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There are certain words of wisdom that will forever endure the test of time; and my father’s landmark West Coast speech of 1970 is a prime example.
Elisabeth and I had just married a few months earlier. We went along to help as best we could. And like all those who attended, we were spellbound.
Over 500 pre-registered investors crammed into the Los Angeles Hilton ballroom, on the edge of their seats the entire time.
A crowd of non-registrants lined up in the hallway, as Elisabeth hurried to accommodate as many as she could. My job was to provide the research, take the pictures and tape the proceedings.
The topic was debt and deflation. The conclusion:
"In moderation, debts alone will not hurt us. They are not evil per se. They can help finance growth.
"Deflation alone is also not something to fear. It can make every dollar in your pocket more valuable; everything you buy more affordable.
"What we must avoid at all costs, now and in the future, is a situation in which both elements — dangerous debts and deep deflation — come together. That will be the day when everything we’ve achieved or strived for as a nation will be in jeopardy; when our economy, our government, our entire society will be turned upside down.
"It is a rare occurrence. In my lifetime, I’ve seen it only once. But when it does happen, watch out. Chrysler, already borrowing too heavily, will fail. Hundreds of America’s savings and loans will go under. Big banks will blow up. Cities, states, even entire countries, will default, restructure their debts or announce a de facto default by officially devaluing their currencies.”
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In sum, the formula for tragedy was: Deflation + Debt = Disaster.
And it has played out over both shorter and longer time horizons.
Chrysler got into trouble almost immediately but didn’t sink to the brink of bankruptcy until 1979, avoiding failure thanks to a $1.5 billion government bailout. And it wasn’t until nearly our 40th wedding anniversary, in 2009, that Chrysler and twenty-four of its subsidiaries formally went under, filing a petition with the federal bankruptcy court of New York.
Meanwhile, Dad’s forecast of a savings and loan debacle didn’t come true in a meaningful way until the 1980s: Between 1980 and 1991, nearly 1,200 S&Ls went under — including giants like Lincoln, Silverado, Midwest Federal and Home State Savings Bank … precipitating statewide shutdowns of state-chartered banks in Ohio, Maryland and Rhode Island … and infecting the commercial banking sector, where another 1,500 institutions failed.
The first major municipal debt crisis didn’t strike until about five years after Dad’s L.A. Hilton speech, when New York City nearly went under.
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How close did it come to outright failure? asks The New York Times in its retrospective of the crisis. "So close that the city’s lawyers were in State Supreme Court filing a bankruptcy petition. So close that police cars were mobilized to serve papers on the banks.”
Dad’s forecast of major sovereign debt crises couldn’t go wrong: India in 1972, Chile (1972, 1974 and 1983), Turkey (1978, 1982), Argentina (1982, 1989, 2001, 2014), Mexico (1982), Brazil (1983, 1986, 1990), and Russia (1991, 1998).
Deflation Delayed
One big event was not in the L.A. Hilton speech. Nor was it ever one of our forecasts.
On August 15, 1971, President Nixon walked into the Oval Office, sat before a national TV audience and effectively devalued the U.S. dollar.
And this single event — the Nixon Shock — helped create persistent inflation, allowing thousands of indebted corporations and governments to reduce the value of their debt payments and avoid what otherwise might have been closer encounters with financial Armageddon.
Listen carefully to Nixon’s words that shattered the U.S. dollar’s age-old link to gold, demolished the world’s most important currency pact, and set off a decade of inflation.
But then fast-forward nearly 45 years to June 13, 2016. And take note of how radically our world has changed:
Radical change #1. Instead of fighting inflation, all major central banks are doing everything in their power to create inflation, but failing to do so. Their target is typically 2% yearly increases in consumer prices. But with rare exceptions, they have woefully missed their target year after year, struggling to keep inflation over 1%.
Radical change #2. In the 1970s and early 1980s, surging interest rates were the most painful plague, hitting big borrowers the hardest. Today, it’s near-zero interest rates that are the cash-flow curse, this time impacting lenders, investors and savers.
As Mike Larson pointed out last Tuesday, savers seeking safe yield are now being treated no better than zombies pursuing eternal life after death.
And he does not mean that just figuratively: "The finance arm of Toyota Motor," he informs us, "just sold a three-year, unsecured note with a yield of 0.001%. If that was your yield on a savings account, you would double your initial investment in approximately 69,300 years."
In other words, if you could have bought that investment 35,000 years before the last Ice Age began, you’d be close to getting there just about now.
