America's Great Reorganization, Part Two
Yesterday, our old friend Joe Withrow introduced the idea of ‘normal’ interest rates in the US economy and the restructuring of the US economy the would trigger. Today in part two, he writes about the remonetization of gold, what ‘America First’ means and if it’s really possible, and whether you can generate enough monthly cash flow from some of your investments to fund new ones.
Backstopping the Dollar and Recapitalizing America
I’ll submit to you that the markets began pricing in a massive recapitalization of the United States the day after the US presidential election – when it was called for Trump. Here’s what I mean…
It’s more common to talk about recapitalization in terms of a business, but the same concept can apply to a country. Recapitalization refers to a significant restructuring of an entity’s financial and economic framework. It’s all about stabilizing the capital structure.
For the United States, this must be done on the following levels:
Government Debt and Fiscal Health
US Dollar Stability
Economic Revitalization
If the DOGE team is successful, their effort would go a long way towards shoring up the federal government’s finances and stabilizing the US dollar. It would also stave off a sovereign debt crisis as demand for US Treasuries would almost certainly increase.
And if they are able to take an axe to the current regulatory structure and the administrative state, that would go a long way towards economic revitalization. It would take some time, but we would see a small business renaissance in this country if the Deep State was neutered.
At the same time, normalized interest rates would help reverse five decades of financialization… which would pave the way for a revival of the once-great American Middle Class.
But we can’t be Pollyanna about all this.
Even if all the above occurs, it wouldn’t erase 50 years of bad economic policy overnight. Nor would it erase the $36 trillion national debt.
And that’s where a curious new plan comes into view…
Wyoming Senator Cynthia Lummis recently introduced a bill to establish a “Strategic Bitcoin Reserve” for the US government. The legislation proposes that the Treasury and the Fed purchase 200,000 bitcoins annually for five years.
The goal is to accumulate one million bitcoins. That’s nearly 5% of all the bitcoins that will ever exist.
At current prices that equates to over $100 billion worth of Bitcoin. But if the feds actually followed through with this plan, the dollar-based price of Bitcoin would go much higher – probably by 5X or more.
Incoming president Donald Trump has voiced support for this plan. As have numerous corporate executives.
Marc Andreessen – founder of Netscape and Silicon Valley-based venture capital (VC) firm Andreessen Horowitz – is one of those. Curiously, Andreessen recently revealed that he’s spent about half his time at Mar-a-Lago working with incoming Trump administration since the election.
When asked about what this Strategic Bitcoin Reserve would be for, they give fluffy answers about economic stability, national security, and paying down government debt. But there’s another angle to this as well…
My bet is that Bitcoin will be collateralized within the existing financial system in some capacity. Then it could be used to recapitalize the banking system and perhaps backstop the US Treasury markets. Bitcoin would be a perfectly suited for this.
Of course, that isn’t the original purpose of Bitcoin. This isn’t why I gravitated to it in 2014. Back then we were interested in Bitcoin as privatized money… not as a mechanism to help recapitalize the legacy financial system.
Still, I’ve learned not to let “perfect” be the enemy of “better”. And there’s a lot more to this story than meets the eye…
The America First Plan Comes Together
Trump appointed a man named Howard Lutnick to serve as Secretary of Commerce in the next administration. I don’t think Lutnick has much name recognition, but he’s the CEO of investment firm Cantor Fitzgerald.
Cantor Fitzgerald provides institutional clients with a range of financial services. And the firm also happens to be one of the 24 primary dealers within the Federal Reserve System.
This is quite a privileged position to be in. The primary dealers bid on US Treasuries at auction and receive direct access to the Fed’s cheap financing through the discount window and repurchase (repo) agreements.
All that’s to say that Lutnick is a true insider. He’s attuned to the plumbing that underlies the dollar-based financial system.
And here’s where this story gets interesting…
Earlier this year Cantor Fitzgerald invested $600 million into a company called Tether. Cantor now owns roughly 5% of the company.
Tether issues the US dollar stablecoin of the same name. Tether’s ticker is USDT.
USDT is a cryptocurrency that functions similar to Bitcoin… except it’s pegged 1-to-1 with the US dollar. That means one USDT always equals approximately $1.00.
Maintaining this peg is rather simple. Users buy USDT with dollars. When they do, Tether takes those dollars and invests them in various assets, including US Treasuries, Bitcoin, and gold. This creates an asset reserve that backs each USDT issued.
Shortly after Cantor’s investment in Tether, a rumor began to spread throughout financial circles that Cantor was also developing a fund to loan US dollars against Bitcoin collateral – with Tether serving as a critical piece of that infrastructure.
