The last few posts I wrote about stashing some silver – there’s reasons for these writings I’ve recently shared with my friends on Facebook, but that won’t travel here. I’m seeing some patterns I don’t particularly like that trouble me. I’m also hesitant to write much about it because our entire economy is backed by the faith in the American dollar. If faith in the dollar is questioned, down comes the house of cards. It all starts in your own households.
Our economy these days is propped up by spending by the American consumer – using debt. Not savings. When you put that round of Christmas presents under the tree on your Discover card, you are contributing to the economy. Had you had dollars tucked away under your mattress, not so much.
There’s a couple of things that are bothering me – and they should bother you.
- National debt. Whoever is president in 2020, I’m hoping we start reducing our spending. I think lowering taxes was a great first step to get more people back to work and get us spending on things with our savings and not our credit cards. But now that we are at full employment and peak tax revenue, NOW is the time to start cutting costs. One example may be in the defense side of things. I work in the defense industry, but that pile of money is very large. Another is in the healthcare side of things. Americans get sicker and sicker, and the fix to this is not cheaper drugs (it will help, but it’s pissing in the wind), it’s reducing sickness such as heart disease, stroke, diabetes, and cancers. At $22 trillion, and climbing, this needs to start going down.
- The repo market is now being fueled by the Fed. If you don’t know what’s going on with this, it’s kind of scary. In 2008, this happened once after the collapse, and it was a colossal big deal that the Fed injected $800 million into the repo market. It’s expected that on Dec 31st, the Fed will be injecting $500 billion into it. And it’s been injecting $200-$300 billion daily since September. Now, the question is if the Fed can keep this up indefinitely – and how does this ever go back to the private sector. The problem here is if the fed no longer does this, inflation may skyrocket. Metals are a way of storing your wealth through inflation. For example, if you have 2 silver dimes, today, they can be exchanged for enough currency to buy $2.50 loaves of bread. You know a loaf of bread may cost $2.50. If you have $2.50 on hand, today, you know you can buy a loaf of bread. If hyper inflation hits next week, and a loaf of bread suddenly costs $25, you can only buy 1/10th a loaf with the $2.50 you have on hand. But those two silver dimes will then convert to $25. Get metals now to preserve some dollars and hedge against inflation.
- Chinese and Russians hoarding gold. If you look at gold in the last several years, you start to see a move by our “enemies” to moving away from the US dollar towards gold. One thing that is being talked about is China having a gold-backed crypto currency. When we want to pay our debts now, we just print more money. As much as people don’t like the scary orange haired man, China’s economy is in real trouble, and they need this deal far more than we do. It seems China is consolidating power en route to Xi declaring himself president for life. He can’t do this with their economy on the brink. In the short term, a trade deal for China is needed by THEM to bolster Xi’s case. If this doesn’t happen how the Chinese want, they may have no choice but to walk away from the dollar – which could take us down with the Chinese.
- China bank runs. You aren’t seeing this on mainstream media, as they do not promote these stories due to their cascading effects of fear mongering. That being said, China has nationalized a lot of their banks and their 4th largest bank all week has been having people trying to take their money out. People have been arrested for attempting to take too much money out. China is having a massive problem with people trying to send their money out of country and converting it to other currency. For example, if someone has $100 in Chinese money, China has devalued their currency time and time again. That $100 is worth $80 in spending power the next year. So on, and so forth. China has limits on how much money you can move – and there’s a lot going on in China with this.
- Inverted yield curve – yes, you heard a lot about this recently. It signals this curve prior to recessions 6-12 months before. It might not happen soon, but it is on the horizon. We have to cut spending – and soon. This is a sign.
- 9300 stores closed last year – What you will find is consolidation, and rapid consolidation, into mega corporations. If you’re a local mom and pop store selling anything, I feel for you. Amazon is putting most people out of business, and quickly. What many of you don’t know is that small business is the backbone of all local neighborhoods. They contribute significantly to their local tax base. This money is being re-directed to Amazon and the Walmarts of the world.
- AI coming, and quickly. A lot of us work in IT. In 5-10 years, a lot of jobs may disappear, and quickly. Automation is the way ahead. As people demand higher wages for low skilled work, employers will put robots in their place. It’s already happening, and I predicted this 7-10 years ago with McDonald’s. When the switch is flipped, I see a lot of unemployment happening, and quickly.