What Mike finds even more astounding is that the average yield to maturity of all outstanding German government debt is now below zero, while investors are now being asked to buy newly issued Swiss bonds with a coupon yield of exactly ZERO.
Radical change #3. Both of the above changes are prima facie evidence that the powerful deflationary forces my father feared decades ago are now finally here — in aces and spades.
The deflationary forces explain why impotent central banks can’t get prices up.
They explain why savers are getting shoved to the ground … or corralled into high-risk yield.
And they also help solve the mystery as to how central banks can print massive amounts of money with apparent impunity — without the usual inflationary consequences.
Forty-six years ago, we could never have dreamed this could happen. But kudos to Larry Edelson for his courage to defy conventional wisdom, warn us this unique scenario was coming, and explain it as it unfolded.
(For just one of many examples, see "Myth #3: Hyperinflation is the end result of money printing" in Larry’s year-end 2013 commentary, 5 Investing Myths to Ignore in 2014.)
Radical change #4. America’s debt burden is now dramatically larger:
- U.S. interest-bearing debts: $45.7 trillion as of March 31, 2016.
(Want proof? Go to the latest summary tables of the Fed’s Flow of Funds. Scroll down to page 5, "Debt Outstanding by Sector." Then check out the number in the last line of the first column, for 2016 Q1.)
- U.S. government contingent liabilities — for Social Security, Medicare, veterans’ benefits and more — is, conservatively, more than $37 trillion, according to former U.S. Comptroller General David Walker. And with less conservative assumptions, the number is far larger.
Years ago, Mr. Walker was among the few warning that these can be nearly as problematic as outright debts. Today even organizations like the International Monetary Fund have recognized that they are a "hidden fiscal risk.”
- Even more hidden from view are big leveraged bets under the rubric of "derivatives," a close cousin to outright debt obligations. Like bets with bookies, if you lose, you’re obligated to pay, and those obligations are a form of debt.
Total net outstanding derivatives contracts held by U.S. commercial banks: $203.1 trillion, also as of March 31, 2016.
Source: U.S. Office of the Comptroller of the Currency (OCC) Quarterly Report on Bank Trading and Derivatives Activities, First Quarter 2015, page-one Executive Summary, paragraph 4. Plus, for a list of banks with the most exposure, go to page 26, "Notional Amount of Derivative Contracts, Top 25 Commercial Banks.”
Grand total U.S. debts of all kinds: $285 trillion.
Radical change #5. In the race for debt, other countries have followed — and now greatly surpassed — the United States:
- Global interest-bearing debts: Close to $250 trillion. Source: International Monetary Fund.
- Global derivatives: $518 trillion. Source: Bank of International Settlements. (Add their total for over-the-counter derivatives, 492.9 trillion to their total for exchange-traded futures and options, $25.1 trillion.)
- Global contingent liabilities: Unknown, but surely massive, given the overwhelmingly burdensome pension and health care liabilities of Japan and most E.U. countries. My rough estimate: $202 trillion, based on the conservative assumption that, in proportion to their interest-bearing debts, theirs is no larger than ours.
- Grand total for entire world: $970 trillion.
Even adjusting for inflation and taking into consideration the growth in the global economy, these debts are many times more burdensome today than they were 45 years ago.
Excluding derivatives and contingent liabilities, the $250 trillion global debt figure I cited above is more than triple global GDP (321%, to be exact).
Worse, if you include all forms of debt, the grand total comes to $970 trillion, or more than 12 times GDP (1,247%).
When Dad was giving his memorable speech 45 years ago, anything above 100% of GDP was unthinkable. Now, just the U.S. government’s officially counted, interest-bearing debt alone is over 100% of GDP.
Emerging-Market Debts Ready to Blow Up
Last fall, I was in Russia, including their deep south. I’ve also spent a good amount of time in Brazil and China recently. And, in each case, I’ve seen vividly the collision course they’re on:
In Russia, private sector debt has surged to almost 75% of GDP, including both corporations and households. While I was there, I met few people who had been laid off. But nearly everyone I know is suffering directly or indirectly from salary cuts. One good friend, an emergency-room doctor in Samara for over 40 years, says her meager salary has already been slashed twice. Another, who works in the federal court of St. Petersburg, has suffered a similar fate. Giant oil companies are on the brink. Big banks are next.
In Brazil, private sector debt recently hit a new high of 95% of GDP. As long as incomes continued to grow, no one batted an eyelash. But right now, incomes are sinking fast. The malls we’ve visited have been deserted. The entire economy is contracting at the fastest pace in over a decade. And the recent vote to start the impeachment of the president threatens to make everything many times worse.
