Category: simonblack

The US Department of Transportation clearly has a lot on its plate.

America’s infrastructure is not in great shape. The American Society of Civil Engineers (ASCE) grades America’s roads, bridges, and public transportation a C- overall.

In fact 42% of US bridges are at least 50 years old, and nearly 7.5% are considered structurally deficient. 43% of public roads are rated as mediocre or poor.

Then there’s the sorry state of US railways, many of which are considered ancient by industry standards. And despite the “High Speed Ground Transportation Act” being passed SIX DECADES AGO in 1965, the amount of high-speed rail in the US is pitifully low.

There are also seemingly constant problems with US air traffic, especially at major airports.

But what has US Transportation Secretary Pete Buttigieg done thus far during his tenure to address these challenges?

Well, after Congress handed him an astonishing $1 TRILLION to fix America’s crumbling infrastructure, he’s managed to spend $7.5 billion to build a grand total of seven electric vehicle charging stations across the country. Clearly that’s money well spent.

But now Secretary Pete has shifted his gaze to America’s biggest transportation problem.

It’s not highways. Or bridges. Or even electric charging stations.

Secretary Pete is now devoting precious taxpayer resources to regulating airline points… as in the frequent flier miles and other reward points that you get whenever you fly with a major airline or even sign up for a new credit card.

Last week, the government announced that Secretary Pete has “sent letters to American Airlines, Delta Air Lines, Southwest Airlines, and United Airlines ordering them to provide records and submit reports with detailed information about their rewards programs, practices, and policies.”

First of all, what do credit card reward point have anything to do with infrastructure? And second, even if we want to accept Pete’s bird-brained logic, how could anyone possibly argue that airline miles should be anywhere near the Department’s top priorities?

Yet Secretary Pete is fixed in his duty. He claims that:

“…points systems like frequent flyer miles and credit card rewards have become such a meaningful part of our economy that many Americans view their rewards points balances as part of their savings… But unlike a traditional savings account, these rewards are controlled by a company that can unilaterally change their value.”

What an interesting point of view. Airline points are a form of savings that is controlled by a company which can unilaterally change its value.

Gee where might I have seen that before….

OH, I remember! Like how the Federal Reserve can unilaterally inflate the value of the dollar, i.e. the actual form of savings that people all over the world use? Or, even better, how the US government can destroy the value of the dollar through its reckless and irresponsible deficit spending?

It is utterly hilarious (though simultaneously pathetic) that Secretary Pete has no concept of this irony.

This is the guy who has spent $7.5 billion dollars on building seven electric vehicle charging stations, an average cost of more than $1 billion per charging station.

Guess what, Pete? Your staggering waste of taxpayer money has contributed to the decline in value of the US dollar. But, sure, keep going after those airline points, bro.

If you thought airline points were declining in value now, just wait to see how worthless they become once Pete starts regulating these programs. How many segments will you have to fly in economy class to rack up enough points for that family vacation to Key West next year? Pete will decide. It’s genius.

Sadly this is not an isolated issue within the Department of Transportation. Agencies all over the federal government have abandoned their core missions and are instead focused on their leftist agenda.

The Federal Trade Commission, for example, exists to protect consumers from monopolies. Instead they’re busy suing grocery store chains over “greed” and made-up threats to unions.

The US Committee on Foreign Investment exists to ensure that state secrets and strategic technology don’t fall into the hands of America’s adversaries. But this same agency is now killing a deal for US Steel to be acquired by a Japanese company (i.e. one of America’s biggest allies) because the labor unions don’t like it.

The list goes on and on. The State Department is handing out money to America’s sworn enemy in Afghanistan. The Treasury Department is setting up banking systems that fund terrorism.

Everything the government is doing is the exact opposite of what is needed to address THE largest threat to America— its massive debts.

They spend like drunken sailors and focus their efforts on destroying the economy… instead of allowing it to flourish and generate much-needed tax revenue.

And that’s why, even though America’s problems are still fixable, I highly doubt anyone in charge will use the rapidly closing window of opportunity to address them.

That’s why it makes so much sense to have a Plan B.

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Taylor Swift’s announcement pretty much said it all.

After last night’s Presidential debate, the pop star publicly endorsed Kamala Harris because “she is a steady-handed, gifted leader” who fights for “LGBTQ+ rights, IVF, and a woman’s right to her own body. . .”

I really try to keep an open mind and understand other people’s opinions. But I personally have an extremely difficult time comprehending how someone thinks abortion and LGBTQ rights are the most important problems facing the country right now.

This is a pivotal moment in history. The United States is in serious decline. Among other critical challenges, the national debt is $35 trillion and is set to grow by at least $22 trillion over the next decade (according to the government’s own forecasts).

The impact of this extreme debt level cannot be overstated. The US dollar will almost certainly lose its reserve status, inflation will soar, and the government will most likely default on key promises like Social Security.

On top of that is the invasion at the southern border, the threat of war, the decline in US military readiness, full-blown government dysfunction, and America’s waning power in the world.

But none of these issues makes it onto Swift’s list of priorities. And given the eight million “likes” within the first few hours of her making that post, she’s obviously far from alone.

Yes, I recognize that abortion and LGBTQ rights are concerns for some people. But the geopolitical and economic security of the world’s dominant superpower is something that affects literally every single person alive.

Kamala has positioned herself as the “joy” candidate. And sure, she’s all about abortion and LGBTQ. But from an economic and security perspective, she’s a total disaster.

She wants to give $25,000 to every first-time home buyer (without even a basic understanding that this will only serve to make starter homes more expensive by… duh… $25,000!)

She blames inflation on “greed” and insists that she’ll bring down prices by fighting grocery stores in court. She’s also floated price controls as a way to bring down inflation.

Kamala sees bigger government as the way to solve problems (even though this typically just makes things worse) and will almost certainly oversee soaring deficits that America simply cannot afford.

Again, the Congressional Budget office already forecasts a total of $22 trillion in deficit spending over the next decade– and most of that within the next 5-7 years, i.e. a theoretical Kamala administration.

And most likely her ideas will make that number much, much worse… which is what brings me to gold.

