July 30, 2020

We recently read with interest an essay from Corey McLaughlin, editor of the Stansberry Digest.

He penned a sharp look at the American economy today… and left us with questions about what is likely to happen next.

He writes about a startling prediction from Stansberry Research founder Porter Stansberry… and how to be among the first to hear it today at 10 a.m. Eastern time. All you have to do is sign up in advance – which you can do by clicking here.

Then read on to get Corey’s insight…

The Coming ‘Reckoning’ in America

By Corey McLaughlin

Imagine if we ignored the stock market…

That doesn’t mean to stop investing in stocks or using the stock market as a wealth-generating tool.

Instead, imagine if we simply stopped using the Federal Reserve-juiced benchmark S&P 500, the Dow Jones Industrial Average, the Nasdaq – or whatever your preferred index is – when it comes to gauging the true story about our nation’s economic health and the health of all our people.

If we do that – and ignore anything about “new highs” while roughly half of Americans don’t have jobs, people are rioting in the streets, and our leaders continue to fumble around Washington – the world suddenly looks, sounds, and feels a lot different.

Just like that, America’s financial reality is not what it seems. And through this lens, we might want to consider alternatives to the traditional ways of making, protecting, and growing money in this country.

How might we show what’s really going on for most Americans?

You could calculate a measurement like this in a lot of different ways. But one that we track closely is the percentage of income owned by the richest 10% in this country. And as you can see, it has never been higher in the past 120 years than it is today…

Now, this doesn’t track what everyone is doing with their money once they get it…

But the point is, the richest people in this country have been increasingly getting a larger share of our wealth pie since the late 1970s… while most Americans have struggled with low wages and next to no savings.

As opposed to the continued new highs of the stock market indexes, this “income share of the richest 10%” chart is one that you don’t want to see hit new all-time highs – if you’re expecting a mostly peaceful, prosperous society.

Because at times like these in history, the frustrations of the American public have tended to boil over…

When the gap between the rich and the poor is large and continuing to grow, an unexpected, panic-inducing event – like say, a pandemic – can spark trends of violence, political and financial upheaval, or even war.

For instance, in the wake of the panic of 1907, our nation saw the creation of the Federal Reserve in 1913… Shortly after, most Americans saw their wages fall in half.

It happened in 1933 after newly elected President Franklin D. Roosevelt passed an executive order to restrict gold ownership… Almost every American saw the value of their savings and their wages fall immediately by around 30% – setting off the worst aspects of the Great Depression, and leading to violent insurrections in Washington.

And it happened most recently in 1971, when the U.S. dollar came off the gold standard… This began the financial crisis of the 1970s, which lasted a decade and spawned domestic terrorism all across the country.

Today, that same sort of event is happening with the pandemic and the government’s response…

The solution of the Federal Reserve, the Department of the Treasury, and Congress to our country’s ills is massive money-printing. These are literally digital dollars that we may never actually see… (In fact, we’ve recently seen stores around our headquarters in Baltimore that are short on actual currency.) And each round of stimulus “creation” has been more unprecedented than the previous one.

In 10 days in March, the Fed created trillions of dollars of free “fake money”… more than it had created in the previous 30 years before the financial crisis of 2008 and 2009.

And this week, another huge round of “juice” – that is to say, debt kicked down the road to future generations to pay for programs brainstormed by the economists of the Fed and approved by politically motivated members of Congress – is being introduced.

The price tag could be anywhere from $1 trillion proposed by Republicans in the Senate to $3 trillion suggested by Democrats in the House.

Direct deposits and extended unemployment benefits might ease some panic in the short term. But do they really help the health of our country in the long term? The simple answer is “no”…

The U.S. dollar has lost 95% of its value since 1913, when Congress passed the Federal Reserve Act and “modern” central-bank policy began. Since then, the Fed has only increased its interventions over time.

Unless someone takes their stimulus check and literally wins a state lottery, this means the “wealth gap” between the rich and poor will keep growing…

Those with fewer dollars to their name get relatively poorer every time a new one is created… and more frustrated whether they know it or not.

This isn’t new, of course. The wealth gap in the U.S. has been growing astronomically over the years…

• Even before we all started living in a pandemic economy, the gap between America’s richest and poorest families had more than doubled from 1989 to 2016…
• Middle-class incomes have grown at a slower rate than those of the rich for the past 50 years…
• And the highest-earning 20% of families in the U.S. made more than half of all U.S. income in 2018.