China tops both Russia and Brazil, with private debts now up to a red-hot default-prone level of 185% of GDP. In other words, for every dollar of goods and services produced in all of China, the country’s corporations and households have $1.85 in debts outstanding.
Plus, all three countries have one huge additional problem: The value of their currencies has fallen, and in the first two, even crashed. This means that any debt payments they have to make in U.S. dollars (or euros) are taking an even bigger chunk out of their shrinking incomes.
Will federal governments come to the rescue?
Don’t count on it. Most emerging markets and advanced countries have already exhausted all the monetary and fiscal weapons in their arsenal — and then some.
They’ve already cut interest rates — often to zero. They’ve printed money up the wazoo. And they’ve already run down big chunks of their foreign currency reserves.
Moreover, the governments of the world’s largest economies have done absolutely nothing to reduce their own government debt:
At the latest reckoning the debt load of the U.S. government, even excluding all the uncounted extras, was 105% of GDP. Belgium’s was 107%; Portugal’s, 128%; Italy’s, 133%; and Greece’s, 197%.
Worst of all, Japan, the world’s granddaddy of government debt, was up to a death-defying 246%, or more than double the levels of notoriously debt-buried countries like Ireland, Spain, Cyprus and Ukraine.
Some people ask …
"If this is truly such a big deal, why
aren’t more people talking about it?"
Our response: Which planet are you living on?
The U.S. Federal Reserve, for example, implicitly forecasts inflation/deflation with its "Five-Year Forward Breakeven Inflation Rate."And as Mike pointed out back in January, it had sunk to below the lowest level of the Great Recession. Now it’s even lower.
One month later, the OECD warned that "trade and investment are weak"… "financial instability risks are substantial"… and a massive government response is "urgently needed.”
In April, the IMF warned about global growth that’s "too slow for too long.”
And just last week, The World Bank again downgraded its global growth forecast, citing "an environment of anemic growth … mounting risks, and a further slowdown in major emerging markets."
Regardless of what you may think of these organizations, how can anyone say "no one told us"?
The clincher was the jobs report that was released exactly 10 days ago. As Mike summarized that same afternoon …
- Our economy added only 38,000 jobs, or not even close to the "expert" estimates of 160,000. They were off by more than 76%.
- The Labor Department slashed April’s previously reported gain to 123,000 from 160,000 and March’s number to 186,000 from 208,000. That confirmed a marked slowdown in job growth from late 2015 and 2014.
- Job losses were not concentrated in any one sector. Manufacturing lost another 18,000 … mining lost 10,000 … construction lost 15,000 … and temporary help lost 21,000.
- The size of the American workforce plunged by 458,000, while the labor force participation rate dropped another 0.2 percentage points to 62.6%. That means over 37% of workers have now given up looking for jobs and dropped out of the labor force.
This is the uglier underside of the trends I have told you about here. So is the ever-more challenging quest for safe yield.
But it certainly doesn’t mean you have to be among those afflicted by the debt-and-deflation diseases of our time. The formula for safety — and success — in these times starts with these three steps:
Step 1. Continue to build your cash hoard.
Step 2. Follow our prescriptions for prudent hedging.
Step 3. And if you can afford some investment risk, carefully consider the unusual opportunities our editors recommend.
Good luck and God bless!
Martin
Dr. Weiss founded Weiss Research in 1971 and has dedicated his entire career to helping millions of average investors find truly safe havens and investments. He is Chairman of the Weiss Group, which includes Weiss Research and Weiss Ratings, the nation’s leading independent rating agency accepting no fees from rated companies. His last three books have all been New York Times Bestsellers and his most recent title is The Ultimate Money Guide for Bubbles, Busts, Recession and Depression.
{ 62 comments }
Very brilliant and factual analysis of the current situation, but we all know that after summer comes autumn and finally winter before the next spring.
It all makes since now, the government must now raise rate for many reasons, to pay off debt, to keep corporations from destroying the banks, to attract buyers for bonds that a lot of countries are selling that could destroy our power completely with no shots fired.,or loaning money to companies with no real cash flows, and over paid ceo’s and cio’s with no real clues other than what used to work before it was controlled to help companies or what is global at stake; they will fail big time or the country will, and how will the politicians respond for themselves and great companies or for the cheaters that should go to jail for cheating that controls us. It is a big decision but the only way to have time is to raise the interest rate allow the overpriced and the bad to fall and help the global economy and us to survive they have no choice and if they wait the next time they can figure it out too it will be worst than ever. I think they will not raise rates and I stand to profit big time, however I WANT people and the economy to have a chance to exist Over that. It is the best choice they can make it also makes things fair and keeps the ceo’s from destroying everyone else to make the 1% into a 1/2 percent control forever. I believe this will happen, if you do not simply look at the stock market and timing and low volume easily controlled. Stay out of it for 6 months and you will win!