I want to clarify first that I’m not a “gold-bug”. I don’t have a fanatical view that gold is a magical solution to all the world’s problems.

But it’s obvious to me that there is tremendous upside for gold, even though it’s already at an all-time high. Here’s why:

As recently as 2020, the gold price dipped below $1,500 per ounce. Today it is trading at $2,500 per ounce.

That’s a 66% surge in price which has been driven largely by central bank purchase. In fact, most retail investors have been SELLING gold, if you look at gold ETF outflows. So, while individuals were selling, central banks were buying… sending gold prices to record highs.

In a typical year, central banks around the world buy an average of roughly 500 metric tons of gold annually.

But from 2022 through mid-2024, that figure doubled, with central banks purchasing an average of 1,000 tons per year.

In other words, central banks have purchased an additional 500 tons per year over the past 2 ½ years… for a total of 1,250 metric tons of ‘excess’ central bank gold demand since early 2022.

The value of these 1,250 metric tons of gold over the past few years amounts to about $80 billion.

So, think about it– central banks around the world, from Poland to China to Mongolia to India to Singapore– used some of their foreign reserve stockpiles of US dollars to buy gold.

This means that $80 billion worth of foreign reserves that was taken out of US dollars and invested in gold caused the gold price to surge from $1500 to $2500.

Guess how many US dollars in total are sitting on central bank balance sheets around the world in total?

More than $8 TRILLION.

So, $80 billion was enough to make gold rise from $1500 to $2500… yet central banks still have more than 100x as much US dollar reserves on their balance sheets.

What will happen to the gold price if the foreign central banks invest even 5% of their reserves into gold?

My guess is that the gold price will go a LOT higher. And on top of that, hedge funds and individual investors will probably jump on the bandwagon too. ETF holdings will go through the roof, and the gold price will go even higher.

The reasoning is pretty simple; as foreign nations continue to lose confidence in the US government, will they continue to hold so much of their reserves in US dollars? Probably not. And again, we’re already seeing early signs of the decline in foreign holdings of dollars.

My guess is that Kamala will push that trend into light speed.

So even though gold is already at an all-time high, I think a Kamala victory means MUCH higher prices over the next few years.

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When I was a kid growing up in the 1980s, my father used to go every summer for two weeks of military training as part of his commitment to the US Army Reserve. And whenever he flew home, we would always meet him at the airport.

But back then, my mom, sister, and I could all go straight through security and sit at the gate to wait for him. In fact that was normal all the way through the late 1990s.

Then, of course, everything changed after 9/11. The federal government took over airport security overnight, and for the past 23 years, we’ve been taking off our shoes, getting fondled by federal agents, and throwing away our liquids.

More than two decades after 9/11, most of these TSA Security rules (the majority of which have been adopted around the world) seem pretty stupid.

Does anyone honestly believe that a 3.4 ounce tube of toothpaste is OK, but 3.5 ounces of toothpaste is a security threat?

This is the kind of idiotic logic behind rules that add unnecessary inconvenience to people’s lives, without providing any discernible benefit.

The same thing applies to those ridiculous consent forms on countless websites across the Internet. Whenever we visit a site we are now forced to “accept cookies”, thanks to a law passed by the European Union’s most idiotic politicians.

They somehow think we are all safer and better off… and that our privacy is protected.

Except that our privacy isn’t protected. Mark Zuckerberg and the Google guys are still following us around the Internet collecting watching everything we do and click. Not to mention the governments themselves grab our biometric and personal data, shove it all in a database, then leave it prone to breach by hackers.

But hey, at least we have those cookie notifications to keep our data safe, right?

It’s just another stupid rule that inconveniences people, without providing any discernible benefit.

Banking is another great example.

Some people aren’t old enough to remember, but it used to be a pretty simple process to open a bank account. You’d show up, sign some papers, and you were done. Now, we’re all threatened with imprisonment, forced to fill out a million forms, and every single transaction is scrutinized under anti-money laundering and anti-terrorism regulations.

The entire apparatus treats you like a criminal suspect rather than a valued customer. And for what?

Turns out, it’s all for nothing.

Laws like FATCA, CRS, and the USA PATRIOT Act were supposedly passed, at least in part, to cut off terrorist groups from the global financial system.

But all the regulators missed that Iran– a nation that has been blacklisted by the global financial system– sent hundreds of millions of dollars to Hamas– a blacklisted terrorist organization. And then Hamas used that money to kill innocent Israeli civilians on October 7, 2023.

The US President himself agreed to release $6 billion in frozen funds to Iran for the release of a handful of Americans. So again, what exactly is the point of all that scrutiny in the financial system?

My mother has to jump through all sorts of hoops to prove that she’s not a criminal just to withdraw some cash from her bank account. But Hamas and the Taliban get hundreds of millions of dollars funneled to them, through the US banking system.

The latest example is actually the Iraqi banking system—which was set up in part by the US government after the 2003 invasion.

Top officials from the US Department of Treasury and Federal Reserve helped oversee the establishment of Iraq’s new financial system, including the anti-terrorism and anti-money laundering controls.

Well, big shocker, it turns out that the Iraqi banking system, i.e. the system set up by the US government, was used by terrorist groups to send money to Iran and to Hamas.

So once again, what exactly is the point of all these rules and regulations, which inconvenience regular, law-abiding citizens… if groups like Hamas can still receive ample funding through the system. It’s obvious the rules are pointless and have no real benefit.

The irony here is that so many governments around the world, including the US, are some of the most outspoken opponents of cryptocurrency.

The US Treasury Department hates crypto. They say it is dangerous to have an unregulated monetary system where terrorists and drug cartels can operate with total privacy.

Yet the very banking system that THEY established is what’s actually funding terrorists.

Everyone else has to suffer through daily friction and be treated like criminals, just to send some money from point A to point B; withdrawing $5,000 in cash brings a bureaucratic shock and awe.

And this is one of the biggest reasons why I think it makes sense to own crypto.

I’m not a crypto fanatic by any means. I don’t own it to speculate on the price. And most days, in fact, I don’t know the price of Bitcoin or Ether. Nor do I care.

