The End Of America As We Know It. Whose Fault Is It?
America has racked up debts (both private and public) so large they can never be repaid in sound money and will inevitably be forced to print its way out of perdition. As a result, the U.S. dollar will inevitably lose its position as the world’s leading reserve currency. Read on…it gets more understandable.
For Americans, the days of cheap and easy credit are over. Going forward, we won’t be allowed to merely print paper money to pay for our foreign loans as well as all the student loans and car loans that too many cannot afford to pay back.
We predict lots more social unrest like that in Ferguson and Baltimore or the “Occupy Wall Street” movement. America’s credit rating has been downgraded. There will be the rise of new “alternative currencies” like Bitcoin to bypass the raping and pillaging by credit card companies of credit card holders and we’ll see the hoarding of gold and silver by governments, banks and individuals.
We’ll see more and more political challenges to the status quo, more isolationism pitched to us as protectionism and nationalism, who knows maybe even political violence in America. New nationalist world leaders will arise as countries go bankrupt because the public doesn’t want to accept the consequences of the same like-minded politicians who are continued to be allowed to be in control who tend to promise too much and deliver too little. Wars and revolts in small countries will break out, too many to keep track of.
Incredibly… the currency collapse hasn’t happened yet in America or in any other major developed nation. We haven’t seen YET the kind of panic I know we’ll see sooner or later in the world’s leading paper-money brand — the U.S. dollar.
Since 2009, total global debt has increased by $57 trillion. That’s about the same amount of debt as America owed, in total, back in 2009. Said another way, in a little more than the past six years, the world has added a new pile of debt as big as the one that blew up the American economy in 2009.
Meanwhile, total debt (public and private) in the U.S. has increased, too. We’re up to $65 trillion, from around $55 trillion in 2009. Our total debt is up 150% since 2000.
The problem is that all around the world, debt growth is far outpacing economic growth. As a result, countries and companies today don’t have the ability to finance new obligations to spur economic growth meaning fewer good paying jobs. If economic growth can’t finance new loans (or re-finance the old ones), who is foolhardy enough to lend all more money?
It’s the governments of industrialized countries, of course!
61% of all liabilities in the U.S. financial system are now implicitly or explicitly guaranteed by the government. That’s way up from 1999, when only 45% of the liabilities of the financial system were guaranteed (mostly Fannie and Freddie). In other words, more and more of our financial institutions rely on the government (aka taxpayers) for access to credit.
These guarantees, however, can’t be found on any U.S. government balance sheet. Imagine if a publicly traded company did the same, its leaders would be put in jail. It’s called financial engineering. That’s the status of the U.S. banking system. You can find the same problem in every major economy in the world.
Well, it has been fun so far. Over the last 20 years or so, the world has seen an explosion of debt unlike any other period in history. Most of these obligations wouldn’t have been financed by the free market. Individuals investing their own savings would have never agreed to those risks or the tiny interest rates now being offered to lenders in every major economy.
But rather than live within the means of the free market, governments from almost every major nation keep printing more and more money, basically engaged in massive currency and interest-rate manipulation. And that’s not all. They haven’t merely guaranteed the availability of capital in more and more ways. They’ve also unbelievably guaranteed the principal of the loans.
None of these problems stopped the big bull stock market we’ve seen since 2012. So even if the all the financial engineering isn’t sustainable, how can anyone know when the boom will end or when the music will stop? Nobody can know for certain if the next market correction or bear market will be the “big one.”
But here’s an indicator of where things might finally hit a real breaking point: The top 20 industrialized nations have pension and retiree obligations (also held off the balance sheets) that exceed $80 trillion. All of these come due over the next decade or two. And of course, none of these obligations can be financed based on current GDPs or tax rates. The mountains of debt these economies continue to labor under ensure there is no decent growth.
How will it all end? I have no doubt that it will be far worse and far more violent than anyone could possibly predict.
So I hope that while you’re thinking about what the stock market will do next week or next month, you also spend a little time thinking about the bigger picture. Over the next decade, the biggest threat to your wealth won’t be the risk of losing your savings to a market crash. The biggest threat (by far) is the risk of losing your wealth to our government via confiscation or devaluation… or both.
Most financial assets and a lot of “hard assets” will be lost to bankruptcy. But the real wealth won’t disappear. All that will happen is a massive transfer of wealth from creditors to lenders.
But that isn’t the only thing that will happen this time. By guaranteeing so many of these debts and obligations, governments are setting up an unprecedented collapse of not only the banking system, but of the political system itself. You might not know it, but the U.S. government has already pledged a large amount of your wealth to other people. And when that bill comes due, we’re going to have a huge problem. Think Detroit, on an international scale.
We’re already so late in the game that the expense of just maintaining the existing debts can’t be honestly financed. What will happen when the taxpayers face negative interest rates, huge increases in taxes, enormous cuts in benefits, or crashing currency values? The wealthiest in America will leave taking their wealth to new and friendlier nations and leave the poor U. S. citizenry with massive debt that cannot be paid.
My fear isn’t that the market will crash… or that default rates will rise… or that interest rates will go up (or down). Those things are all going to happen in the normal course of events. My fear is that the stock market disappears. My fear is that the government defaults. My fear is that no bank will survive.
It’s obvious to anyone who looks at the staggering numbers involved worldwide that our current path is not sustainable. It is clearly beginning to completely break down.
Now we’re even seeing negative interest rates in many countries which is in effect where banks begin charging YOU 2% or 3% a year just to keep your savings with them!
Negative interest rates have already become pervasive (along with their handmaiden, unsustainable levels of debt) in two out of the three major developed currency blocs worldwide. And the U.S. could certainly be next. Recently, the head of the U.S. Federal Reserve Bank did not rule out negative interest rates for the U.S.
We could never have imagined the debt bubble would continue to grow at an even faster pace than the bubble of 2009… or that the government and big business would have agreed to guarantee still more (and lower-quality) obligations, like student loans and car loans.
In short… if you thought 2009 was bad… just wait until the real fireworks begin.
About 10,000 doctors each year “opt out” of serving Medicare patients. These numbers will continue to get worse as the government can’t afford to pay for the entire Baby Boomer generation’s health care costs. That means no matter what you’ve been promised about health care, actually getting an appointment (or care) will keep getting harder and harder.
To keep the U. S. citizenry from a panic and run on the banks the government will deceive the news media to keep telling the people that the consumer price index is flat — no matter how much actual living expenses are rising. And most people will believe it. Never underestimate the ignorance of the American voter. And there’s more….
the system is falling apart because the most important input in capitalism is the cost of money — the cost of capital. The longer the government manipulates the cost of borrowing, the worse all of these problems are going to get… and the slower our economy will grow.
The other sure sign that something is fundamentally broken in our society is that wages haven’t risen in about 40 years — just debts. Don’t trust the government. It’s not going to save you… It’s going to try to save itself.
SUPPLEMENTAL SOURCE: PORTER STANSBERRY DIGEST APRIL 22, 2016
COURTESY: FREEwayOut.com
