BALTIMORE – What a great time for an observer with a sense of mischief!
This year’s presidential campaign is the most absurd and remarkable we have ever witnessed.
After more than two centuries, Americans are finally getting the democracy they deserve – one that is grotesque… slimy… and immensely entertaining, albeit in the mud-wrasslin’ genre.
In Sunday’s debate, one candidate actually promised, if he wins, to put the other one in jail.
The other one, with a straight face, said she would risk provoking Russia into a war by backing the al-Qaeda-linked rebels in Syria.
Who could possibly be so earnest and civic-minded as not to laugh?
But the financial world is our beat here at the Diary. And it, too, keeps us chuckling.
Yesterday, stocks and bonds sold off. The British pound plummeted versus the dollar. And LIBOR – the rate some of the world’s largest banks offer each other for short-term loans… and a key gauge of the health of the banking system – spiked.
Most commentators tell us that investors are reacting to the smoke signals from the Fed.
Apparently, after eight years of “emergency” low interest rates, America’s central bankers are wondering what the emergency is.
Now, they hint, they will tighten credit conditions as though they meant it.
The absurdity of fixing interest rates in what is supposed to be a free-market economy must be working on their innards. They go to bed at night gassy and bloated and wake up with their heads aching…
Central banks set out to mislead investors, households, and businesses with their phony money and fake interest rate signals.
Now they are lost, too.
With no honest money or true prices to guide them, they don’t know east from west or up from down. They don’t know where they are… and they are afraid they might end up where they don’t want to be.
The fear is interfering with their digestion.
So, they talk about returning to “normal.” But there is no way to do that. Not without suffering the cramps and pains they so richly deserve.
As the manager of the world’s biggest hedge fund, Ray Dalio predicted last week even a 1% increase in the Fed’s target lending rates would mean trillions of dollars of losses in stocks and bonds.
How could the Yellen Fed sit still for that after pretending to protect investors from risk for the last eight years?
And as we’ve been pointing out, there is no reason to expect the losses would stop at a few trillion dollars.
The greater the absurdity, the greater the panic that follows it. In a matter of weeks, as much as $75 trillion could be wiped from the world’s asset prices.
There is currently about $14 trillion worth of debt trading at the most absurd (negative!) rates in 5,000 years.
U.S. stocks are near record highs… even as corporate balance sheets have deteriorated and GDP growth has stalled.
And “inflation” and “unemployment,” as measured by the Bureau of Labor Statistics (BLS), are largely fantasies.
And the little people know it…
Our friend Rob Marstrand from OfWealth just looked at one key price – one that is near and dear to the working class: the price of a pickup truck.
According to the BLS, prices on automobiles have barely budged over the last 20 years. But that is clearly absurd. A new Ford F-150 pickup costs upward of $26,000 today. The same basic truck was about $15,000 in 1996.
The BLS says the two are actually the same price because today’s pickup is “better.”
Yes, that’s right. It is better. More electronic gear. Airbags. And so forth. So, BLS argues that, dollar for dollar, you get the same amount of truck today as you did in 1996.
But, of course, the man who needs a pickup truck cannot go to the dealer and say, “I just want $15,000 worth of pickup. You know, like I got in 1996.”
He still has to pay the full $26,000… and it still does basically the same job it did during the Clinton administration. It takes him and his tools from point A to point B. But it costs him 70% more.
The other big thing a working man needs is a place to live.
According to the BLS, since 1996, housing prices have gone up about 50%. But when we do a little fact-checking, we find that, 20 years ago, the typical home sold for $137,000.
Today, the median sales price is $305,500. Wait, that’s not 50% more. It’s 123% more. We didn’t check with the BLS, but we suppose the discrepancy is due to the same “adjustment” made by wonks who think that today’s house is “better.”
Maybe so. But the typical working stiff still has to live in the typical house and drive the typical truck to his typical job. He can’t say, “I’ll just take the house, but hive off a couple of those bedrooms. I can’t afford them.”
But wait… Does the typical working man earn 70% more today than he did 20 years ago?
According to the Census Bureau, in 1996, the average nominal (unadjusted for inflation) personal income of people with “some college” but no degree was about $29,000.
Today, if we read it right, it is $40,000. That’s an increase of about 38%, not 70%.