Their money is limited but if they win they will control everything in you life forever! Just guesing
Usually the economy goes in 5 stages over a ten to fiveteen year period, boom, recession, depression, recovery, growth. This has been happening to economies for millions of years.
…and it will go on for another million years.
the reality is:
stocks are fairly valued (or fully valued) at this stage of the economy cycle.
stocks will likely become over valued in the not too distant future and well have a recession.
lest we not forget the old adage – buy low, sell high.
Martin’s words are spot on…… Sadly, this did not have to happen….. Most any debt chart will show you that our troubles really began with the election of Reagan in 1981 and the coming of the Republican Revolution when they gave HUGE tax cuts to the wealthiest 3% (who also funded their revolution) without cutting Federal spending. Add to that exploding debt, the GOP came up with GATT and NAFTA which sent millions of “Good paying Middle Class jobs” to China and Mexico and the debt increased geometrically as those tax receipts went away…. As if that were not enough, tax laws were enacted that let the 3% hide trillions offshore which made tax receipts even lower (and the debt higher)……
It should be noted that our Grandparents figured out how to pull us from disaster’s doors in 1932. when they ended that Republican Revolution and elected FDR…..
One of the great truths no one here seems to want to talk about, is that when you elect a political party that is funded my the 3%, one should not be surprised when the 97% gets crushed……
I’m left to wonder how long it will take our generation to figure it out and pull us from disaster’s doors?
So many in our nation have not kept up with current events at all. So the lessons of
the past 36 years are all but forgotten, not to mention the past 66 years. David Stockman has said: Republicans caused the U.S. Economic Collapse. Now they are running a sociopathic narcissist as Presidential Candidate.
As if Hillary Clinton is going to ‘right the ship’..The Clintons are only interested in The Clintons & cover-ups
I so agree. It is so good to know you are out there. Thank You.
While Reagan was President, ‘revenue’ collected by the U.S. government almost doubled. That is a fact that is easily looked up and verified. When economic growth accelerates, guess who also benefits- yes, big government. The question is, who spent it all and then some? Government has an insatiable appetite for spending money that it doesn’t have and because it is an ineffective allocator of capital, it acts as an anchor on GDP growth. That is being proven over the last 15 years, wouldn’t you say, if you look at the rapid acceleration in government ‘investment’ (spending and debt) and the flat line growth of GDP?
Verify the “Doubled” quote with a link or a site, please….. Either way, the Debt began to skyrocket under Reagan, then HW Bush, leveled off under Clinton and they went parabolic (even steeper debt growth) under Cheney/bush, resulting in the Republican Stock Market Crash and Depression (the Republicans like to call it a “Recession”, but a 60% loss is a Depression) which resulted in even steeper debt accumulation in a effort to recover the economy….
usgovernmentrevenue.com is one of many sites. Big government revenue went from .8T to 1.6T. Government revenue tripled over the 20 year period during and following Reagan. 16 million new jobs were created under Reagan. Democrat controlled Congress drove spending increases and debt that you reference. These are all facts as I stated in my earlier post. The problem that we and the rest of the world face is simple- we are a world floating on debt which has been driven and accumulated by big government politicians and their backers who believe that money grows on trees. The only purpose is to increase the power base and wealth of those in government.
Despite the increase in revenue ,govt debt increased from 800 billion to 2.8 trillion under Reagan and has been on the rise ever since .
Gee, I must have missed your comment about which president signed NAFTA into law….and which party just doubled the country’s debt in 8 short years…..and which party’ s policies contributed mightily to underwriting the housing collapse in 2007-2008…and which president and his party spent two terms avoiding the looming Social Security and Medicare crisis. But I definitely didn’t miss benefitting from President Reagan’s economic policies despite being nowhere near the top 3% in the ’80’s. Based on your slanted viewpoint, you must be one of those college professors who are filling the heads of their impressionable students with revisionist history.
