YOUGHAL, IRELAND – The Dow rose yesterday. Gold rose, too. Dow investors are betting on clear skies and smooth sailing. Gold investors are betting on icebergs.

Who’s right?

We don’t know. Perhaps both are betting on rate cuts. Like a gust of wind, more fake money, lent at fake rates, may push them both along… in the short run.

In the long run, our money is on the icebergs.

Economic Amnesia

Economies are living things… Civilization, too… They breathe in and out. They learn from their mistakes and go forward. And then, they forget… and sink.

Yesterday’s Wall Street Journal explains the latest amnesia:

How Washington Learned to Love Debt and Deficits

Political support for taming federal debt has melted away, and the U.S. is testing just how much it can borrow.

Moody’s projects that within a decade, interest payments will consume over 20% of federal revenue, well above most other developed nations and exceeding U.S. levels in the 1980s and 1990s when debt worries consumed Wall Street and Washington.

The WSJ turned to an old-timer, former Senator Alan Simpson, born in 1931, now retired in the mountains of Wyoming, to help remember:

If you spend more than you earn, you lose your butt.

Losing your butt can take time. And as we pointed out yesterday, it happens slowly at first… so slowly that few people even notice.

Not Worth a Continental

And it begins with politics. Ultimately, the feds control the money we use. And over a long, painful history, they learned – and we all learned – that no human being can be trusted to create fake money at will.

Counterfeiting is a federal crime.

John Law was the world’s first modern central banker to make counterfeiting a matter of public policy. His fake money system collapsed in 1720.

The South Sea Bubble in England, too, was essentially a scheme to finance the government with fake money; it blew up in the same year. Later, French assignats – another form of fake money based on land confiscated from the church – caused inflation of 3,500% in 1795.

These… and many other 18th-century paper money disasters… persuaded governments to rely on metal for their money.

Americans had the experience of fake money fresh in their minds when they wrote the Constitution, for example. The “continental” dollar was issued in 1775. By 1781, it was worthless. “Not worth a continental,” was a famous expression.

So, the Constitution made it clear: states (which issued money at the time) were prohibited from making “anything but gold and silver coin a tender in payment of debts.”

Prosperous and Peaceful

In Europe, too, all major governments turned to gold-backed currencies. This real money is part of the reason the 19th century was so prosperous… and relatively peaceful.

There was no systematic price inflation, neither on Wall Street nor on Main Street. And with no easy access to counterfeit money, governments could not undertake wars, wasteful adventures, and boondoggles.

But the gold standard got gassed in World War I. All the combatants – save the USA – were so eager to keep the war going that they turned to fake money to pay for it.

Later, gold-backed money was revived… and lingered on in bad health until 1968.

Then, the U.S. declared that henceforth, it didn’t need no stinkin’ gold for its domestic finances. The gold standard was finally laid to rest in 1971, when the Nixon administration removed it from its global commitments and buried it.

But that didn’t mean that people had completely lost their senses. Members of Congress continued to rant and rave about overspending and debt… and generally, made an effort to balance the federal budget – though rarely did they succeed.

And then, the old fiscal conservatives disappeared completely.

Deficits Don’t Matter

The Democrats were early adopters of the “deficits don’t matter” flapdoodle. Once in power, Republicans found it useful, too.

And now, according to your editor, and The Wall Street Journal, nobody in power worries too much about balanced budgets, deficits, debt, or fake money.

In the latest monthly accounts, for example, we find that in May, the feds spent nearly $2 for every $1 they raised in taxes, bringing the deficit for the last 12 months closer to $1 trillion.

How long that can continue before Senator Simpson is proven right is anybody’s guess. But our guess is it won’t last forever.

Regards,

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Bill

TECHNOLOGY INSIGHT: FLYING DELIVERY DRONES ARE NEARLY HERE

By Jeff Brown, Editor, Exponential Tech Investor

Recently, I attended the first inaugural Amazon re:MARS 2019 conference in Las Vegas.

The focus of the invite-only conference was Machine learning, Automation, Robotics, and Space – that’s what MARS stands for.

The event spun out of a private conference that Amazon founder Jeff Bezos held annually for years in Palm Springs, California.