The feds – with their phony adjustments – show the typical person standing still. But he is not. After two decades of prices rising more than three times as fast as incomes, the typical person is far worse off than he was 20 years ago.
His major expenses – and we have not even mentioned tuition and medical care, which even the fed’s fake numbers show are 200% and 100% higher, respectively, than they were in 1996 – cost him $109,000 more than they did 20 years ago…. and he has only $5,000 more income.
Why else would voters spend a minute listening to a scalawag such as Donald Trump? Fake money, fake statistics, fake interest rates – they’ve created an economy where the Trump voter has less real income.
They know they have been bamboozled. They count on Donald to do something about it.
BY CHRIS LOWE, EDITOR AT LARGE
It’s been a crushing couple of months for the British pound…
Since the surprise decision by British voters at the end of June to exit the European Union – the so-called Brexit – the value pound has been absolutely gutted.
As you can see from the chart above, the British pound is down a whopping 18% versus the dollar since the Brexit vote.
Did you lose money during the 2008 financial crisis?
If so, you need to watch this urgent message from Doug Casey and his team. You see, there are events unfolding right now in Italy that could ultimately set off a financial shock in America far greater than what we saw in 2008.
In this video, you will learn how to protect yourself in this coming financial storm and specific ways to profit from it.
Bill’s Diary about Sunday’s “depressing” second presidential debate was a big hit with readers…
Loved Bill’s article today on the debate – I couldn’t agree with him more. It’s sad but true!
– Gord P.
Interesting you say about Sunday’s debate, “I can’t watch this – it’s too depressing.”
Within minutes after watching the VP debate, I called my wife into our living room. I asked her if she would take my blood pressure. My eyes felt like they were about to explode out of their sockets.
I have been on medicine for high blood pressure for a while so this request was nothing new for her. I was a little concerned after she repeated the process a second time. Even without medicine I have never had a reading of 188/98! It was then that I decided to not watch any more of these two debate (health reasons) – seriously!!
– Joe M.
Have been wondering if Bill could bring himself to watch the "debate" and how he’d react. Best analysis I’ve heard, or read, anywhere.
What a truly, truly, awful spectacle. I have, up till now, been hoping that Trump would trump Clinton, regardless of how bad he might be.
However, after watching that absolutely bizarre performance, I am convinced that Mr. Bonner is absolutely correct in that it really doesn’t matter: Both candidates are as bad as the other, and the Deep State will just keep on keeping on regardless. What a sorry state of affairs.
– John S.
But not everyone agrees with Bill’s take on the debate…
One of the great mysteries to me is why Trump is the only one noting the problems that must be addressed for the country to survive.
Everywhere you look on the internet, fear of the future is evident. What will remain of the existing in upcoming events? You don’t have to believe in the Bible to see the Devil’s deeds ongoing.
– Dave D.
There’s more at stake here than just personalities. If we EVER hope to get out of the morass we have been for too long, we MUST have an outsider in the Oval Office.
What Donald Trump said 11 years ago when he was a Democrat has no meaning to those of us who can’t bear to think of another four years of the same old same old.
Our nation can’t withstand more crippling debt, more crippling rules for businesses, more trampling over the Constitution, and Supreme Court justices who make laws instead of following the laws of our nation. There is much more, but this gives you an idea of how many of us are thinking.
– Winona Y.
You have on more than one occasion referred to Donald Trump as an opportunist, and this baffles me.
I see Trump as a person who is deeply concerned about the direction this country has taken – a man who is hell-bent and determined to do something about it.
With regard to his potty mouth, is there a woman alive who isn’t aware of how insecure little boys, who genuinely fear us, engage in their dumb locker-room bragging?
You all do it. Oh, but you never have. Uh-huh, I see.
The Fed Will Kill the Dollar
The Fed’s reckless actions have completely doomed our financial system… and the only escape may be to trash the dollar. But that will have a major impact on gold.
Ray Dalio: There’s a “Big Squeeze” Coming
Ray Dalio, who manages more than $160 billion in assets at his hedge fund, Bridgewater Associates, warns that there is a “big squeeze” coming in the debt markets. Bondholders beware…
Women Are Deserting Donald Trump in Droves
A new poll by the Public Religion Research Institute shows a massive gender split among American voters. Trump is losing women by a larger margin than any candidate in U.S. presidential history.