Highlights

• Charles Hughes Smith from the Of Two Minds blog returns with commentary on the US economy / financial markets.
• US corporate buybacks data indicates that near zero interest rates has enabled thousands of firms to issue debt at low rates used to support share prices.
• The financial slight of hand is based on the concept of rising corporate earnings.
• According to work by David Stockman, debt is the primary means of economic growth.
• Currently the national debt stands at the Dow advance and US debt (Figure 1.1).
• National income and corporate earnings trends are static, for the most part, suggesting a decreasing return on each dollar of debt accumulated.
• Debt growth has eclipsed the rate of GDP expansion, presenting yet another red flag, further degrading the nation credit score.
• History teaches that as currencies are devalued, bad money drives out good, i.e. Gresham's Law, which may explain much of the push to abolish cash.
• Charles Hughes Smith notes that all the bad debt will eventually be written off - he advocates sound money investments such as arable land and PMs.

Charles Hughes Smith from the Of Two Minds blog returns with commentary on the US economy / financial markets. D data from Societe Generale on US Corporate Buybacks indicates that near zero interest rates has enabled thousands of firms to issue debt at low rates, and direct the proceeds to propping up their own share values. The financial slight of hand is based on the concept of rising corporate earnings. However, amid waning earnings growth momentum, according to work by David Stockman, debt is the primary means of economic growth. Currently the national debt stands at an approximate 1:1 ratio with the amazing stock market advance as illustrated by the startling correlation between the Dow advance and US debt (Figure 1.1). Nevertheless, national income and corporate earnings trends are static, for the most part, suggesting a decreasing return on each dollar of debt accumulated. In addition, debt growth has eclipsed the rate of GDP expansion, presenting yet another red flag, further degrading the nation credit score. History teaches that as currencies are devalued, bad money drives out good, i.e. Gresham's Law, which may explain much of the push by governments to abolish cash in favor of intangible digital money, which may be viewed in retrospect as a global financial mirage. Charles Hughes Smith notes that all the bad debt will eventually be written off - he advocates sound money investments such as arable land and PMs.

Figure 1.1. US Equities Growth vs. US National Debt - A Comparison