Many times I have told people that this “printing money” and buying assets is theft- from all of us. Since such massive numbers are involved many cannot discern the magnitude of what is taking place. I hope that this note helps everyone recognize the scope and scale of what is happening. This should also help you realize why it probably can’t last much longer without major consequences for all of us.
This all started long before 2008. That was just a wakeup call. Prior to that manipulating interest rates by buying bonds was about the most aggressive that central banks would admit to.
Since then it has been “anything goes” because if the debt doesn’t increase exponentially going forward this whole scheme is likely to crash and burn- in very short order. Remember in December 2018 there was just a minor pause in credit growth and the effects were felt almost immediately.
Let’s also keep in mind that to keep getting the same outcomes the interventions have to be exponentially larger also- or it may not be enough. My theory is that we hit that wall again in December until President Trump called out the Fed, Treasury and major banks to “fix it”.
In Japan it was reported over the weekend that the Japanese Central Bank is a top 10% shareholder of all Japanese stocks- as they threaten to “do more”. As I reported a few weeks ago they have already amassed over 560 TRILLION Yen on their balance sheet. That means that they conjured up over 560 trillion yen and bought stocks, bonds and who knows what else. All central banks are doing similar things- although many not to this extent.
The Federal Reserve has a balance sheet (assets they bought by conjuring money up out of nowhere) of over $4 trillion dollars. After reducing it slightly in the past few months they have let it be known that going back to normal is now out of the question. They are already proposing more money “printing”, buying of assets and even negative interest rates. Many can discern the evil of negative interest rates and how it could collapse the savings of a nation because who wants to store their money somewhere and instead of getting paid, they have to pay an institution to leave it there? This also destroys one of the major themes of investing which is that of compound interest. Instead of your money working FOR you it is working against you as the longer you save the less you have. WHO WOULD EVER DO THIS? Unless you conjured the money up out of nowhere and whatever you get back is more than you started with (ZERO). That leaves all of us regular people out because if we did what they are doing we would be in jail in this country and maybe executed in some other countries.
So just how large is this problem? Since gathering all of the information from all central banks could take weeks I will just focus on the Federal Reserve and their largesse.
Many times I will make a comment to someone- whether a dentist, a doctor, a laborer, etc. that while they are busting their butts to earn a living there is someone somewhere who with a click of a mouse can conjure up a trillion dollars out of nowhere. This leads to making your labor far less valuable- and worth less each time it is done. This “purchasing power” is just an illusion that creates NOTHING BUT the purchasing power- no food, no water, no shelter, ZIP. Of course, with this new-found wealth they can buy up these things and raise the costs of whatever they buy for all of us who need it.
Putting this ridiculous number – A TRILLION DOLLARS- into context might be easier by letting you know just how much labor is being pretended was done when a trillion dollars is “printed”.
Let’s is assume an average hourly wage of $25.00 per hour. This is near a median income here in the USA. It is also easy to use division with.
So to actually EARN a trillion dollars a person averaging $25.00 per hour would have to work 40 BILLION HOURS. If we assume a 40 hour work week we would have to work a billion weeks or 19,230,769 YEARS.
So with a click of a button the “authorities” can produce purchasing power that would take a million people 19.25 years to produce (BEFORE TAXES) in a second. Add taxes and it may take 25-30 years for a million people to actually have that purchasing power. Keep in mind that this has produced NOTHING of value- it just distorted ALL prices.
After all of this what do we have to show for it? A slowing economy globally, income inequality that is unmatched- even prior to 1929 which is really saying something, and more debt globally than has ever existed. Don’t forget every dollar conjured up comes with interest attached “Federal Reserve Note”.
I heard over the weekend that 4 families own more than the bottom 50% of all humanity- in other words 4 families have more assets than over 3.5 or so BILLION people. That my friends is obscene. This is a major reason we have an eviction and homelessness crisis right here in the USA and around the world those disenfranchised by these actions are rising up en masse.
Of course, this information is nowhere to be seen on the financial game shows- just like no mention of the REAL story of the financial condition of our own nation. Sure we hear about the trillion dollar deficits the government is running with hardly anyone batting an eye but look at the real story.
I may be dating myself but I remember Paul Harvey picking out a well-known historical event and adding something interesting that most wouldn’t know if he didn’t tell us about it. Truth In Accounting, a 501 (c) (3), in their April 2019 report, focused on government financial information just gave us a Paul Harvey moment with regards to our national deficit in 2018. They stated that while the reported “$779 billion national deficit is troubling, it doesn’t reflect the true financial situation”. Actually, the government’s overall financial condition worsened by $4.5 trillion in 2018. That is similar to the information that I relayed last year from USdebtclock.org using GAAP accounting. This year using GAAP accounting USDebtclock.org estimates a $6.1 Trillion dollar deficit in fiscal 2019. By the way that would take 6 million people working 20 years using all earnings to pay off.
In my opinion this is totally unsustainable. The most likely outcome, in my opinion, is that we become somewhat like Argentina where for years they have been “printing” money to finance government, have very high taxes, high government spending and protectionist trade policies. Sound at all familiar???
Here in the USA we have been “printing” money to finance government now for decades but in the last decade it has gone far off the rails. So far that from 2000-2015 an estimated $21 TRILLION was “printed up” and spent with no idea where it went- and that was just between the Department of Defense and HUD. That is according to Dr. Mark Skidmore (Michigan State University) and Katherine Austin-Fitts (Former Asst Director HUD). This is an ADDITIONAL 21 trillion not accounted for in the 22.3 Trillion that the government admits to owing.
We also have VERY high taxes here. Not only income taxes but property taxes, sales taxes, gas taxes, FCC taxes, Township taxes on internet, cable, etc. I’ll bet most of us pay 50% of earnings on taxes whether they be state, local, sales, gas, social security or Federal taxes.
We have governments at every level spending money like it is going out of style. Our government spending is so far out that it is likely that nobody knows the true amount of debt we are actually in.
We now have an administration that is also promoting a protectionist agenda.
I am hoping that Argentina is the worst downside target where, according to Daniel Lacalle of dlacalle.com , Argentina had inflation rise to 54% annualized in the last week. Far better than the assumed 1 million percent inflation in Venezuela.
Don’t worry though – according to Truth in Accounting- everybody’s share to pay off this mess is a measly $700,000.00 per taxpayer. Of course, the state, local and personal debts in the trillions will still exist- as well as the unfunded pensions and student debt but Uncle Sam will be out of debt with everyone’s payment of 700k. That was last year so it is likely higher already.
With this type of action happening in most of the developed world is there any question why I am saying that real assets that are not someone else’s promise to pay should be the correct assets to own going forward?
How many of these uber-printed currency units will you be needing in the future for food, water, shelter, energy, etc.? How many of these currency units will it cost to buy real money like gold and silver in the future? How many dollars will it take to get a share of companies that mine these assets or produce food, clean drinking water and energy in the future? My guess is a LOT more.
This in no way means that many of these assets are immune from sharp drops and recoveries along the way as the valuations of most companies are historically high at this time.
It appears that the central banks, major banks and countries agree as they all appear to be loading up not only on gold but many hard assets. I believe it pays to pay attention to what they are doing.
They created this mess and it is my guess that they already know what they will do to “fix it”. All we can really do is watch what they do and act accordingly at this point.
Financial Advisor, Raymond James Financial Services, Inc.
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