BALTIMORE – Like a house on fire, the election continues to draw a crowd of gawkers.
We joined them last night, warming our hands and hoping to see the whole damned place burn down.
Last night’s debate brought a shift to policy issues. But, as usual, it was a pathetic discussion…
One, a slick, conniving pro with more jackass solutions to the problems she helped cause. The other, floundering, unable to form a coherent critique of his opponent’s claptrap programs.
Both of them offered to heal the sick, enrich the poor, and raise the dead.
Occasionally, by accident, an intelligent idea came running out of the house with its hair on fire; the candidates quickly shot it dead.
Hillary’s Deep State economics don’t work.
We’ve been arguing for years that fixing the price of credit by central banks would have the same consequences as fixing any other price: disaster.
If you set the price of credit too high, borrowing gets too expensive… and the shelves groan with unsold inventory as you punish demand. If you set the price too low, buyers are happy at first… until the manufacturer gets tired of taking losses and the product disappears.
The only price that works is the one you don’t set… the one that is discovered by buyers and sellers… moving freely as supply and demand shift.
So it was that when the Fed nailed the price of credit to the floor, we expected the typical debacle.
And now, others are coming around to our point of view. Here’s William Hague, the former leader of the British Conservative Party, explaining in The Telegraph why QE is a bad idea:
Savers find it impossible to earn a worthwhile return, which drives them into riskier assets, thus causing the price of houses and shares to be inflated ever higher.
Higher asset prices make people who own them much richer while leaving out many others, seriously exacerbating social and political divides and fueling the anger behind “populist” campaigns.
Pension funds have poor returns and therefore suffer huge deficits, causing businesses to have to put more money into them rather than use it for expansion.
Banks find it harder to run a viable business, contributing to the banking crisis now visibly widespread in Italy and Germany, in particular.
Those people who are able to save more do so because they need a bigger pot of savings to get an equivalent return, so low interest rates cause those people to spend less, not more.
Companies have an incentive to use borrowed money to buy back shares – which they are doing on a big scale – rather than spend the money on new and productive investments.
Central banks are starting to buy up corporate bonds, not just government bonds, to keep the system inflated – so they are acquiring risky assets themselves and giving preference to some companies over others.
“Zombie companies,” which can only stay in business because they can borrow so cheaply, are kept going even though they would not normally be successful – dragging down long-term productivity.
Pumping up the prices of stock markets and houses without an underlying improvement in economic performance becomes ever more difficult to unwind and ultimately threatens an almighty crash whenever it does come to an end – wiping out business and home buyers who got used to ultra-low rates for too long.
People are not stupid; when they see emergency measures going on for nearly a decade, it undermines their confidence in authorities who they think have lost the plot.
But they haven’t lost the plot at all… Hillary and her backers are following the script perfectly.
The trouble is it wasn’t the show Mr. Hague and others thought it was.
It was more like House of Cards or Game of Thrones than Father Knows Best or The Andy Griffith Show – the good guys were never meant to win.
Fixing prices never makes sense for the public. It makes sense only when you are trying to achieve a result that willing buyers and sellers – the public – wouldn’t achieve on their own… and wouldn’t want.
QE is designed to steal from the public and reward the privileged elite. Pushing down interest rates punishes ordinary savers; it benefits big borrowers, the rich, and Wall Street.
That is the way the system is really rigged.
It is obvious why Ms. Clinton didn’t mention it last night. She is one of the riggers… a member of the Establishment… the Deep State… the Parasitocracy. She benefits from the rigged-up system.
In 2013 alone, she was paid $675,000 for three speeches to Goldman Sachs.
We don’t know what she said, but we doubt that Goldman was paying for financial advice.
Mr. Trump didn’t mention either in the debate last night. Too bad.
Further Reading: Bill is so adamant about the disaster that’s coming that he’s put together a tell-all presentation to help you prepare for the consequences of decades of reckless Fed policies. You can watch it all here.
BY Alexander Green, Chief Investment Strategist, The Oxford Club
Health care costs have gone up more than 80% in the last 15 years.
And you are likely to consume more health care services in retirement, not less.
That’s why you should definitely own one of the new “medical 401(k)s.”
That’s what many financial advisers call the new health savings accounts.
They are a good deal. Here’s why…
HSAs are medical savings accounts available to any American enrolled in a high-deductible health insurance plan.
Account owners can use them to pay for current out-of-pocket health care expenses or let the money compound to pay for future health care costs.
Your account will be held by a trustee or custodian, like a bank, credit union, insurance company, or brokerage firm. And it offers three separate tax benefits:
Like your IRA or 401(k), the money you contribute to an HSA is tax-deductible.
The funds in your account will compound tax-deferred.
The withdrawals you make – provided they are used to pay for qualified medical expenses – are also tax-free.
You cannot use your HSA to pay health insurance premiums. But you can withdraw funds without penalty for out-of-pocket medical, vision, and dental expenses, diagnostic devices, prescription drugs, and even over-the-counter medications.
These are not “use-it-or-lose-it” accounts.
