-- Published: Thursday, 3 October 2019 | Print | Disqus
Gary Christenson, Deviant Investor
What Silence?
Have you heard loud warnings from Mainstream Media or from official government sources about the following huge problems? No! Official sources and the media are largely silent. They can’t/won’t discuss our serious problems and prefer the hopium strategy.
Gold and Debt: Asia has accumulated thousands of tons of gold. The U.S. has created over $22 trillion in federal government debt and $72 trillion in total debt per the St. Louis Federal Reserve. What happens when they devalue the dollar further, and gold prices go sky high?
Answer: Consumer prices for Americans will climb much higher. Gold will protect purchasing power, but few will own it. Asian economies will flourish, and the west will drown in debt.
Problem: Will Americans pay higher prices? Will they express anger at government and bankers for creating higher prices? Will they create a distraction, such as another war? Asia loves gold, while western nations love debt. Who will be wealthier in twenty years?
Solution: Don’t worry, be happy, and trust the people who devalued the dollar by over 90% since 1971. Silence and hopium!
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Student Loans: Total government guaranteed loans exceed $1.5 trillion. Many of those loans have gone into default during a “good” labor market. What happens in the next recession when jobs disappear, and ex-students can’t pay their loans?
Answer: People will pay for rent and food before they pay their student loans. Expect many more defaults.
Problem: Some student loans exceed $1 million. Many exceed $200,000. Are those likely to be repaid?
Solution: Hope government guarantees will disappear, and colleges and universities will lower costs and reduce tuition. (Not likely.) Congress, in their wisdom, passed the legislation that encouraged these unpayable loans. Until they “fix” the legislation, don’t worry, be happy. Listen to the sounds of silence about ongoing student loan disasters.
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Medical costs are huge, unsustainable, and rising. At what point will Big Pharma and the health care cartel price their services out of reach for most people? Is their drain upon national resources sustainable?
Answer: The U.S. government and individuals pay high prices for drugs and health care by increasing debt. Rising health care costs will bankrupt individuals and governments.
Problem: Costs are too high. Medicare expenses are “out of control.” Pension plans are underfunded, partially because of skyrocketing costs of health insurance.
Solution: Don’t worry, be happy, smoke hopium. Congress might rein in costs, even though lobbyists shower huge gifts upon congress from the health care cartel and pharmaceutical industries. The media, Big Pharma, and medical spokespersons are silent about the growing problem of expensive health care.
Worse Solution: Political candidates suggest free Medicare. Really?
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Derivatives: These contracts are a profit center for banks, so they grew huge—much larger than global economies. Remember the derivative disasters from 2008. Nothing material has changed. Expect a rerun of that horror movie. Read “Here’s Proof… Lying about Derivatives.”
Answer: Derivatives work until they don’t, as demonstrated in the credit crunch of 2008. They may offset each other and spread risk (official story) but they haven’t reduced total risk. Expanded leverage means increased risk.
Problem: What happens when a large bank fails? It has happened before and is likely to occur again. Deutsche Bank stock sold for over $110 in 2007. It closed at a new low on August 15, 2019, at $6.44. A stock that drops over 90% is sick. Deutsche Bank supposedly controls $50 trillion in derivative contracts. What happens if Deutsche does a Lehman and can’t pay on those contracts?
Solution: Don’t worry, be happy. Deutsche isn’t bankrupt yet. The EU will bail it out. They’ll print tens of trillions of euros and move forward. Instead of discussing the possibility that derivatives could create another Lehman, we hear sounds of silence.
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National Debt and unfunded liabilities. The U.S. government owes over $22 trillion because congress overspent revenues, mostly in the past several decades. Unfunded liabilities are another $100 – $200 trillion. This will end in tears. Look at the US Debt Clock.
Question: Which three members of congress have announced they want to spend less, balance the budget and reduce the national debt?
Answer: No one! They will increase spending, regardless of revenues, on social programs, “pork,” defense, wars, giveaways etc.
Problem: Excessive spending expands currency in circulation, devalues all dollars, increases prices and enlarges the interest expense drain on the budget.
Solution: Don’t worry, be happy. The government will monetize new debt if they can’t find buyers. This gravy train will roll down those congressional tracks toward insolvency. Regarding unpayable debt, we hear sounds of silence.
From Sven Henrich: “‘We’re forecasting a recession’ was said by no Fed Chair ever.”
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Regulatory Capture: Is anyone concerned that Wall Street might exert undue influence upon the SEC? What about Big Pharma influencing the FDA? How about communication companies directing FCC policies?
Answer: Few in government or industry worry. Corporations think it’s sensible to “own” regulators. It increases profitability.
Problem: If the wolf regulates the flock of sheep, the health and safety of the sheep are at risk. The silence of the regulators will impact us soon enough.
Solution: Don’t worry, be happy. The stocks of large corporations are rising, and hopium feels good.
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Household and corporate debt: Debt is huge and growing. Households borrow for mortgages, student loans, autos, medical care, and necessities. Corporations borrow for stock buybacks to boost stock prices and increase executive compensation. When jobs disappear or stock prices fall, the debt remains. What happens during the next recession?
Answer: Stock prices fall, corporations and individuals declare bankruptcy, banks foreclose on homes, and they liquidate debts. 2008 was a trial run for a larger disaster in 2020—2025.
Problem: Every debt is another’s asset. If someone defaults on debt, the related assets disappear. More debt means more leverage, and that increases losses when bond prices and stock prices collapse toward normal valuations.
Solution: You know the solution, but it’s not pretty, so we believe hopium and listen to the sounds of silence about excess debt.
Alternate solution: Gold and silver are assets without counter-party risk. They are no one’s liability. China and Russia understand. Individuals could live on a modified gold standard, even if our government will not.
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Question: Would you rather own gold that maintains value while politicians and bankers devalue currencies, or piles of debt paper that could default and become worthless? Even if they repay debt paper, the payment will be made in devalued currencies. This makes little sense unless you are “front-running” with leverage.
Strangely, rather than gold, many will choose debt paper, fiat currencies, Deutsche Bank stock, Enron promises, MMT, tears, delusions and politicians who promise more “free stuff.”
Gold in 1971: $41.00. Gold in 2019: $1,500. Average annual price increase since 1971 is 7.8% per year because of dollar devaluation.
National Debt in 1971: $398 billion. National debt in 2019: $22.5 trillion. Average annual debt increase was 8.8% annually because government overspent.
Physical gold and silver will be valuable in a hundred years. Can we say the same for fiat currencies, T-Bonds, pension plans, and student loans?
Read David Schectman: “Your cash is currency… my cash is gold and silver.”
Read: Gary Christenson: “Hurricanes are Coming.”
Read Bill Holter: “Infinity is Here.”
Miles Franklin sells gold and silver. They do not sell hopium, stocks, dodgy bonds, politician promises, Presidential tweets, trade wars, currency wars, pension plan underfunding, over-priced medical care, student loans, or counter-party liabilities.
Gold and silver are more reliable.
Gary Christenson
The Deviant Investor
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-- Published: Thursday, 3 October 2019 | E-Mail | Print | Source: GoldSeek.com
