4 Truths About the 1%


I don’t particularly like the phrase, “the one percent.” It reeks of envy and thus of socialism. But at the same time, the wealthiest people in the West really have become much wealthier in the past decade or two, while working people have, perhaps, stayed even. That’s a legitimate issue, regardless of the unfortunate terminology.

The roots of this go back to the changes of the 1980s, when the financialization of the US economy took hold((We can trace it even farther back to the closing of the gold window and the rise of the petro-dollar in the 1970s.)). It’s crucial to understand that the Wall Street complex thrives on the skim: moving money from place to place to place and taking a percentage each time. This is not productive. Rather, it absorbs the fruits of production. As of 2016, that skim was a significant percentage of the US gross domestic product. (It was 7.3% for finance and insurance combined, so a guess of 5% for Wall Street may be close.)

In the end, that means that some trillion dollars per year is skimmed from the US economy by Wall Street and related businesses. These outfits provide some services, to be sure, but have you noticed that nearly 100% of all retirement money in the US is now channeled through Wall Street? That didn’t happen by accident; it happened because legislation and regulations made it happen.

I’m simplifying here but not unfairly. And I’m not willing to turn away from the truth just because it’s hidden behind complexity.

Here’s a graph((Taken from NY Times data and annotated, I think, by Charles Hugh Smith.)) showing the difference between 1980 and 2014:


Since 2008 this process has become much worse, because of central bank actions (including massive asset buys and their zero interest rate policy) and corporate stock buybacks. So much so that projections show that the richest 1% will control nearly two-thirds of the world’s money by 2030. That’s not a healthy situation.

Four Truths

Given these facts, I’d like to express some important facts about this situation:

#1: This is because the system is rigged.

The status quo system is clearly rigged, and it had to be for the system to continue without a painful reset of some kind. Especially since 2008, the system needed more tax income and lower interest on its debt burden and to keep the populace acquiescent with a general prosperity. A reset would have been bad for the banks, bad for the corporations, and bad for the politicians.

And the rigging delivered. With income going to the richest, the state gathered more money from the higher tax brackets. With stock and bond prices soaring, those high-end taxpayers were quite content to pay. The banks got free money, taking loans from the Fed at 0.25% or less, then put the money into Treasuries at 3%. Politicians were better funded than ever before too.

It was an era of easy money for the high end of the economy. But more important than that, it was a time of mass compliance and thus an era of mega-government.

#2: Any other “class” would have done likewise… and has done likewise.

Dividing people into classes is misleading at best, but since we’ve started with “the one percent,” we’re more or less locked into that model. And so, with apologies, we will continue with it.

The upper class has clearly cashed in on the rigging of the US economy, and the middle and lower classes have clearly lagged behind. Behind all the self-congratulatory unemployment figures, for example, there are 90-some million Americans who aren’t even considered “in the workforce,” not to mention millions on welfare and disability programs.

But it’s also very clear that if the lower or middle classes had been given an opportunity to leap ahead at the expense of the others, they would have done so too. In fact, the middle class did exactly that in the 1950s.

Because of labor laws and a variety of regulations and court rulings, labor unions were able to wield massive power in the post-World War II years. There were huge numbers of ignorant and not particularly hardworking guys riding around in luxury cars, with big boats or RVs parked next to their houses.

So, calling the one percent evil, or even culpable, is a stretch. Certainly some small number of them are, but most have simply been getting ahead because they could.

#3: Envy and retribution is the path to barbarism and death.

A lot of the people who talk about “the one percent” seek to stir up envy, anger, and hate. They want a mass of angry people who will bring them into power. Please understand: This is the path to death and degradation.

“Getting them back” is something we should have gotten over in childhood; in adulthood it leads to “charismatic” leaders and piles of corpses.

Sure, we all get angry sometimes. But we are not children anymore, and simply lashing out is both childish and barbaric. These are precisely the kinds of emotions that bypass reason and empower monsters.

And as in the Soviet Union, those who empower the monster will also be its victims. Whatever you empower the big man to build will be turned against you.

#4: The solution is to walk away from the rigged system.

You never have any power in a negotiation unless you’re prepared to walk away from it. Likewise, if you’re not ready to walk away from the status quo – to be called weird and to be disliked – you have no power to change anything. The best you can do is hope that a politician will somehow respond to your whining.

