LONDON – Want to know what happened yesterday?
Read the newspapers!
There are three big news stories today…
No. 1: The Greeks are making a “last ditch” effort to get more money from their creditors.
After countless delays, it looks as though the spark and the fuse will come together this weekend. Things could get hot.
Your intrepid reporter loves a financial blow-up. So he’ll make his way to Athenstomorrow to see it for himself.
No. 2: We’ll let the Financial Times tell it – “Rebound in China equities spurs rally in U.S. and across Europe.”
The rally in the U.S. was nothing to write home about. The Dow was up just 34 points (about 0.2%).
Yesterday, Shanghai stocks rallied by almost 6% – the biggest single-day gain since 2009 – after the government threw the kitchen sink at trying to save the stock market from utter collapse. And overnight, Shanghai stocks surged another 4.5%.
Although the Shanghai Composite is still down 25% since its June 12 high – officially, bear market territory.
No. 3: The British government has unveiled its budget and revealed a proposal to increase the minimum wage to £7.20 ($11.20). This will rise again to £9 ($14) by 2020.
But these headline reports give you only the public stories –simpleminded narratives that even voters can understand.
The hidden story – and the real story – is that these are all clashes, battles, and skirmishes in the Great Zombie War.
On the one side: honest workers, businesses, entrepreneurs, and households.
On the other: fixers, meddlers, thieves, layabouts, and criminals.
Is it really that easy to understand?
Probably not. But it helps us put things in perspective.
Take the proposal for a higher minimum wage. The Financial Times(Britain’s equivalent of the Wall Street Journal) is usually wrong about everything. But it is right today: “Politicians cannot ‘magic up’ a national pay boost.”
From the dawn of time until the moment you read this, politicians have never added one single cent to the wealth of the world.
They can move it around. They can suppress it. They can steal it and destroy it. But if you could add wealth by legislation, they would have gotten the hang of it long ago.
Everything has a price… and a value. You can change price by passing a law. But you can’t change value. And when the price gets out of line with the value, it triggers distortions, shortages, or hoarding.
So why is a minimum wage the “law of the land” not only in Britain, but also in the U.S. and many other developed nations?
Because the way the news media tells the story you’d think the politicians were protecting workers from greedy employers. But it really just helps the zombie politicians keep the masses in line.
The British government’s push for a higher minimum wage is just one more front in the Great Zombie War.
In China, the zombies in power are desperately trying to prop up a debt-addled economy by goosing up the stock market with borrowed money and empty promises.
According to Anne Stevenson-Yang, a leading China expert and the research director of J. Capital Research, Chinese government debt is 300% of GDP.
The average interest rate on Chinese debt is about 7%. So, the economy would need to grow in real terms by between 14% and 21% just to service its government debt alone.
Officially, the Chinese economy is growing at roughly 7% a year. According to London-based economic forecast consultancy Lombard Research, average GDP growth was about 4.5% after-inflation.
And according to Lombard’s calculations, the Chinese economy suffered its first quarter of negative economic growth since 2009 during the first three months of this year.
But that hasn’t stopped the Chinese debt binge. There are even reports that Chinese investors can pledge their homes as collateral for their stock market loans.
Why is keeping stock prices high so important for Beijing?
Because asset prices are the collateral backing the entire capital structure. The zombies’ credit depends on it.
In Greece, the Tsipras government tries to keep the credit flowing its way, too.
Greece is already so deeply in debt that its creditors are threatening to cut off any further emergency financing.
Why is Athens so eager to borrow more?
Because that’s the only way to keep the zombies on the state’s payroll fed.
What about the London Underground?
Yesterday, we were walking through the City of London (the equivalent of Wall Street in New York) at about 6 p.m.
The sidewalks were mobbed. A 24-hour strike by unionized London Underground workers had left hundreds of thousands of people to make their way home as best they could.
Public employee unions have become nests of zombies. The market should set their wages near their real value.
