US Congress Marches Arm in Arm Towards Catastrophe

One for the record books!

Right up until a last minute deal US Congress was threatening a default…the first default by a major economy since Adolf Hitler’s Germany declared that it would not pay its bills. That was in 1933.

You’d think this would have investors sweating, right? You’d expect that they’d be nervously guessing about which way it would go…bidding stocks up one minute and letting them fall the next.

Nope. The volatility index – the VIX – shows that the market has been surprisingly calm.

And yesterday, the Dow was up 205 points. Gold rose modestly too. The VIX is low.

What does it mean?

Well, it implies that no one ever took the threat of default very seriously. Everyone expected a last-minute deal. When the chips are down, they believed, the pols will get their act together. One way or another, they’ll shake hands…and continue marching, arm in arm – towards a real debt catastrophe!

Except that hardly anyone sees a catastrophe coming. The gold price is probably the best measure of that. And gold has been on a losing streak for nearly three years.

Never before in history have so many central bankers worked so hard to degrade the world’s money. And never before have they failed on such a grand scale. Not only have consumer prices not yet broken out to the upside, the consumer price index (CPI) has actually tended to drift down.

How can this possibly end…but badly?

I don’t know what will happen,‘ said our favourite economist in Buenos Aires. Rob Marstrand is the chief economic strategist at our very own Bonner Family Office. Living in Argentina has turned him into a connoisseur of financial disasters. And now…he sees one coming.

I don’t know what…and I don’t know when.  But I make sure I have a few gold coins on hand…just in case.

But that’s the strange thing. Whether the world faces an imminent monetary collapse or not, we don’t know. But it certainly faces something. And it’s not likely to be pleasant. The advanced economies are heavily in debt – more heavily than at any time in history.

All their economies are having trouble growing, adding jobs and boosting wages. All face social welfare bills that – given reasonable assumptions – they will be unable to pay. All have ageing, dependent populations who will resist cutbacks. And all now rely on some form of manipulation by the central bankers in order to keep the party going.

By the way, the problem has little to do with stubborn Republicans, the Tea Party, continuing resolutions, debt ceilings, or bi-partisan cooperation. The problem is spending, and its inevitable toxic waste product – debt.

Every year, the feds spend about $1.2 trillion more than they collect in taxes. That is reported in the press as a ‘deficit’ equal to 7% of GDP. But it’s better understood as a deficit of nearly 50% of revenues.

Over the last five years, deficits have added more than $5 trillion to America’s debt. Suppressed interest rates have probably added another $2.5 trillion to the nation’s private debts (the number is not calculable…this is just a wild guess). And now, under the leadership of arch-meddler Janet Yellen, the Fed is prepared to do even more. 

And without it, the economy as we know it will fall apart.

Yet, even with these facts staring him in the face, the typical fellow has no insurance. He has no vegetable garden. He has no wood stove, with a stack of wood behind the house. Most important, he has no gold coins.

Again, we don’t know what will happen. But the odds of a major breakdown in the financial system must be greater than zero. And yet, there is nearly zero interest in the one and only sure protection – gold.

One for the history books.

Regards,

Bill Bonner
for Markets and Money

Join Markets and Money on Google+

Urgent Investor Report:

Global Financial Crisis 2017: Three Crisis Scenarios, and How They Could Impact on Australia
Markets & Money Free ReportMarkets and Money editor Vern Gowdie reveals the three crisis scenarios that could play out as the next credit crisis hits Aussie shores…and ways you could potentially navigate profitably through the troubling times ahead.

You’ll learn:

  • Watch out! Trouble in this debt-fuelled market could spark a worldwide financial panic: Stocks won’t be the only markets that crash as Global Financial Crisis 2.0 sweeps across the planet. There’s another, multibillion dollar credit market relied upon by companies — as well as local, state and national governments — that’s poised to collapse once the credit bubble pops. And the fallout could severely impact your wealth.
  • The presidential decision that paved the way to our six decade-long debt binge: Australia — and the rest of the world — is living a lie. Debt has funded our lifestyle, NOT production and savings. Today’s global debt stands at $200 trillion. That scary number is the official debt level. The real debt tally will spin your head…
  • What happens when Australia’s gigantic credit bubble goes ‘pop’: We’ve experienced two previous credit bubbles from 1880–1892 and 1925–1932. The current credit bubble has been building since 1950. A 65 year build-up. What happens when this bubble finally pops? As Vern will show you…it’s not pretty.

To download your free report ‘Global Financial Crisis 2017: Three Crisis Scenarios, and How They Could Impact on Australia’ simply subscribe to Markets and Money for FREE today. Enter your email in the box below and click ‘Send My Free Report’.

We will collect and handle your personal information in accordance with our Privacy Policy.

You can cancel your subscription at any time

Bill Bonner

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities.

Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and MoneyDice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill's daily reckonings from more than a decade: 1999-2010. 

To have Bill's reckonings delivered straight to your inbox subscribe to Markets and Money for free here.

Read more

Bill Bonner

Latest posts by Bill Bonner (see all)

Leave a Reply

1 Comment on "US Congress Marches Arm in Arm Towards Catastrophe"

Notify of
avatar
Sort by:   newest | oldest | most voted
Elke Hubble
Guest

Just enjoy life, have fun, appreciate and love all human beings and learn from history.
You can not eat money, gold gave a a loaf of bread for a day.
Not more.
Nicks Mum

wpDiscuz
Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.
If you would prefer to email the editor, you can do so by sending an email to letters@marketsandmoney.com.au