What works is to turn your back on the status quo and start building better systems. And it’s just about the only thing that has ever worked.

So, pick a spot and start building a better world. But don’t talk… act. Unless and until you act, you remain inert, no matter how much you talk.

Break out of your inertia. Get up and start doing.

* * * * *

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Paul Rosenberg

The 16 Years’ War and Its Cost


Every night on American TV you can see repeating commercials to raise money for young people who’ve had limbs blown off. It might be cruel to ask the following question in the presence of these veterans, but millions of other people have been forced to pay for all of this, and they need to be protected as well.

And so, with condolences to the young people who signed up for these wars believing they were actually defending the good, we must ask this question: What was the payoff?

Some people will evade this question by maintaining that “freedom was preserved,” but that statement rests on a nebulous and self-serving definition of freedom… a definition that boils down to, “What we have is freedom.” Or it’s variant: “It’s worse in North Korea; therefore we’re free.” These lines of reasoning, of course, are fallacious.

The 16 Years’ War (Heading for 20 or More)

So, with apologies where due, I must assert that the payoff from all the bloodshed in Afghanistan and Iraq has been negligible. Both places are still a mess, and both places will likely remain a mess for a long, long time.

Almost 16 years of war have gone by in Afghanistan and more than 14 in Iraq. I think we should admit that any possibility of a “respectable win” is long past.

So, what was it all for? To make people feel they were getting revenge after 9/11? Was that really worth the cost? Bin Laden (whose official death story reeks) was sick and dying anyway. Or to “get” Hussein? He had been a US ally for many years before he was pushed into the role of the villain. So how reasonable is revenge in that case?

Were these two snorts of emotional cocaine worth their price?

Ah Yes… The Price

War is insanely expensive, so I’ve decided to crunch the numbers on this, and I think you’ll want to see them, especially if you’re an American.

And so, here, courtesy of Wikipedia, are the costs of the US military-industrial complex for the years 2001 through 2017:

2001                  $335 Billion

2002                  $362 Billion

2003                  $456 Billion

2004                  $491 Billion

2005                  $506 Billion

2006                  $556 Billion

2007                  $625 Billion

2008                  $696 Billion

2009                  $698 Billion

2010                  $721 Billion

2011                  $717 Billion

2012                  $681 Billion

2013                  $610 Billion

2014                  $614 Billion

2015                  $637 Billion

2016                  $522 Billion

2017                  $524 Billion

That comes to a staggering $9.751 trillion. And we should remember that this is for a nation bordered on the east and west by immense oceans, and on the north and south by nations that are more likely to dissolve than to invade. On top of that, The War on Drugs and other programs are only partly accounted for in these numbers.

The costs of just the Iraq and Afghan wars – if they could realistically be separated from the rest of the military-industrial complex – would be substantially lower. One report (PDF) has those costs for 2001 through 2011 at $1.28 trillion. Extending that figure through 2017 would yield a rough cost of $2.2 trillion.

But since no war can be fought without the underlying military-industrial complex (bases, training, recruitment, hospitals, logistics and so on), let’s split the difference between the total budget and $2.2T and call the money spent by the US government on these two wars $6 trillion.

And That Comes To…

The cost of the past 16 years of these unresolved wars comes to $44,776 per household. That’s a lot of spare change.

If you want to look at it on an individual basis, it comes to $18,809 per man, woman, and child in the United States ((I am using Wikipedia’s figures of 319 million persons and 134 million households in the US.)).

Revenge, we see, is very, very expensive.

The full cost of the military-industrial complex (excluding parts of the War on Drugs, some intel agencies, and so on) comes to $30,567 per man, woman, and child and $72,769 per household.

Can We Please Be Honest?

I really can’t see a reason to say that the two wars in question kept America safe. I’m not sure how you’d make an argument for that without resting entirely on dark imaginations.

And please remember this: Imagined terrors are infinite. You could imagine terrifying possibilities for as long as you had time and energy.

And so, any conclusions based upon “what might have happened” are useless. More terror attacks might have happened, or there might have been a Muslim Enlightenment if we hadn’t blown away a few pieces of collateral damage. Both of these are imaginary and neither is an excuse to spend fifty cents, much less trillions of dollars.