But zombies aren’t content with market wages; they want the politicians to set the price. And they’re willing to bring London to a standstill to get the wages they want.
Further Reading: What’s happening in Greece and China will be mild compared to the highly unusual monetary catastrophe Bill sees coming.
It’s all detailed in the new presentation Bill has put together. As you’ll learn, this monetary catastrophe could affect your life in ways you never thought possible – including being locked out of your bank account and unable to use your credit card or deposit a check. To find out what has Bill so worried, go here now.
As Bill says, Greece and China have one thing in common – too much debt.
Greece has a government debt-to-GDP ratio of 175%.
But that’s nothing compared to China… where government debt is equivalent to 300% of annual GDP.
That’s roughly three times the official government debt-to-GDP ratio in the U.S.
But even a debt load three times its annual economic output hasn’t stopped Beijing from encouraging the use of leverage to boost stock prices.
The roughly 150% rise in Chinese stocks in the 12 months leading up to the June 12 peak was fueled by a tripling of margin debt. That means a good chunk of the capital that flowed into stocks was borrowed money.
How to Destroy a Market – Chinese Style
By removing the ability to freely sell shares, the Shanghai Stock Exchange no longer qualifies as a stock market. It’s now a government bureaucracy masquerading as a stock market.
Greece Has Blinked… This Is It…
The odds are soaring that Greece will stay in the euro zone. Alexis Tsipras just agreed to raise taxes and eliminate some pension payments. A deal to defuse the Greek crisis now looks likely.
The Most Valuable Financial Book in America
Financial warfare expert Jim Rickards has published a plan to survive the imminent collapse of the fiat monetary system. It includes Jim’s blueprint for how to safeguard your wealth.
In today’s mailbag, readers respond to our question: Is the only real value of gold what someone else will pay for it? Or is it a prudent hedge against the devaluation of paper currencies?…
Gold has no counter-party risk, pure and simple. It has been accepted as both a store of wealth and as money for far longer than man has memory.
The memory part is important because every generation or two, all the accumulated wisdom of man seems to be lost and folks start doing and believing crazy things… like:
1) Having “faith” in a fiat currency that already lost 95% of its value is a rational decision (I guess it can’t go lower!)
2) Rolling over debt in perpetuity is a good idea
3) The founding fathers (of America) were chumps (aka the US Constitution has outlived its usefulness) and
4) This time its different
5) Solving a debt crisis with more debt is perfectly logical
As a “gold bug,” I’ll take all I can get my hands on. It’s the only real money.
As a “stacker,” I’ll keep buying as much silver as I can afford. The price is severely manipulated. It is now selling about $7 below the cost of production.
This is insane!
If, as you say… and I totally agree… that solar panels are the coming thing, then keep your eye on silver. The solar industry demand for silver has been growing geometrically, and once silver breaks loose… some people will be very happy!– P.D.
Who can say for sure what gold will do? But the supply of gold as thinning while the supply of money explodes. So I’ll bet on gold.– R.G.
Although I agree that gold has been and is a great store of value, how would it function as currency in a crisis?
Money would not be available. So how would you use a brick of gold to buy food, clothing, gas for the car or electricity for your Tesla?
You could saw off a junk of say $1,000 worth and go to Costco or Walmart. (They would, of course, still be in business.) You buy $800 worth of stuff. What do they give you back? Dollars? Euro?
There are not enough gold coins to serve as a viable currency. The ones that do exist are collectors’ items. Would someone mint gold coins?
Greeks right now have the option of taking there gold to other European countries and getting euros to use for their expenses thereby getting around government controls.
In a broader ban/restriction of money, say in the USA, China, Japan or worldwide, where would you go to get a usable currency? What would it be? Would gas stations (or charging stations) accept raw gold?
Is gold a good currency to hold in a crisis? Or are gold “preppers” deluded?
Tell Bill what you think. Write to firstname.lastname@example.org.