Jack,
Try getting your information from someone other than a GOP funded source….. I’ve explained all that you say is “fact” and, in fact what you have said here is not….. As for status, I grew up dirt poor, served my country and used the GI Bill to graduate college (Thank You FDR- Democrat) and now I am wealthy and willingly pay more taxes for the luxury of living in this great country…..
i did a little unbiased research the NORTH AMERICAN FREE TRADE AGREEMENT also known as ( N.A.F.T.A. ) and the GENERAL AGREEMENT ON TARIFFS AND TRADE also known as ( G.A.T.T. ) was signed into law by BILL CLINTON … who is HILLERY CLINTON’S husband. BILL CLINTON
BILL CLINTON a democrat along with 244 other democrats signed NAFTA into law
You seem to have missed the part about BOTH f them being given birth during Reagan/HWBush with Republican Majority Congresses… Bush signed the official contract for NAFTA… All Clinton did was sign the formal (unbinding) agreement… Check it out… Try Google or Wikipedia rather than a GOP site, aye?
Your first guidance of build a cash hoard. I had done that quite awhile ago, but can
find no safe place to invest it at this time, especially with the market ready for a crash. Al
Al, the only advantage that individuals have over the professional investors is that we don’t have to keep our assets invested all the time. If there are no good investments, we can sit in cash. Few professionals have the latitude, or fortitude, to do that.
Concern is that your cash will disappear with currency devaluations faster than the fall in stock prices ??
John
gold and silver and hold on to it long after the economy bottoms. If you panic and sell it on the way down or immediately at the bottom you will probably lose.
While Ireland has a high level of debt mainly due to the Banks collapse,the economy is growing and unemployment falling . . Its probably the best placed of the indebted countries to make progress.
Save our economy and America.
Well said Dr. Weiss. My concern remains that we are staring Stagflation in the face. The world economies are stagnating together, but what is needed to pay off all the debt in the world is inflation. To get inflation it is necessary for each and every country to devalue its currency, but they can not all do this against each other at the same time. Excepting, that there is one and only one currency that all others can now devalue against at the same time; and that currency is Gold.
Excellent article. The point that should be stressed is that besides writing letters to our congressmen there is precious little that we can do to effect change. With that said people can only concentrate on their personnel lives by always doing the exercise of “What will I do if I am out of work.”. With that approach you will always be ready to weather whatever storm life throws at you. Don’t let your resume or skills get dusty.
Great article, Dr. Weiss!!!! Thank You.
Larry
THE BEST ARTICLE THIS YEAR.
A recession/depression was inevitable for the last 20 years. We could have gotten out of it possibility with Clinton not deregulating the banks. With derivatives up even more than before the 2008 crash, we are in big trouble. The end will come with everybody using everybody else for buoyancy as we all go under. Get yourself some gold or silver and don’t spend it until at least 2 years from the crash when it’ll be worth a lot. Spend it as you go down and you might as well thrown it in the lake.
We will come out of this strong but it won’t be with a Clinton in charge. Expect 4 plus years of misery, 6 years of hope and then we’ll see the light at the end of the tunnel until our next depression.
Yeah that’s right we never learn and human greed cannot be controlled. Maybe it’s time to look at a new way of government?
Mike,
The removal of the Glass Steagall Act which deregulated the banks was brought by powerful Republicans Gramm/Leach/Blyley and passe in 1999 under a Republican Majority Congress. Sadly, Clinton took the recommendation of his Treasury Secretary Rubin (A Republican) and signed the Bill rather than forcing the Republican Majority to override his Veto…. As soon as the deal was done Rubin left and took a job on the board offered to him by Citibank at a Million a year….
So far only Democrats have brought legislation to return Glass-Steagall to law and the Republicans have kept it from passing….. Until it is returned to law, our Stock Market and our Economy are in jeopardy, in my opinion….
Our economy was in jeopardy Eagle495 when a community organizer was elected POTUS with absolutely no job experience just what did we get for trillions spent and billions missing a economy that has negligible growth where more and more of the population seems to garner a career in collecting government benefits.
Ah, it was called the 2nd REPUBLICAN Stock Market Crash and Depression of 2007-2009 (Cheney/bush) OF THE PAST 100 YEARS….
As Dr. Weiss mentioned, in Russia, wages are starting to fall. In this country, the number of jobs are falling, since the politicians have been getting their fat fingers into the what should be the business of workers and employers. There are always consequences, however, so, with fewer workers, the government’s receipts of withholding taxes is falling. The Treasury is seeing less money, so I guess the politicians will do something to “correct” the deficiency. I guarantee the rest of us will bear the brunt. NEVER elect a politician twice to the same position. YOU will pay the price, as with Mr. Clinton, Mr. Bush, and Mr. Obama, not to mention all the Senators and Congresspersons.