And now we can see the plan starting to form…
Led by Cantor Fitzgerald, we’re going to see the legacy financial system start to lend dollars against Bitcoin—in just the same way that they lend money against other hard assets like real estate.
That means the US government will be able to borrow dollars against its Strategic Bitcoin Reserve – giving it a second financing source in addition to issuing Treasuries.
The net effect of this is that the US dollar will be backed by Bitcoin to a certain extent. Bitcoin will be monetized.
This will also drive demand for USDT as it’s the middle layer between legacy dollars and Bitcoin.
As capital flows into USDT, Tether will invest it in reserve assets – further backstopping the dollar. And with a primary dealer in Cantor now backing the company, we can expect Tether to invest heavily in US Treasuries as well.
The more I think about it, the more I realize that it’s a rather brilliant plan.
The US government is going to buy one million bitcoins over the next five years to create its strategic reserve. Meanwhile, the legacy financial system is creating the infrastructure necessary to lend against Bitcoin as collateral. This means that the Strategic Bitcoin Reserve will back the dollar to a certain extent.
At the same time, other institutions and individuals will use these bitcoin-backed loans to unlock the value they hold in Bitcoin – allowing their bitcoins to serve as a personal reserve asset.
This will drive increased capital into Tether, which will then buy US Treasuries. That, in turn, will support the federal government’s finances – reducing the need for foreign investment.
This dynamic will unlock an immense amount of value that’s currently sitting in Bitcoin. It stands to reason that much of this capital will be used to drive economic activity and perhaps even begin to address America’s crumbling infrastructure. One can hope, anyway.
And it doesn’t have to stop with Bitcoin…
The Remonetization of Gold
The US government still owns 8,133.46 metric tons of gold. This is the largest known gold reserve in the world.
Previous officials, including former Fed Chair Ben Bernanke, have always downplayed this. When asked why the US government still holds its gold, Bernanke said it was “because of tradition”… which is just silly.
Obviously the US government has always recognized that its massive gold hoard is of strategic importance. Otherwise they would have sold the gold long ago.
If the government monetizes Bitcoin as outlined above, it stands to reason that they would remonetize gold as well. The same infrastructure used to collateralize Bitcoin could be used for gold.
Interestingly, the US Treasury still accounts for its gold reserve at a book value at $42.22 per ounce on the balance sheet. That values the US government’s gold at $10.4 billion… which is a drop in the bucket today.
However, gold trades above $2,600 per ounce as I write. The US gold reserve is worth nearly $687 billion at current prices. And gold’s price would almost certainly surge higher if it is remonetized.
A surging gold price (in dollar terms) would further recapitalize America and help provide another solution to the national debt. In fact, we’ve seen numerous proposals for gold-backed US Treasury operations in recent years.
Trump’s former chief strategist Steve Bannon suggested that the second Trump administration might pursue gold-backed monetary policies in an effort to curtail the national debt. Former Trump Fed nominee Judy Shelton has also promoted the idea of gold-backed Treasury bonds.
In addition, the Heritage Foundation’s Project 2025 explicitly calls for the remonetization of gold.
Trump distanced himself from Project 2025 on the campaign trail… but two of his incoming cabinet members were direct contributors to it – incoming OMB Director Russell Vought being the most prominent as far as monetary matters are concerned.
Restoring gold’s monetary role within the dollar-based financial system would almost certainly enhance global confidence in the dollar and US Treasuries. In conjunction with monetizing Bitcoin, this could also unlock trillions of dollars in trapped value that could be used to pay down the national debt.
Could It Actually Happen?
Prior to this past year, I didn’t think anything like the scenario we’ve just explored could ever be possible. I was black-pilled, as the current saying goes. I didn’t think the system could be reformed – largely because of a past experience…
I actively supported the 2012 Ron Paul presidential campaign, and I was plugged in to everything taking place on the ground around it. Back then we had a site called The Daily Paul through which grass roots supporters reported everything they saw happening in their counties and their states. I lived on that site and contributed to it often.
The legacy media, including Fox News, went out of their way to make it look like Dr. Paul was some nutjob with absolutely no support. But the reality is that we had the GOP’s good-old boy network on the ropes.
We went to county meetings and caucuses, and we got a significant number of our people appointed as delegates to the national convention – where they planned to vote for Ron Paul to be the Republican nominee for president.
Nobody knows exactly how many delegates we had. Some speculated that we were close to 50%... but that was probably too optimistic.
Still, we had enough support to prompt all kinds of shenanigans from the GOP at every level. They went so far as to de-credential entire slates of State delegates… and then to replace those Ron Paul delegates with their own.
