| By Bill Bonner, Chairman, Bonner & Partners Dear Reader question: I have been reading the Diary for quite some time now. Generally, I enjoy your wit and wisdom. But one of the latest gives me pause. I cannot understand how you could say “Whee!” I will soon be 89 years old, and I fully depend on retirement funds for income. If I read you correctly, most of that may soon disappear down into the bowels of the ever-hungry federal government. Will I last long enough to see that? Our answer: Probably not… NEW YORK, NEW YORK – Yesterday, we looked at how The Swamp drenched American capitalism in regulation, corruption, and cronyism… making it the laggard among the world’s three major economies. Today, we’ll look at the other major cause of America’s decline. In preview, our Dear Reader can relax. It takes time to build a great economy – and it takes time to destroy one. America’s Money, Old and New We’re sitting in a little coffee shop on Madison Avenue in Manhattan. It’s cold outside. Inside, it is bright and cheery. There’s a lot of money here on the Upper East Side. At one table is a group of girls wearing expensive Canada Goose jackets, on a break from a private school around the corner. At another is a group of older women, all botoxed up… and with hair suitable to much younger women. The customers are almost all blond-ish. Some of them look like they are new to the area… the wives and families of successful hedge fund operators from Indiana and the Carolinas. Others are the residue of the people who have been around for generations. All are being attended to by a crew of about 10 dark-haired, dark-skinned, Spanish-speaking Latin Americans who seem happy to serve coffee and donuts until they are deported. | Recommended Link | | Look at the codes in the box below. 99.99% of Americans haven’t seen anything like that before. It’s like the Matrix. Yet those secret codes hold the key to hidden fortunes in the gold market. (Without touching stocks, bonds, ETFs, options, futures, bullion, coins, or mutual funds…) The secret was swiped from gold sector millionaires to bag extraordinary gains like: 218%… 220%… 277%… 350%… 420%… 433%… 650%… 1,054%… 2,450%… 3,922%… 5,509%… and 6,200%. This story is too good to miss. A short video exposé reveals all the details on this rare opportunity. | | | -- | Deep State Battle Meanwhile, the fight for control of the world’s deepest and most powerful state continues in Washington. Democrats hope to weaken Mr. Trump by showing him to be incompetent and corrupt. Republicans rally round their flawed champion, for better or for worse, and vow to stop the attack at the trenches of the Senate floor. The impeachment battle – like the coming election – is not about the direction of the country, but about who rides and who walks. To the extent that Mr. Trump’s policies have any consistency, they put the rich on wheels and favor the military-industrial complex on the south bank of the Potomac. The Democrats favor the rich too… but they pretend to have a liking for the minorities, women, the poor, and anyone who can say “post-structuralist queer theory” without laughing. They claim their spending will save the planet… right the wrongs of this world (inequality, sexism, racism, etc.)… and probably straighten out the next one too. Going Broke But what does it matter? Mr. Trump was not in the White House for the first 229 years of the republic; life went on tolerably well. Whether he stays or goes now is unlikely to make much of a difference. On the other hand, we predict that there will be wailing and gnashing of teeth… Young men will throw stones… old men will dream ugly dreams… and the lamb will be devoured by the lion… when the nation goes broke. But nobody’s worried about it. The press doesn’t mention it. Economists think they can dodge it. And Mr. Trump thinks the solution is lower rates. Here’s the president on Tuesday: At my meeting with Jay Powell this morning, I protested fact that our Fed Rate is set too high relative to the interest rates of other competitor countries. In fact, our rates should be lower than all others (we are the U.S.). Too strong a Dollar hurting manufacturers & growth! | Recommended Link | | Massive disruption in Washington, lawmakers freaking out A new, competing financial system is taking root… This could be the biggest disruption to the U.S. dollar average Americans have seen in a century… And the technology behind it will change the world in ways you can’t imagine. | | | -- | No Real Boom The key Federal Reserve rate was as high as 20% in 1980. It fell over the following 39 years to its present 1.75%. So, if lower rates really helped an economy grow, you’d think the U.S. economy would be in an unprecedented boom. It’s not. Over the last 20 years, the U.S. grew more slowly than either the Chinese or European economies. What’s more, GDP growth rates have been coming down for a long time. From an average around 4% in the ’60s… they’ve fallen more or less steadily. When interest rates rose in the ’70s, GDP growth rates kept falling. Then, rates fell sharply… but still failed to reverse the trend. GDP growth continued to slow, and clocked in at an average of only 1.7% for the last 12 years. So you see, higher interest rates are not the cause of slower growth. And lower rates are not the solution. Instead, the two things that have coincided with, and probably caused, slower growth are 1) more politics (a deeper Swamp… as we showed yesterday) and 2) more debt. Today, we look at debt… Funding Speculators When Ronald Reagan was elected in 1980, U.S. government debt stood at 31% of GDP. Now, it’s over 100%. Total debt in the U.S. – public and private – was about $52 trillion in 2007. Now, it’s $73 trillion. The economy, meanwhile, rose from about $14 trillion to $22 trillion. In other words, total debt is