LONDON – Illinois is in trouble.
It has $14.6 billion in unpaid bills… not including a pension liability of $130 billion. The state is running a $6 billion deficit, and its government is dysfunctional, operating without a budget for two years.
Illinois is America’s first failed state. Our guess is that it won’t be the last…
…which causes us to reflect, briefly, on what’s ahead.
Government is always a way for the few to exploit the many. But since the widespread use of cheap guns and cheap newsprint, the few have had to bribe, bully, and bamboozle the many in order to hold on to power.
They call it “democracy.”
Typically, states borrow and make promises – pushing the costs into the future. Two years ago, Forbes estimated total unfunded pension liabilities of all states at $3 trillion. And that excludes local government obligations such as those of U.S. cities and counties.
Typically, too, state and local governments have to balance their budgets. Like families and private companies, they only have so much credit available. That means they must work with “real money,” not fake credit dollars.
Real money limits the ability of the government to tax, borrow, and spend… which also limits the size of the inevitable problem. Fake money is easier to get your hands on… and easier to promise – especially if you can “print” it yourself.
That’s why national governments can dig themselves into much deeper holes… and it’s why, compared to the U.S. government, Illinois, with its paltry $130 billion pension liability, is a model of financial integrity.
The feds have promised some $200 trillion in pension and medical benefits – all of it unfunded.
These promises are win-lose deals. The win happens when the promises are made. The lose doesn’t come until the bills come due.
“In Germany in the 1870s and 1880s,” explains a colleague, “Bismarck set up a great system.
“The older generation wins. The young lose. It works great as long as the population is growing. Young people believe they will be winners when they get older.
“But now, German women don’t have enough children to even maintain the population. There’s no way to pay for all the benefits that have been promised. They’re counting on immigrants. But that’s not going to work.”
Back in the USA…
Dear readers still want to know what’s wrong with us. We paraphrase:
Hey, Bill, all you do is complain. Why don’t you stop criticizing the president and get behind him? At least he’s trying to fix things… and he needs our support.
First, we would like to deny the allegation. We do not complain. We only observe. And mock. And ridicule. And hit below the belt whenever we get a chance.
Second, we deny all responsibility for whatever happens. No matter what we think or say, it will have zero effect on what happens.
And third, we don’t have anything against Mr. Trump. But what we’ve observed is that human progress depends on win-win deals. Only win-win deals deliver what people want (such as it is).
All a government can do is protect life, liberty, and property – that is, your freedom to do win-win deals – and provide honest money. Otherwise, it should butt out.
So when the president proposes to make win-win deals easier to do – by cutting spending, taxes, and regulations – we’re behind him 100%. When he proposes more wars, walls, and witless meddling… we doubt it will take us where we want to go.
It’s nothing personal.
Mr. Trump is the chief executive. He heads a government that is headed toward Illinois. It has set up more than $200 trillion worth of win-lose deals… which will soon tip over from win to lose.
Already, Social Security is running in the red. Medical care costs are already way out of line with costs in other countries. And the federal government is already scheduled to add $10 trillion to the national debt over the next 10 years.
The president has pledged to not cut the “win” part of deals. Perforce, the “lose” part follows. And the economy – weighed down by win-lose deals forced upon it by the feds and their cronies – struggles to move ahead.
This is not the whole story, but it is an important one.
Nothing personal… but it would be nice to hear someone tell it.
BY CHRIS LOWE, EDITOR AT LARGE, Bonner & partners
The market judges bitcoin to be worth $2,350 today.
But back in May 2010, when the first bitcoin transaction was made, you could buy one bitcoin for less than $0.01.
That’s a 23,500,000% gain.
And in July 2011, the first bitcoin “bubble” burst – with a peak price at the time of $31.
If you’d bought at that peak, you’d still be up 7,500%.
One way to think about bitcoin is as a percentage of global financial household assets.
This covers government fiat currency on deposit as well as stocks and bonds. And according to Credit Suisse, the total value of these financial household assets worldwide stands at $157 trillion.
As you can see in the chart below, the total value of all the bitcoins in existence today is about $43 billion – or about 0.0003% of total household financial assets.
If bitcoin’s share of global financial household assets rises to just 0.25%, each coin in existence today would be worth $24,000.
If bitcoin were to make up just 0.5% of global financial household assets, each bitcoin in existence today would be worth $48,000.
At 1% of global financial household assets, each bitcoin would be worth $96,000.
– Chris Lowe
Fundamental Traders Are Going Extinct
Fundamental stock traders attempt to find the intrinsic value of a company’s shares and then invest accordingly. A new study found that these traditional investors are dying out. Here’s why.
Illinois: The First Bankrupt State?
As Bill mentioned above, Illinois is in trouble. Here’s why the Prairie State could soon be bankrupt.
How to Spot a 100-Bagger
A “100-bagger” is a stock that turns every $1 invested into $100. How to find these rare gains? One of Bill’s top analysts, Chris Mayer, tells you two steps you can take today.
In today’s mailbag, readers continue to consider the world of cryptocurrencies…
Cryptocurrencies aren’t “immune from the next sovereign debt crisis” like gold is. What about crises of confidence? When people lose confidence in gold, it has never gone to zero in value. Will the same be said of any crypto? Not only is there no cap on the number of cryptos that can be created to flood the market, but they can be destroyed by any loss of confidence, either individually or as a class.
Gold is money. I don’t think any crypto, let alone cryptos as a group, can ever become money, because there is nothing to stop them from going to zero value – almost all their utility comes from being exchangeable into another fiat currency. In order to be money, a currency has to have its own value in the marketplace. Even when you can’t eat gold, you can use it for other things. Cryptos are the tulip bulbs of currencies, without the bulbs.
– Sandra K.
Meanwhile, readers who took Bill up on his offer to try his Tacana Malbec write in…
I just received a case of your Malbec. Cellared 11 bottles and had one with a delicious pasta entree created by my lovely wife for dinner tonight. Pleasantly surprised to taste a very nice Gualfin Malbec. Deep color and fruity with a bit of spiced pepper on my palate. Can’t wait to taste it in 2020. Looking forward to the limited edition next iteration. Love the hearty mountain grape. Well done.
– Charles T.
I wish you all the best with your vineyard. There’s a unique market for organic wines – if you can stomach the certification process. Sounds doable there in Argentina.
Argentine Malbec tends to have an earthy, strong tannic character. If you plant more vineyard hectares (or graft a few over), I would add something that could soften it a wee bit, like Carménère. Perhaps Tempranillo will grow there at your ranch. Yes, I am talking about a blend. Even in Cahors, France (the heartland of Malbec), it is blended with a little Tannat-Merlot.
If you’re interested in all this, consider reading my book Creating World Class Red Wine. It’s the best, most practical winemaking book available.
– Mark S.
We’ve got six bottles of your Malbec coming and are looking forward to tasting it. I love your approach of selling wine directly to your readers who are interested in trying it. How can you lose?!
– Wayne O.
I bought some of your wine and I don’t even drink. That is how much I respect your opinions on life and the economy. You’re going to help a lot of folks get through this coming time of tribulation. I’ll stand with you anytime!
– Clifford C.
The Centers for Disease Control recently released a study…
There is an undiagnosed epidemic in America killing one person every 24 seconds. And it’s growing faster than diabetes, heart disease, and cancer combined.
Researchers believe they have now identified the source of this global health scare: the cell phone in your hands. Get the full story right here.