OUZILLY, France – We’re going back to basics here at the Diary.
We’re getting everyone on the same page… learning together… connecting the dots… trying to figure out what is going on.
We made a breakthrough when we identified the source of so many of today’s bizarre and grotesque trends.
It’s the money – the new post-1971 dollar.
This new dollar is green. You can buy things with it.
Yes, it has lost more than 80% of its buying power since it was put in place.
But still, it’s not so bad.
Compared with the Argentine peso (current inflation rate: 47% a year), it is splendidly solid.
But the new dollar is an imposter. The old one was connected to gold at a fixed rate. And gold was anchored in the real economy.
The new dollar has no gold backing.
Billionaire investor Warren Buffett believes it’s silly to pay someone to take gold out of the ground… and then put it back in the ground and pay someone to guard it for you.
But Buffett misses a vital point: Real money is essential to building real wealth.
It’s what makes the economy operate smoothly. It helps us all decide when to buy and when to sell… when to invest and when to refrain from investing… and where to apply our scarce time and resources.
Real money has real value.
Gold-backed money increased about as fast as the mining industry could extract gold from the ground – which was about the same rate as the economy was growing.
So, when people got more money, they had a claim on more real wealth.
But the new money was phony.
Governments and banks could add as much of this new money as they wanted. But it did not create or even track real wealth; it just took it away from those who owned it.
It was as if Baltimore Orioles owner Peter Angelos tried to increase attendance at Oriole Park by printing extra tickets.
Like a counterfeit ticket to a baseball game, the new money didn’t magically add a new seat to the stadium.
The Fed made funding readily available to the banks… and the banks lent lustily to their customers.
Each new bank loan created money that hadn’t existed before. Out of thin air. No additional wealth attached. Just credits.
That’s why some economists call this new system “Creditism.” Because the new money is no longer based on real wealth, but on credit.
And the flip side of credit is debt.
You can see the problem already. There’s no limit to how much real money you can have. Each additional dollar represents additional wealth.
Credit money is different.
With credit, you know you can increase your spending dramatically. But you know, too, that there is a limit to how much you can borrow.
Eventually, you reach a point where you don’t have the cash flow to service the interest on your debt. Then it’s time to open the book to chapter 7. Or chapter 11. You are insolvent.
With real money, the more you have, the richer you become.
But as the quantity of credit money increases, the economy becomes more and more vulnerable to a turn in the credit cycle.
As the quantity of debt increases, the quality decreases. That’s what’s happening with corporate debt now.
You’ll recall that, since 2008, corporations have been big borrowers. According to analysts at Goldman Sachs, corporate America has more than doubled its debt since the collapse of Lehman Brothers.
And that’s a big problem…
Here’s Michael Lewitt, editor of The Credit Strategist newsletter:
As of the end of August, 113 companies had defaulted on their debt in 2016, already matching the total number of defaults from 2015. The year-to-date default count was also 57% higher than a year earlier.
In case anyone is paying attention (it appears they are not), the last time defaults were this high was in 2009 when 208 companies failed during the financial crisis.
Yes, get ready for a new credit crisis – this time centered on corporate debt.
“But wait,” you say, “the feds can print money. They can make sure we never again suffer a credit crisis. Right?”
Alas, no. They can’t create real money. They can only issue more tickets for seats that don’t exist. That is, they can only make the underlying problem worse, by lending more money to more people who can’t pay it back.
The first big crack in the credit money system came in 2008, when a giant fissure broke open between mortgage debt and the homeowners’ ability to pay it.
House prices fell. One in 20 houses was in foreclosure by 2010… and the suicide rate had risen 20%.
And here’s the big, dirty secret of the system… and why the rich love it so much… and why they’re giving millions to Hillary Clinton to keep it going.
When the housing bubble popped, about $800 billion (our estimate) worth of housing went into foreclosure.
Houses are real assets. When owners couldn’t pay, the houses went to the banks that had lent the money against them.
These banks hadn’t built the houses. They never owned them. They never earned the money that they lent to buy them either.
Nor did the money come from savers who had deposited their money in the bank. It was money that no one ever earned. It was fiction.
But this didn’t stop banks using this fake money to capture real wealth – our houses.
And this is how the rich – heavily concentrated in the financial sector – get richer, thanks to the new credit money system.
It increases the values of their stocks, bonds, and real estate (thanks to low interest rates and Fed buying).
It increases corporate profits, too, by lowering financing costs (and incidentally reducing returns to savers) and by boosting credit-fueled retail sales.
Most important – the rich are first in line when the counterfeit tickets are distributed.
Then you go to the stadium… and you find them sitting in your seats.
BY TOM DYSON, CO-FOUNDER, PALM BEACH RESEARCH GROUP
It’s one of the most exciting, most incredible charts I’ve ever seen…
Unfortunately, it’s also one of the scariest.
Take a look:
It’s a chart from the U.S. Census Bureau. It shows the centenarian population.
A centenarian is a person aged 100 or older.
The arrow shows how many centenarians exist in America today. The curved line after it shows the explosion of the 100-year-old population in the years to come.
In every developed nation worldwide (such as the United Kingdom, Canada, Australia, and Japan), you’ll see the same trends.
Lifespans are increasing at an unprecedented rate. And the 100-year-plus age bracket is the fastest-growing group of people.
Let that sink in for a minute.
Right now, the U.S. has an estimated 72,000 centenarians.
If the population of centenarians continues to increase at its current rate, the U.S. will have close to 500,000 people over the age of 100 by 2055. A sixfold increase from today’s numbers.
Some of you reading this will live to 100. Many experts believe the first humans to live past 125 have already been born.
