If you study American history, you’ll see that Debt Jubilees occur only in a unique type of extreme political environment.
After all, a Jubilee is a radical measure.
The government essentially steals money from one group and hands it to another.
In order for this to occur, four elements must be in place…
1. The wealth gap must be getting dramatically bigger.
2. There must be cultural threats from those with different values or from outsiders (in other words, minority populations and immigrants).
3. The government must be ineffective at providing solutions.
4. And there must be growing anger toward the “elites.”
Sounds familiar, doesn’t it?
We have the largest gap ever between the rich and poor…
We have huge increases in violent protests about immigration and race…
We have a completely ineffective government…
And we have extreme animosity toward the “elites” from both the left and right.
Check… check… check… and check.
Why Does Porter Call It a “Jubilee”?
The term “Debt Jubilee” has its basis in the book of Leviticus.
The Israelites were instructed that every half century there should be a reversion of land to its original owners or their heirs, a general forgiveness of debt, and a manumission of bond-servants.
In the year of this jubile ye shall return every man unto his possession.
The slate is wiped clean and everybody gets to start over.
It’s a nice idea.
However, in fairness to the ancient Israelites and their common sense about economics, it’s worth mentioning that The New Oxford Annotated Bible contains the following footnote: “There is no evidence that the jubilee program was ever carried out.”
– The editors
There’s actually a name for this type of political and social phenomenon.
It’s called “populism.” And it emerges every 30 to 40 years.
Populist movements are characterized by extreme anger at the government, at the wealthy, at the establishments, and at “newcomers” and minorities.
As the director of an Alabama group that tracks violence and hate crimes around the country told Newsweek in June 2017: “There has been a massive explosion of violence across the country.”
I’m sure you’ve seen this yourself.
The hatred and anger is like nothing I’ve witnessed in my lifetime. And it’s coming from all sides. A member of my staff went to a book reading in Baltimore by one of the most famous left-wing authors in the country.
The author told the crowd that he wished he could go back in time and smother Donald Trump in his crib as a baby… or convince Trump’s mother to have an abortion.
This epitomizes the political and social environment in America today.
From the protests and marches… to the refusals to stand during the national anthem…
From Black Lives Matter to the anti-immigration movements… to the rejuvenation of white supremacists… to the tripling of membership in the Democratic Socialists of America.
It’s clear we are in the middle of an extreme “populist” period in America.
Ray Dalio, one of the richest men in America, studied the political environments of the past 100 years and concluded in March 2017…
The last time that it [populism] existed as a major force in the world was in the 1930s, when most countries became populist. Over the last year, it has again emerged as a major force.
Look at this chart. The big spikes show when populist politicians got the most votes in America and abroad…
So what does this all mean?
It proves that what we’re experiencing today is eerily similar to what happened in the 1930s… right before the biggest and most radical Debt Jubilee in American history.
The economic comparison is stunning.
Interest rates hit zero leading up to each of these periods…
The government went into mega money-printing mode during both periods…
Printing money caused the stock market and other risky assets to boom during both periods… boosting the wealth of the rich, but doing nothing for the poor…
During the 1930s, just like today, the wealthy acquired a much higher-than-normal percentage of our nation’s wealth…
And in both the 1930s and today, the percentage of the population that was foreign born was higher than normal… causing animosity among the “common man.”
Just like today, the economic conditions of the 1930s caused extreme income inequality.
Back then, the top 10% earned 45% of all income (compared with 50% today) and owned 85% of the wealth (compared with 75% today).
Even the political characters are the same…
The 1930s saw a popular socialist presidential candidate just like we had in 2016. Huey Long was a former governor of Louisiana and a U.S. senator. He proposed an income cap at $1 million… a 30-hour federal work week… and 100% income taxes at the highest level.
Long even established 27,000 “Share Our Wealth” clubs around the country and had a radio show that was listened to by one in five Americans.
So where did this all lead? It led to America’s most dramatic Debt Jubilee to date…
How Americans Lost 69% of Their Savings
In 1933 – in order to deal with mounting debts and print money to pay for dozens of new social programs – President Franklin D. Roosevelt made two extraordinary changes to the financial system.
First, he closed banks for four days and forced Americans to turn in each ounce of gold they owned for $20.67 in paper money.
Then the government raised the price of gold, wiping out 69% of the savings of anyone who followed these rules.
You’re probably familiar with that part of the story. But that was only the beginning…
Roosevelt also eliminated the “gold clause” in all contracts, including loans, bonds, and other financial instruments.
You see, at the time, people were worried the government might inflate away the value of their money.
So they added a gold clause, which said repayments could be required to be made in gold.
These gold clauses were in federal loans, bank deposits, insurance contracts, and other private agreements.
When Roosevelt outlawed the gold clause, he stole billions from investors. In fact, a Harvard paper estimates this rule took $700 million a year from private investors who bought government bonds.
Billions more were stolen from folks who lost money from the elimination of the gold clause in private contracts, bank accounts, and insurance deals.
Eliminating the gold clause was so controversial, investors sued the government. The case went to the Supreme Court.
Roosevelt was terrified his Debt Jubilee would be overturned. He even drafted a speech saying he would ignore the court if it ruled against him.