That first one is scary, however, and fear is great for making humans act stupidly.

I’d also like to add that these expenditures have not gone to the young people who were blown up in these wars and who should have been a top priority. If they had, there’d be no need for perpetual charity appeals on TV. That very expensive segment of the military-industrial complex (VA hospitals, etc.) has failed horribly. Ask a vet.

So let’s be clear on this:

The average American family would be at least $44,000 richer if these wars hadn’t been run. And given that most of these families are just scraping by, that seems like a pretty big deal.

And given that the net gain from all of this was nil, I don’t know what to call it but a disaster… save for the people who’ve been empowered and enriched by it.

Almost no one living has been more damaged by this than all those young people missing limbs. Without this debacle they’d still be whole… and probably a lot wealthier too.

* * * * *

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Paul Rosenberg

Cornerstones of Oppression: The Upper Middle Class


Let me begin by making two things clear:

First: Most upper middle class people have no intent to oppress. They’ve found themselves in an assigned role, and they are simply playing it. And let it further be said that the other class-groups (poor, lower middle class, etc.) would do precisely the same.

Second: This article addresses the current role of the upper middle class in the West and especially in the US. It does not address other places or times.

That said, and as someone of upper middle class background myself, I want these people to do better than to amorally play a role. They are educated, literate, and generally quite able. If and when they decide to find the truth of things, they are able to do so. I want these people to reclaim their morals and place them above wealth and status. The poor aren’t nearly as able, and the lower middle class are more restrained. We who are able, must do.

How Their Role Formed

The current ruling structure in the West derives from the industrial society that thrived from roughly 1910 through 1980. That system was designed to reap the production of industrial workers; everything from withholding taxes to government schools was put in place to maximize the take. Whether purposely or by trial and error, the Western world was structured to keep industrial workers moving in a single direction and to reap from them as they went.

Between 1979 and 1981, however, things turned, and the industrial workforce steadily declined. But the elite class (we’ll define them some other time) was in no position to rebuild the structure. So, they adapted as best they could. Among other things, stock and bond markets, which had previously been for “rich people,” became the destination for everyone’s retirement money. IRAs and 401(k)s were enacted and popularized at just this time. Exporting dollars for foreign goods became policy at this time too.

Details aside, the upper middle class (UMC) – generally the most agile of the non-elite classes – adapted to the new environment. After all, their commercial positions allowed them to gather bits and pieces of inside information. With a few associates in high places, they could make out what was happening and how to take advantage of it.

And so they did. Haphazardly, of course, but far better than the poor, who had no chance, or the lower middle class, who gathered bits and pieces of information from the upper middle class, just as the UMC did from their higher-level associates.

And so, from roughly 1980 until 2007, the financialization of the US and Western economies proceeded apace, as if it would be permanent. Then came the crash and the doubling down of the elite: Their institutions (big banks) were protected, and the lower classes (“Main Street”) were allowed to suffer, although they were provided with government handouts.

The Current Role

As I write this in 2016, the role of the upper middle class is clear. In brief, the work assigned to them is:

Pay lots of taxes: US government tax receipts are at record highs, and as Mitt Romney infamously but correctly noted, the poor pay very little, while the upper classes pay almost everything. The upper middle class, in fact, is carefully kept in a position to play this role. The Fed is very reliably keeping the stock market up, protecting this class’s wealth. And because they’re in the highest tax brackets, a large percentage of everything they earn goes right back to the state. So, as long as the UMC has the Fed protecting them, the tax man remains well fed.

Keep Wall Street strong: The lords of Wall Street pay even more taxes than the upper middle class, and they also pay oceans of money to politicians, keeping their games going as well. And Wall Street needs reliable clients like the UMC, who are carefully given no alternative. Interest on savings is roughly at zero – in some places below – and endless regulations give people nowhere else to go. And so, all the UMC’s mobile assets stay in Wall Street’s pot and under the ultimate control of the US government.

Buy luxury goods: I recently saw a gift registry for an upper middle class wedding where the bride and groom requested olive spoons. Yes, olive spoons! Such purchases are simply status tokens, the UMC’s part of “keeping the economy going.” More than that, these people simply don’t know what to do with their money – most of them have no real purpose in their lives beyond “success.” And so, they default to status tokens that will sell for pennies on the dollar at their eventual estate sales.

