determining value even more challenging. Historically, when huge monetary changes occur, the best rule of thumb is to control as many real resources as you can. These can include precious metals if you so desire, but it also extends to the above water-rights, energy production systems (solar, geothermal, etc.), and farmland or other arable land. For much of the world, it may be technically safer to keep these assets outside the banking system, especially since widespread policy changes mean you may be forced to bail in your own bank.
In terms of wealth creation strategies, our changing world presents a number of new possibilities. Before we describe them, I cannot stress enough that nothing in this chapter or indeed the entire book constitutes investment advice.
The fact that it contains guidelines for a crossroad pact with the devil should really be the giveaway there. Cast your mind back to Deirdre McClosky’s notion of the Great Enrichment; the middle classifying of the whole planet. We can observe this process playing out in the world’s stock markets. In her 2014 annual wrap up, Catherine Austin Fitts observes that the total value of every stock market on earth in 1990 was $11 trillion dollars.81 Today it is $70 trillion and is on track for at least $150 trillion as more countries launch their own exchanges and the emerging ones continue to grow. Fitts calls this “a once-in-a-civilisation event,” the securitisation of the entire planet. It is a huge growth opportunity and it is presenting itself—indeed is powered by—the increase in access and participation in markets thanks to the rise of mobile and digital communications.
We already see the beginnings of this increased participation with the emergence of crowdfunding, micro-funding and investment concepts such as motif investing, where participants can buy trends such as “clean energy” or “America on the move.”
As for retirement strategies, the world has changed so much that if you are under forty the social and capital infrastructure, pension funds, and so on will have been largely or completely dismantled by the time you come to retire.
There are currently more than $60 trillion in unfunded pension liabilities as we head into the largest mass retirement in human history. Consider the following Ponzi mathemathics, courtesy once again of Charles HughSmith. (Buy his book and subscribe to his blog.)82
1 retiree consumes the taxes paid by 5 workers.
Those 5 workers when they retire consume the taxes paid by 25 workers.
Those 25 workers when they retire consume the taxes paid by 125 workers.
Those 125 workers when they retire consume the taxes paid by 625 workers.
Those 625 workers when they retire consume the taxes paid by 3,125 workers.
Superannuation and pension schemes rely on harvesting the wealth of the working age population, “investing it wisely,” and paying for the retired members of the schemes with the profits from their canny investments. Don’t know about you, but I think I’ll pass.
Given the supreme unpredictability facing the economic system, let an understanding of physical wealth inform your retirement decision-making. It is also a very good idea to keep your network healthy as you approach retirement age, a practice that has been humankind’s tried and true approach to our later years.
Inevitably, what constitutes wealth and how much of it you actually need to achieve your personal vision of success can only be measured on an individual basis. If there were a defined strategy, everyone would be wealthy. Complicating this further is that the tried and true strategies of the previous five decades are not a good match for the changes the world is currently experiencing. These changes suggest some novel approaches are called for.
Housing: Leveraging yourself by more than 300 percent for a single, illiquid asset that has returned less than 1 percent per year over the past fifty years is not a good idea. Take seriously the possibility of multi- generational living or living with a group of friends. This reduces overall financial risk both in terms of debt servicing and any possible job losses;
it reduces child care costs, expenses, and it provides alternative vectors for retirement. Why do you think we lived this way for centuries?
Geography: Match your wealth strategy to your location. Rent in areas of
high income and high property prices (major cities). Move to areas that present the correct mix of opportunity and cost for you. In short, adapt to your environment. We all know what happens to creatures who don’t.
Health: Few people consider their health to be a component of their wealth portfolio, but a bad health diagnosis is the single biggest cause of bankruptcy in America. This has tremendous implications for how you view food spending—it’s an investment—and should have you thinking extremely seriously about converting parts of your property into food production areas: vegetable plots, aquaponics, etc. Health is absolutely not an area in which to cut costs.
Debt and investment: If you are in debt, consider radical possibilities to get out of it as fast as possible: selling possessions, moving in with friends and family, and so on. Once you are out of debt, stay out of it.
Debt completely skews your risk profile just as the global economy is undergoing some dramatic changes. Not only does debt increase your overall risk, servicing debt means you are reducing your opportunity to participate in other investments; whether that be your own business, securities and other asset classes, and so on. Never forget that the planet’s economy is actually growing, even if the local one is not. Participate!
Career: Make peace with the reality that you will have multiple careers over the course of your lifetime and that there really are no such thing as stable jobs any more. Be prepared to move, be prepared to seize
opportunities, and never stop upskilling yourself. If you are debt free and prepared to be geographically dynamic, the world is your oyster.
Education: If someone rich is paying, go expensive. If you are paying, go as cheap as possible. The student with the online degree and a year of interning will always beat the student with a degree from a mid-level college. The difference is so stark that you are probably better off getting into debt to support a year of interning than you are getting a degree. (Not that I would recommend that, of course.) Huge structural changes are looming for the education sector. Think of how angry you will be if you
were one of the last students to get so deeply into debt before everything changes.
Finally, there is one other factor to be accounted for in your quest for success.
The most important factor … so important it made it into the title of the book.