To me there’s no point in trading dollars for crypto, only hoping to trade crypto back for more dollars. The larger idea is that crypto represents a way to send and receive funds outside of a system run by incompetent bureaucrats who constantly make our lives worse.

It’s similar to my belief that gold makes sense as a long-term store of value; I don’t trust the Federal Reserve or the White House with preserving the value of my savings. Gold is a great way to do so… without having to rely on the financial system.

With both crypto and gold, there’s no intermediary or incompetent bureaucrat standing in the middle.

That’s also why I’ve never seen any reason to debate which is better, gold vs crypto. There’s no reason to argue about it.

Both serve a useful purpose, and both are worth considering as part of any sensible Plan B.

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It’s been three years since the guy with five decades of experience ordered his top military generals, against their advice, to rush their withdrawal out of Afghanistan.

So in their haste to comply with the boss’s orders, the US military abandoned billions of dollars worth of equipment— aircraft, guns, tanks— and left it behind for their sworn enemy the Taliban.

This made their oppressive regime even stronger, and the Taliban did not hesitate to use the abandoned weaponry against their own people.

To make matters worse, as we discussed last week, the US State Department also inadvertently gave hundreds of millions of dollars worth of foreign aid to the Taliban. Talk about clownish incompetence.

Naturally no one has lost his/her job over ANY of this. There was no accountability. And no one in the Biden administration seemed remotely fussed about the implications of equipping and enriching one of America’s biggest adversaries. Literally ZERO national security concerns.

But do you know what IS a national security concern?

Japan.

More specifically, the administration is throwing a fit over a Japanese steel company— Nippon Steel— trying to buy its American counterpart— US Steel. And the President is trying to kill the deal over “national security concerns”.

Just a reminder for anyone who hasn’t kept up with global affairs since 1945— but Japan is one of America’s staunchest allies… which is saying a lot for a country who was the world’s first and only victim of a nuclear strike.

Nippon Steel is Japan’s largest steel producer. And like US Steel, they’re also desperately trying to fend off Chinese competitors.

The thing to understand about the steel industry is that it’s a global commodity… which means that low-cost producers have a major advantage. Chinese steel producers have this advantage— they can produce steel efficiently and inexpensively, in large part because wages are much lower in China… and the Chinese firms don’t have to deal with labor unions.

(Not to mention the Chinese government also violates international trade rules by illegally subsidizing their steel industry. Shocker! China doesn’t follow the rules!)

Steel companies in the US and Japan both understand this. They know their Chinese competitors have an advantage.

So in order to stay competitive, US and Nippon Steel decided to combine forces via an acquisition. By becoming bigger, they stand a better chance to compete; they can cut costs, increase efficiencies, and increase market share to better compete with China.

And as part of the deal, Nippon Steel agreed to invest $2.7 billion of foreign capital into steel factories in Pittsburgh, Pennsylvania.

Yes, the very same Pennsylvania that is part of the United States.

But, again, this is apparently a major national security concern to the Biden people. Giving the Taliban military hardware is no big deal. But Japan investing billions into Pennsylvania steel mills? WE MUST STOP THIS DEAL AT ALL COSTS.

Of course, the actual reason for blocking the merger has nothing to do with national security.

Instead, a friend of the Biden Administration is the CEO of another US steel company, Cleveland Cliffs, which put in a rival bid to buy US Steel at roughly HALF of Nippon’s offer.

It should be obvious— the better offer should win.

But this Cleveland Cliffs CEO is a hardcore union guy. So the Biden administration loves him. And he’s calling in all of his political favors to get the Nippon deal blocked so that he can scoop up US Steel at a big discount.

He’s leading the charge with this ridiculous national security threat. I mean, the guy actually said that “Japan is not a friend,” of the US— which should come as a major surprise to countless Japanese diplomats and businessmen who work closely with the US.

According to reports within the Biden administration, the Nippon Steel deal is as good as dead… which means that Cleveland Cliffs will likely be able to take over and create an actual steel monopoly in the United States.

Where is Lina “Genghis” Khan, i.e. the head of the FTC, when you need her? She’s out prosecuting every company she can find— most recently two grocery store chains that want to merge— because of “greed”.

This is literally the reason why the FTC was created in the first place a century ago— to prevent monopolies in the US.

But instead of preventing monopolies, the Biden people are helping to create one… while preventing Japan from investing billions into the state of Pennsylvania. All because of ‘national security”. It’s genius.

The sad part is that Joe Biden is far from alone. Kamala Harris is unsurprisingly on board with this idea.

But what’s really surprising is that Donald Trump and JD Vance are also against Nippon’s acquisition of US Steel.

Frankly it’s just nuts; Nippon is ready to invest billions in America to make its dilapidated steel industry more competitive. Yet politicians on both sides are against it.

This is a perfect example of how the world is moving farther away from the peace, prosperity, and free trade it once enjoyed.

For decades, free trade generated vast amounts of wealth for investors, kept prices low for consumers, and created jobs for the working class. Now we’re seeing a sprint in the opposite direction towards protectionism, isolation, conflict, and monopolies.

And it’s coming from both sides of the political aisle.

Look, I always acknowledge that America’s economic and debt problems are fixable. But it’s news like this that make me realize that I shouldn’t hold my breath for significant improvement.

The people in charge, or who may be prospectively in charge, do not appear to be willing to make the necessary changes.

When this kind of resistance comes from both political camps, it leads to one inevitable conclusion: a period of less prosperity, more debt, and higher inflation is coming. This isn’t a pessimistic view— it’s just a rational appraisal of the facts.

And that underpins the critical response from anyone who wants to protect or grow their wealth during such times: real assets, now more than ever, make a lot of sense as a hedge against this looming instability.

There is very little downside to owning some of the world’s most important resources like energy, food, and productive technology— all critical materials that cannot be simply conjured out of thin air by governments or central banks.

And the fact that many of these are selling at steep discounts makes this strategy worth a close look.

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You wouldn’t be especially impressed by someone’s insight if they told you that the world today is full of turmoil. That’s obvious— from wars and cultural clashes to cost of living crises and a pervasive sense of negativity.

