Miles Franklin sponsored this article by Gary Christenson. The opinions are his and are not investment advice.
Suppose you knew tragedy would occur at the end of a long journey. That knowledge would change your behavior, attitudes, and expectations. Global financial systems are near the end of a long journey.
What Long Journey?
Most unbacked fiat currencies issued by governments and central banks have failed and ended in tears, inflation, abuse, and corruption. Governments collapsed, devalued currencies to minimal or zero value, and people lost jobs, savings, retirements, and homes.
Dollars, euros, yen, and pounds have been over-printed and devalued but have not yet failed.
Knowing the many historical examples of failed currencies, and knowing that every major currency is backed by nothing in 2020, and knowing that central banks have created, from “thin air,” over $20 trillion in new currency units, the dollar’s perilous journey should concern us.
The world is traveling a long and perilous journey toward failed currencies. The implications are staggering. Unless the following are true, expect many fiat currencies to fail, probably this decade:
a) Central banks are wise managers of the currencies they create.
b) Governments manage spending, debt, and their economies responsibly.
c) Consumer price inflation and total debt stay low.
d) Spending by governments, corporations, and individuals is contained within existing revenues.
e) Fractional reserve banking and QE are not used.
f) Public and private pension plans are funded and solvent. Government bailouts will not be needed.
It is obvious that the above are false. Central banks manage economies to benefit their wealthy cronies. U.S. government spending is out-of-control and growing worse every year. Official consumer price inflation (CPI) is supposedly low, but everyone knows better. U.S government spending has exceeded revenues every year for decades. Official national debt has reached $26 trillion. Fractional reserve banking and QE4ever create trillions of currency units every year. Many state, city, and corporate pension plans are insolvent, limping along, and waiting for federal bailouts. Over 40 million newly unemployed workers have filed for benefits since March, stressing budgets and creating a wave of bankruptcies.
We are traveling a long and perilous journey toward currency failure and insolvency. Federal Reserve actions look like a runaway train barreling down the tracks toward a barrier at the end of the line.
Does anyone see any serious political effort to reverse our doomed trajectory? Will fiscal and monetary sanity return in an election year marred by an ugly recession, massive unemployment, and a coming wave of bankruptcies? Probably not. Expect more debt.
WHAT ARE THE CONSEQUENCES?
QE4ever, MMT (Magic Money Tree) economics, “Inflate or Die,” fiscal stimulus, helicopter money, and central bank purchases of stocks and bonds lead to market distortions, inappropriate risks, inflated stock and bond markets, crashes, recessions, and depressions. And yet we persist in disastrous actions…
Along this journey we know the dollar’s purchasing power will plummet, much higher prices are inevitable, hyperinflation is possible, and many asset prices will deflate before spiking higher during an inflationary disaster.
How much inflation, how deep a recession, and whether deflation comes before or after inflation will be determined by actions of The Fed and U.S. government.
BUY GOLD AND SILVER TO PROTECT YOUR ASSETS AND SAVINGS.
As the dollar is devalued (down 98% to 99% since 1913) prices rise. Cigarettes cost twenty-five cents in the 1960s. Now they are $5 to $10 per pack. Thousands of other examples exist at the grocery store, doctor’s office, hospital, and college tuition office.
As the dollar buys less, houses, the S&P 500 Index, gold, and hundreds of other necessities rise in nominal prices. Do you remember paying a dime for restaurant coffee?
Examine the graphs of M2 (a measure of money supply) and gold prices.
As too many dollars are created by the banking cartel, M2 rises more rapidly than the economy grows. Prices rise. We don’t need an academic discussion, complete with integrals and partial differential equations, to understand this concept.
Total credit market debt per the St. Louis Fed tells the same story. More debt forces gold prices higher.
The S&P and gold rise as dollars buy less.
National debt shows the same relationship. Government creates excessive debt, and higher gold prices and a weaker dollar follow. We know that national debt will increase by multiple trillions every year, regardless of which political party is mismanaging the economy, regardless of which Fed Chairman is facilitating the transfer of assets from the many to the few, regardless of which tech company is censoring news, and regardless of pandemics, infection rates, and distracting stories of impending doom.
Politicians will spend currency units they don’t have by borrowing, and borrowing, and borrowing…
M2, total debt, the stock market, national debt, and gold prices will rise as the “Powers-That-Be” devalue dollars and transfer wealth to the financial and political elite. This devaluation process has been ongoing since 1913, and more aggressive since 1971 when President Nixon “temporarily” abandoned gold backing for the dollar and allowed the quantity of debt and dollars to skyrocket.
Read: What Went Wrong in 1971.
This perilous journey began in 1913, accelerated after 1971, and will eventually create a crash or reset with dire consequences for everyone, except the political and financial elite. This year and 2021-2025 will be difficult.
WHAT IS EXPENSIVE in July 2020?
Tesla stock closed at $1,208 on July 2. Sounds expensive, considering it sold for less than $180 thirteen months ago. The NASDAQ closed at 10,207. Expensive! Silver (COMEX) closed at $18.32. Cheap!
Examine the ratio of the NASDAQ to Silver.
Silver is inexpensive compared to the NASDAQ! That will reverse.
WHAT SHOULD WE EXPECT?
- Debt creation will accelerate for several more years regardless of which political party controls the Senate and Administration.
- New programs will be implemented. They will be costly and “paid for” via borrowing and QE4ever. A few that could accelerate national insolvency are aggressive MMT dollar creation, Universal Basic Income, reparations to selected groups, “stimulus” programs, expanded Medicare, Medicaid, tuition cancellations, more wars, pension plan bailouts, and bailouts for states, cities, corporations, and banks.
- A much higher DOW and S&P 500 will probably occur after a correction and the coming inflationary disaster.
- Apple and Tesla stock might sell for even higher prices than in July 2020.
- Gold and silver prices will sell at all-time highs and then multiples higher by 2026.
- Gasoline at $_____ . Your turn to guess. Food prices?
- Wealth will continue to be transferred from the many to the few.
- Our perilous journey toward currency destruction will include disasters, setbacks, and tears.
Read: We are on borrowed time.
- The banking cartel creates dollars because they can, and to increase their wealth and power.
- Those newly created trillions of dollars devalue existing dollars and increase prices of financial assets and consumer goods.
- Dollars are debts issued by the Federal Reserve. They are currency units, not real money.
- Since dollars are debts, total debt inevitably increases. Someday, perhaps soon, a reset will occur.
- Stocks and most prices rise as dollars buy less.
- Stocks are expensive in 2020.
- The NASDAQ fell over 80% after the 2000 bubble. Gold fell 70% after the 1980 bubble. Silver fell over 70% following its 2011 high. Buy what is inexpensive and avoid the expensive sectors.
- Gold and silver are inexpensive compared to stocks, dollars in circulation and total debt. They are “go to” assets for this decade.
Silver prices are almost as low, relative to debt and the stock market, as they were in 2001 when they bottomed at $4.01. Food for thought…
Miles Franklin sells gold and silver coins and bullion. Insurance may reduce your risk during a perilous journey. Gold and silver are insurance against government and central bank currency devaluations, corruption, and dangerous policies.
Call Miles Franklin at 1-800-822-8080.