- The rest of the world is in recession – but we’re not. If you look at the markets of….the rest of the world…they are in recession. We are not. When you realize a lot of our liquidity and bull market ahead is sparked by…printed money and consumer confidence, you start to wonder how long we can be storming ahead when the rest of the world can’t afford to buy any of our goods?
- Unfunded liabilities. In France, you are starting to see riots for the last 3 weeks over pensions. They constantly have union issues. Here’s the deal, when pensions came out, they were sort of a ponzi scheme, in a sense, that required like 8% return on investment, by law. I don’t know about you, but what investments these days give you 8% returns? What apparently has happened is that in order to get these returns, they have had to invest in more risky investments. These investments are now bordering on “junk bonds”. By law, these pensions can’t own junk bonds or stocks. So – when these crash and burn soon, how are pensions funding their customers guaranteed pensions? This also goes along with social security. This is one of those things where people are drawing money on money they put in during their lifetimes. But this money is coming from current workers. What happens when less and less people today are having children, driving down the birth rate? It means less money is going in, to pay more people drawing. Pop.
What can you do??
- Reduce your costs, and do it now. Paying down credit. Buy a used car. Sell things – while you can, and while people have money to buy them. Your $3000 Mickey Mouse collector’s plate is going to be worthless in 5 years if no one has a budget to buy such things. If you have things of value sitting around that you don’t need, see if you can move it.
- Stock up on some basics. Have some cash in the house, and a few weeks of food. What happened in places like Venezuela was overnight hyperinflation. While I’m not predicting disaster – yet, it might be worth having some stocks on hand at the house. A week or two of water, canned meats, cash, protection, silver, etc. With hyper inflation, it’s also hard to find food on store shelves. Stock up on proteins and things like white rice.
- Keep your eyes open on financial news. My HOPE is that in the next 6 months, they solve the repo issue. Hoping they get a good trade deal with China finalized and China doesn’t nuke our dollar. HOPE of cost reductions coming to the national debt. The answer is not free college and free healthcare for all – the answer is reducing costs, having cheap money available for training/college you can borrow, and proactively taking care of your health. Vote for those interested in reducing government spending.
- Proactively move a lot of your stocks to physical metals. I’m afraid that ETFs are just magic on paper, and similar to the derivative market. I feel the stock market is hyper inflated and being driven by – automation. Get this, apparently 80% or more of trades are being done by AI. They scan the headlines and when there’s mention of “china trade deal”, the AI buys. When there’s bad news, the AI sells. The powers that be can juke the headlines in major market papers to prop up confidence in the economy. This has us at a hyper-inflated market. If a pop happens, and the stock market tanks, you will preserve the wealth. When the stock market bottoms out, trade your metals back in for stocks and ride the next bull market.
- Do NOT rely on social security. Invest in things like metals, real estate, 401ks, IRAs.
- Teach your children about money. Unless you go to Harvard for law, no one really cares where you get your first 2 years of college. Many colleges are doing online today. Why can’t you send your kid to local community college for the first 2 years to get the maths and 101 and 201 classes – LOW cost. From there, year 3 and 4 go to your brick and mortar colleges or do them online. Rather than going to school for $200,000 for a communications degree, you might be able to get a 4 year STEM degree for $50,000 – having most of it borrowed at low rates. Teach them about ROI. Have them save money and buying with saved money rather than credit.
- Teach your children about hard work, and encourage them to learn many skills. In the age of super specialties with travel baseball, we need to teach our children diversity with skills. Yes, a math degree is important, but so is learning how to hang drywall. Chemistry is important, but so is cub scouts and learning how to survive in the woods. English lit is great for culture, one can argue taking a motor apart is far more useful in tough times.
Note – in 2003, I wrote about the oncoming gloom and doom in the housing market coming because all of the math was showing we were creating fake wealth out of nothing by manipulating interest rates. Today, it’s 10 times worse. The numbers spoke to everyone, yet they all turned a blind eye. I’m no Einstein, but all of the signs are there again – but this time, people could be more prepared. I’m sharing this out with family and friends not to share gloom and doom – but to perhaps encourage them to tighten the belts a little after the holidays by taking care of the health of their bodies and wallets.