I think that your current investments in American securities are not a good idea and that a very bad crash and subsequent Great Depression is coming very soon to an America near you. Let me try to convince you that if you want to preserve your assets and standard of living you need to drastically rethink your views on the world as it is today.
First of all, the US is absolutely up to its eyeballs in debt and future unfunded liabilities. Check out the debt clock:
Look at the federal debt per taxpayer (130,440 and rising) and liability per taxpayer (1,028,097 and rising). Those are astronomical numbers which tell the story of the USA as the greatest debtor nation in the history of the world. I don’t care what any of the US politicians say, this debt is unsustainable.
The rest of the world is beginning to understand. Many other countries have been moving away from the dollar and Treasuries. The dollar is dropping like a stone against other currencies (a big Mac now costs $17.19 in Zurich) and gold is going through the roof.
Gold going through the roof, is not in a bubble and its price not even a representation of any real gains. It is instead a verdict on the dollar and how the world consensus outside of America that the dollar is doomed. Gold is effectively replacing the dollar as the world reserve currency.
So what happens next? As the equity markets continue to crash, which they will as people continue to take their money out of equities and go to safer havens like metals the only recourse the USA will have is further “quantitative easing” which means printing more money. Bernanke has already pumped trillions into the US money supply and like any other hard drug, this “stimulus” means that to keep the Ponzi scheme that is the US dollar afloat, they will need to do more and more of it. All this money printing will cause inflation, probably hyperinflation in the not too distant future.
Even if your annuities promise a certain return, it’s not a good idea to invest in them. First of all, there are no guaranteed returns in investing no matter what they’re telling you because if the market tanks and your annuity company doesn’t have enough money to pay everybody, then you’re just another screwed creditor. But that’s not even the real problem. The real problem is that there will be more money printing and more inflation, so even if you achieve a nominal gain of 7% your real net will be negative.
Now I know that the politicians in DC say there is no inflation. That is a lie. In some of the most shameless book-cooking they do, they do not include energy, sales of housing or food in the consumer price index, so basically the price of everything you actually need to survive doesn’t count in the government’s so-called “consumer price index” (CPI). They also say things like, “Since the Ipad 2 has twice the power of the Ipad 1 it should be worth twice as much and since the price of the 2 is the same as the 1 that means prices are going down.”
However when you look at the US dollar against other currencies you see the real story. A couple recent examples are instructive.
The Japanese government last week on the 4th of August in an attempt to protect their exports purchased $58 billion dollars in order to weaken the yen vs the dollar. The yen went from under 77 per dollar to 80. That intervention bought them 4 days and now the dollar is below where it was before the intervention (76.453) and is just above its all time low vs the yen. In 2007 before the big time money printing really started it was 123.29.
In a similar attempt to keep their exports affordable the Swiss central bank in an overnight move yesterday increased the supply of francs available on short notice from the bank by 40 billion Euros. The subsequent move of the dollar against the franc was retraced in an hour and 15 minutes. The Swiss franc is at an all time high against the dollar ($1.30124). In 2007, it was 0.789. But no, there is no inflation, says Washington.
In conclusion, I’d like to say that my friend’s theory that the end of America as we know it is soon is not based on just a few data points, but the whole picture of global finance. The dollar is doomed within the next 5 years and we have a potentially game changing paradigm shift on the way which I believe will be hyperinflation. As far as I know the only way to protect your assets is through tangible assets like metals, commodities, energy, and real estate. Please consider this carefully.
I concur. The perfect analogy here is that of the Titanic just shortly after striking the iceberg. Most people have no clue there is any real trouble in store. Almost nobody foresees even the possibility that the whole ship could sink. Most of the passengers are still in the ball room sipping martinis and listening to classic music. However, the smart ones, like Charlie and I have already taken one of the very limited lifeboats available and set sail for a much warmer, sunnier tropical paradise. If you haven’t woken up to reality yet you’re running out of time!