhance your plan to achieve Intergenerational  Family Wealth.