All someone needs to do is drive around, or take public transportation, and look at what’s happening on the streets in cities and towns all over this country.

Here in my town of Baltimore, for just one example, you can drive down just a single street and be in front of the beautifully landscaped lawn of a million-dollar house one minute… then drive a few blocks down the road and be staring at rampant homelessness and rows of graffiti-covered, boarded-up rowhomes.

The wealth gap today is greater in America than in any of the other six major industrialized Group of Seven (G7) nations – that is, the United Kingdom, Italy, Japan, Canada, Germany, and France – according to data from the Organization for Economic Cooperation and Development.

As Stansberry Research founder Porter Stansberry has said for years, while this may be good in the short term for the portfolios of folks with access to Wall Street, this type of American economy is largely unsustainable…

These problems will catch up with everyone’s wealth eventually, no matter how well-off or where you live, rich or poor.

And Porter has said for years that 2020 would mark a pivotal time for America…

Before knowing any of the specific players or events involved today, like the COVID-19 spark, he said 2020 was the year when the country would truly face the consequences of decades of debt creation and misplaced government interventions.

He has written books on this idea, noting these periods of crisis and converging financial, societal, and political factors have happened roughly every 30 to 40 years – with the last one coming in the 1970s. In the book America 2020, Porter wrote about this year…

America is in for some major changes to our economy, our country and our very way of life over the next few years, the way you live, the way you work, travel, retire, invest; everything is going to change, some of it in ways most people would never expect.

Today, Porter says we’ve reached a tipping point for a “reckoning”… And he and his company are showing subscribers and individual investors how best to prepare for it.

The COVID-19 pandemic has exposed a lot about our economy and markets. And the government has tried to paper over these problems with endless money-printing, socialist policies, and creating growing debt… future generations be damned.

When this reckoning comes due, somebody has to pay… And don’t think for a second that a massive amount of wealth won’t be lost or gained. That’s why it’s so critical to prepare for the inevitable fallout of what we’re talking about today.

Porter has been urging subscribers to do that for years, just like he did in advance of the financial crisis in 2008 and 2009… including the blowups of Fannie Mae, Freddie Mac, and General Motors.

Then, in March, as stocks were cratering, Porter called the bottom in the stock market almost to the day. And he also predicted we’d reach new highs by the end of the year, which the tech-heavy Nasdaq already has.

And now – as this wild year continues and the Fed continues to create money out of thin air – you should pay attention to the “reckoning” that Porter sees coming.

Did you miss these two recent articles?

After the COVID-19 War, the Debt Bomb
Investors no longer represent a captive audience as they did in the 1940s, and “bond vigilantes” will sniff out a devaluation scheme in advance, driving interest rates higher and punishing the value of the dollar and the buying power of citizens. Of course, if the Fed were to take the dangerous, inflationary tack, it would be a lovely time for holders and hoarders of gold and cryptocurrencies.

The Chasm Grows Deeper and Wider
Our nation is a financial, cultural, and demographic pressure cooker. And the coronavirus has caused this pressure cooker to explode – sending shrapnel into the pillars of American society. If you think the virus has upended your life so far… just wait until you see what’s coming next. Things are unlikely to “go back to normal” anytime soon – if ever. What happens next will determine who gets rich in America… and who gets left behind.

And here are a few of the other stories we’re reading…

U.S. Is About to Unveil the Ugliest GDP Report Ever Recorded
The U.S. economy ground to a halt for almost the entirety of April. Now the world is about to find out the depth of that contraction.

The World’s Covid Resurgence
Remember the stories blaming America’s virus resurgence on states reopening too fast and praising other countries for crushing the virus with lockdowns? Well, flare-ups are now occurring in several countries that recently eased their lockdowns and travel restrictions. Victory declarations anywhere are premature.

Spike in gold puts dollar’s reserve status in question: Goldman Sachs
“Combined with a record level of debt accumulation by the US government, real concerns around the longevity of the US dollar as a reserve currency have started to emerge,” the analysts wrote.

Read our latest issues of American Consequences by clicking here.

And let us know what you’re reading at [email protected].

Regards,

Steven Longenecker
Publisher, American Consequences
With P.J. O’Rourke and the Editorial Staff
July 30, 2020