One Of The Largest Wealth Transfers In History?
In my last article, I discussed how the Fed is determined to keep the financial system primed with sufficient credit to prevent it from imploding. However, in this article, I’ll explain why their plan is doomed, because our GDP growth will not be able to match the credit expansion they so desperately need. I’ll also show how this will result in one of the largest wealth transfers in all of history. If you have not read part one of this article you can do so here. Global Debt Crisis – Part One
So, if you’re interested in knowing how to increase your odds of being on the right side when it occurs, then please keep reading.
Let’s start with a question. Do you think it would be possible for someone with a $75,000 salary to successfully carry $860,000 in debt on their credit cards? No, of course not. That’s completely ridiculous and not workable in any stretch of the imagination. But that’s exactly where the U.S. is headed.
Let me explain . . .
As mentioned in my last article, the U.S. debt-to-GDP ratio is at unprecedented levels. At one point, it was well over 370%, but as of this writing, it stands at about 350%. The Feds hope that by means of robust economic growth, that ratio can be reduced. But is that reasonable? I’ve analyzed the average yearly growth in U.S. GDP going back to the late 1700s and noted its lowest point was about 1.5%, and its highest point was about 6%. But on average, the U.S. GDP has been 3.8% over the last 220 years.
Unfortunately, that’s nowhere near enough to cover the 8% rate that our debt is growing. In fact, with these numbers, our debt-to-GDP ratio will grow to 1,130% in the next 30 years! As mentioned, that’s the equivalent of someone with a $75,000 salary trying to carry $860,000 in debt on their credit cards. The bottom line is this: our GDP growth has NEVER been high enough to cover our current 8% debt growth.
But that creates a HUGE problem, because our debt-based fiat money system was designed with the need to grow. And if for any reason, it stops growing or even reverses, the whole system can literally implode.
In my opinion, that’s why we’re seeing various central banks dropping any language about the need for future interest rate increases and they are continuing with loose monetary policies. What I see are central banks everywhere pumping liquidity and promising to keep interest rates down. Why? Certainly not because they think it’s a good idea, but because it’s what they MUST do to keep the financial system from imploding!
The underlying problem is that real growth is not coming back. The only increases we’re seeing are in paper-wealth, meaning stocks, bonds, and currencies. And this can only go on for so long before there is a huge re-balancing, bringing excesses back in line with reality. When that happens, the vast majority of people will lose as the most of the real wealth gets transferred to relatively few.
Those holding paper assets will suddenly find themselves holding nothing of real value, while those holding real assets will find themselves with all the wealth. But even worse is that with all of this easy money sloshing around, prices are being driven up on everyday necessities. You see, the Fed is working tirelessly to debase the dollar and boost borrowing, because that’s what our financial system requires to survive.
But time is almost up.
Living beyond our means is very pleasurable, but it can’t go on forever. It’s just not a workable long-term plan. So, what do I recommend? As your making your money trading, make sure you continuously transfer a significant portion of your profits into real, tangible assets like gold and silver.
The jig is almost up. The world just cannot provide the level of growth required to support the debt we are accruing.
The time of reckoning is near. Don’t delay. Take action right now.
To get updates when we make posts please subscribe in the right column in the “stay connected” area.
what up my bonus iwant buy something.
The explanation is, I believe, quite good. However I think that a further definition of the word “credit” would help clarify the situation.
For the word “credit” let us substitute the word “debt”. Credit is debt! “Credit” sounds like an OK word to the average person. But “debt” is something to be paid back to the bank or whoever lent the money out to begin with. When a person uses a “credit” card they take on a “debt”. The Fed, by issuing “credit” is actually issuing a “debt” that the American Taxpayers have to repay in the future… and pay interest on the “credit” until the “debt” is paid off. In my opinion the “debt” will never be paid off so, sad to say, bankruptcy is inevitable.
there is no such thing as free..We have brain dead polititians…
there is a limit to what the government can give as free services…unless the plan is to destroy the U.S. economy
so buy gold,stocks real estate?
The govt spoils the economy by itself. Not mention where the countrys wealth is. Boosting up the market just by posing un planned and failure datas to the people. when the market and the economy collapses the looser are the investors and the govt keep on doing the same thing to the people. when the economy is not stable and dont know what to do… they made to listen and begin tappering the talks of other country officials what they do in their economy… yyy!!!!!! they do this they fear that they spoiling their economy by unusual and false datas to people, an abnormal growth may lead the economy lead to suffer a lot…lot….. lot…. Remember when u travel at Top there’s a Chance of Slipping down to death…. u cannot always be in top top top top top…. u need to get down to u r normal life that will be good for u and good for every one around u…….
You said, “Take action right now.” What action(s) should we take then??
Paul Pazdan asked about gold, stocks & real estate.