If you don’t use all the money in your HSA, you can withdraw the money for non-medical reasons before age 65 by paying the income tax and a 20% penalty.
Starting at 65, account owners may take penalty-free distributions for any reason. (However, to be tax-free, withdrawals must be used for qualified medical expenses.)
You can even roll your HSA into your IRA or other qualified retirement account when you are ready for Medicare.
There is no minimum required contribution to an HSA. But there are annual contribution limits. For 2016, it’s $3,350 for an individual or $6,750 for a family.
If you are 55 or older, you can contribute an extra $1,000. (Limits are subject to change by the IRS each year.) You can also – once in your lifetime – make a tax-free rollover from an IRA to an HSA to fund it.
Unlike Roth IRAs, you are not disqualified if your income is too high. Even high-income earners are eligible for health savings accounts.
HSAs are quickly becoming the norm with U.S. corporations.
Many employees set up automatic pre-tax payroll deductions. (Some companies even make the health savings account contributions themselves.)
Even if the account is opened through an employer-sponsored program, all money in an HSA belongs to the account owner.
You can take your HSA with you if you change jobs. And you can use it to pay medical expenses well into retirement – and for as long as you live.
Indeed, many HSA owners prefer to use the accounts not to meet current out-of-pocket expenses but to save tax-free for future health care costs.
To qualify for an HSA, you need only meet four basic requirements. You have to have a high-deductible health plan (increasingly common, thanks to Obamacare), no other non-high-deductible health insurance, no Medicare, and not be claimed by anyone as a dependent.
If you qualify, contact your bank, broker, or mutual fund company and tell them you want to set up a health savings account today.
It is an absolute no-brainer.
Editor’s Note: For other little-known ways to save and make money in today’s uncertain economy, check out the new online presentation put together by Alexander’s team at The Oxford Club.
It highlights four government cash rebate programs, six “easy-money” secrets, four 401(k) tips, and a new federal law that gives $42.4 billion back to taxpayers. Watch here now.
Trump to America: I Won’t Commit to Accepting Election Result
At last night’s debate, Donald Trump would not commit to accepting the result of the presidential election, saying, “I will tell you at the time,” during his final debate with Hillary Clinton.
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Judging by your feedback over the past few days, Bill’s open letter to Donald Trump has been one of the most thought-provoking and hotly debated Diary issues so far this year.
Think what you may. I happen to like Trump. Stop sending me advice. Why didn’t you run for president if you know it all? We are done. Please stop emailing me.
– Danny S.
Well, you really did it this time! You wrote probably the best (and shortest) piece of advice I have seen to date.
I send your pieces on to my sons every now and then. However, this time, I should have a plaque made. Of course, it would hang in some obscure corner of the house where others seldom look. Above your words and in even bolder script, one would read “A VOICE IN THE WILDERNESS.”
– Mike C.
Thank Heaven you wrote your open letter to Donald Trump and published the truth!
I have devoted my career to pulling people’s heads out of their asses in the perhaps mistaken belief that sunshine, fresh air, and introspection might improve their quality of life. The jury is still out…
In the meantime, please triple my lifetime membership [of The Bill Bonner Letter] so I may, at age 74, live long enough to complete my “work.” Your check is in the mail, good buddy.
– Dr. Norman W.
Trump never hit the target with Clinton because he never set out to aim for it. He may as well be Clinton’s running mate. His whole campaign has been designed to ensure she gets elected.
His job was to get to the Super Bowl – but only so he could throw the game. Don’t worry about the Deep State coming for him after the election. He’s performed his role for the Deep State just fine.
– Nick P.
Bill Bonner for president! Quite frankly, I couldn’t have stated this better. I’m voting for Donald, but not for any reason that points to his magnificent plans for the U.S.
– Gary E.
Kudos my friend: brilliant open letter to Trump. He does shoot himself in the foot nearly every time he opens his mouth, and I hate it.
– Greg S.
Yes, Bill is extreme, caustic, and irreverent in his rant. Unfortunately, I embrace most of his commentary. The most important result of his open letter would be to have Trump read, understand, and adopt this position – now!
I really enjoyed your open letter to Donald Trump. I laughed from start to finish. For some reason, I doubt he will take your advice.
– Jim V.
I enjoy the letters from Bill. I do not always agree with their topics or conclusions, but I do like his independence. Keep it up! If we are to succeed in the future, all good minds will need to be involved.
– Mark S.
Certainly enjoyed your rollicking romp through the political fiasco we are being fed these days. I want to compliment you on your talent as a satirist worthy of the late, great Will Rogers. As you must know, he did tricks with ropes… and even better tricks with words about politicians.
– Michael S.
At this rate, Bill, it won’t be long before the only subscribers left will be foreigners and Americans who actually get irony – or humor of any sort. Shame there’s only three weeks to go before you’ll have to write about something else.
– John S.
Our friends over at Casey Research just released a surprising video. It’s all about a 94-year-old discovery that will make a fortune for people who know enough to make the right investments today.