➡ From 1942 to 1951, the U.S. reduced its debt from 120% of GDP to 35% not by paying it back, but by inflating it away. This strategy is being used again today, which can be harmful to those using popular investment strategies. Many people try to counter this by day trading, chasing cryptocurrencies and meme stocks, but often end up losing money. However, there is a strategy used by the top 1% that involves less risk and better performance, which doesn’t rely on picking the right stock.
➡ The top 1% of investors don’t spread their money across many assets, but instead, they invest deeply in a few assets they understand well. This approach, called vertical investing, allows each dollar to work in multiple ways, such as buying real estate, which can then be used to buy Bitcoin, which can then be used to buy more assets. This strategy can lead to exponential growth over time, rather than the incremental growth seen with horizontal investing, where money is spread across many assets.
➡ Investor B, who used debt to invest, ended up with $14.2 million in equity after 20 years, seven times more than Investor A who didn’t use debt. This was achieved by investing in Bitcoin and NASDAQ, despite the risks of market crashes and margin calls. However, these risks can be managed and are preferable to the hidden risks of traditional investment strategies, which are likely to underperform due to financial repression. The key to success is building a layered investment strategy, or ‘stack’, and managing it carefully to protect against volatility.

Between 1942 and 1951, the United States ran a playbook that took debt from 120% of GDP down to only 35%. But the thing is, they didn’t pay the debt back. They inflated it away. They’re running the same playbook again right now. Now, if you were using the most popular investing strategy that your maybe financial advisor pushes today, you would have gotten completely destroyed. And it’s not because you picked bad stocks, because the strategy itself was designed to lose under those conditions. But the thing is that now, most people who figure this out, they know they need, you know, outsized returns to beat it.

So they start day trading, they start, you know, complex option strategies, they’re chasing crypto, they’re chasing meme stocks, and most of them blow themselves up. But there’s a strategy the top 1% use to take on far less risk with much better performance. It’s got nothing to do with picking the right stock. So in this video, I’m gonna break down the exact mechanism they used in the 1940s, why it’s being run again right now, and the strategy that puts you on the right side of all of this. So let’s go. Alright, so let me show you where all this comes from.

Now, the International Monetary Fund, they published a paper in 2011, titled The Liquidation of Government Debt. Now, this isn’t some conspiracy, right? This is not a blog or fringe theory. The IMF, they documented this, the BIS also put this white paper out. And the IMF documented exactly how governments erase debt through what they call financial repression. And they put numbers on it. Now the numbers that are pretty brutal. Now, post World War Two, the United States had debt of 120% of GDP. And they couldn’t pay it back. At least not honestly, right? Because the numbers didn’t work.

So they ran the playbook. In 1942, the Federal Reserve pegged Treasury bills at three eighths of 1% and long term bonds at 2.5%. That’s called yield curve control. Now, they did that to maintain the peg the Fed had to buy unlimited quantities of government securities, the Treasury issued the debt, and the Fed absorbed it. But here’s what happened on the other side of that you see inflation ran hot inflation ran 8% 14% even as high as 18%. So your bond paid 2.5%, your savings account paid maybe 1%. But if inflation is running 14% and your return is 1%, that means you’re losing 13% per year.

That was the policy, right? That’s not volatility. That’s what they meant to do. But it was that gap between what you earned and what inflation cost you transferred silently from the savers to the government. Now, of course, nobody announced this, nobody voted on this to happen. But it did happen, year after year after year. Now, the IMF calculated that between 1945 and 1980, the United States liquidated debt at a rate of 3 to 4% of GDP per year through these negative real rates alone. That’s how the debt went from 120% of GDP down to 35% over just three decades.

Again, not because they paid it off, because they inflated it away. Now, the US held the peg from 1942 to 1951. It was about nine years. And by February of 1951, inflation was raging inflation hit 21% annualized. And of course, that caused the Fed to finally break. So they had to restructure. And they reached what’s called the Treasury Fed Accord. Now, the Fed regained independence, rates were allowed to finally start moving again. But by then, the job was already done. Financial repression works by keeping interest rates lower than inflation. Now, when that happens, the real value of debt shrinks, which is great, right? But it’s a transfer.