It amazes me that anyone would blame Reagan for not balancing the budget with a Dem congress. He also took a bullet for us and did not have the strength to buck the system to the extent necessary. I say God Bless Reagan! I pray that Trump will be half as good. May Crooked Hillary go straight to jail and spare us her demented reign of terror.
I must once again state that for the first 6 years of Reagan’s tenure Republicans held the Senate and the economic game plan was labeled Reaganomics not Congressonomics. Moreover when asked if this economic plan would produce larger deficits Reagan’s first chief economic adviser said yes. Since that time Reagan’s budget director, David Stockman, has repeatedly laid the blame for our debt problems on Reagan. Further proof that voodoo economics are failed was provided by Bush Jr. when he lowered taxes and increased spending with a Republican controlled Congress. Facts are inconvenient for those who ignore them and repeating the same thing over expecting different results is a measure of insanity. If you want less debt raise taxes and cut spending.
Actually cut taxes and reduce spending will do it every time. If it doesn’t then we’re screwed. You can only raise taxes so much before the people revolt and throw the tea in the harbor.
The budget was fairly balanced until Reagan gave the Ultra Wealthy 3% a HUGE tax cut!….. :(
The total debt run up in Carter’s 4 years was less debt than any one year under Reagan. Further, more jobs were created in Carter’s 4 years than in Reagan’s first term, Bush Sr.’s term or Bush Jr.’s two terms. Carter is a Republican whipping boy but had a better 4 years than three Republicans had in 16 years.
actually at the end of jimmy carters term as president the economy was in shambles with high inflation and high unemployment and it took many years for it to get better .
False
All of these systems are swords with two edges to cut both ways. Too little debt means the economy is not progressing as fast as it could, but too much debt slows down the economy greatly. Too much inflation causes big problems, and too little inflation causes limping economy. Free markets, ultra deregulation, globalization, tax cuts, and so forth are all double-edged swords that cuts both ways. Too much taxes are bad, but too little taxes can too be bad. Too much regulations are bad, but so are too little. Some economists believe that trickle-down-economics like Reganomics are all for the good without any downsides. They don’t understand that such economics can cut both ways, good and bad, like double-edged swords. This is half-brained thinking of these economists who believe Reganomics can only do good without any chance of doing bad. That is they believe Reganomics (ie. big tax cuts for the rich, and ultra deregulation) and free-markets are perfect. These half-brained thinking has proved to be dangerous, as shown in 1929 and in 2008 with the Republican Presidents Hoover and Bush during the Great Depression, and the Great Recession. If people only use half of their brains to form economic policies, and to run economies, disasters are bound to happen. If people are half wits in only looking the good sides of their economics system without the realization of the need to look at the other bad sides of their system, these half wits will sooner or later create disasters. Greed can make people mad in believing and push these half witted policies. Murphy’s Law will ensure that half witted policies will end in disasters.
ric,
You forgot to mention that both recoveries from the Republican Crashes and Depression of 1929 (90% loss) and 2007 (60% loss) happened under Democrat Administrations with Democratic Majority Congresses… Basically the Republicans screw it up and the Democrats fix it… Been that way for the past 100 years at least…..
AND Eagle 495 you forgot to mention the DEMOCRATS had control of the SENATE from 2004 – 2014 and that the DEMOCRATS had control of the CONGRESS from 2004 – 2010 and the DEMOCRATS had control of the PRESIDENCY from 2009 – till the end of january in 2017 why is it in your world its always the others guys fault the way i see it clearly the democrats had the majority in congress and the senate from 2004 thru 2010 especially with the election of barack obama as POTUS in the yrs 2008-2010 all 3 branches of government were controlled by democrats please tell me this… why when BARACK OBAMA had control of the congress the senate and the presidency why didnt they just fix all the things your constantly crying about… your glass -steagull please let me know how your going to blame this on the republicans
Here is a birds eye view of just one state what shape are the rest in?? Of course it is watered down with “its far to early” etc. etc. etc.
June 13 — Rhode Island’s economy “deteriorated noticeably” in April and its performance in March was weaker than first reported, according to the monthly Current Conditions Index compiled by University of Rhode Island Prof . Leonard Lardaro .
“However, it is far too early at this point to contemplate the dreaded ‘R’ word,” said Lardaro, referring to recession.
His index, scheduled for release on Monday, measured 42 in April and was downgraded to 50 in March from an earlier-reported 58.
When the index is above 50 the economy is expanding. When it is below 50, the economy is contracting.
The index is based on 12 indicators, such as retail sales, single-unit permits and the labor force.
Four of the five leading indicators in the index failed to improve in April, Lardaro said. Employment service jobs, which includes temporary jobs, fell by 4 percent for the second consecutive monthly decline.
