Get Ready for More Government Spending

DRIGGS, IDAHO – I sit here in my little home office, surrounded by financial reports and data printouts…

It doesn’t look good.

The World Trade Organization says global trade will decline 9.2% this year. Between April and June, the world economy lost 400 million full-time jobs, and will contract 4.5% this year.

I never imagined I’d see statistics like these.

To give you a sense of perspective…

The Eurozone economy will shrink 7.9% this year, more than double what it shrank in the 2008 financial crisis.

The 40 largest companies in France generated cumulatively 82 billion euros in profits in 2019. In the first half of 2020, they generated no profits.

Their profitability disappeared like a spoonful of talcum powder in a stiff breeze…

Will our overlords sit quietly and let the mess sort itself out naturally? Of course not… (More below.)

Is the Magic Leaving Our Relationship?

Greetings from Driggs, our winter hideout…

Kate and I got divorced in 2014.

We lived separate lives, with new partners, and we passed the kids back and forth like any other divorced couple. We didn’t have a relationship. Not even a friendship.

Then in 2018, as two virtual strangers, we packed a suitcase and hit the road together.

We had such a great time, we ended up living out of that suitcase for the next two-and-a-half years. We visited 30 countries and did a complete loop around the planet.

We decided to get married again.

But that was then – on a romantic adventure – living in a fantasy world.

Now that we’ve re-entered society, and we’re living in a house together, doing laundry, picking up groceries, and cleaning dishes after meals, is the magic leaving?

Nope. We’re having a great time, living together in this isolated community, homeschooling the kids, and waiting for the snow to come…

The great thing about our homeschool is, anything can count as “homework.”

Today we watched Lawrence of Arabia, the epic three-and-a-half-hour World War I film about the fight between the British and the Turks in the Arabian Peninsula.

Now back to our overlords… and their strategy to fix the recession…

How Our Overlords Plan to Fix the Global Recession

As I said above, our overlords won’t just sit quietly and let this mess sort itself out naturally.

“But, Tom,” you might be wondering, “97% of advanced economies around the world have already set interest rates below 1%. And 20% have set interest rates negative. What else can they do?”

My answer: print and spend. (The bureaucrats call it “fiscal stimulus” or “government spending.”)

There was a letter in Tuesday’s edition of the Financial Times by Gita Gopinath, chief economist at the International Monetary Fund (IMF), advocating for more government spending:

The importance of fiscal stimulus has probably never been greater. Fiscal stimulus is not just economically sound policy, but also the fiscally responsible thing to do.

Authorities can actively support demand through cash transfers to support consumption and large scale investment… It’s time for a global synchronized fiscal push.

“But, Tom, aren’t Western governments already broke?” you might ask. “How can they afford to increase their spending?”

In the words of Carmen Reinhart, chief economist at the World Bank and one of the most famous living economists: “First you worry about fighting the war. Then you figure out how to pay for it.”

(Hint: They’re going to pay for it with watered-down paper currency.)

– Tom Dyson

P.S. Last month, a tech start-up called Varo Money won a new banking charter from the Office of the Comptroller of the Currency (OCC). It’s the first new banking charter ever awarded to a fintech company. This opens up the marketplace for tech startups to compete with banks. (The OCC is the regulator in charge of overseeing the banking industry. It’s a department of the U.S. Treasury.)

The head of the OCC – Brian Brooks – was formerly an executive at Coinbase, one of the biggest crypto exchanges. No surprise, then, that the OCC is becoming increasingly “tech friendly.”

I expect to see more announcements like this. To water down their currencies, central banks must be able to bypass their banking systems and issue their own currency receipts. To do this, they’re going to need to let tech firms become more involved in finance and banking.

P.P.S. This all ties back to the globalized currency devaluation I’ve been calling for in these postcards… and why I see gold going to $10,000 and beyond…

Like what you’re reading? Send your thoughts to [email protected].

One reader is amused by Tom’s response to the dangers of shoveling snow…

Reader comment: “Tom’s response: Isn’t this why people have kids?” I nearly snorted my tea when I read that. You could be channeling my father from 45 years ago. Must be the universality of fatherhood. I enjoy every aspect of the Postcards.

Meanwhile, others share tips on how to keep the Dyson family safe in the snow…

Reader comment: Whatever you do Tom, do your research on winter tires. A highly recognized brand doesn’t mean squat. I live in Ontario, Canada and I can tell you that there are winter tires being sold out there that perform more poorly than some all-season tires. One more thing: You have to purchase four (4) winter tires. Anyone who says otherwise doesn’t know “nuttin” about winter driving.

Reader comment: Be sure to have everything in the car gone over. From checking the antifreeze for specific gravity to the battery condition, battery terminals to new wiper blades. Tire pressure and wiper fluid are also important. An ounce of prevention is worth a pound of cure. It is a lot safer, too.