It’s a tax. It’s a tax that nobody voted for, that nobody calls it even a tax. Now, let’s fast forward today, because what does that have to do with today? Well, today, in the US, the debt is now 123% of GDP, about the same, same starting point as 1945. But now, what are we going to do? Well, there’s only four ways that a government can reduce debt to GDP. The first one is they could run a surplus, right? So they could grow their way out of it, they could make more money than they spend.

But that’s not happening. We’re running trillion dollar plus deficits every single year. So that’s not happening. Number two, well, you could just default, right? Just say you’re not going to pay back the money. But of course, that’s off the table. A US default collapses the entire global financial system. And of course, we have a money printer. So why would we? Well, there’s a third option. And that’s grow faster than the debt. And so maybe GDP could just grow naturally faster than the debt’s going up. That might be good. Maybe AI could accelerate this.

Maybe we might see more productivity, but it’s uncertain. And it’s slow. Finally, the fourth option, the one they all choose is inflate the debt away. That’s the only realistic option that’s left. Now, look at what’s happening here, right? The Fed is again, right now, cutting rates, real inflation, food, healthcare, housing, it’s all running hot, right? It’s about 50% above what the official numbers want to be. And every structural advantage that the US had in the 1940s, younger populations, industrial dominance, you know, 15 to 20% saving rate, it’s all gone. Now today, the savings rate in the US is about three to 4%.

So there’s no there’s no cushion there. Now, the 1940s version of this playbook, it was improvised, right? They were figuring it all out as they went along back then. But today’s version, it’s deliberate, it’s fixed, it’s optimized. They’ve had 80 years of data proving it works. And now we can see this is exactly shaping up. We can see the new Fed chair nominee Kevin Warsh, he’s been nominated, and he’s publicly calling for a new Fed Treasury Accord. Same thing. Now again, in 1951, that accord ended yield curve control. Now, why would he be talking about that unless the same structures already being considered? Well, that’s the same playbook being dusted off in the vehicle this time.

It’s your retirement account, your brokerage, your bond holdings is anything denominated in dollars that’s supposed to be safe. Okay, so now most people hear what I just explained and they do one of a couple things. The first group, they’re probably not even paying attention there, they don’t even know. So they just continue to do what their financial advisor tells them to do, maybe what their plan administrator does. And that’s most commonly something either called a 6040 portfolio. So that’s 60% stocks 40% bonds, or maybe it’s something more like Ray Dalio’s all weather portfolio.

The thing is for both of those is they have significant bond exposure. And as I just explained, the way this playbook works is by crushing bond holders liquidating them. So the portion of your portfolio that’s supposed to be safe, the bond part, it’s not protecting you. That’s the part that’s being liquidated intentionally. So whether you’re on a basic 6040, you know, or you’re spread across 17 different asset classes that you probably don’t understand, your safe money is funding that liquidation that you’re leveraging. So while it looks responsible, you’re thin everywhere, and you’re deep nowhere.

All right, now there’s a third group. Now, they’re probably watching these videos, maybe you’re watching Lynn Alden or Luke Grumman, right? And they figured out a system they know it’s rigged, right? They understand what I’m talking about, they understand that they’re going to need huge returns to offset this massive liquidation of debt. And so those people, they start chasing trends, they buy pumps, they start day trading, they’re doing some complex option strategies, they’re looking for meme stocks, right small crypto coins that can pump, whatever they could do to try to outperform this inflation.

But they’re swinging for the fences with no structural edge here, right? Most of them give back everything, right? They make some maybe, and then some they give it back. All right, and then there’s a fourth group that actually gets it at least partially right. So they go buy the assets, right? They hope those assets are going to outperform inflation on their own. So let’s take a look at what this looks like. So let’s say here, if you look at my screen, you can see, you know, I have, I don’t know, $100,000 to invest.