More impressive is that William Strauss and Neil Howe predicted that the 2020’s would be like this nearly three decades ago in their 1997 book, The Fourth Turning.

According to their theory, societies move through cycles approximately 80-100 years long, with each cycle divided into four distinct “turnings.” These phases mirror the seasons, with the Fourth Turning representing the harsh winter—a period of upheaval and transformation.

Strauss and Howe predicted that the next Fourth Turning would begin in the mid-2000s, ignited by a crisis that would set the stage for significant societal change.

The 2008 global financial crisis marked the beginning of this period. Since then, governments and central banks have been in a constant state of crisis management, employing measures like low interest rates and increased government spending to prop up the faltering system.

Today, as Strauss and Howe foresaw, this phase is characterized by a collapse of trust in institutions that have dominated since the start of the current cycle, just after World War II.

From the media, to government bodies like the justice system and Federal Reserve, to global organizations like the UN and IMF, these institutions are increasingly viewed as ineffective, obsolete, or downright harmful.

Historically, Fourth Turnings are marked by intense turbulence, often culminating in major conflicts or transformative events, such as the Great Depression leading to World War II, or in the cycle before that, the American Civil War.

While history doesn’t have to repeat itself exactly, the growing dissatisfaction across the developed world is palpable. Issues like healthcare costs, immigration, and rising inequality fuel a sense that society is no longer functioning as it should.

This widespread discontent often leads to political upheaval. As voters lose faith in current leaders, new political movements and parties gain traction.

But none of these ‘saviors’ are going to win by promising to cut spending.

Until their hand is absolutely forced, politicians will continue to borrow and spend as much as they can in a desperate attempt to cling to power. But to be fair, the public is also to blame— they largely demand it.

As Howe writes in the sequel to the Fourth Turning which he published last year:

“Like addicts acquiring tolerance, policy-makers have backed themselves into a corner: The public braces itself for the dark hour when the Fed can no longer ease and Congress can no longer borrow no matter how badly the economy founders.”

This scenario highlights three key trends that are likely to shape the future:

1. Huge Deficit Spending

The US deficit reached nearly $2 trillion in 2023, a historic high outside of wartime or national emergency.

In theory there is no limit to the level the deficit can reach. After all, the US Government can issue the debt and the Federal Reserve can buy it all.

But the problems show up in the value of the US dollar. Not just against other currencies— other governments are devaluing their currencies in the same way. Instead, the value of what a dollar is worth in terms of real goods and services that people need to buy is diminished.

The Fed is acting right now as if the inflation problem is licked. But, given the trajectory of future deficit spending, we are really just in the opening stages of a larger, wider inflation problem.

2. Increasing Conflict

The intensity of global conflicts has escalated, particularly following Russia’s invasion of Ukraine. This has accelerated a shift away from global trade and cooperation, as countries prioritize securing their own supply chains and others try furiously to develop parallel financial systems that leave them less vulnerable to the whims of US foreign policy.

This retreat from global integration is likely to increase tensions and create further instability.

3. Potential Monetary Resets

All of this leads to the potential for a monetary reset— typical during a Fourth Turning. The value of the reserve currency is being continuously debased and its status as a reserve currency can leave others vulnerable to the imposition of sanctions or even confiscation of their assets. That’s not sustainable.

There are so many possible permutations of how this could all play out that it’s difficult to say exactly what a global financial reset would look like right now.

But it would almost certainly mean the loss of the dollar’s global reserve status.

That is exactly why we always advocate having a Plan B, a solid backup plan to provide great optionality in tumultuous times.

That’s why we started Schiff Sovereign: Premium, a highly educational, month-by-month guide that is designed to help you navigate the world from a position of strength, both personally and financially.

In Schiff Sovereign Premium, we focus on what we think will work well amidst all the uncertainty, regardless of the sequence of events that occur.

It includes both Plan B strategies (such as maintaining your freedom of movement, and legally reducing your tax bill), as well as compelling investment research.

Our investment thesis focuses on real assets— the world’s most critical, valuable, and useful resources, as well as the businesses which produce them.

Real assets are a beneficiary of the huge debasement of currency that we are seeing. And right now, with central banks across the world starting to cut interest rates again, we should see that trend accelerate.

Gold in particular has already responded to the impending injection of liquidity that lower interest rates will bring, reaching all time highs on multiple occasions this year.

Gold mining stocks, however, haven’t yet followed suit… but are primed to do so. (In July’s issue, we explained why, and released research on two well-positioned companies in the gold mining industry.)

Commodities are also a beneficiary of the unfortunate trend of increasing conflict across the world. Not only are war-time economies typically inflationary, they also require a huge amount of industrial commodities.

But the chronic underinvestment in commodity supply over the past decade has set the stage for potential shortages. As these issues come to the fore, both prices and investment in production are likely to rise— a great opportunity for investors.

But even if these trends don’t play out exactly as expected, investing in companies that control some of the world’s most valuable real assets—especially including critical energy resources like natural gas and uranium—has very little downside.

If you want to learn more about Schiff Sovereign Premium, and the specific investments we have researched, click here.

At just $9 a month, it’s a no-brainer.

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I wanted to do a bit of a deeper dive today on the topic of the national debt— and answer a basic question: is the debt a terminal problem? Or is it still fixable?

I actually had a bit of a debate on the topic with my friend and partner Peter Schiff last week. Peter thinks it’s terminal… and that there’s no way it could be paid down.

Based on the math, I disagree. There are a lot of things that have to go right, and very little that can go wrong. But at the moment, it is still possible to improve America’s gargantuan national debt challenge.

The first and most important thing to understand when discussing national debt is that the really important number to consider is the Debt-to-GDP ratio… not the actual debt itself.

Today the national debt is nearly $35.3 trillion, or roughly 125% of GDP. In other words, the national debt is 25% larger than the entire size of the US economy.

Typically even a debt-to-GDP ratio of 60% is considered high. 80% is dangerously high. But developed countries in Europe, North America, and especially Japan get away with higher levels of debt because their economies are more advanced and productive.

For most of its history, the US had a very low national debt— with periodic exceptions like World War II. Even during the 1980s, the debt-to-GDP ratio hovered at around 30%… and even that level raised some eyebrows.

