September 2, 2021
It’s been quite a week – the Taliban’s takeover of Afghanistan… a dangerous hurricane in the southeast… more evidence of inflation…
What else can go wrong? A lot.
Because just when you think things are about as bad as they’re going to get… we then learn that the Taliban now has $85 billion worth of our taxpayer-funded U.S. military equipment.
According to House Minority Leader Kevin McCarthy, the Taliban now have more Blackhawk helicopters in their possession than Australia. And they got them for free!
Meanwhile, the Taliban may get billions more in funding from U.S. taxpayers that was intended for the Afghan government. Current estimates suggest there may be more than $9 billion in foreign-currency reserves on hold by the Afghan central bank. Pressure is on former Fed Chair Janet Yellen to prevent the transfer of funds, but thus far, it’s not clear that she will.
I realize the mainstream media is already beginning to pivot, and hail the U.S. exit out of Afghanistan a “success”… But the people who really understand the situation know better. This entire operation was a failure – a big, massive screw-up that will plague us for generations to come.
But perhaps what it really shows us is the total ineptitude of our government. And I’m not just talking about Afghanistan…
As we watch the search-and-rescue mission underway in Louisiana, and we prepare for a massive federal spending push there as a result of Hurricane Ida, I remain – once again – concerned about our government’s incompetence.
Sixteen years ago, I traveled to New Orleans as a correspondent for the CBS Evening News to cover the aftermath of Hurricane Katrina. I wound up spending more than six weeks on the ground, documenting the challenges families faced as they tried to piece their lives back together in the wake of such devastation.
One of the most heartbreaking and discouraging things about the entire ordeal was seeing the trailers… hundreds, even thousands of them… parked in lots waiting to go out to families. So many people were homeless and desperately needed those trailers as they rebuilt their homesteads. Yet the trailers sat in the parking lots, day after day… after day.
Government ineptitude again at its finest… A bureaucratic breakdown prevented the people that needed the shelter (that taxpayers had already paid for!) from actually getting the trailers.
Afterward, federal auditors found the government wasted millions of dollars in its award of post-Katrina contracts for disaster relief, including at least $3 million for 4,000 beds that were never used.
Now, I don’t dispute that in moments like these, when terrible natural disasters strike, the government can and should be of great assistance.
But what happens when the government can’t get out of its own way?
More government waste… Just as we saw in Afghanistan, just as we saw with Hurricane Katrina, and just like we’re about to see with Ida.
Meanwhile, it’s not just the politicians that are wasteful…
If you’re considering buying a new phone, this shocking tale could change your mind. Get the full story now.
The Fed’s Ultimate Waste
The Federal Reserve has also engaged in irresponsible, massive money printing the likes of which we haven’t seen… well, ever.
Let me remind you of a staggering fact: 40% of all the money in existence has been printed since March 2020.
At the end of last week, Fed Chief Jerome Powell told us he intends to initiate the “taper” (or pullback in bond purchases) before the end of this year. I’ll believe it when I see it…
The expectation is that weaker-than-expected jobs report tomorrow could give him some cover to avoid the taper a bit longer, as investor, physicist, mathematician, and former attorney Neil Grossman explains in this week’s podcast. Meanwhile, low-interest rates could be the ticket to far greater problems down the road.
Already, housing prices are suggesting inflationary, problematic times ahead. In the early 1970s, we saw a massive spike in home prices (16%), followed by a 45% drop in the market in 1974. In the ’80s, home prices escalated again… and we got the 1987 crash. Then in the run-up to 2008, home prices again led to a credit crisis.
The question now is, are record-breaking home prices signaling more problems ahead? It could be argued, as Grossman contends on the podcast, that high real estate prices are inflationary and problematic because they put pressure on the financial system as a whole.
This makes this piece of news rather relevant: On Monday, we learned that home prices hit an all-time record in the month of June, with the Case-Shiller index rising 18.6% for the year. This is up from a record 16.8% increase in prices in the prior month.
The good news on the financial front is that we can point to many mechanisms now in place that should hopefully prevent such a scenario, including increased liquidity and cash reserve requirements at financial institutions, as well as better credit standards.
But if we are to learn anything from the tragic debacle in Afghanistan… the crisis here at home during Hurricane Katrina… or the Fed’s hand in creating the credit crisis in 2008… we should know by now you can’t depend on the federal government to get things right.
You can hope of course, but ultimately, I fear you’ll be disappointed.
The challenge for investors now is to ensure that they capture the riches created by irresponsible monetary policy, while simultaneously hedging their portfolios enough to prevent a wipeout of their retirement and savings.
It’s, for this reason, I still like diversifying into inflation hedges like gold and oil, while also encouraging investors to remain committed to the growth companies and tech opportunities that will ultimately benefit from a growing economy (assuming we grow).
For those that have created some wealth, however large or modest, the challenge remains… How do we grow and preserve it?
We do that best, not by being greedy, but by having goals and being disciplined about how to achieve them.
Chances are if you’re reading American Consequences, you’re a self-starter that believes in yourself, believes in independence, and understands the importance of establishing your own nest egg.
The key now is to not be a victim of bad policy. It’s critical to plan for the future knowing the toll that an overly bloated and bureaucratic government can unintentionally induce on your savings.
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Publisher, American Consequences
With Editorial Staff
September 2, 2021