Providing inertia: The upper middle class is crucial to keeping the system going, even though the industrial class it was designed to reap is gone. These people must legitimize the regime. “Things are fine,” “we just need the right people in office,” and a dozen other trite phrases serve this purpose. They can support either the Blues or the Reds, so long as they support “the process” and an idolatrous belief in “democracy.” The illusions of permanence and inevitability must be maintained above all, and these people are in a position to do it. This is the most essential part of their role.

“Is That All There Is?”

This is the question I’d like upper middle class people to ask themselves. Is getting and displaying stuff the sum total of life? Is servicing a system a fitting role to a conscious, intelligent being?

As I said at the outset, the upper middle class is composed mainly of literate, competent people. If they wish to, they are able to see past slogans and frauds. And they are familiar with morality, even if they tend to ignore it in public.

There is more to life than playing a role in a game, even a pampered role. If we sell our souls to status, we are fools, and upper middle class people are able to be more than fools.

We who are able must choose to understand, not just to gather stuff. We must choose the future over the present, morality over mere expediency.

We who are able must do the things that matter.

* * * * *

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You may never look at life the same way again.

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* * * * *

Paul Rosenberg

This Is – by Far – the Biggest Threat to Your Investments


Have you ever noticed that nearly all the world’s surplus rests on Wall Street… or maybe in the City of London? I think this is something we should pay attention to.

So, let’s face it directly for a moment: All the big investment markets are owned and controlled by the Western aristocracy: by politicians, high officials, mega-corps and deep-state operators. These people are fully in control of the markets; they can close them anytime they like.

And in fact stock and bond markets are closed, and fairly often. NASDAQ has closed repetitively for technical reasons, all the New York markets closed for Hurricane Sandy, and nearly every market was closed after 9/11. The markets reopened each time of course, but only because it was in the best interest of the aristocracy. They didn’t have to reopen them. These people were – and are – in control.

This being the case, I’d like to familiarize you with two words that you have rarely heard but which are likely to be heard far and wide some day: Systemic Risk. Wikipedia defines systemic risk as “the risk of collapse of an entire financial system or entire market, as opposed to risk associated with any one individual entity, group or component of a system….”

My point is this: Your most serious risk is not from the failure of a single stock or even a group of stocks, but a closure of the market itself.

“They’d Never Do That!”

Of course they would… and of course they have.

Don’t we remember what they did to Cyprus, just a few years ago? Haven’t we seen their current campaign to ban cash? Didn’t we see them save the institutions they owned in 2008, selling average folks down the river? And there’s more, including the US Treasury holding meetings on taking control of IRAs and 401(k)s and the IFM discussing “financial repression.”

The truth is that the Western aristocracy does what’s best for the Western aristocracy. If that means keeping the status quo going, that’s what they’ll do. If it means turning the status quo off, they’ll do that. Shutting it down would be a big and risky step for them of course, but if they face a near-certain loss of control otherwise, you can bet that they’ll do just that.

“Oh TINA, Thou Art a Heartless Bitch”

With due credit to William Shakespeare, TINA – There Is No Alternative – may end up being the most heartless wealth-destroyer in history. Why? Because of everything noted above and because of this:

Anyone who has examined the current situation knows that the markets should have tanked years ago and have been held up with massive currency injections from the central banks. They know that the system would crumble if any serious portion of that was pulled out or even if interest rates reverted to the mean.

And yet, people stay right where they are, smack in the middle of the risk zone. And why? Because there is no alternative. Where else can they put a million dollars or a few million euros? How many of us even have savings accounts anymore? With interest rates hovering around zero, they make no sense.

There are options of course, but they all involve extra work. Dump your money into the stock and bond markets, and you can move it from place to place with the click of a mouse; you can get instant charts and graphs; and of course you get crisp, clean accountings of everything. All is clear, all is simplified, all is easy.

And so, 99% of the world’s surplus has fallen into fully undiversified investments: Regardless of ‘market sectors,’ they all stay in the same big pot, controlled by an aristocracy that nearly all of us either distrust or despise.

This, at least in my view, is not a good plan.