Older readers may remember businessman Ross Perot running for President in 1992, and a large part of his campaign was bringing down the national debt (then roughly 60% of GDP).

But by the end of the 90s, with the economy booming and the government actually running a small budget surplus, America’s debt-to-GDP ratio had dropped to around 50%.

It didn’t last.

The War on Terror was extremely expensive, and by the end of George W. Bush’s terms, debt-to-GDP had spiked back to 65%.

The debt then quickly reached 100% of GDP during Barack Obama’s first term, much of that due to bailouts and benefits paid in the aftermath of the 2008-2009 Global Financial Crisis.

The debt-to-GDP ratio hovered at around 100% during Obama’s second term, and during Trump’s first term… until the pandemic hit in 2020. The resulting economic shutdowns and insane government spending pushed the ratio to an all-time high of 133% of GDP.

Although debt-to-GDP has slightly decreased as some COVID spending programs have finally been discontinued, the ratio now stands at 122%… and it’s rising.

Ultimately to solve its debt problem, the US government must first stop making it worse. That’s the priority. So this means ensuring that debt-to-GDP doesn’t rise beyond 122%.

So that’s really the question: is it possible to stop the increase in debt-to-GDP?

Yes. But it will come at a significant cost… with plenty of challenges and uncertainties.

So let’s do some basic arithmetic. In order for the debt-to-GDP ratio to remain the same, it means that both the national debt and US economy must grow at the same rate.

In other words, if the US economy grows by 5%, then the national debt can also grow by 5%, and the ratio will stay the same.

It’s not unusual for the US economy to grow by 5% in a single year.

Bear in mind that this “nominal” GDP growth includes the impact of inflation.  So if inflation is 4% in a single year, and real economic productivity growth is just 1%, then overall GDP growth will be 5% for that year, i.e. 4% + 1%.

On average in the three decades from 1989 through 2019 (i.e. pre-Covid), average GDP growth in the US was right around 5%— which, again, includes the effects of inflation. So this is a reasonable assumption.

Simultaneously, a 5% increase in the national debt (which is roughly equivalent to that year’s annual budget deficit) is a substantial number. Again, the national debt is $35+ trillion. 5% of that is a whopping $1.75 trillion.

In other words, as long as the size of the US economy grows by 5% (whether through inflation, or actual productivity growth), then the annual budget deficit could be $1.75 trillion… and the debt-to-GDP ratio would not increase.

Obviously this is an absurd sum of money. A $1.75 trillion deficit is ridiculously large. So you’d think that the federal government would be able to run its operations with a $1.75 trillion deficit.

Unfortunately that’s not the case; this year they expect to be over-budget by nearly $2 trillion.

So right off the top, they’re going to have to shave around $250 billion from the budget this year in order to achieve a deficit of “only” $1.75 trillion.

Where will they cut that money? Well remember, there are three main categories of government spending:

1. Interest on the debt: This cannot be cut without a US government default, which would undoubtedly spark an immense global financial crisis.
2. Mandatory spending such as Social Security and Medicare: No politician has the courage to touch mandatory spending.
3. Discretionary spending: This is the only realistic place where spending cuts can be made.

However, cutting discretionary spending is no small task.

For fiscal year 2025, the President’s budget is set at $1.8 trillion. Roughly $800 billion of that is military spending… and, like Social Security, few politicians have the willingness to cut Defense.

So that leaves $1 trillion for what’s called “Non-Defense Discretionary Spending”. Think NASA, the Department of Education, National Parks, etc. They’ll have to trim these budgets by 25% in order to save $250 billion and achieve a $1.75 trillion budget deficit for the year.

And remember, even making those cuts would only freeze the debt-to-GDP ratio at its current level—not reduce it.

To maintain this freeze, similar austerity measures would need to be enforced year after year, leaving no room for unforeseen expenses, emergencies, or economic downturns.

Now, the irony is that executing on this idea, i.e. slashing a significant portion of the federal government— would also liberate the economy from excessive regulation. Fewer government bureaucrats means a more productive private sector… and that’s precisely what’s needed to generate economic growth.

This, coupled with technological advancements like AI could boost productivity and real GDP growth, and could even reduce inflation. Eventually GDP could be growing faster than the national debt, and the overall ratio would fall back to a safer level.

This is still, right now, a possible outcome for the US. I’m reminded of that wonderful line from Dumb and Dumber, “So you’re telling me there’s a chance!” Yes, I am. There is a chance.

But it will require difficult decisions, politicians who understand the problem (and are willing to solve it). And a fair amount of luck that no major wars, emergencies, or new pandemics occur.

This solution also means there is no money to bail out Social Security. When the trust funds run out of money in less than ten years, retirees would take an immediate 20-30% cut in benefits. That’s year one, and it would likely only grow worse from there.

Yet this is still a far better outcome than the alternative.

If the US government does nothing— and continues to overspend by trillions of dollars each year, debt levels will likely rise far more quickly than the US economy can grow. And most likely within a few years there will finally be a point of no return where it will be virtually impossible to pay down the debt and salvage the government’s finances.

Bottom line, America cannot afford another four years of ignoring this problem, no matter how much “joy” the politicians intend to bring.

So, yes, while the debt problem is still fixable, I wouldn’t hold my breath.

This is a key reason why we emphasize owning real assets, i.e. the most critical resources in the like productive technology, key minerals, energy, and food.

Unlike fiat currency, these assets can’t be conjured out of thin air by central banks or politicians. And they historically perform very well in times like these where debt and inflation appear to be major challenges ahead.

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It’s impossible to forget those iconic images from the late summer of 2021— helicopters over the US embassy in Afghanistan. Locals dangling from the landing gear of US Air Force cargo planes desperately trying to escape. The US military frantically packing up their gear to leave the country.

It had only been a few weeks prior when the guy with five decades of experience insisted that the Taliban would never take over Afghanistan. But then it happened within a matter of days.

The intelligence community, military analysts, and State Department all cautioned against such a cavalier approach.

But Joe Biden persisted: despite all the risks, he wanted troops out of Afghanistan before September 11th.