Real estate: Did you see what happened to RE values with the great recession? Yes they plummeted. Why? If people are losing their jobs and there’s fear in the air do you think people are going to commit to a huge loan in a hurry? And what about those that lose their job and can’t pay the mortgage? Imagine this on a much huger scale.
Gold: Good now but you have to be very careful. What do you think will happen when things get really bad and people start cashing in their gold because they don’t have any cash money left? And how many buyers will there be then when everyone who wanted to buy gold already bought it some time ago?
Stocks: Give me a break! Look at what happened in the great recession and the great depression.
Sorry for the bad news.
Very well presented idea. The only problem is: Who controls Fed? Is it the Vatican? If so, why letting another Country controlling the financial system of another Country?
Capital has to be invested somewhere so when the bond markets implode the funds have to be employed somewhere – if we cant trust government bonds then the stock market will likely be the beneficiary. Despite the negative sentiment about the economy perhaps the markets are going to get a boost with a massive cash injection. I know this seems to defy logic but when you really stop and think about the situation I see the stock market as up, up and even more up 🙂
The Federal Reserve was created by and for banksters, they buy currency for cost of paper & ink and immediately realize the profit on its face value, then earn additional profits by LENDING it into circulation. Yes, assets will ALWAYS be a better value than paper money, BUT don’t underestimate the Fed, they are shrewd and don’t be surprised if they pull another rabbit out of their hat; America only sells T-bills as a courtesy, to let investors “participate” in our debt creation process. But it’s largely a perception and Uncle Sam could issue it’s own credit/dollars without banksters or buyers of debt, Lincold did it, it pissed the banksters off royally. Anyway as for the stock market, why not just give money to poor people who’ll spend it, thereby driving up the prices of stock in companies they patronize! Seems a better idea than just giving it to Wall St. banksters to stoke inflation.
The US is headed for disaster thanks to all the Millions and Millions of IDIOTS that have not got a Clue what is really going on with our government and there are a whole lot of IDIOTS out there. The following is a quote I received and that Marine nailed it.
“The danger to America is not (solely) Barack Obama but a citizenry capable of entrusting an inexperienced man like him with the Presidency… Blaming the prince of the fools should not blind anyone to the vast confederacy of fools that made him their prince. The Republic can survive a Barack Obama. It is less likely to survive a multitude of Idiots such as those who made him their president.” – A U.S. Marine
Until there are thousands (OK I will concede there are not that many that even understand what is going on in Washington DC, much less get pissed off about it so let’s say 1 thousand really, really pissed off people on Capital Hill all at the same time – with base ball bats, or 2 x 2s) raising some serious hell against the Lunatics, and idiots absolutely nothing is ever, ever going to happen to these totally bought and paid for by the richest 50 people in the world that are becoming more and more powerful with each passing rigged election thanks to the stupid people.
Wall Street is Worried. Can’t imagine why.
Just look at the three stooges. Obama the Wimp, Holder the puppet of the Wimp, and Justice Thomas the mute who hasn’t said anything intelligent on the supreme court in many, many years. What about the hearings on how bad Wall Street is screwing everyone???? Clinton put over 1000 Wall Street Crooks in jail, Bush put 1300 and Obama the Wimp and put Zero, “0”, nada, none, no one in jail!
Also the “greatest wealth transfer” is a misnomer, what you should have said is the greatest RIP-OFF!
Any person who has gone to the grocery store knows that the government lies to us when they claim we are in a state of deflation. They only way I see getting out of our obligations is to devalue the dollar even further. Perhaps one day we shall be obliged to turn in our dollars in return for currency worth a fraction of their face value.
Diana – You and I both know you are right… this is correct… i.e., “the only answer will be to devalue the DOLLAR.” – So once again, as was asked, what do we do about it?
Gold has almost finished its run. Soon, those who had the foresight will take their profit. Real Estate will plummet for the obvious reasons, and that leaves the stock market. The stocks will continue a run because there is no other “retail” invesment vehicle that will produce a decent dividend and/or equity.
PROBLEM ? The Stock Market will dive when the IMF/Fed’s pull the plug on the Dollar, and it is revalued, giving us the “less than Dollar, new Dollar.” There’s some good heads on this Board, let’s hear some ideas…
Ultimately either US will opt for bankrupcy or a war to which ever country they owe the most.
As a disabled war veteran, I was forced into “retirement” while obligated to making mortgage and car payments. Even so, I am making all of my debt obligations but I feel like I am on a treadmill with a very limited ability to buy “hard assets”. My wife (48 years) says our home (with a big mortgage) is our “hard asset” and we should focus on getting out of debt ASAP. How can debt payments be met when our source of income (via the US Government) is cut by $?% when the day comes our currency is devalued? Prioritize getting out of debt or buying what little Au and Ag we can accumulate?
Hey folks! The wealth transfer has already taken place. Where have you been? The bottom seventy percent of Americans are already bankrupt.