But… TINA!

Yes, there are alternatives, but they involve work. Moreover, they also involve us taking responsibility for our failures. And let’s be honest about that too: Having investments ‘in the market’ means that you can blame any number of things for your losses, rather than taking blame yourself.

One option is to invest on Main Street… in a local business. Truthfully, that kind of investing can be far more personally rewarding, but it certainly isn’t sanitized and sanctified by authority like Wall Street is. If you invest in a dry cleaner that fails, your authority-minded ‘friends’ might ridicule you; if your Apple stock crashes, it’s merely “bad luck.”

But while investing on Main Street isn’t point-and-click easy, it’s far more diversified. And it gives you some personal control over your investments. If, for example, the dry cleaner or the grocer you funded is having problems, you can get involved, rather than watching helplessly from the sidelines.


So, we face choices. My point is that closing your eyes to your greatest risk – merely because it has an “Approved by Authority” banner draped across it – is a foolish thing to do.

* * * * *

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You may never look at life the same way again.

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* * * * *

Paul Rosenberg

The Era of Fiat Currency Capitalism

fiat currencyI have worked long and hard to gather a broad perspective on history. I don’t doubt that there is value in specialization. In fact, I would have great difficulty doing what I do without good specialists.

Nonetheless, my particular set of abilities suits me to play specialist for short, intense periods, and then to integrate my gleanings into a larger whole.

One of my general conclusions has been that if we were to give a name to the last 40 years of Western history, we’d have to call it the era of fiat currency capitalism. There is a contradiction built into this term, of course, since fiat currencies and capitalism are oppositional, but such an inherent contradiction is also highly representative of this period.

Having been inside of this contradiction most or all of our lives, it can seem almost permanent and inevitable to us. Nonetheless, it will end, and probably before terribly long. As Robert Louis Stevenson once wrote:

Sooner or later, everyone sits down to a banquet of consequences.

For the last 40 years, things that should have crashed and burned have not crashed and burned, and it was fiat currency that permitted the consequences to be scorned. Western culture and millions of minds have been bent in the process.

Fiat versus Reality

Fiat currency is money based upon nothing at all. The Monopoly money shown above has the same actual value as the Dollars, Euros or Pounds in your pocket. For the moment, the paper in your pocket will buy you food and furniture, but not because it has any real value.

Our daily money is created by politically-favored groups who have been granted monopolies on the creation of currency. (They are referred to in polite company as central bankers.) They create our money, from nothing, and all others are forbidden from doing so. If that sounds crazy, it’s because it is.

The only people with any authority over these currency monopolists are politicians, and that isn’t terribly strong. (In the case of Great Britain, the monarch has some control as well.)

I won’t bother trying to list the ways this astonishing privilege could be abused. Feel free to play with the possibilities on your own. And do remember that more or less every dirty trick that people could get away with, they have eventually used… and bankers have never been exceptions.

This new era began in 1971, when the previous international monetary arrangements, the Bretton Woods system, fell apart. On May 5th 1971, US dollars flooded the European currency markets and threatened the Deutsche Mark. The central banks of Austria, Belgium, Netherlands and Switzerland stopped all dollar trades. Who was behind this flood of trades is unknown to me but it was apparently someone with inside knowledge. At about the same time, the French were, via complex arrangements, redeeming their dollars for gold from the US Treasury, as Bretton Woods allowed. (It was gold that kept the system honest. If you thought games were being played, you could turn in your paper for actual gold.)

If the US had allowed redemptions to continue, they would have lost all their gold reserves. So, on August 15th 1971, the US pulled out of their monetary agreements and refused to redeem any more dollars for gold. (This was called closing the gold window.) Bretton Woods fell apart and, very shortly, no major currencies were redeemable; everything became fiat currency, based on government edicts alone.

This change from redeemable money to fiat currency has affected Western life immensely. For more than 40 years, life in the West has been based on money with no value, which has spawned a lot of other things that have no value.