And the results were disastrous.

America left behind thousands of local Afghans who served the US military as interpreters, administrators, etc..

Each was promised a US immigration visa so as not to be murdered if the Taliban took over. But the State Department told them to hang tight for 12-18 months while the bureaucracy processed their requests. Many of them are dead and their families tortured.

Then, of course, the US military abandoned tens of billions of dollars of equipment, weapons, ammunition, and vehicles to the Taliban.

They gave away dozens of US military aircraft, thousands of Humvees and Armored Personnel Carriers, and tens of thousands of assault rifles, all courtesy of the United States taxpayer.

Sadly that was not the final parting gift from the US government to the Taliban.

A recently released Inspector General report found that at LEAST $293 million worth of foreign aid for Afghanistan-based NGOs (non-governmental organizations) was vacuumed up by the Taliban.

“In total,” the report says, “State [Department] could not demonstrate compliance with its partner vetting requirements on awards that disbursed at least $293 million in Afghanistan. State officials acknowledged that not all bureaus complied with document retention requirements.”

The report later noted that, “Since its takeover in August 2021, the Taliban have sought to obtain U.S. funds intended to benefit the Afghan people through several means, including the establishment of nongovernmental organizations (NGOs).”

There are so many things wrong with this.

One, bear in mind that all of this money is borrowed. The US government went into debt to give money to its sworn enemy.

Two, this just extends and intensifies the shame and embarrassment of the Afghanistan withdrawal.

Is this really the behavior of the world’s dominant superpower? They spend 20 years failing to secure a country, give tens of billions of weapons to their enemy, and then hand out cash gifts… simply because their bureaucrats are too incompetent to notice?!?

This is an obvious example of why the US has lost so much of its standing and reputation around the world. China, Russia, Iran, etc. all notice this behavior. And to them, the US government looks incredibly weak.

The implications of that weakness translate into very real financial consequences, including the end of the dollar as the global reserve currency.

Why would any foreign government or institution give even MORE money to the Treasury Department? Any foreign creditor who buys US government bonds right now has to be questioning whether it makes sense to continue to do so.

Seemingly ever day there’s another embarrassing revelation about the US federal government’s incompetence. Politicians in Congress cannot even agree on a basic budget. A major Presidential candidate blames inflation on greed, and her solution to the problem is price controls!

There is virtually zero intent to even try to cut spending and run a balanced budget. The national debt keeps surging to new record highs, while projections on future budget deficits ring in at $22 trillion over the next 10 years. The inflation problem is still not solved and likely going higher.

The Federal Reserve— the most systematically important central bank in the world— is insolvent on a mark-to-market basis.

And on top of everything else, accidentally handing out money to your enemies adds to the vast body of evidence that the US government is inept at everything it does.

This is why the dollar’s days as the global reserve currency are numbered.

Having the global reserve currency means that other nations around the world (who all have to use the dollar) must have a tremendous amount of trust and confidence in the US government.

The Biden administration seems to be going out of its way to make Uncle Sam a laughing stock.. which ultimately turns other nations away from the dollar.

This shift is already under way— it’s one of the reasons why central banks have been buying so much gold and reducing their ownership of US debt.

But it’s still early days. This dollar reversal trend still has several years to play out… and it will likely be one of the most consequential economic shifts of our lives.

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Over eight hundred years ago, in what is now northwestern China, the Uyghur people— long before they were carted off to internment camps by the Communist Party— ruled their own independent kingdom, known as Qocho.

Then, in the year 1209, Genghis Khan sent diplomatic emissaries to Qocho. The message was clear: the Great Khan wanted to avoid a bloody military campaign, and he proposed a peace offering instead.

Genghis Khan’s deal was simple: the Uyghur people would keep their rulers, their infrastructure, their religion, and their customs. Their soldiers would live. Their buildings would not burn. Their women would not be touched. They would even be granted a high degree of autonomy.

And in exchange, they would provide the Mongol Empire with administrative support, as the Uyghurs were famously adept in governance and literacy.

The Uyghur ruler, recognizing the military strength of the Mongols and the benefits of an alliance, voluntarily accepted these terms, avoiding destruction.

Genghis Khan is generally known to history as a butcher and conqueror. But he was also a fairly skilled diplomat; he understood that it was far better to talk and settle matters peacefully than to go to war.

Through peaceful negotiation, lives could be spared, resources conserved, and vital economic assets preserved— not just for his own empire but also for the kingdoms he sought to absorb. This meant more tax revenue him, and prosperity for everyone.

Fast forward to the present day, and Genghis’s namesake— Federal Trade Commission (FTC) Chair Lina Khan— has taken the opposite approach. She wants to go to war… which in our modern era means lawsuits. She has no interest in diplomacy, discussion, or compromise; she just wants to sue businesses and take them to court.

Bear in mind, the FTC was created in 1914, back when a handful of huge companies wielded monopolistic control over key industries in America. So the government set up the FTC to protect consumers from being squeezed by these powerful monopolies.

But a century later, Genghis Khan is using the vast powers of her office to wage war on legitimate business… and even capitalism itself.

A few months ago, for example, Genghis decided to ban “non-compete” clauses from employment contracts. This is one of the fundamental principles of capitalism: a voluntary agreement between an employer and employee to protect a company’s investment and intellectual property.

But Genghis Khan wouldn’t hear of it. So she banned non-competes, even though she had absolutely legal authority to do so. And this is typical of her— she just invents whatever authority she wants.

Another example we talked about this a few months ago— Genghis filed a lawsuit against two major grocery store chains (Albertsons and Kroger) to prevent them from merging.

Her claim is that the merger will harm labor unions, though she offers absolutely no reasonable explanation or evidence to support this assertion.

More importantly, her job is to protect CONSUMERS…. not labor unions. But here we have it again: Genghis Khan has once again invented new authority for herself to be the Protector of Unions… even though Congress never tasked her with that mission.

The whole thing is so absurd, in fact, that the FTC has no reason to suspect that the merger of these two grocery store chains will harm anyone at all. If anything, consumers should benefit.