For the GOP, it was all about ensuring that the average Republican voter believed Ron Paul was a fringe candidate with crazy ideas. They didn’t want people to hear what he actually had to say… because they knew it would resonate with many voters.
A journalist by the name of Deborah Smarth wrote a book about what happened during that GOP primary season. She titled it America’s Lost Opportunity: Stolen Victories 2012.
The book was good. Smarth documented many examples of the GOP’s deceptive and hostile practices during that campaign cycle. However, I can say from first-hand experience that she only captured a fraction of the chicanery that we witnessed on the ground.
Many of us gained an appreciation for what Bill calls “cynicalism” from that experience. We actively supported a political candidate who advocated fiscal reform and a return to America’s founding principles… and we knew that this message would resonate with millions of voters.
But we learned that the system – even within the GOP – is a machine that actively repels any efforts at fundamental change. We were shocked at how they broke their own rules to undermine any grass-roots efforts… all in favor of a globalist-supporting candidate in Mitt Romney.
I held onto my cynicalism for well over a decade. I’m putting it on hold for the moment though. There’s just something about what’s playing out today that’s different.
Given all the dots we’ve connected in this report… and all the breadcrumbs leading forward – I believe the America First agenda has a chance.
Granted, it’s not as philosophically consistent as the Ron Paul plan we supported over a decade ago. But it’s certainly better than what we have now. And it’s dramatically better than what the globalists would like to impose upon us.
Here’s what’s different about what’s going on today…
We’re seeing an odd coalition of tech giants, Wall Street insiders, the new media (headlined by Joe Rogan and Tucker Carlson), and former Democrats coalesce around the Trump team and their America First agenda. Even Robert F. Kennedy Jr. (RFK Jr.) is on board… and his surname represents perhaps the most iconic political dynasty from the Democratic Party in American history.
Along the same lines, Joe Rogan endorsed Bernie Sanders in 2016. Now he’s actively supporting the America-First agenda.
So this is nothing short of a counter-revolution against the globalist agenda.
The revolution is non-partisan in nature, and it’s driven by more than self-interest... it’s driven by self-preservation. Elon Musk said he’s “all-in”. He suggested that his very life is at stake.
So I’m convinced that the reform effort we are seeing today is sincere.
There’s a comprehensive plan at work here. This is nothing like the 2016 Trump administration that appointed a bunch of old GOP neoconservative (neocon) hacks who ultimately undermined everything.
Now, I don’t know if they will be able to execute or not. But I think they have a reasonable chance of success. It’s going to be fascinating to watch this all play out.
And there are some major investment implications at work here as well…
Investing In An America-First World
If what we’ve discussed today comes to pass, we’ll have entered into a world that none of us have known before.
I never thought for a second that such a thing would be possible just six months ago. But if the dots connect as we’ve laid them out today, we’ll find ourselves in a deflationary world where the US money supply is shrinking, as is the federal government itself.
That’s not good news for valuation multiples in the equity markets. Those high-flying tech stocks currently trading at 30+ times sales would almost certainly crash back down to more reasonable valuation levels.
I don’t think this scenario would lead to Armageddon in the stock market though – simply because investment capital would likely find US equities attractive in a world where government spending is under control and the regulatory state isn’t openly hostile to business and commerce.
What’s more, the world we’re describing is a world in which 50 years of financialization would gradually be reversed.
In that world, the stock market should gradually come to mirror the real economy once again. Just like the old days. Naturally, there will be some sectors and companies that benefit from this... and some that don’t.
Meanwhile, Bitcoin and gold would continue to rise in dollar terms.
For Bitcoin, there’s nothing to do but go up if the US government starts buying 200,000 bitcoins a year. Consider this – there will only ever be 21 million bitcoins in circulation. But 19.8 million of those bitcoins are already here.
That leaves 1.2 million bitcoins left to enter circulation through the mining process. However, Bitcoin’s software code exponentially reduces the number of new bitcoins mined over time.
We can calculate with mathematical certainty that the last block of bitcoins won’t be mined until the year 2140. That’s 116 years from now. This scarcity is why Bitcoin is so valuable as a financial asset.
The bullish case for gold in this scenario isn’t quite as direct. On the surface, we would expect deflation to be bad for gold’s price in dollar terms.
On the other hand, remonetizing gold would likely boost demand from central banks and institutional investors dramatically. Every institution that currently holds US Treasuries as a reserve asset would likely allocate a portion of their reserves to gold also.
At the same time, the US dollar would strengthen relative to foreign currencies. Especially the Euro.
I’m not a trader and I don’t recommend it… but shorting the Euro right here looks like a great bet. Buying the ProShares UltraShort Euro (EUO) ETF is an easy way to do that.