Manufacturing employment rose barely but the work week fell sharply as total manufacturing hours slipped by 1.5 percent. New unemployment claims rose by 3.2 percent. Single-unit permits rose a tiny 0.1 percent.
Also, retail sales declined by 3 percent.
Lardaro said the Rhode Island unemployment rate slipped to 5.3 percent in April but for all the wrong reasons. He said it fell from 5.4 percent because the labor force continued to decrease.
In a separate report from the state Department of Labor and Training that reported the 5.3 percent unemployment rate, the state also reported a net loss of 1,500 jobs from March.
Boy the American market sure is resilient today considering what happened in Asia and Europe and gold. As one analyst stated it seems investors checked their brains at the door
Looking at the comments section it is a surprise most knew how to read the article. So many people without a clue why do they read anything as it sounds like they’ve got it all figured out. Of course as Mark Twain said, “It is easier to fool people than to show them they have been fooled.” Here’s a news flash- politicians of either party work to keep the show going, keep people all lathered up over “issues” while the boom is moved into position over their heads. The blind can’t see and they won’t even know who it was that hit them when their lights go out.
There are savers and spendthrifts. Savers prosper. Spendthrifts fail. When public policy favors spendthrifts and punishes savers, public failure is inevitable. Most social welfare spending today is because someone is making money from it. As for Chrysler. It was a government loan that was paid back and Chrysler became wealthy enough to buy Jeep and AMC. It was then sold to Daimler-Benz which profited handsomely from Chrysler. An equity firm bought Chrysler from Daimler-Benz with creative financing just as the 2007 crash hit. The only similarity is that Chrysler’s difficulties were caused by fuel prices both times .
it will be exciting to get some good advice about capitalizing on these investments.
[ “If this is truly such a big deal, why aren’t more people talking about it?” Our response: Which planet are you living on? ]
Dr. Weiss, there are many puppets and talking heads in the media being used to deliberately deceive the population. Yes, there are many people talking about the global debt monster in these mitigating terms that paint everything as being alright to keep the sheep docile before the slaughter.
The question is, “Why isn’t *main street* talking about it” The average American citizen has about as much understanding of how money works as a chimpanzee. If you talk finance with most people, it’s about as useful as trying to teach a dog to read Shakespeare. It’s the average American that is force fed this sedative that needs to start talking about the problem. Instead we’re told that straw-men and boogeymen like Trump and Hillary and their supporters, fellow Americans, are the mortal enemy. It’s just a red herring.
You’re right. Those people are on some other planet, and it everyone’s problem like it or not.
Liam, You’ve pretty much hit the nail on the head!
Between Obama declaring that the economy is “just fine,” the mainstream media parroting the government line (or should I say, lies) to the few folks who read about something other than ballgame scores and celebrities’ antics, and the scant number of folks who actually do go searching for and understand the truth about the economy, we have a grossly uninformed populace. (I love your line, “If you talk finance with most people, it’s about as useful as trying to teach a dog to read Shakespeare.” Isn’t that the truth!)
Unfortunately, I fear that even if the public were well informed, it’s too late to do much to fix our current situation. For several decades, we have had a terribly bloated, inefficient, and often corrupt government “machine” and way too much “crony capitalism.” Our founding fathers must be rolling over in their graves. Too bad that we can’t send the whole bunch in government home and start over with a few statesmen. Since I suppose we can’t do that, going to a gold standard is probably our best bet. Whatever happens, it’s going to be rough going for a long time, but at least a gold standard would keep thing more honest.
Thank you Dr Weiss for the analysis and recommendations for riding out the upcoming debacle. One big question remains….call me stupid, but….the world grand total comes to $970 trillion, or more than 12 times GDP (1,247%); so who has lent out that money and who can call in the loans, what instruments of debt repayment are at their disposal and what are the likely outcomes if they call in the loans which cannot be repaid due to the financial and fiscal indiscipline that have been rampant??? Some historical instances, for example the recent (European central control in Brussels) Cyprus initiative of forcefully removing funds from citizens’ bank accounts, leave me stunned and appalled that they can get away with it and that there are no laws against the practice. I hope that was not a trial run!
Note to Eagle495: You keep blaming Republicans with your cherry pick examples. The fact is since 1945, Democrats have controlled the House 79% of the time and Democrats have controlled the Senate 70% of the time. Putting all the blame on one party with your cherry picked examples ignores these facts.