And so what I’m going to do is I’ll say, well, I guess I’m going to buy some real estate here. So I’ll buy a $500,000 home here. Maybe I’m going to buy some Bitcoin here. And then I’ll buy some NASDAQ stocks right here. So now I have three different assets, I split this money up. And I have three assets that are giving me a blended return. Okay. But the thing is here is that every dollar they invest is doing one job. So you have $1 in Bitcoin, and that’s in Bitcoin, that’s great. You have $1 in real estate, and it’s in real estate.

And that’s fine. But as you can see, this is all horizontal investing. So it works, but you’re limited by how many dollars you have. Now, if you’re trying to outrun a government printing press, but you have a fixed stack of dollars with each dollar doing only one thing, then the math isn’t going to work long term. So the question is, what do the top 1% do differently? Well, they don’t diversify wider, they stack deeper, instead of spreading across 17 things like Ray Dalio may recommend, they only pick two or three assets, two or three that they understand.

And they get each dollar doing multiple jobs. You see $1 buys real estate, the equity in that real estate, you could buy Bitcoin, the Bitcoin could collateralize into more assets. And that is not horizontal. That’s vertical. And that’s the difference in outcome over 10 or 20 years. It’s not incremental. It’s exponential. Let me show you the math. Now, if you’re already thinking like, hey, I want to actually do this. Well, I am hosting a free live presentation where I’m going to break down the entire system, how we stack assets will do it all together, we’ll do it step by step.

There’s a link in the description down below, we’ll put a QR code on the screen right here. And just code register now. I’ll wait. Okay, for everyone that’s still here, let me show you how the math works. Let’s just jump in right here, I’ll break all this down for you. Okay, so most people invest horizontally, as I said, so they put $1 and they split it among a bunch of different assets like this, all horizontally. But what we want to do is we want to learn how to invest it vertically, so we can get each dollar doing multiple work.

So let’s say that we’ll continue to use those same assets real estate. So over here, we’re going to have real estate, and let’s call that a million dollars of real estate, and it’s growing at 5%. All right, let’s call it 5%. That’s about the national average. Then we might have another asset like Bitcoin. Now, currently, it’s not doing so well. But historically, over the last two years, it’s averaging about 50%. Over the last three to five years, it’s like 75%. But let’s just call it 25%. Okay, over here, we have let’s say stock.

So we have like the NASDAQ, the tech stocks, and they’re doing about 15 to 17%. Right now, let’s just call it 12%. So instead of putting, if I had $10, putting, you know, $3 to $4 here, putting $1 to $2 here, and putting the rest here, we could do that. But again, that’s horizontal. What the top 1% have done is they figured out how to make the same dollar work through all three of them simultaneously. So let me show you what that looks like. Okay, so let’s do the tail of two different investors here, each one with the starting point.

So let’s say that we have two investors, and each one has a $1 million home. Now, both of them have about 300,000 in equity on $1 million home. Now, here’s the thing. Since they each have a home that’s worth 1 million, and they each have about 300,000 in equity, if neither one does anything different, then they end up in about the same place. So let’s say over here, we have investor A, and they decide just to let this play out over a long period of time, they do nothing. But investor B realizes that, hey, this is a big problem, but they understand that financial repression is real.

And they understand that a money printer is trying to take away their wealth, and they don’t want that to happen. And so what they want to do is they want to activate this 300,000 right here, what they understand is that these homes are going to go up by 5% a year, each of them, regardless, if this 300,000 sits there or not. So whether this 300,000 is there, or I take it out, the home is still going up $1 million times 5%. Okay, so what we want to do right now is we want investor B, they decide they want to activate this 300,000.