Thanks to advances in medicine, diet, lifestyle, and hygiene, we’re living longer than ever before. And it’s only going to get better (or worse, depending on how you look at it).
Living to 100 is an amazing prospect. It means more time with grandkids… more time with friends… more time to see the world… more books to read… additional hobbies to learn.
That’s the exciting, incredible part of getting older in America.
The scary part is paying for it all.
Those additional years will also contain health care bills, food bills, electric bills, insurance bills, and dozens of other bills. That’s why one of your greatest concerns should be running out of money in retirement.
And that’s why it’s perhaps the scariest time to be a retiree.
I don’t think many see it coming. And I don’t see many people preparing for it.
Now, most people are counting on Social Security to bail them out. After all, with Social Security, you get steady, consistent income not tied to volatility in the stock market… for the rest of your life.
But if you rely, or will rely, on Social Security for a big portion of your retirement income, it’s time to start paying close attention.
With increasing life expectancy rates, I have serious concerns many retirees aren’t taking their financial futures into their own hands. And that they don’t have another plan in place.
If this sounds like you, don’t lose hope. A longer life is a blessing. And no matter how unprepared you may feel at the moment… there’s still time to set yourself up for a fulfilling, worry-free retirement. But you must start taking the right steps to prepare.
P.S. My colleagues and I have created a unique income program to make sure you never run out of money in retirement. It’s called Retirement “Plan B,” and it offers yields as high as 24%… daily, weekly, and monthly income options… and even the chance to completely protect a portion of your nest egg from market crashes.
We’re unveiling this plan on September 13 at 8 p.m. ET in a free, first-ever Roundtable event. If you’d like to attend from the comfort of your own home, just click here to register for FREE.
Trump Fears “Crowdsourcing” of His Tax Returns
Donald Trump says he can’t release his tax returns because he’s under audit. Could the real reason be that releasing his returns would allow the IRS to “crowdsource” an audit… and find buried secrets?
Watch Out for These Dangerous Wall Street Clichés
“Don’t fight the Fed.” “The easy money has been made.” “Sell in May and go away.” “Never catch a falling knife.” These all sound like common sense. But they’re nothing but clichés. And they need updating.
Clinton Is More Likely to Start World War III Than Trump
In a private interview, Bill Clinton’s former classmate talks U.S. politics, his personal encounters with the Clintons, and why he thinks Hillary is more likely to start World War III than Donald Trump…
Why do rich people hate Trump?
It’s the question Bill asked in yesterday’s Diary. And it’s gotten readers thinking…
Have you considered that the rich favor Clinton because Trump is a nut case?
Only an ignoramus would support him, no matter what his economic philosophy may be, which we are unable to figure out. Rational people understand that Trump will make a bigger mess than Clinton. (The Deep State is damned in either case.)
Also, the rich like to be on the winning side. Trump has no hope of winning. He has only shown the amount of ignorance, fear, and anger in this country, which will have to be reduced by the next president if she hopes to survive.
– Edmund S.
In a fair world the wealthy would have to work as hard as the rest of us to build and maintain their wealth, not simply rig the system to maintain the status quo.
– Dave H.
Hillary is controlled by the bankers, as is Obama… and Bush I, Clinton, Bush II, and so forth. If he gets in Trump promises to shake things up.
Many of my associates, including me, believe the bankers and folks who own the Federal Reserve will try and do him in like they tried to do with Andrew Jackson (the gun misfired). They were successful with Abraham Lincoln and for the support of Lincoln in this regard, the Czar of Russia – all for not supporting central banks.
– John S.
I really enjoy your writings even, though we sometimes share different opinions and ideas. When I was a young man, the U.S. Treasury had a bill called a silver certificate. I assume it was backed by silver. Why can’t we revert our money back to that day? Is there something wrong with backing money with silver?
– Gene T.
In the U.S. people do not vote for a president as much as against the other guy… it being easier to detect B.S. than to perceive wisdom.
So, who is going to be most hated, come polling day?
– Chris G.
Meanwhile, readers continue to send their thoughts, comments, and advice about Bill’s challenges at the ranch…
Instead of trying to drive a backhoe to the site (sounds like a super bad and foolishly risky idea), why not buy 50 shovels, give them to the local workers, tell them what you want accomplished (what the back hoe is supposed to do) and tell them how much you will pay them to get the job done (50% to be paid when the job is half done and the balance when the job is completed)?
– Peter G.
I am dumbfounded by all the people promoting the idea of giving the ranch in Argentina away, whether it be to the ranch hands and their families or to the originarios. Doing so would do nothing but perpetuate the problem of freeloading so prevalent throughout the world already.
Bill, my son, you seem to be an admirable fellow, and I disagree with the man that said your Argentine adventure may have been the biggest mistake of your life.
I see it, as you apparently do, as an adventure, and applaud you engaging in it. Doing the sensible, safe and profitable thing all the time is to live a life without any juice in it – a rather dry and unsatisfying affair.
I’ve put my assets and even my life in jeopardy numerous times, survived (though not entirely unscathed), and treasured the good times without too much regret for the occasional and inevitable disastrous outcome.
The disasters have cost me money, time, effort, and frustration. From what you’ve related so far the same is true for you. As is true for me, I expect you’re enjoying all of them and don’t regret anything. My hat is off to you.
– Al R.
Bill’s friend and colleague, Doug Casey, just got back from another world tour… and what he learned is quite disturbing: The U.S. could be hit by a devastating financial shock within the next seven months. That’s why he’s published an urgent broadcast to present the evidence he found.
Watch below for all the details.