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Chart of the Week #7

Over the years, meeting people from all walks of life, I’ve noticed something: when you bring up the massive U.S. debt that’s starting to take over our whole economy, some just shrug and say, “Well, the U.S. has always had a ton of debt — it’s just how things are, nothing to be too surprised about.”

When I come across this line of thinking, I like to whip out the following chart. Take a look. It shows the U.S. government’s debt since 1790.

What you’ll notice right away is that government debt was pretty much nonexistent from the early days of our country until about halfway through the 20th century.

But this situation changed in the second half of the century, first gradually and then alarmingly. This happened with the expansion of federal government spending under Presidents Franklin D. Roosevelt, Lyndon B. Johnson’s, Richard Nixon. And debt just kept snowballing since.

That said, President Biden really took it to levels we hadn’t seen before.

In the years since taking office in 2021, Biden went on a trillion-dollar spending spree with stimulus projects like the American Rescue Plan, the Infrastructure Investment and Jobs Act, and the Inflation Reduction Act.

The unmistakable result of such policies is the current national debt standing at $34.8 trillion — more than a quarter-million dollars for every household — compared to “just” $27.8 trillion in 2021.

Come to think of it… “standing” may not be the best word. The U.S. government debt never stands still; it grows relentlessly with every passing moment. Here’s a link if you want to watch it go up live, but be warned, it’s quite disturbing.

U.S. Government Debt vs. GDP

June 22, 2024

U.S. Government Debt vs. GDP

Chart of the Week #8

I don’t usually do these more than once a week unless I come across something really pressing that I want to share with you. But after a reader named Laramie made an interesting comment under the chart I published earlier this week, showing U.S. government historical debt, I figured this topic needed a follow-up for more context. Here’s a snippet of what he wrote:

We know a debt level at 120% or more of GDP eventually leads to chaos in countries that do not have the world’s reserve currency.

Laramie is spot-on. Once a country reaches a certain level of debt relative to its economy, something tends to break. And usually, it’s not just one thing.

As it happens today under Biden, the U.S. government’s $34.8 trillion debt is already about 125% of America’s Gross Domestic Product (GDP). This places us in the company of nations like Venezuela, Sudan, and Lebanon on the list of Top 10 countries with the highest debt-to-GDP ratios.

None of these countries are successful, vibrant economies, or places you’d want to hang your hat in — quite the opposite. It’s just not a great club to be a part of.

And what’s really frustrating is that things haven’t always been like this in the good ol’ US of A. In fact, the only comparable period when the nation was this deep in debt relative to its economy was during World War II and its immediate aftermath. Not even the years of the Great Depression came close. Take a look at the chart below.

Just think about it — it took the mother of all emergencies, a world war no less, to bring the U.S. debt-to-GDP ratio to where it is now. If that doesn’t give you pause, I’m not sure what would.

…click on the above link to read the rest of the article…

De-Dollarization Just Accelerated… And You Might Not Even Know About It

June 13, 2024

De-Dollarization Just Accelerated… And You Might Not Even Know About It

BRICS in Nizhny Novgorod, Crickets’ Silence, Saudi Arabia, and Bridges (Away from the U.S. Dollar)

This past week has been a real turning point in the de-dollarization trend we’ve been talking about in these pages.

Funny enough, the media seems to be completely oblivious to most of it. Perhaps intentionally so.

As I told you earlier this week, the 50-year petrodollar agreement between Saudi Arabia and the United States is no more, with no new deal in place.

But, we mostly heard crickets from the Western mainstream media…

And just as I was writing about that, something else closely related was happening in Russia. This is from TASS, the Russian News Agency…

NIZHNY NOVGOROD, June 10. /TASS/. Delegates from 22 countries are expected to take part in the meeting of the BRICS foreign ministers in Nizhny Novgorod, the organizers told journalists.

According to the organizers, representatives from Russia, Brazil, China, Egypt, Ethiopia, India, Iran, South Africa, and the United Arab Emirates (UAE) are taking part in sessions on Monday and representatives from Bangladesh, Bahrain, Belarus, Cuba, Kazakhstan, Laos, Mauritania, Saudi Arabia, Sri Lanka, Thailand, Turkey, Venezuela, and Vietnam are expected to attend events on Tuesday, June 11.

The majority of the participating countries are represented by ministers.

Meanwhile, once again, awkward silence from the Western media. Here’s a screenshot I’ve taken of my Google results to illustrate. Not even one of these reports came from the West…

This is suspiciously odd given that….

BRICS collectively hold 32% of the world’s GDP, surpassing the 30% held by the G7 countries.
BRICS represent nearly half of the world’s population.
BRICS nations produce about 42% of global crude oil output.