I’m not interested in short-term bets though. I like to approach investing from a holistic perspective.
As investors, I think backstopping our own finances with gold and Bitcoin is the most important thing we can do. We should treat them both as true reserve assets – not as investment vehicles.
In other words, the point of buying gold and Bitcoin isn’t to invest dollars today in hopes of getting more dollars out later. No – it’s to trade our dollars for the world’s two premier reserve assets. That way we always have a strong balance sheet with sound financial backing.
Doing this opens up a host of interesting strategies for us – especially in a world where we can collateralize these reserve assets to accelerate our investments.
One of the most intriguing strategies to me today involves mortgage notes…
Creating a Turn-Key Investment System
Most investors know that there’s an active market for real estate in every major city in the US. People buy and sell real estate in this country every day. I’m an active real estate investor myself.
I don’t think many investors realize that there’s also an active market for mortgage notes in the US as well. We’re talking about mortgages on single family homes and parcels of land throughout the country.
At any given time there are hundreds of these mortgages for sale. And they are available to retail investors at will – no accreditation needed.
I’m willing to bet that most of us have financed a home using a mortgage before. Chances are most of us have also received a letter in the mail notifying us that our mortgage was sold. That letter included information on how we should make our mortgage payments going forward.
When this happens we tend to assume that the bank just flipped our mortgage to another bank. But that’s not necessarily the case. It’s possible that a retail investor purchased our note and contracted with a loan servicing company to manage it.
In that scenario, the principal & interest (P&I) portion of our mortgage payments go to some guy we’ve never met. Our mortgage payment becomes his cash flow – every single month.
That’s what makes mortgage notes an intriguing investment opportunity. Buying mortgage notes is the other side of the coin to buying rental properties.
With notes, you don’t own the home… just the debt. And that means you’re not on the hook for cleaning carpets, painting walls, or fixing the leaky shower. There are no unexpected expenses that could eat into your monthly cash flow.
What’s more, we can always find mortgages selling at affordable prices. I’ve seen notes selling for as little as several thousand dollars.
Of course, there are also mortgages selling for hundreds of thousands of dollars. But believe it or not, most mortgage notes available in the secondary market sell towards the lower end of the price range.
That’s because banks, insurance companies, and hedge funds tend to sell their older notes whenever they buy a block of larger notes with longer durations. They constantly must maintain a “ladder” of durations throughout their portfolio.
Mortgage notes are a very attractive investment in a deflationary world – where we don’t have to worry about the purchasing power of the dollar falling dramatically.
Plus, notes offer higher returns compared to rental real estate in the current climate given how much interest rates have risen. They are a great vehicle for creating passive monthly income today.
And we’re just scratching the surface here…
What if we used mortgage notes to create consistent monthly cash flow… and then we used that monthly cash flow to fund other investments – including investments with contractually guaranteed rates of return?
What we’re talking about here is creating our own magic money machine… which is exactly what the world’s best business has been doing for centuries.
There are quite a few pieces to this puzzle. But once you understand them – and how they fit together – creating a turn-key investment system is fully within anyone’s grasp.
The idea underlying a turn-key investment system is simple. First we backstop our finances with gold and Bitcoin. Then we create extra monthly cash flow through vehicles like mortgage notes – or real estate if we prefer. Or both.
From there we use that monthly cash flow to fund new investments – including investments that further increase our cash flow. If we do this, we can create a “snowball” effect that dramatically increases our assets and our income over time.
The key here is that this strategy works best in a climate where the dollar’s purchasing power remains relatively stable. That’s why the America First agenda could be a major boon for strategic investors going forward.
To that end, I’m hosting a webinar on January 8, 2025 to share with you exactly how to build out a turn-key investment strategy like this. At the event, we’ll talk about how to:
Generate Consistent Monthly Cash Flow: Learn how to invest in mortgage notes to create a steady stream of passive income without the hassles of property management.
Leverage Your Cash Flow: Discover how to use this income to fund other high-return investments, creating a self-reinforcing "snowball" effect that grows your wealth exponentially.
Protect Your Wealth: Incorporate the best ways to backstop your finances with gold and Bitcoin, ensuring stability – even in a deflationary environment.
Comprehensive Approach: Let’s shed the piecemeal investment mindset and focus on how to build out a turn-key investment system, step-by-step.
We’re calling this event Secrets of the Turn-Key Investment System. It’s scheduled for 3:00 pm Eastern on January 8, 2025.
The core presentation will run for an hour or so, and then we’ll open it up to Q&A. And we’ll address all questions that come in – nothing is off limits.
If you might be interested, you can register for the webinar here.
I hope to see you there!
Joe Withrow