The supermarket industry is extremely competitive, with traditional grocers now having to compete with tech companies, co-ops, farmers’ markets, delivery apps, big-box warehouses like Costco, and even Walmart and Amazon.

For Albertsons and Kroger, it’s clear that a merger makes sense; it helps them optimize their cost structure, achieve greater efficiencies, and thus deliver savings in the form of lower prices to consumers.

And lowering prices isn’t some altruistic act by these companies; lower prices will make them more competitive.

But Genghis Khan has no understanding of how capitalism works. In the sentiment of her fellow Marxists, she views capitalism as a zero-sum game, best encapsulated by AOC’s false logic: “No one ever makes a billion dollars. You take a billion dollars.”

This way of thinking is completely false. Sure, 1,000+ years ago when the real Genghis Khan was conquering the world, economics was indeed a zero-sum game. Nations got richer by plundering their neighbors, and individuals became wealthier by taking from others.

But that’s not what modern capitalism is about. It’s not a zero-sum game. Capitalism is about making the pie bigger. It’s about value creation. It’s about making everyone better off— workers, customers, investors, even the government that collects tax revenue. Everyone wins.

But FTC Chair Genghis Khan acts like it’s still the year 1209. She doesn’t understand modern economics or the value creation principles of capitalism. So her tendency is to engage in warfare— not with soldiers on the battlefield, but with lawyers in a courtroom. Albertsons and Kroger never had a chance.

For example, the FTC initially howled that the combined Albertsons and Kroger company would have too many locations. OK fine. So the companies promised to sell off a percentage of their stores, and they even found a buyer.

Then the FTC claimed there wouldn’t be enough stores, and competition would suffer.

“Damned if I do, damned if I don’t.” Again, the companies never had a chance. There’s no satisfying Genghis Khan. She doesn’t want to talk. She doesn’t want a solution. She just wants to go to war.

The hearing started yesterday, and both sides showed up to court ready to fight. I’m keeping my fingers crossed that the case is quickly dismissed, or that reason prevails in court.

Either way, it’s not a great outcome. If Genghis wins, food prices are likely to rise. But even if she loses, she’ll just find some other business to attack, or some other pillar of capitalism to assault.

In Genghis’s mind, lawfare is always and everywhere the answer. And somehow we are all supposed to become more prosperous because of it.

That’s capitalism in the 21st century, folks: the federal government will sue its way into prosperity.

Unfortunately, Genghis Khan is not isolated in her way of thinking. In fact one of her biggest cheerleaders is none other than Kamala Harris, who has applauded this lawsuit for taking on “corporate greed.”

This is the sad lie they always use try to explain inflation; rather than acknowledge that their own policies and profligate spending have led to higher prices, they blame greed. And promise to sue their way to lower prices. It’s genius.

And it’s not just Kamala either— Joe Biden, Elizabeth Warren, AOC, Bernie Sanders, and a whole bunch of other very vocal supporters (surprisingly from both parties) are all on board with this idiotic approach.

It represents an obvious risk to prosperity and success. And that is something that should be factored into the long term planning of anyone who wants to build anything of value in America.

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It almost sounded like an apology. Almost.

On Friday, Federal Reserve Chairman Jerome Powell stood in front of reporters and explained how we got here… and how inflation took hold.

To be fair, he rightly diagnosed the root causes: extreme government spending and money printing during the pandemic. And then, when the economy reopened after the lockdowns, there was a sudden surge in inflation.

The Fed and its army of experts assumed this inflation would be a temporary phenomenon—what they called “transitory.” They said that, due to the pandemic lockdowns being lifted, prices would rise suddenly, then fall back down.

This turned out to be one of the worst calls in the history of central banking. As we now know, inflation wasn’t transitory. Prices rose and continued to rise higher and higher, and they haven’t come back down.

To his credit, the chairman acknowledged this mistake on Friday.

But he was in quite a jovial mood about it, even joking with reporters about how in late 2021 they all set sail on, “The good ship transitory,” essentially making light of their enormous error that turned a lot of people’s lives upside down.

His joke got a lot of laughs from the room, and it’s nice to see there can be so much levity about a mistake that has cost Americans so dearly.

Adding to the sting is that this press briefing took place at the Federal Reserve’s annual retreat in Jackson Hole, Wyoming—one of the most exclusive and expensive resort towns in the world. And there he was, in fancy Jackson Hole, cracking jokes about blowing the inflation call—a mistake that has wreaked havoc on so many people’s lives.

To be honest it was a bit offensive… sort of like how many generals during World War I drank champagne as their men were being starved and slaughtered on the battlefield.

But again, it was at least an acknowledgment that they got it wrong. And this shouldn’t be an earth-shattering revelation. The Fed is not some all-knowing, all-powerful institution; it’s comprised of flawed human beings. Everyone makes mistakes— you, me, and the Fed Chairman too.

(Although ideally Fed officials would make fewer, smaller mistakes than the rest of us…)

Part of the reason the Fed was wrong is because they claim their decisions are data-driven. But the data they rely on is itself deeply flawed; just look at the most recent revision from the Labor Department, which is a major data source the Fed looks at  when crafting policy decisions.

The Labor Department said last week that they were revising down the number of jobs created in 2023 by over 800,000. That’s a huge miss, and it proves that the data the Fed relies on to make decisions is also fundamentally flawed.

So basically our monetary system is run by flawed human beings who make far-reaching, life-altering decisions based on flawed data. What could possibly go wrong?

Quite a lot, obviously. And that’s why it’s worth briefly examining where else the Fed could get it wrong. And we see two clear items on the horizon:

One is the presidential election. A couple of weeks ago, the Fed chairman almost bragged about how the outcome of the Presidential and Congressional elections are irrelevant to them and do not factor into their economic forecasts at all.

This is completely absurd.

On the one hand, you have Kamala Harris, who wants to impose price controls, pass tax hikes, enforce arduous business regulations, push energy prices higher, and more.

On the other hand, Trump wants to reduce the independence of the Fed.

You couldn’t have more diametrically opposed policy outcomes. Yet the Fed is willfully ignoring the massive consequences of what could transpire in November. They’re not thinking about it or planning for it. And that is insane.