But again, they want the same dollar doing multiple jobs. So what we can do more in a layered approach, a vertical approach, is we could take this 300,000, I don’t have a move that into another asset. Let’s call that Bitcoin my favorite. Over the last two years, it’s been averaging about 50% per year. The last year, it’s down over three years, over five years, it’s about 75%. But let’s just call it 20% just to be safe. So I can put the 300,000 in Bitcoin, and now I have the $300,000 still in the home, but it’s also growing in Bitcoin at the same time, two jobs at the same time.

Now I could borrow some of the money out of Bitcoin, let’s call it I’m going to take 40% out of that. And I’m going to move that into another asset. Let’s call that stocks. We’ll put it here into the NASDAQ. And it’s been averaging about 15 to 17%. Let’s just call that 12% return. So now I have $1 here in the home, and layered layer two, it’s now working in Bitcoin at the exact same time. And then the third job is it’s sitting here in the NASDAQ at the exact same time.

Three jobs happen simultaneously, still back in the home, through its mortgage, it’s compounding. In Bitcoin, it’s now compounding. And now through stocks, it’s doing the same thing. Same dollar, multiple turns. Now let’s run the math on this. Okay, so let’s check this out. So we have a million dollar home, and let’s say that it appreciates at 5%, right per year. It’s compounding at that. Again, Bitcoin, it’s averaging, you know, 50% last two years, but we’re going to call that 20%. And again, stocks are 15 to 17% last two years, we’re going to call that 12%.

You can run your own numbers. But this is just so we can run some math here. Okay, now what happens over 10 years? Let’s compare what happens between investor A and investor B. Okay, so remember, we have A and B, investor A and B, they’re about the same, they both have a $1 million property, they both have 300,000 in equity. So they’re in the exact same starting point, but investor A just lets that ride for 10 years. But investor B wants to then put it into another asset, which then puts it into another asset.

And we’re going to let that ride for 10 years. So let’s check this out. Over the course of the next 10 years, investor A’s 1 million times 5% grows to a total of $1.63 million. Not bad, pretty good. Now you subtract the $700,000 mortgage, so minus 700,000 that they owe, and they end up with about $929,000 of net worth. Okay, not too bad, right? That’s been a solid return for basically doing nothing sitting in a home. But let’s take a look at what investor B has done by making just a couple small moves.

Now, the key piece I want to bring up again is that they didn’t make any more money, they didn’t work harder, they didn’t add any more dollars. But here’s what they did. Now, the same million dollar mortgage has also grown to about 1.63 million, same house, same growth. However, it’s a little bit different because now they also have Bitcoin. And during that time, the Bitcoin has grown to 1.83 million. And then they have the stocks, and that’s now grown to $373,000. Now in order to true up this math, we remember that investor B took some of their equity out.

So at this point, they don’t have as much equity. Currently, they have about 629,000 equity in their home. At this point, they also have now the 1.83 million in Bitcoin and 373,000 in stocks, but they did borrow against that. So we have to subtract 120,000 from the loan as well. Now what that gives us is a now a new total of $2.74 million total. Same starting point, they both had the same $300,000 in equity. But now investor B, instead of 900,000, they now have $2.75 million. It’s about a 3x return for just making a couple moves.

Now this is only 10 years, but would you imagine what could happen in 20? Let’s take a look at that real quick. Okay, so we’re gonna look at it in 20 years again, we have investor A, investor B, right? They both have a million dollar home, 300,000 of equity again. But let’s take a look at it over 20 years. So again, remember, investor A lets it ride 20 years. Investor B though wants to take it out and put some into Bitcoin. And then we’ll take some out and put it into stocks. And again, we’ll see what happens over 20 years.

And you won’t believe this. Okay, let’s check this out. So investor A again, they did nothing. And now at this point, their home has grown from 1 million all the way down, you won’t believe this to 2.65 million dollars. Amazing, but we do have to subtract the mortgage, right? So we subtract the mortgage and they have about now 1.95 million. That’s how much equity they’re sitting on after 20 years, just for paying down the home. Not bad. Okay, but remember, investor B started the same place, but they decided to mobilize part of their money.