The bitcoin conversation continues…

Reader comment: I think the big issue for me with bitcoin is actually understanding the value of each “unit.” With a U.S. dollar, we are familiar with the basic units and can easily gauge the value or cost of something fairly quickly. I would be hard-pressed to understand what something “costs” if it was only listed in bitcoin.

Will we always have to convert the amount of .0072092855 bitcoin to equate to $100?? And bitcoin is hardly stable with its value fluctuating greatly. Everyone must also remember that the U.S. government has legal tender laws to make sure the U.S. dollar has no competition.

Last time I checked, the U.S. government accepts only U.S. dollars for payment for taxes. If and when that changes, then perhaps alternative payment methods will actually gain a larger following. It is all too easy for the government to issue an edict that all banks are prohibited from exchanging U.S. dollars to any crypto currency. And then, how would we access the stranded cryptos??

Reader comment: You stated in a response to a reader email that bitcoin has no special utility. I would propose that bitcoin has a very special utility and that is the fact that bitcoin cannot be devalued by a government or any third party. No other cryptocurrency, fiat currency, or commodity has this property.

This is what gives bitcoin a new property of money I refer to as integrity. This property is what has been missing from money since the dawn of man. It is the reason why bitcoin may turn out to be one of the most important inventions in the history of humanity.

I also suggest you discuss the subject with the venerable Bill Bonner. “Sometimes right, sometimes wrong, but always in doubt.” You may be right about gold due to forces that I don’t foresee at this moment. However, you don’t “know” that you are right about gold. That’s why I’m 99% bitcoin and 1% gold. You might be well-served to at least hedge your bet like I have, but in the opposite direction.

P.S. The postcards are an enjoyable read, even when you trash bitcoin. I’m still waiting for someone to give me a convincing argument against bitcoin. An additional thought: I actually think bitcoin will eventually expose gold for the fallacy it is. Once bitcoin adoption reaches critical mass, gold will fall to its industrial use value, which is the equivalent of about 20 dollars per ounce today. Gold is the Mississippi bubble!

Reader comment: I became enamored by Austrian Economics about the same time as you did. You probably influenced my thinking back around 2007 in your 12% Letter (by the way, Stansberry still mentions you periodically, or at least refers to your newsletter). You might enjoy reading about the time-as-money theories of Tupy and Pooley. Those ideas are altering my opinions and interpretations of the Austrian School (not abandoning it but altering it).

Reader comment: I’ve been reading along almost throughout your whole journey, following your travels, shared experiences, and investment strategies and thoughts. Thanks so much for sharing! It’s a little crazy to me to imagine putting myself out there, both struggles and successes, and allowing others to form opinions and respond.

It’s admirable that you’ve done that (at least, seemingly) without changing course or losing confidence in who you are, what you’re learning, and how to continue forward in both taking care of your family as well as your investments.

I’m in Oklahoma so I have nothing to offer in terms of travel advice or a dinner invitation! Definitely not looking to show up in the “Reader Comments” section of your Postcards; I really just wanted to share my appreciation with you all.

My ex-wife and I are living all together with our kids and functioning as a family, while also possibly working towards full reconciliation. Through that, I have a greater appreciation and admiration for your priorities and what you’re working towards, moving forward.

I must say that I’m also envious for your travel experiences, both globally and across the U.S.! You guys are all gaining such unique experiences and knowledge. So very cool! Again, thank you so much for sharing, and please keep on writing. I’ll continue to follow from afar!

Finally, others give Tom a movie suggestion after he finished the Monte Walsh audiobook… and one shares his favorite part of Yellowstone National Park…

Reader comment: If you do choose to watch a Monte Walsh movie, do yourself a favor and watch the original with Lee Marvin, Jack Palance, and Jeanne Moreau. I haven’t seen the Tom Selleck remake, but there’s no comparison in the cast, especially for Western authenticity.

Reader comment: I don’t know if Tom reads these or if they are forwarded to him. If it has to be forwarded to him, please do so quickly so he and his family don’t miss it in Yellowstone. What a road trip adventure for parents to have the blessing to do with their children! And the experience for the children!

Do not miss the less-traveled northeast quadrant of Yellowstone while you’re there. It really is the most stunningly beautiful area of the park and most never venture that far from the west entrance! When I took my children, we just so happened to enter the park from the northeast, so we lucked into it! Enjoy the experience while you can with your children; nothing in life is more important in life! It goes by quicker than you think.

Tom’s note: As always, thanks for your messages! I’ll be answering your questions in tomorrow’s mailbag edition of these Postcards. If you have questions you’d like me to answer in a future mailbag post, send them to [email protected]. We read every message you send us.