The second issue is the national debt. The Fed isn’t sounding the alarm bells. And in the past, it has actually supported the government spending even more money.

And it’s not like “the data” is suddenly absent here. The Congressional Budget Office (CBO) has estimated an additional $22 trillion in new debt over the next decade. And generally, the CBO is conservative— meaning the debt will likely grow even quicker than that.

Who’s going to lend that money to the Treasury Department?

The Fed should know they will play a major role in funding government debt and deficits— triggering a massive money printing operation with major impacts. Yet they don’t say a word about it. They don’t seem to be thinking about it.

We’ve been clear about our assessment of this situation: $22 trillion in new debt will almost certainly be highly inflationary. And a Kamala Harris presidency is extremely likely to knock the US dollar off its throne as the world’s dominant reserve currency.

There’s a very narrow path to avoid that outcome, but it’s looking more and more likely every day.

You’d think the Fed would be planning for it. But they don’t say a word about it, and insist these factors don’t matter to them at all.

To us, this is why it makes so much sense to own real assets—scarce critical resources such as food, energy, key minerals, and productive technology.

If the Fed proves unable to tame inflation, critical commodities like these will grow in value.

And if by some miracle we avoid major inflation, there’s little downside to owning profitable businesses which produce some of the most vital resources on the planet.

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“Oceania was at war with Eastasia. Oceania had always been at war with Eastasia.”

The world of George Orwell’s dystopian classic Nineteen Eighty-Four is divided into three totalitarian superpowers: Oceania, Eurasia, and EastAsia. And the novel’s protagonist, Winston Smith, is a mid-level bureaucrat within Oceania’s “Ministry of Truth”.

Early in the book we learn that Oceania is in the midst of a protracted war with Eurasia.

But suddenly the party announces that they were, in fact, at war with Eastasia… NOT Eurasia. Everyone was simply expected to forget that Oceania was ever at war against Eurasia.

The ideological dictatorship of Orwell’s world demanded that all citizens memory-hole the old truth and internalize the new truth “Oceania was at war with Eastasia. Oceania had always been at war with Eastasia.”

Watching what little of the Democratic National Convention I could stomach; I couldn’t help but think of this scene from Orwell’s novel.

I watched as the Party leaders this week announced new truths. For example, the Party is tough on crime. They have always been tough on crime.

Everyone is supposed to forget how their cities are overrun with crime; or how they have long since been the party of “Defund the Police”, or “catch and release” programs that put violent felons back onto the street.

They say that border security is a major priority of the Party. Border security has always been a major priority of the Party.

Again, we are all supposed to forget how they let millions and millions of illegals come across the border… and went as far as to sue the State of Texas in federal court in order to PREVENT Texas from taking up its own efforts to secure the border.

They say the Party will stand up to Iran. The Party has always stood up to Iran.

Well let’s all forget about these guys paying billions of dollars to Iran for US hostages and the failed nuclear deal… or the fact that their more radical foot soldiers have essentially set up Hamas branch offices in the United States.

They claim the Party stands for Freedom. The Party has always stood for Freedom.

Feel free to believe it. But first you have to memory-hole all of the censorship, vaccine mandates, and cancel culture they shoved down everyone’s throats over the past few years.

This isn’t even about blatant hypocrisy– though there was plenty of that on display. Remember a few years ago when they claimed that it was “racist” and “Jim Crow 2.0” for the State of Georgia to ask its citizens to show a valid form of ID before voting? Curiously, every attendant at the convention had to show ID to gain entry. But apparently that’s not racist.

Nor is this about blatant lies, exaggeration, or vague platitudes– and there were plenty of those as well.

They went on and on, for example, about Kamala’s honest character… even though she was Liar-in-Chief when it came to covering up Joe Biden’s obvious dementia.

This is about their full-blown, Nineteen Eighty-Four style memory-holing some of their most important principles and acting as if they never existed.  Kamala has always been at war with Eastasia. Kamala has never been at war with Eurasia.

It’s also notable that the Party expects its members to memory-hole the real problems facing the United States.

Kamala didn’t mention the word “deficit” even one. There was no discussion of reining in outrageously high government spending. She said “debt” one time, only to claim that her opponent would increase the national debt.

She did not say the word “inflation” either, and only in a passing footnote did she even graze past the high cost of living.

These are among the issues that real people care about. But everyone is supposed to memory-hole those too, and act like the #1 issue in the country is… abortion rights.

Abortion factored very heavily into her remarks, and into the Party’s platform.

They’re still moaning the fact that the Supreme Court overturned Roe v. Wade, which essentially turned the abortion issue over to the states to regulate.

But facts don’t matter. Because according to research cited by the Wall Street Journal, last year there were a whopping 1 MILLION abortions in the US, roughly 10% MORE than before the Supreme Court overturned Roe v. Wade.

So why exactly is abortion access such a huge crisis and a bigger priority than inflation, domestic security, global security, the national debt, Social Security, and all the other problems that the country faces?

In Nineteen Eighty-Four, part of Winston Smith’s job was to alter or destroy old newspapers, films, and any other evidence that the Party had changed its policies.

The legacy media will continue to serve this role for Kamala and her Party. They’ve already expunged their own headlines from a few years ago proclaiming “Kamala Harris is the Border Czar”. Now they insist “Kamala Harris is not the Border Czar. Kamala Harris was never the Border Czar.”

They’re also memory-holing every poll that showed how Kamala was widely disliked and incredibly unpopular. Kamala is so fake and wooden that she makes Hillary Clinton look folksy by comparison. And the polls reflected that.

But those polls are gone. Poof. Now we’re expected to believe the new polls, that Kamala is exciting and popular.

Look I’ve said before that I don’t buy any of it. In fact, I’m stupefied that anyone believes these people.

But I’ve also acknowledged that the Party and the media and all of their allies will pull out all the stops to take the White House. And that scenario has major consequences.

It’s no exaggeration to say that a Kamala Presidency represents a major security and economic risk. For example, I cannot see the US dollar surviving as the global reserve currency by the end of her first term.

The outcome this November is far from certain. But their Nineteen Eighty-Four is reason enough to have a Plan B.

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