Still no visible crack in the stock market. But the economy may be breaking down.
First, there is growing recognition that the Obama/Trump recovery has been a flop.
A headline at Yahoo Finance:
Jamie Dimon: The U.S. economy should have grown 40% in the last decade, not 20%
Hardly a week has gone by since the White House proposed its new budget, counting on 3% growth. Now, it too is already admitting that it won’t work. The New York Times:
The Trump administration pushed a $1.5 trillion tax cut through Congress in 2017 on the promise that it would spark sustained economic growth. While the tax cuts have goosed the economy in the short term, officials now concede they will not be enough to deliver the 3 percent annual growth the president promised over the long term.
Second, more signs are appearing that the recovery – weak as it is – is reaching its end.
The big exporters – China, South Korea, and Japan – all report slowing overseas sales. And the shippers too, say there is less traffic on the high seas, confirmed by the decline in the Baltic Dry Index.
Even Fed Chairman Jerome Powell has noticed the weakness in the global economy:
… We’ve seen increasing evidence of the global economy slowing down… I would say the principal risks to our economy now seem to be coming from slower growth in China and Europe and also risk events such as Brexit.
Great Britain is scheduled to leave the European Union in just nine days. On what terms? We don’t know. Apparently, neither does anyone else. The uncertainty could be disruptive.
But today, we follow up on what we believe is a sure thing – that the U.S. fiscal train is going to run off the rails.
The feds already have $22 trillion of debt, increasing by $1 trillion per year. The Trump budget will be rejected by Congress. And its economic projections are nonsense.
But its most pernicious feature – trillion-dollar deficits as far as the eye can see – will prove an underestimate. Our own guess is that U.S. debt (following a recession and market crash) will rise to $40 trillion by 2030.
But wait… surely there’s some way out… a way to slow down… and get back on track. A Dear Reader reminded us that Canada did it.
It is possible to balance a federal government budget. Canada’s debt was so bad in 1996 that the IMF [International Monetary Fund] was threatening to intervene. But six years later, the budget was in surplus, and the government managed to run seven straight surpluses until the Great Recession drove it back into the red.
The problem for the U.S. is that, as Canada showed, getting to a surplus requires measures that either liberals or conservatives abhor: One-fifth of all government positions, other than military and RCMP [Royal Canadian Mounted Police], were eliminated (about 50,000 jobs); government transfer programs (to provinces and individuals) were radically restructured.
For example, unemployment insurance was renamed employment insurance to reflect a realignment towards supporting workers between jobs, with lower monetary benefits and more training programs… Taxes were increased on individuals and corporations.
A temporary 3% surtax was applied to income over $50k; the tax was eliminated when the deficit was gone. Although it wasn’t a part of the strategy, the existence of a new value-added tax raised more revenue than anticipated.
The U.S. is one of the only major industrial democracies without such a tax. There was also a degree of luck.
Canada cut its deficit in a period of global prosperity and high resource prices, bolstering corporate earnings and tax revenues. The recent U.S. tax cut has, once again, failed to result in increased government revenue from greater economic activity.
In fact, tax revenue is down 6%. Spending cuts must be combined with at least temporary tax increases to get the government into the black.
So, you see, it can be done. Disaster is not fore-ordained. Catastrophe may be avoided.
Howl for Stimulus
But… can you imagine Mr. Trump raising taxes and cutting spending? How about AOC or Bernie Sanders?
Can you imagine the Fed sitting on its hands as the stock market crashes again and unemployment goes to 10%?
Can you imagine Jerome Powell standing tall, unflinching, like Paul Volcker… as economists, politicians, the White House, and the press all howl for “stimulus”?
More to come…
ECONOMIC INSIGHT: HOW AMERICA GOES FULL ARGENTINA
Editor’s Note: As Bill reported on Monday, inflation in Argentina is a fact of life. The most recent data shows prices of everyday goods rising 50% over the last 12 months. That’s a problem for the Argentine people, but it could also become a concern for Americans.
To get the full story of how Argentina-style inflation comes to America, we turn to Casey Research’s globetrotting analyst, Nick Giambruno. As someone who has seen runaway inflation in foreign countries firsthand, Nick reveals why the same dangerous trends are taking root at home… and he shows why now is the perfect time for some wealth insurance.
By Nick Giambruno, Editor, Crisis Investing
As Bill has been telling you, inflation is rampant in Argentina. Prices, on average, are doubling every two years.
Imagine if your salary was effectively cut in half every 24 months. That’s the reality for today’s Argentines.
“Okay,” you may think, “but that’s not my problem.”
Maybe not yet, but the U.S. is following in Argentina’s footsteps. Its shifting demographics all but guarantee it.
A recent Gallup poll showed that 51% of young people (18 to 29 years old) now favor socialism. And a growing number favor outright communism.
This is no small problem.
Millennials are now the largest demographic group in America. And sometime this year, they are expected to surpass Baby Boomers as the nation’s largest living adult generation.
Millennials are part of a growing majority of U.S. voters addicted to the heroin of government welfare.
An estimated 47% or so of Americans already receive some form of direct government benefit. However, when you include government employees, along with those in the nominally private sector who feed off the government slops, that figure is actually much higher.
This includes defense and other government contractors who win huge, no-bid contracts and provide nothing of value to the private sector. Any honest account of government wards needs to include them.
When you tally up everyone in the U.S. living off of political dollars, it’s well north of 50% of the population – a solid and growing majority.
