2018’s Current Unseen Crisis

Embedded below are three of the best interviews that I have heard lately that sum up the extent and magnitude of the economic situation that we are currently in worldwide.  In addition, I’ve added some of my own comments and perspective to try to bring those who aren’t at all familiar with the topic up to speed.

The Dow Jones has hit $26,600+ and all other indices have recently hit all-time highs.  Government regulations that hamper the development and expansion of business have been rolled back at historic 20 to 1 levels.  For every new regulation introduced since the 2016 elections, 20 other regulations have been repealed.  That can have a positive long-term effect on the economy as new businesses emerge, established businesses expand and each needs more talent to implement their expansion plans!  In addition, tax rates on business have been rolled back from 35% at the federal level to 21%.  That can free up a good deal of capital for expansion, new jobs, higher wages, and reduction of debt loads and buybacks of dividend paying stock.  Keep the stock buyback in mind, we’ll come back to that one.

While I don’t agree with everything our new President does (or says), having a businessman with an ingrained New York-state-of-mind that refuses to be pushed around has netted us some gains on the economic front here at home, and more profoundly on the foreign relations front abroad.  While at the time of this writing there are serious concerns about the effects of backing out of the Iranian nuclear agreement, the US has shown in regards to ISIS in Afghanistan, and with North Korea, that we aren’t lead by spineless windbags that don’t back up what they say.  That said, there are still several campaign promises outstanding that I’m waiting to see fulfilled.  While the current administration has made some good headway, I don’t think they have done nearly enough to move toward fixing the issues that face us.

Here is a recent interview with Nomi Prins, 2 -time best-selling author, interviewing for her new book, “Collusion, How Central Bankers Rigged the World”.

When compared to a 1913 US Dollar (silver certificate) which could be exchanged at any bank for a Morgan Silver Dollar (roughly 371 and 4/16 grains of refined silver) the current “One Dollar Federal Reserve Note” has only 3% of the real dollar value as defined by the US Constitution.  You see, one of the original problems that the county’s framers and founders sought to solve was the manipulation and devaluation of the value of currency by governments, organizations, and people in power.  When you define the dollar’s value as a weight of a consistent element like silver or gold, you can’t manipulate it in any other way than with a “thumb on the scale”.  That can be easily seen and called to account.  When there is nothing backing the dollar, which there is nothing backing the Federal Reserve Notes (FRN$) any longer, you have a freely manipulated and moving sense of value.  The more money that they make available (called “quantitative easing”), the less purchasing power each individual one dollar Federal Reserve note will buy.

With that in mind, take the top value of the Dow Jones and multiply by the current purchasing power of a dollar at 3%.  In terms of 1913 dollars, the Dow has a real value of about $798.00.  Working that calculation backwards, the current spot price of silver per troy ounce hovers around $16.50 (in FRN$) plus a $2.00-4.00 premium for the precious metals dealer.   Dividing the recent highs of the Dow at $26,000 by $20.50 (16.50 + 4.00 for Silver Eagles, a US Currency with a $1.00 face value) we get a much different view of the value of a share of the Dow at $1297.00.  Add into that bit of reasoning that the historical value of silver is based on its rarity in comparison to gold at 16:1, the current value of silver which has been depressed by a manipulated market much like the purchase power of a dollar, should be (Au @ $1318.50/16) around $82.00 per ounce!  Calculating that value in one-dollar Federal Reserve Notes gives some insight that the real value of the Dow should be closer in real value to 324 real dollars or ounces of silver per share.

The point here is that almost all information available in the Wall Street centered financial market is completely manipulated behind a smoke screen in front of which values are expressed in terms of a freely moving scale known as the US Dollar or Federal Reserve Note.  So, not only are markets largely manipulated by major financial players, but the unit or dollar in which the value is expressed is a moving target!

Here’s another interview with professional investor and venture capitalist Marc Faber, who works out of Singapore due to his involvement in Asian markets.

Over the past three decades, since the entry of the US into the war in Iraq, the US has been racking up major defense expenses and the politicians have been looking for ways to pay for the military spending, and appease the populace (that’s you and me) by offering more and more government programs; which they have to find a way to pay for.  What they implemented was a shell game called “quantitative easing”, more simply expressed as the old adage of “priming a pump”.  You infuse the economy with liquidity, or cash that can be loaned to businesses and individuals to finance expansion and the economy should get a boost.  While small amounts of that may work in the short term, the level at which the Federal Reserve as our Central Bank has pumped trillions upon trillions of US Dollars into our own economy and economies around the globe has severe consequences when all that cash makes it to main street.  Just for clarity’s sake, one trillion is one million, millions:  1,000,000 x 1,000,000 or 1,000,000,000,000.

Dow Jones Industrial Average 1950-2017

If 10 people are stuck in a life raft in the middle of the ocean, the one person with two apples as the only thing to eat in the boat is rich indeed!  Scarcity drives up value.  If you and I are standing in the middle of an apple orchard with ripe apples hanging off every tree, your response to my offer to sell you my apple for $1.00 is met with indignation.  “Why?  I can just go pick one right here…”, you would argue.  In that situation, my apple holds zero value to you.  Scarcity is what drives up value.  With money literally everywhere, it’s no wonder that bond and bank rates have been near zero for a decade, and that the value of each dollar is buying significantly less than it used to.  Banks and major businesses everywhere are using this “cheap money” to buy back stocks in the stock market so that they don’t have as many dividend benefits to payout come the end of the quarter.  They get to keep more profit.  The stock values in the market are bid up because with all this cheap money available, these businesses and investment banks don’t really care what they are paying for the stocks.  The prices in the market rise.  That’s how we got here.

The answers are simple but outside the mainstream.  We can use the strategies that the wealthy, including, major industry executives, entrepreneurs, and families with old money have used for centuries.  The value in the stock market may change, the value of a dollar may change, but the property that I own will always hold value.  “People who have money have planned to have money.”  That is a point that I continually make to friends, clients, those that purchase my book, and attendees to my seminars.  People who plan to have money have more money than what they need today, tomorrow, next week, next year, and maybe for their foreseeable future; that’s called retirement, by the way.  The truly rich own assets on which they earn a growing cash flow for as long as they own or control the asset.  Businesses, dividend paying stocks, rental property, intellectual property, and precious metals are all forms of wealth ownership.  Control of these mostly physical assets over which no other entity exercises authority is a means to avoid “third-party-risk”, or the need to have someone else (like a bank or stock market) convert and transfer your value to you.

Finally, this interview with Michael Pento of pentoport.com, a professional active portfolio manager, gives some scathing feedback on the state of our financial system and the very physical asset versus paper assets consideration that I discuss in the above paragraph:

While I thoroughly believe that the banking industry and Wall Street (more closely connected than most people realize) each have inherent problems that will lead us to an eventual financial catastrophe, I do believe there are places in the financial services industry where you can earn good returns with significantly less risk of devaluation or default.  Add to that the ability to leverage your growing assets in those accounts with high liquidity and you once again have a financial service and account that is useful for growing your wealth while protecting you from artificial values and inherent risk in the market.  Useful, in fact, in helping you grow resources from which you can expand your net worth with physical assets others will find very difficult to devalue or take from you.  Those are the types of accounts that I help people establish for their families.

Do contact me through the means of the forms on the website or through the “contact” tab and start a conversation and we can discuss how I can help you in the pursuit of your financial goals.

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