Needless to say, it’s fair to say that BRICS isn’t just any bunch of countries. This makes it doubly weird how the mainstream media chose to ignore this.

…click on the above link to read the rest of the article…

There’s More to China’s U.S. Debt-Dumping Rush Than Meets the Eye

May 27, 2024

There’s More to China’s U.S. Debt-Dumping Rush Than Meets the Eye

Unprintable Alternative to Debt, De-Dollarization, Not Just China, Leaving the West for the East

“Gold is money. Everything else is credit.”
~ J. P. Morgan

Earlier this week, I told you how China has accelerated its de-dollarization efforts with rapid-fire sales of U.S. debt.

The country offloaded $53.3 billion worth of U.S. Treasuries and U.S. agency bonds. This is the largest single sale of U.S. debt in its history.

But, as I explained, even U.S. allies like Belgium and Switzerland have recently dumped an impressive $20 billion and $43 billion worth of Treasuries, respectively.

If this trend keeps up, it could be a big problem for the U.S. government. That’s because about one-third of its debt, or $8 trillion, is held by foreign countries.

The Unprintable Alternative

Now, the main reason foreigners own such a large portion of U.S. debt is simple: the U.S. dollar is the world’s primary reserve currency.

Currently, central banks hold about 58% of their foreign reserves in U.S. dollars. To earn returns on all this cash, they invest it in U.S. Treasuries, which are considered the safest assets in the world.

There’s just no alternative… or is there?

Well, China certainly seems to think so.

Just take a look at the next graph showing China’s holdings of U.S. Treasuries and gold as a percentage of its foreign reserves since 2015.

The chart above shows that as China cut back on U.S. debt, it ramped up its gold purchases. This inverse relationship between China’s gold and U.S. debt holdings became really noticeable around 2018, when the trade war with the U.S. kicked off. And as I mentioned in my last essay, by 2019, China had given up its spot as the biggest holder of U.S. debt to Japan.

…click on the above link to read the rest of the article…

Unconventional War

May 24, 2024

Unconventional War

At home and abroad

War isn’t limited to tanks, aircraft carriers, and drones. Much of war is fought by unconventional means. Looking at last week’s headlines, it’s easy to conclude that war is already upon us and ramping up.

Consider what’s happening both at home and abroad, then look at the summary of unconventional warfare tactics below…

Some news from just the last week…

In Economic terms; “This is WW3”

In Kunstler’s latest Podcast episode, his guest, Jeff Rubin says,

“In economic terms this is World War 3. In 1960 4% of global GDP was subject to sanctions. Today, it’s almost 40% and at the rate we’re going it’ll soon be 50%.”

Europe Agrees to Give Russia’s Billions to Ukraine (msn.com)

The European Union on Tuesday approved a plan to hand Ukraine the profits generated by frozen Russian central bank assets.
“We have approved in the EU using revenues from Russia’s central bank’s frozen assets to help Ukraine,” wrote Lipavsky on X, formerly Twitter. “Up to €3B only this year, 90% goes for Ukraine’s military. Russia must pay for its war damages.”

Gold and sIlver prices continue record high runs (yahoo.com)

Alliances, Assassinations, Coup attempts, and color revolutions:

Putin Goes to China. Major takeaways

“New Era” Partnership:
- In a joint statement, Putin and Chinese President Xi Jinping pledged a “new era” of partnership between the two powerful rivals of the U.S.
- They cast the U.S. as an aggressive Cold War hegemon sowing chaos worldwide.
- Their shared opposition to the U.S. extends to security issues, Taiwan, Ukraine, North Korea, and cooperation on nuclear technologies and finance¹.
Signaling Priorities:
- By choosing China for his first foreign trip after being sworn in for another six-year term, Putin emphasizes his priorities.
- The red carpet welcome and personal ties with Xi underscore the strength of their partnership².
Grievances Against the U.S.:

Russia and China expressed concerns about U.S. actions:

…click on the above link to read the rest of the article…

This Is the Proverbial Ball You Should Be Keeping Your Eye On…

May 17, 2024

This Is the Proverbial Ball You Should Be Keeping Your Eye On…

Gold, the Brief History of U.S. Debt, Not a Great Club, and the U.S.’ Debt-to-GDP Surpassing Venezuela’s

“Blessed are the young, for they shall inherit the national debt.”
~ Herbert Hoover

If you’re like me, you probably sometimes come across an important economic or geopolitical event in screaming headlines and think, “That’s bullish for gold.” But then the metal moves in the opposite direction from what you were expecting. Doug Casey always tells us not to worry about short-term fluctuations — and he’s absolutely right — but it’s still frustrating at times.

Now, it’s easy to dismiss these thoughts because gold has recently hit new all-time highs, topping $2,400 per ounce.