All right, so they have about the same thing, their house also grew, but because they use the debt, they don’t have as much equity. So now their home after 20 years is now only has about 1.65 million equity, right? About $300,000 less as you can see, but the Bitcoin over 20 years, remember at 20% has now grown to 11.5 million. And the NASDAQ, which you believe has grown to 1.16 million. Big numbers, all of that. Now we do have to remove the loans. And if we remove the loans, we end up with 14.2 million dollars.

Think about that for a second. Investor A did nothing. They did the same thing. They let their equity ride, they start with a million dollar home, 300,000 equity, and they end up with 2 million. Not shabby. Okay, that’s a good place for anybody. However, investor B started in the same place, didn’t earn a dollar more, didn’t work an hour longer, but they did do a couple of moves. And instead of 1.9 million in equity, they now have 14.2 million in equity, a seven times wealth increase from the same started position. That’s a blended return on that capital.

Okay, now again, investor A, they compounded at about 10% a year. Again, not bad. Investor B compounded over 21%. Same dollar stay same starting equity, but completely different architecture. Now, I know what you’re thinking. Hang on. Let me just, let me just answer this real quick. Leverage risk. What if a crash in the market happens? What about margin calls? Right? Okay, that’s fair. Let’s talk about this honestly, though, for a second. Yes, stacking assets like this. It does add leverage risk. It does. That’s real. However, risk compared to what? Let’s think about this for a second compared to what the 6040 portfolio, where 40% of your money is guaranteed, guaranteed to be liquidated by the exact same policy we just started about the all weather portfolio spread across 17 positions that you can’t even monitor day trading options where one bad week could wipe out six months of gains.

Those are all risks too. Alright, so the difference is those risks, those risks are invisible. So you kind of feel like they’re safe. They look responsible on a statement. But under financial repression, they’re guaranteed to underperform. So the risk is in the stack that you have right there, it’s visible to you. I can know what my collateral ratios are. I can monitor it, I can manage it, I could adjust it. So that’s not reckless. It’s engineering. Now one risk is hidden. It’s almost guaranteed to hurt me. The other one is visible, and it’s manageable.

So I know which one that I would rather take. Okay, so financial repression, it’s documented, right? It’s math. It’s already in motion. It’s here, the IMF told us, and most people are never going to see it. So they’ll keep their same 6040 portfolio, they’ll keep listening to their advisor, and they’ll fund the deleveraging without ever seeing a single bill, right? But the ones who figure it out, they’re gonna go buy good assets, and they’re gonna do okay, they’re gonna do fine. But they’ll be investing horizontally, every dollar doing one job, but they’re trying to outrun the printing press with a fixed stack of capital.

But the ones who build the stack, who go vertical, who layer it, those are the ones who come out on the other side of this with generational wealth. Now I showed you the architecture, I showed you the math, but there’s a piece that I can’t fit into this YouTube video, because I can’t go on forever. And I’m talking about the collateral ratios, the sequencing, the tax treatment, and specifically what I call the four layer liquidity system. That’s how you mitigate all of this risk of stacking so that you’re not exposed when volatility hits.

Because leverage without a liquidity system, that’s not a strategy, that’s a gamble. Now, comment down below if you want me to go ahead and make a whole other video, breaking all that down in more depth, right? If so, I’ll plan a whole other video, I’ll break it down for you. Or you can come join me for a free live presentation, we’ll go for about an hour. I’ll show you how we build the stack, how we layer the collateral, how we use four layers of liquidity to protect you, when markets move against you, and then we’ll do a live Q&A, right? I want to make sure at the end that you have got all your questions answered.

Do you know what we’re doing doing right here? I’m going to go ahead and put a link in the description down below. We’ll put a QR code on the screen right here. It’s totally free. So go register, come hang out. It’s going to be super fun. Now, I want to ask, this video changed how you think about investing. We’ll just share it with somebody who’s still sitting on an advisor managed account and doesn’t even know what’s coming. As always, like I always like to say to your success, I’m out. [tr:trw].

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