In other words, the U.S. has already crossed the rubicon. There’s no going back.
Today, radical socialist ideas are flourishing in the U.S. Top contenders for the Democratic presidential nomination are all calling for more freebies… free medical care, free college, free housing, free food, and so forth.
It’s why Bernie Sanders, Elizabeth Warren, Kamala Harris, Alexandria Ocasio-Cortez, and other socialists are skyrocketing in popularity.
Bernie Sanders, the Democrats’ runner-up for the presidential ticket in 2016, openly ran as a socialist. Once a fringe senator, Sanders is now one of the most influential members in his party. And of course, he’s running again in 2020.
In other words, more people simply want the State to take care of them. They want a savior, and these politicians are simply answering the call.
I think this trend is unstoppable. Argentina proves that once socialism becomes entrenched, it’s impossible to uproot.
Bottom line, there’s no political fix to this problem.
That means one thing is certain: an ever-increasing amount of money-printing to pay for all these government programs.
You may not want to believe that. But putting your head in the sand won’t stop this trend.
I’ve been recommending that my readers be sure they own precious metals like gold.
For thousands of years, gold has been the safe-haven asset. That’s because it’s durable, divisible, consistent, convenient, and has intrinsic value.
Physical gold in your possession cannot be easily confiscated, nationalized, frozen, or devalued at the drop of a hat.
Gold is universally valued. Its worth doesn’t depend on any government.
There is nothing particularly American, Chinese, Russian, or European about gold. Different civilizations have used it as money for millennia. It’s always been an inherently international asset.
Gold is the ultimate form of wealth insurance. For thousands of years, it’s preserved wealth through every kind of crisis imaginable. It will preserve wealth during the next crisis, too.
This is why gold is the traditional “crisis currency.” Now, with the advent of the digital age and Bitcoin, people have another crisis currency to lean on.
That said, Bitcoin is no substitute for physical gold, nor is it a threat to gold’s value. I still think gold is the best way to preserve wealth over the long term.
I see Bitcoin as a complimentary tool for advancing your financial freedom and to protect your wealth.
I expect gold and Bitcoin to reach not just multiyear highs, but all-time highs as this all plays out, and as socialism comes to America.
– Nick Giambruno
P.S. As I said above, radical socialist ideas are flourishing in the U.S… and I think this is an unstoppable trend. But I’m not the only one who thinks that…
I’m about to sit down with Doug Casey, the founder of Casey Research. Doug is a living legend. And he has five politically incorrect predictions for 2019 and beyond that he wants to address…
But, these forecasts are just too controversial to reveal to you right now. You’ll have to watch the world premiere of what we’re calling Totally Incorrect: LIVE to see for yourself. It airs on Wednesday, March 27, at 8 p.m. ET.
And if you sign up now, you’ll get to see some “behind the scenes” footage on how he’s brought in once-in-a-lifetime gains of up to 86,900%. Sign up for this free event now.
The Devil in the Dow
The passive investing trend is not slowing down. Passively managed funds – funds that automatically track a sector or index – now own roughly half of all U.S. stocks. But as Dan Denning showed you recently, passive investing isn’t investing. It’s mindless buying… a precursor for the next fall.
Facebook: Sorry… We Thought You Were a Bot
Facebook is apologizing again, this time, to White House Director of Social Media, Dan Scavino. After noticing, yesterday, that he couldn’t reply to comments from followers, Scavino asked the Big Tech giant, “why are you silencing me?” Facebook’s response? Well, it thought he was a “spam bot”…
This Is the Next Space Race
Two of the world’s great superpowers are in an all-out race for global dominance of one type of technology… And Bill’s go-to tech expert, Jeff Brown, reveals the next big trend you won’t hear from the mainstream media. One that’s already pervasive in our everyday lives… and one that most investors are overlooking…
Today, the capitalism vs. socialism debate continues to intrigue dear readers…
Capitalism didn’t fail. It’s built like that. What has failed is its regulation, because from Teddy Roosevelt in the U.S. and the Trust Barons onwards, it’s been obvious that it needs strong regulation, not the light touch Reagan onwards put in. That is a failure of government and of a brainwashed people who elect such governments believing in that great half truth – the American Dream. Workers need strong, honest unions, the citizenry needs honest representation, and the corporations need effective regulation to keep them on the social straight and narrow. None of these exist in modern America.
– Richard C.
The raving socialists who demand the stripping of wealth from others out of desire for “fairness” do not understand that they are not poor because some rich person has money that rightfully should be theirs – availability of money and wealth is infinite, and I am not talking about the paper money spewing out of overheated printing presses in Washington. If anyone wants income equality, then be prepared for effort equality. Find a need and fill it or make up a need – like Facebook – and fill that. This is how real wealth happens.
– Dorian S.
Meanwhile, after last Friday’s story from the ranch, a dear reader thinks our editor might actually have it easy…
That’s a walk in the park compared to Idaho country. You just need cowboys who know how to get a bunch of cows to string out and travel right. And not too many… too many push too hard.
– John M.
IN CASE YOU MISSED IT…
Doug Casey is about to go live with what he sees coming for America in 2019 and beyond…
On Wednesday, March 27 at 8 p.m. ET, Doug is sharing five controversial predictions in the world premiere of Totally Incorrect: LIVE.
We must warn you… If you’re easily offended, this isn’t for you. Click here to reserve your spot now.