But his political pressure worked, and the court ruled 5-4 in Roosevelt’s favor.
Of course, there were consequences…
Tens of millions of Americans lost massive amounts of their savings. And after booming, the stock market soon fell 50% in a single year.
Investor confidence was crushed. Supreme Court Justice Harlan Fiske Stone vowed he would never buy another federal bond.
We had another Debt Jubilee in America about 40 years later… Starting in the late 1960s, we saw another populist uprising… a combination of economic and social upheaval.
If you’re old enough to remember, think about the anger and resentment of the 1960s.
The Black Panthers’ slogan was: “Power to the People.” The idols of the day were people like Latin-American guerrilla leader Che Guevara, Malcolm X, and Muhammad Ali.
All over the country, there was one clash after another…
Small farmers fought banks and railroads… Union workers battled their bosses and federal judges. On college campuses, students fought anyone with authority. Election rallies routinely ended in violence.
Things were so bad, Lyndon Johnson decided not to run for re-election. Martin Luther King Jr. and Robert Kennedy were assassinated.
A terrifying new trend is creating thousands of new millionaires… while at the same time it’s destroying the financial future for many others. You’ll want to be on the right side of this trend. More here
In 1968 alone, there were violent uprisings in more than 120 U.S. cities.
A few miles from where my company is headquartered today, thousands of National Guard troops and 500 state police officers were brought in to quell the violence and looting.
At the same time, a major financial crisis was brewing…
The government had borrowed extraordinary sums, and we were having a hard time repaying creditors.
That’s because at the time, every dollar was required to be backed by $0.25 worth of gold. So the government couldn’t print unlimited amounts of money out of thin air.
Also, foreign creditors who owned U.S. government bonds were allowed to collect repayments in gold bullion instead of dollars… so our gold reserves were quickly disappearing.
Get this: Between 1958 to 1968, 52% of America’s gold reserves left the country in the form of repayments for our debts.
The government was scared. It knew there was only one way out… another Debt Jubilee.
First, we eliminated the 25% gold backing of every dollar.
Then, in 1971, President Nixon completely defaulted on our promise to pay gold for dollars to our foreign creditors.
Once again, the government simply wiped the slate clean.
No one could redeem dollars for gold any longer.
This allowed the Fed to print as much money as it needed to make payments on our debts.
But once again, there were consequences…
In the 1970s, the U.S. dollar lost 30% of its value over a several-year period. Inflation more than doubled. And the stock market fell 48% in less than two years.
Unemployment was around 10%. And, believe it or not, the federal government got so desperate that it issued “Carter Bonds” denominated in Swiss francs because the U.S. dollar could no longer be trusted.
That brings us to today.
Once again, the stage is set for America’s next Debt Jubilee.
We are living in a world of two different Americas. For the wealthiest 40% of the population, life is good. Asset prices are rising… and wages are finally starting to increase.
For everyone else, life is getting worse…
For the bottom 60% of America, consumer debt is high and wages are stagnant. Most of these folks would have difficulty raising even a few hundred dollars for an emergency. These folks have less than $20,000 on average saved for retirement. Physical and mental health is deteriorating. And death rates are soaring. Premature deaths are up by 20% since 2000.
As Bridgewater Associates wrote in a 2017 report…
The biggest contributors to that change are an increase in deaths by drugs/poisoning (up two times since 2000) and an increase in suicides (up over 50% since 2000).
That is the definition of hopelessness.
And it’s why the inevitable Jubilee in America is already underway…
The concept of a Jubilee comes from the Bible (the Old Testament), the Book of Leviticus, Chapter 25.
A Jubilee in the Jewish tradition was said to occur roughly every 50 years. It was a time for total forgiveness of debt and the freeing of slaves.
Pope Boniface VIII proclaimed the first Christian Jubilee in 1300. And rulers throughout history have occasionally used a Jubilee to reset the financial system – especially when the poorest citizens are threatening revolt.
Today, the vast majority of America is in bad shape. And the poorest citizens are calling for a radical solution…
But this Jubilee will be different from the 1933 and 1971 ones we’ve discussed.
The federal government is free to print all the money it needs to pay government debts. Private households are different.
The only ways out of private debt are to pay it, to default, or to have it forgiven with a Debt Jubilee.
Today, America’s low-income households don’t have the funds to service the money they owe. It’s mathematically impossible. And politicians will never allow tens of millions of our poorest citizens to go bankrupt.
So the only solution left is a Debt Jubilee.
It will be similar to the one that took place in 1841 in America…
Back then, the laws were temporarily changed, so debtors could be discharged of their debts – without the consent of the creditors. Over a period of 13 months, more than 40,000 people wiped away their debts before the act was rescinded.
Today, it will be tens of millions of people and trillions of dollars. And once again, there will be consequences…
Millions of investors, pensioners, insurance customers, and creditors will lose a fortune. Stocks will collapse. Dozens of companies will go bankrupt.
I’m not saying this to scare you. This is simply the reality we face.
The Jubilee is already starting. Protect your financial accounts. Get out of the common investments that are most likely to get crushed. Focus on ways to profit while everyone else loses their shirts.
And learn all you can about the corruption destroying America…