Study economic history from any source other than the GOP or their supported “news sites” and you will find that the Republicans (who are funded by the 3% mostly) profit ONLY the 3% and those policies are devastating to the 97%……
Believe what you want, but this is an Investment site and for the past 100 years roughly, investments in ONLY Democratic Administrations would have brought you roughly 46 times greater returns than investing ONLY during Republican Administrations….. In the Investment World we call those statistics “Significant”!
Great Article that proves my point is called “Poor Dumb Rich Guys”….. Consider reading it, aye?
“Poor Dumb Rich People”
i remember you bragging you got that information form the HUFFINGTON POST.
Bragging? Do your own research based on the article and you will see that it is true and correct……. Or just go on believing the GOP Propaganda and try not to be too surprised when the world goes to hell in a hand basket and they said NOTHING to warn you, much like 1929 and 2007, aye?… …
Who invests money in bonds that have NO INTEREST PAYOUT? & WHY?! WHY would ANYBODY?! Answer:–> Governments buying their OWN! & eachother’s bonds! Paper assets have become an ILLUSION-BUBBLE!–Smoke & Mirrors! & a World Wide Ponzi Scheme-SCAM! & it’s all gonna EVAPORATE–POOF!–SUDDENLY! & SOON!
It’s interesting to watch each persons response – – to blame the other party for failure of America, both economically and their inability to find unity. The blame game – – both parties are ownership of their share, what ever that percentage is. Statistics, proofs, evidence, history and more shows the decline of our culture and a world divided against each other. The Global condition, shows me that America is a participant as well, and not free from responsibility, but this is a global problem. The answer?
You all can fight it out and “blame each other” – – – with evidence, statistics, proofs, history and your solutions. Yet – – I have no one to blame – – other than myself!
May God Bless America and help us find an answer together – – –
Hi Martin,
Superb article–one of your best.I’m a bit late coming to the’party’,but have read most of the previous comments–some good some bad.However no one seems to grasp the seriousness of most young people in the western world wanting to work for Gov’nt at all levels . Almost no one has individual iniative to help themselves.This is something that needs to be talked about–more individual iniative—not depending on Go’vt fo all and everything.
To all, It matters not who is in control of DC. The Democrats will spend us into oblivion with entitlement programs and Republicans will spend is into oblivion with the Industrial Military Complexs and war. Neither party has ever tried to decrease the debt in the last several decades, they just so call balance the budget. Both sides love to spend, spend, spend and most wealthy have made their money off of the tax payer and those that have not are few and far between. The 1% make the bulk of their money financing all of the debt governments incur as well as the general populous incur. Many that acquire wealth via investing in stocks normally end up in the poor house at one time or the other because they did not get their timing correct since credit based economies work based on bubbles developed by the Central Banks around the world.
We have not seen a true economic development based on true production in decades and decades but rather bubbles and busts created by the manipulation of our world currencies and markets by out of control governments and the central banks (which are normally not owned or operated by the government but rather the ultra rich) that tweak our financial systems and normally over do it.
Most of the people (sheepel) around the world never have been taught economics nor do they understand the different economic theories that exist and further more they are too busy with either making a living or enjoying their bread and circus to even care about it.
What we have coming is going to be the biggest transfer of wealth in history. Wealth never disappears as does not money. It goes from one set of hands to another set of hands. There are those that in bad financial times that have enough savings to scarf up the devalued assets of those that suffered a financial collapse no matter how large or small. The whole point is when debt gets to be too large there is either a devaluation of the money or a write down and sell off of assets or both. Since at a given time there is only so much money in circulation it has to go somewhere. Some are winners and some are losers and we are in a position world wide right now for these transfers of wealth to occur. The so called growth in our system today is based on inflation and this is not true growth because everything is based on consumption rather than production especially here in the good ole USA.
And Trump wants to increase our debt, big time.
I wish I didn’t have to disagree with so may views of the reasons for world financial problems!
However, the rest of the world suffered these same problems long before the U.S. was created. That makes an undeniable case against all forms of prior governments; but, the U.S. has without a doubt joined in this incompetent form of governmental controls of peoples lives.
When the United States began to formally adopt the attitudes of the rest of the world, that is when the disintegration financial cooperation began.
When the United States wholeheartedly decided to expand from attacking the American Indians AND join the world as a nation of WAR; THAT is when the U.S. and the world began to follow the path of failure to accept the COMMON LAW of human rights (or if you please, God’s Laws) of LIFE, LIBERTY, and PURSUIT of HAPPINESS and other precious rights.
HISTORY SHOWS HOW the people are deluded to believe government will not take away those rights of COMMON LAW, such a the right of SELF PROTECTION.