But remember, there’ve been plenty of corrections during this gold bull run. And trust me, there’ll be many more.

When they happen, it’s easy to get distracted, lose patience, even sleep, and get shaken out of an otherwise winning investment.

That’s why it’s crucial that you always keep your eye on the ball. Which, I should say, is more like a snowball in this case.

Snowball's Gonna Snowball

Major financial, economic, or political shifts don’t just happen overnight. They’re more like a snowball rolling downhill, picking up speed and size along the way. Eventually, they reach a tipping point, transforming into full-blown crises, catching the unprepared off guard.

And, of course, there’s no better example of this today than the the ever-growing snowball of the U.S. debt that has become so big it’s already engulfing our whole economy. Consider this chart.

Notice that government debt was practically nonexistent halfway through the 20^th century, but has seen a dramatic increase in the following decades. This happened with the expansion of federal government spending under Presidents Franklin D. Roosevelt, Lyndon B. Johnson’s, Richard Nixon. And debt just kept snowballing since.

…click on the above link to read the rest of the article…

The Fed Is Preparing to End Money as We Know It

May 5, 2024

The Fed Is Preparing to End Money as We Know It

Big Banks, FedNow, and the Road to Fedcoin

Every quarter, U.S. Bancorp (USB) releases something called U.S. Bank CFO Insights Report. It gathers insights from over 2,000 senior finance officers (CFOs) nationwide. It might not be everyone’s go-to read, but it’s a good way to stay abreast of what’s happening in the banking industry.

Just a few days ago, they dropped the latest issue, and something immediately grabbed my attention — the survey findings on FedNow, the Federal Reserve’s new real-time payments service.

The report showed that 42% of surveyed CFOs had tried out FedNow in 2023. Right now, 51% are using it, and notably, a staggering 80% plan to use it by 2026.

In other words, nearly double the number of finance leaders anticipate using FedNow in their organizations by 2026 as they did in 2023.

I’m talking about a currency that wouldn’t be printed but would only exist in cyberspace… but one that would also give the Fed and government almost unbreakable financial control over your life.

Now, FedNow isn’t a central bank digital currency (CBDC). But it’s definitely a precursor to one.

Let’s backtrack a bit to understand why.

The FedPal

You see, the Fed and big banks have been gearing up for the eventual rollout of a digital dollar for quite some time now.

As far back as 2017, a consortium including finance giants like Citigroup and JPMorgan initiated a real-time payments network operated by The Clearing House, known as the RTP Network.

This network processed a total of 173 million transactions worth about $76 billion during 2022.

The idea behind the RTP Network has always been to lay the technical groundwork and foster a culture of acceptance for a digital currency. The big banks made no secret of it.

…click on the above link to read the rest of the article…

From Zero to Hero… The Incredible Story of American LNG, Personified

May 5, 2024

From Zero to Hero… The Incredible Story of American LNG, Personified

Mezzaluna, Mr. Souki and the Journey to the Top

“If you keep digging, digging, digging, you find something.”
~ Charif Souki

O.J. Simpson died last month. Unless you’ve been living under a rock, you probably know that.

Well, I guess I sort of have been. I’d been busy working on the latest issue of Crisis Investing, so I only found out about it over the weekend. But, as I caught up on media reports about his “legacy,” I couldn’t help but think about a different yet parallel story… and one that has important investment implications for us.

And that’s the story of Charif Souki, an American restaurateur-turned-energy titan.

In the 90s, Charif owned an Italian restaurant in West L.A.’s Brentwood neighborhood. It was called Mezzaluna and, coincidentally, it was where Nicole Simpson had her last meal on June 12, 1994.

On that fateful night, Simpson’s mother left her glasses there, so a waiter from the restaurant, Ron Goldman, went to Simpson’s home to return them. Shortly after midnight, Goldman was found dead with Simpson outside her condo.

The Switch

After the murders, Mezzaluna was swarmed by reporters, photographers, and curious tourists. People bombarded employees for details, even asking about Simpson’s final meal. Charif was appalled by the media frenzy – “the morbid curiosity, the lack of taste and decency of people, was pretty astonishing,” he would later remark. It was then that he made the decision to sell Mezzaluna and venture into something new.

After some deliberating, he made the unlikely transition to the oil-and-gas industry.

His first big idea was to import cheap, plentiful natural gas from the Middle East in the form of liquefied natural gas, or LNG.

…click on the above link to read the rest of the article…

Congress Just Supercharged the Dollar’s Downfall

April 26, 2024

Congress Just Supercharged the Dollar’s Downfall

Confiscation, Weaponization, and De-Dollarization

“The dollar’s role as the world’s primary reserve currency is a boon for the United States but a bane for the rest of the world.”