Here’s one of the most exciting stories from the conference: Amazon’s Prime Air division unveiled its new drone.

I snapped a picture on my phone when it was shown on stage:

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Amazon’s Prime Air division unveils its new drone

This was amazing to see in person. The drone has a sleek aerodynamic design. That makes it more maneuverable. It still takes off and lands vertically like normal drones. But the drone rotates, allowing it to fly straight like an aircraft.

As I’m sure you’ve guessed, this is the drone that will make Amazon Prime Air’s first deliveries. Right now, it can carry five pounds up to 15 miles. This capability will cover about 75% of all current deliveries by Amazon.

Amazon has already received approval from the Federal Aviation Administration (FAA) to fly drones in U.S. airspace.

Prime Air deliveries will roll out in rural areas first. Customers can expect Prime Air packages within 30 minutes of purchase.

Here’s how it will work…

Customers will put out a landing pad with a big barcode visible from above. The drone will fly to the pad and make sure no people or animals are in the way.

Then, it will plop down… drop the package… text the customer saying the package has been delivered… and fly back to its home base. The home base may be a logistics facility. Or it could even be the back of an Amazon delivery vehicle.

By the way, the drones will use neural networks to get better over time. And they will employ computer vision to detect electrical wires or other obstacles that may be in their way. Trust me, these things in action will be an incredible sight to see.

Service areas have not yet been announced, but Amazon plans to begin drone deliveries within the next few months.

For those lucky enough to live in the first service areas, don’t be surprised if you see flying drones dropping off Christmas gifts this year…

Jeff Brown

P.S. On Wednesday, I hosted my first technology investing summit of the year. Thousands of readers tuned in to make the event a success.

I revealed four predictions about the future of bleeding-edge technology. And I revealed the name of my favorite early-stage tech company that could make investors a small fortune when it IPOs.

If you missed the online presentation for whatever reason, don’t worry. I’ve asked my publisher to keep the video up for a few more days. So if you couldn’t tune in, go right here.

FEATURED READS

The “Financial Scars” of the Great Recession
Ten years after the Great Recession hit, some Americans are still waiting for it to end. About a quarter of Americans say their finances are worse off than before the recession. And while the 1% saw their income rise 17%, less than half of Americans saw no increase in their wages at all…

Local Governments Shy Away From Debt
While the federal government is taking on more and more debt, local authorities aren’t following its lead. Across the country, borrowing among local governments is down. States and cities want to pay for projects with cash or higher taxes instead. And it’s because they fear a recession is around the corner…

The Tech That Will Power the House of Tomorrow
Ask yourself this: How much time do you spend every week making appointments or managing your calendar? These small tasks add up. And they distract you from more productive work. But that’s all about to change, thanks to this technology…

MAILBAG

Today, a reader reaches out from Kentucky to defend President Trump

He’s done more right for the economy and the country than Obama and his idiots ever did! For your information, at least in Kentucky, the economy is great, and “help wanted” signs are everywhere. It might pay you to leave that garden spot, Baltimore, and witness what’s really going on. Your observations are embarrassingly off the mark.

– Lyle W.

And one reader shares her thoughts on Silicon Valley insider Jeff Brown’s “Early Stage Tech Summit” from Wednesday…

The presentation was fantastic, and I want to thank not only Jeff Brown for opening my eyes to the future upon us, but Bonner & Partners, too, for sponsoring this event and being very much a part of the world to come! I’m from an older generation, and sad to say, words are my bailiwick, not machines, math, or technology. I would love to invest in the wave of the future; perhaps some of my penny pot stocks will rise again.

– Jean L.

[You can catch a replay of Jeff’s important presentation here.]

IN CASE YOU MISSED IT…

Did you see the “Early Stage Tech Summit”?

For the first time ever, 30-year tech insider and Bill’s go-to tech expert, Jeff Brown, pulled back the curtain on four early-stage technologies that could change our world… and detailed four small-cap tech companies that could 10x your money over time.

These predictions have the potential to be extremely lucrative. We’ve arranged a special replay of the event, for free. Click here now to watch.

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