now going up three times faster than GDP. Government debt is growing almost twice as fast as GDP – from $9 trillion to $22 trillion since 2007. As debt levels increase, growth slows. Why? Because debt is an obligation that the future owes to the past. As it increases, there is less left over to drive an expansion. Let’s look at it in more detail. When the Fed lends fake money at fake rates, much of it goes right into financial speculation. Asset prices go up. The honest information capitalism needs to flourish is distorted. Real capital investment, productivity, and growth decline. Then too, at ultra-low rates, corporations find it is easier to pass out the fake money to shareholders than to do the hard work of expanding markets and improving products. Over the last 10 years, for example, approximately 100% of additional corporate debt has been used to buy back shares. New factories weren’t built. New businesses weren’t started. Good jobs weren’t created. Real wealth was not produced. That’s why real before-tax corporate profits have been flat for the last seven years. But during that same time, shareholders doubled their money. Fake-Money Scheme Consumer debt is different. Households can’t borrow at ultra-low rates. And they operate on a pay-as-you-go basis; they pay their interest expenses in time on the job. There’s only so much time available; eventually, they run out. That is what happened in 2007; they hit their limit. It’s why final sales are so weak now. And it’s part of the low-unemployment story; desperate for income, consumers take multiple low-paying jobs just to make ends meet. Again, the economy slows as households find it tough to continue spending. That leaves the biggest pile of debt of all – government. The feds can, theoretically, borrow until the cows come home. But the feds don’t produce wealth. And the more they borrow, the more time and resources they take out of the real economy and squander on boondoggles, bamboozles, and B.S. This, too, slows the growth of the economy and makes people poorer. Remember, the feds’ fake money is a claim on real time and resources. At first, the fake-money scheme is just a way of redistributing wealth – from the middle classes to the rich. Wealthy asset holders become more wealthy as the Fed boosts asset prices… and the wealthy use them to claim houses, lawn care, automobiles, and other real-world goods and services. Gradually, though, the economy slows, and real output declines… then, the feds “print” more and more money to try to keep up with soaring prices. But take it easy… the whole process takes time. Venezuela, with 3 million percent inflation, wasn’t built in a day. If you’re 89 years old, you’ll probably never notice. Regards, Bill FEATURED READS The Economy Isn’t Bullish Like the Stock Market
Despite President Trump’s claims of America’s economic success, Bill has been unpacking the reality: The economy is slowing. And Bill’s not the only one urging caution… Protect Your Wealth and Your Happiness
Longtime Diary readers know the importance of growing your wealth without taking on unnecessary risks. Our colleagues at Palm Beach Research Group share one sure way to protect your wallet long-term… Six Reasons Gold Is the Best Money
Doug Casey, Bill’s colleague and a legendary speculator, believes a major gold boom is underway. It has to do with smart players trading in their fiat currencies and buying gold… and what Doug called a “major crack-up” for the economy in this interview. But just why is gold better as money than the feds’ phony currencies? MAILBAG Mixed thoughts from Dear Readers over the Deep State’s impeachment battle… Look at Mr. Trump’s tax reform… It benefited large corporations, real estate developers, and real estate investors (like Trump’s businesses), and was another example of the wealthy class’ 20th century belief in trickle-down economics. Trump has no vested interest in assisting the middle class because he’s never been a member of that class. Nor does Trump have a true and committed belief in truly bringing down the so-called Deep State. He is interested in expressing the rhetoric that will curry favor with his base of disaffected voters, who only see the rich getting richer, and believe him to be an outsider – regardless of how he actually handles economic policy. As long as he remains the antithesis of a modern politician, he will continue to have support from those who believe they have been cheated or left behind by others with more refined communication skills. – Marshall T. When the “loyal” opposition sees a chance to replace a hated rival, impeachment is a useful tool. What warrants impeachment is anything that can be construed as unlawful by an inquiry. – Miguel C. When my children were nasty to others they were disciplined, and that’s what is happening here. Just a bunch of kids fighting over their toys. – Grant S. Does Trump’s economic stance benefit only big business and the one percent, as Marshall claims? Are the impeachment proceedings “just a bunch of kids fighting over their toys,” as Grant suggests? Write us at feedback@bonnerandpartners.com. IN CASE YOU MISSED IT… Is This Making Tesla Nervous? It seems Tesla is getting very nervous. In 2018, Tesla promised their loyal fans a “full refund if Tesla can’t deliver your car this year.” According to CNBC, some customers were left “waiting for months” to get their refund. Perhaps they know that, in the next few months, a brand-new type of electric vehicle is coming out. It has the potential to not only take down Tesla’s top spot as the world’s #1 electric car maker… But also render all 3.1 million electric vehicles on the road today obsolete. And the few investors who see it coming could make an absolute fortune. Click here if you want to learn how to be one of them. 
| 
No comments:
Post a Comment