~ Barry Eichengreen

The U.S. Senate has predictably voted to give $95 billion to Ukraine, Israel, and Taiwan, just three days after the House of Representatives green-lit the assistance in a rare Saturday session.

But beyond the big spending, there was a little something tucked into the Ukrainian aid bill that’ll have major implications for you as an American: the confiscation of Russian dollar assets.

The passage of the Rebuilding Economic Prosperity and Opportunity (REPO) Act, as it’s called, adds a whole new dimension to the story that Matt Smith brought to your attention on Monday.

The Dollar Weapon

Once President Biden signs it into law, he’ll gain the authority to seize more than $6 billion in Russian assets held by U.S. institutions.

Now, in case you’re wondering why Russia held these billions of dollars outside of Russia, it’s because that’s what countries do when they have surplus dollars; they put them to work in the safe and trustworthy nation of America.

The joke’s on you, Russia…

But the $6 billion is just the tip of the iceberg.

You see, it’s not about the amount; it’s about how the U.S. sets a precedent for other Western countries to confiscate the nearly $300 billion in Russian state assets currently frozen under their jurisdiction.

To be fair, it’s not the first instance of the U.S. government’s “weaponization” of the dollar… far from it.

But it has become especially pronounced in recent years, targeting adversaries such as Iran, Cuba, Venezuela, Afghanistan, North Korea, China, and, of course, Russia.

But it never affects just these countries alone…

…click on the above link to read the rest of the article…

What Would a New Civil War Look Like?

April 20, 2024

What Would a New Civil War Look Like?

Not Like the One You Learned In School

Editor’s Note: Today’s essay comes from Doug Casey’s longtime friend, Chris Weber. You might recognize his name because we often discuss his excellent newsletter during our podcasts. You can catch Doug and me discussing the latest issue here. And in the past here, here, and here. We love it.

Each issue of The Weber Report is filled with market insights you simply will not find anywhere else. Plus, it comes packed with historical insights, just like the article below, which Chris graciously allowed us to share with you.

For us, The Weber Report is a must read. To get a three-month introductory subscription, click here.

From Chris Weber in The Weber Report:

A new movie opened this past weekend in the U.S. called “Civil War”, it tries to show what would happen if a new civil war broke out in the U.S. This is not at all a far-fetched idea: at least 40% of Americans believe there will be one within the next decade. Clearly the groundwork has been laid for it over these past several years.

In America these days you hear a lot about people who once were friends but now hate each other. Or were families that now don’t speak except to yell. It’s like walking through a minefield, except for one thing: neither side knows very much. At least not much about facts concerning past civil wars. To start with, they think we’ve only had one civil war before, and on this they couldn’t be more wrong.

Those many people who are so sure we’re going to have another civil war, they rarely have hard facts at their hand. Ask them people what they actually know about the “Civil War”, and they’ll tell you some facts —mostly untrue— about the only civil war they know about.

…click on the above link to read the rest of the article…

This Double Whammy Will Unleash Unprecedented Money Printing… or Break the U.S. Economy

April 11, 2024

This Double Whammy Will Unleash Unprecedented Money Printing… or Break the U.S. Economy

Deficits, Deficits, and More Deficits, Unravelling Social Security, Money Printer Going Brrr

“A government big enough to give you everything you want is a government big enough to take from you everything you have.”

~ Gerald Ford

The Federal Reserve is gearing up to cut rates and fire up the money printer this year. And you can see why…

You have Joe Biden, who’s in dire need of a push to turn the tide in the upcoming election. Then you have U.S. banks sitting on a hefty $480 billion in unrealized losses on government securities. The Fed is poised to lend a helping hand to both.

But then there’s another reason that tells me that the Fed won’t likely stop soon once it starts up the proverbial money printer.

Let me elaborate.

Numbers Straight Out of a Horror Flick

Every six months, the Congressional Budget Office (CBO) releases a rolling 10-year “Budget and Economic Outlook.” Most people ignore reading material of this sort, but I’m always eager for it because it showcases just how utterly incompetent governments can be.

If you open the most recent report, and scroll to Page 10, you’ll find Table 1-1: CBO’s Baseline Budget Projections. Look for the line labeled “Total Deficit.” These are government deficits, and I’ve marked them in the next image.

The first thing that should catch your eye from the table above is that the deficits will consistently worsen, starting at $1.5 trillion in 2024 and reaching about $2.6 trillion by 2024. That’s an increase of 71% in just a decade.

Alarmingly, this also means that the total cumulative deficit between 2024 and 2034 would hit an astounding $21.6 trillion.

If this isn’t a damning indication that the U.S. is rapidly heading towards complete fiscal ruin, I don’t know what is. But it gets even worse.

…click on the above link to read the rest of the article…

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