Quigley’s Chart

The chart below is my modernization of a chart used by Carroll Quigley, one of the best generalist historians of the 20th Century. The chart displays his seven primary factors of Western Civilization, and how they have varied over the last thousand years or so. You’ll notice that I’ve circled our era in red and called attention to the form of economic organization with blue.

fiat currency

As I’ll illustrate below, fiat currency has had significant influence, not only within the ‘Economic Organization’ category I have highlighted, but also over ‘Political’, ‘Economic Control’, ‘Dominant Group’, and even ‘Intellectual’. It has more or less defined our era. So, if I am correct that the reign of fiat currencies is ready to end… big, big changes lie in our future.

Horrific Debt

Fiat currencies allowed politicians to spend money without raising taxes. They did this by creating debt. I won’t spend time on the complex process involved, but every new Dollar, Pound or Euro that is created also creates more than its own value in debt. The currency is spent immediately but the associated debt can be pushed back indefinitely.

Faced with this situation, politicians asked their central bankers to create more and more money, which they quickly spent. Whether on social programs or wars, sensible or not, politicians spent money like there were no consequences attached.

But by spending in this way, the politicians also spent the tax receipts of future generations. Every new dollar requires the central bankers to sell more than a dollar’s worth of bonds, which are debt. This debt has been pushed endlessly toward the future… to the point where American children are now born $70,000 in debt, with five times that much promised.

All bonds are claims against future earnings. The children of the West have had decades of taxes pledged to bondholders they will never know, for money that was spent years before they were born. And, yes, it really is that bad.

The Welfare State

The debt of the Western states was spent on something, obviously, and the most notable destinations for that money were “welfare state” programs. This worked in the favor of politicians in the old, reliable way: by promising voters free stuff. And, more importantly, fiat currency allowed them to make good on those promises without raising taxes.

The most crucial fact about debt-funded welfare, however, is that it made it seem that politics could produce magic. Government was able to give massive streams of money to groups that placed ideals above reality. “Wishing makes it so” seemed to work. This corrupted the reasoning of millions of people and punished those who did hold doggedly to reason. And, this corrupting influence has continued for a long, long time.

Wall Street Contributed to the Damage

The people who work on Wall Street, and in the other financial capitals like London, tend to be aggressive and competitive. On top of that, the big financial firms place them into highly competitive situations like “the top producer gets a double bonus.” It should then be no surprise that such people would want to get in on the central banking game, and to create their own money from scratch.

Central banking need not be the only way to create money; any trusted debt can be used. Here is what Alexander Hamilton (who created central banking in the United States) had to say about this in his Report on Public Credit in 1790:

It is a well known fact, that in countries in which the national debt is properly funded, and an object of established confidence, it answers most of the purposes of money. Transfers of stock or public debt are therefore equivalent to payments in specie. [“Specie” was silver or gold.] In other words, stock, in the principal transactions of business, passes current as specie.

Hamilton’s formulation in plain words is this: Debt can be used as money, and people will accept it as money.

So, if the clever boys of Wall Street and Fleet Street couldn’t get in on the central banking game, they could nonetheless create a new version of it, by using new types of debt as money. (Though this was probably the result of many small decisions rather than one large one.)

What most people don’t know about Alexander Hamilton is that it wasn’t only American central banking that he created; he also created Wall Street. That his securities dealer descendants pursued an alternate way to create money seems almost fitting.

Wall Street’s new debt money is called derivatives. A derivative is a contract whose value is derived from other quantities. Derivatives have existed for a long time, but in the past dozen or so years the financial centers of the world have pumped out stunning amounts of them in a wide array of new configurations. All of these derivatives have their own value. It was one particular type of these financial products that seems to have started the crash of 2008.

I am not expert enough to reach any conclusion as to what specific fallout can be expected from this but $600 trillion dollars of synthetic monetary instruments have to be significant.

Indeed, it goes far beyond just money. The era of fiat currency capitalism has changed who we are in broad and disturbing ways.

[Editor’s Note: This article is an excerpt from our flagship newsletter Freeman’s Perspective – Issue #07: The Era of Fiat Currency Capitalism. If you liked it, consider taking a risk-free test drive. Not only will you gain immediate access to the rest of the issue (which shares 5 ways in which fiat currency has changed us for the worse), but you’ll also be able to enjoy the entire archive – more than 520 pages of research on topics of importance and inspiration to those looking for freedom in an unfree world. Plus valuable bonus reports and all new issues as well. Click here to learn more.]

Paul Rosenberg