What’s Wrong with These Pictures?

Miles Franklin sponsored this article by Gary Christenson. The opinions are his and are not investment advice.

For the week ending May 15:

• Silver rose $1.29 to $17.07 on the COMEX.

• Gold rose $42.40 to $1,756 on the COMEX.

• Gold to Silver ratio declined to 103.

• The DOW fell 645 to 23,685.

“… the Fed sheepishly came out with a warning that asset prices are at risk to significant declines” one minute after the market closed on Friday. Read here.

Our economic and political worlds have transitioned into a “Newer Normal.” Life will not return to 2019 status. It’s an election year so expect narratives, not truth.

What’s wrong with these pictures? What do they show?

Debt and GDP have diverged for over six decades. A financial reset that reduces debt – a massive default – might correct the imbalance.

The problem is debt: National debt, consumer debt, corporate debt, student loan debt, mortgage debt and more. Because our currency units are not real money, what else should we expect but the creation of runaway debt?

ECONOMIC ACTIVITY:

The COVID-19 economic shutdown has crushed the global economy. How many lives have been saved by the shutdown? On the other hand, how many tragedies—bankruptcies, unemployment, hunger, drug abuse, alcoholism, child abuse, and depression—have been created by the shutdown? Consider shipping, industrial production, retail sales, ECRI leading index, and employment:

Low interest rates enabled corporations to borrow $ trillions for stock buybacks to boost stock prices and management compensation. Debts today hurt tomorrow’s prosperity.

GE and Boeing borrowed billions and now beg for government bailouts.

• GE stock prices: Dec. 2016 $30. Friday May 16: $5.49.

• Boeing stock prices:  March 2019 $430. Friday May 16: $120.

Government spending: 2020 is the year for stimulus (aka life support), giveaways, bailouts, and help from the government. Stimulus bills have passed, and more will be implemented before election day 2020. Tax revenues are lower, but spending increased dramatically. Short-term bailouts can lead to long-term disasters.

Excessive spending creates unpayable debt, which requires additional bailouts to “paper over” the debt disaster. Low or negative interest rates are “necessary.” Bailouts and stimulus do NOT lead to economic strength, prosperity, and happy citizens.

The shutdown has caused over 35,000,000 Americans to become newly unemployed in less than two months. Unemployed workers probably don’t pay rent, mortgage payments, and credit card bills, which hurts the economy and those creditors expecting payment.

The “I can’t pay” problems ripple through the economy like cars winding around parking lots waiting for handouts from food banks.

THE CONCLUSION FROM THE ABOVE PICTURES:

THE MEDIA:

WHAT’S WRONG WITH THIS PICTURE?

THE COMING ELECTION:

• Presidents who suffer through weak economies in their fourth year often are defeated.

• Republicans want to boost the economy, tell happy stories, create bailouts, and levitate the stock market to regenerate optimism by November.

• Democrats want to blame Republicans, weaken the economy to hurt Trump reelection, create massive bailouts, boost social programs, and promote a Democratic sweep in November.

• Both parties will bombard the populace with bailouts, free stuff, and “Vote for me” nonsense.

BUT THE REALITY WILL BE:

a)Spending, not prosperity.

b) More debt, not prudent management.

c) Media hype, not truth.

d) Trauma ahead, regardless of which “party” is mismanaging the economy and government.

e) Temporary life support, not sustainable growth.

f) Crashing dollar purchasing power.

g) Loss of confidence in the Fed, government, and media.

WHAT ABOUT HONEST MONEY—GOLD AND SILVER?

• Gold and silver can’t be created by The Fed or congressional actions. The financial and political elite discourage gold, silver, and real money in favor of debt. No surprise…

• Since our economy runs on debt and credit, and debt is “going crazy,” the dollar and fiat currencies must devalue further. The “race to the bottom” is happening. Winners will be gold, silver, and real assets.

• Gold reached all-time highs in most currencies and will reach a new high in dollars soon. Silver will move higher for several years.

How high gold and silver will rise depends upon:

1. Fiscal and monetary insanity.
2. Congressional fiscal mismanagement.
3. Panic and fear regarding devaluing debt-based currencies.
4. Out-of-control spending and debt creation.
5. Lack of faith in central banks and government pronouncements.
6. How long the economy remains on Fed induced life support.

Six Decades of M2 and Gold Prices – Quarterly data from St. Louis Fed.

CONCLUSIONS:

• Much is wrong in our economic world. The Fed, fractional reserve banking, and debt-based currency units (“fake money”) create most of the problems.

• Excessive debt and out-of-control spending are NOT prescriptions for wealth creation, prosperity, satisfied people, and booming economies.

• Adding more debt to fix debt-based problems… you know the drill.

• The media and government will concoct stories to explain everything. Portions of those stories may be true.

• Inflate or die! The Fed must monetize government debt, devalue dollars, keep interest rates low, and inject trillions into the economy for life support. They will sacrifice the dollar before they weaken the stock and bond markets.

• The “Newer Normal” will include massive unemployment, bankruptcies, a Greater Depression, asset deflation, consumer price inflation, hyperinflation, and misery for many.

• Ultimately, the dollar, stock and bond markets will lose purchasing power. Gold and silver will thrive.

TRUST GOLD AND SILVER INSTEAD.

Miles Franklin sells gold and silver. Call them at 1-800-822-8080.

Gary Christenson