Category: simonblack

“Americans are feeling uneasy for reasons that are hard to pin down,” quipped economist Paul Krugman in a New York Times interview published earlier this week.

Reasons that are hard to pin down? Bear in mind that this man received a Nobel Prize– our society’s most prominent award for intellectual achievement. Yet he doesn’t have the foggiest idea why his fellow citizens may be feeling uneasy.

Perhaps it’s the ever-lurking prospect of escalated warfare. Or the exasperation over dysfunctional government, weaponization of the justice system, and manipulative media. Or the invasion of millions of migrants streaming across the southern border, virtually unchecked.

Granted those issues may be outside of Krugman’s wheelhouse. But you’d think that he would at least understand people’s unease over inflation.

Yesterday the federal government reported that the Consumer Price Index (one of their key measures of inflation) was unchanged in the month of May… prompting official in the Biden administration and most “experts” like Krugman to uncork the champagne bottles and toast the end of inflation.

It has now been more than three years since the US inflation rate surged beyond the Fed’s 2% threshold… and over two years since the Fed began raising interest rates in an attempt to arrest that inflation.

Yet even after all this time, inflation at 3.3% still remains in excess of the Fed’s target rate.

3.3% is obviously much lower than its peak 9%. But that’s not really the point. For everyone else who doesn’t work at the White House or Federal Reserve or New York Times, it’s not about 3% versus 9%. It’s about the 20%+ change in prices over the past three years.

And many categories have seen price increases far in excess of 20%– and housing is a great example.

The median US home size back in Q1 of 2021 was 2,284 square feet and priced at $355,000. Three years later the median US home size shrank to 2,140 square feet, yet the price increased to $420,800.

So, Americans are paying more to live in smaller homes. On a per square foot basis, the price increased 26.5% in three years, from $155/ft to $196/ft.

But it becomes much worse when you factor in financing costs.

Interest rates were 3.2% back in Q1/2021, versus more than 7% three years later. So, the average monthly payment (principal & interest) per square foot for the median US house increased from $0.68 per square foot per month in Q1/2021 to $1.33 in Q1/2024.

That’s an increase of 95%– nearly double in three years. And this increase doesn’t factor in rising costs of homeowners’ insurance, HOA dues, maintenance costs, and property taxes.

Owning, maintaining, or renting a home is a LOT more expensive than it used to be… and people are sick of it. Yes, 3.3% inflation is better than 9%. But people don’t want less inflation (that’s still too high). They want prices to go back down.

Nobel laureate Paul Krugman doesn’t get it. Neither does Joe Biden… who seems irritated beyond belief that Americans aren’t groveling kowtowing in honorific gratitude over his handling of the economy.

The dirty secret that no one in power wants to say out loud is that prices will never go back down to where they were a few years ago. This is known as deflation, and the Fed simply will not allow it to happen.

For normal people, deflation is great. Who wouldn’t want lower prices?

But when you’re the most indebted government that has ever existed in the history of the world, deflation is a terrifying outcome that must be avoided at all costs. They much, much prefer inflation.

In 1914, at the outbreak of World War I, the British government borrowed what was considered an enormous amount of money at the time– more than 600 million British pounds. They paid interest on that debt for literally 100 years… and finally paid off the principal balance in 2014.

Obviously by 2014, 600 million pounds was a pretty trivial sum… thanks to inflation. And that’s the idea– inflation erodes the value of money over time, so heavily indebted governments can benefit from the mere passage of time.

The Fed knows this. They understand very well that the US government, with its $35 trillion debt, needs inflation to continue. And that’s why the Fed will never allow prices to go back to ‘normal’.

The Fed chairman made no mention of trying to bring prices down in his press conference yesterday. None.

In fact, he’s already talking about cutting interest rates– something the Fed would ordinarily only do once inflation has been licked once and for all. There was also no mention of the Fed potentially have INCREASE interest rates if the inflation problem worsens.

Nope, it was just more of this false sense that they have everything under control.

To make matters worse (and we’ve written about this extensively), the US government expects to add an additional $20 trillion to the national debt over the next ten years. It’s a staggering figure that will almost certainly create even more inflation.

Historically speaking, whenever the US government significantly expands the debt in a relatively short period of time, most of that financing comes from the Federal Reserve creating brand new money.

In the first two years of the pandemic, for example, US government debt surged by $7 trillion. The Federal Reserve. Over the same period, the Federal Reserve created $5 trillion in new money– with most of that going to buy Treasury bonds.

In other words, the Fed ‘printed’ over 70% of the money that the US government borrowed in the first two years of the pandemic. And that $5 trillion of new money created 9% inflation.

So just imagine how much inflation the Fed will create if they print 70% of the $20 trillion that the US government will need over the next decade…

No one knows for sure. But it’s probably going to be a lot more than their magical 2% target.

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There is a well-known modern proverb (often attributed to the novelist G. Michael Hopf) that goes, “Weak men create hard times, hard times create strong men, strong men create good times, good times create weak men.”

The saying sums up the cyclical nature of the rise and fall of societies– and it’s a topic in which I have tremendous personal interest.

Having recently reached middle age, I can comfortably say with the benefit of hindsight that I was born and grew up during the American prime time– the time at which the wealthiest and most powerful country in the history of the world was at its peak.

The US is still an incredible country with so much prosperity and opportunity. But it would be completely naive and ignorant to claim that America is not in substantial decline.

Its standing in the world has waned, much of it just over the past few years. It’s hard for adversary nations to take you seriously when your President shakes hands with thin air and embassy employees in Kabul have to be evacuated by helicopter.

Financial challenges keep piling up– from the insolvency of Social Security to the $35 trillion national debt to the inflation problem that just won’t go away.

And social divisions, many of which have been bizarrely self-inflicted, seem to grow more tense by the day.

Fortunately, America’s decline began from a historically high peak. So even in its diminished state, again, it is still wealthy and powerful.

But the real concern isn’t where the country is today. It’s the trend, i.e. where the country will end up in ten years’ time if it stays on current course.

I’ve spent the past fifteen years studying similar cases throughout history– the US is far from alone as the only nation that has ever peaked and declined.

And one of the best works on the subject I’ve ever read is The Collapse of Complex Societies, by anthropologist Joseph Tainter.

“Collapse” is a strong word and conjures images of anarchy and death. But Tainter’s definition is more precise; “collapse” doesn’t mean that a society or nation ceases to exist, but that it experiences a steep decline in political, social, and economic stability.

This is what (I believe it’s clear) the US is going through right now, and the trend is accelerating.

Tainter’s book examines the common factors of how different societies throughout history declined– from ancient Mesopotamia to Western Rome. And his analysis shows that one of the key culprits in collapse is the inability of a government to recognize problems… or to solve them.

Many ancient Roman emperors were legendary for failing to recognize the horrible problems brought on by their policies and incompetence– inflation, invasion,

This pretty much describes the US federal government in a nutshell.

Politicians can barely talk about problems in a civil and rational manner. And quite often they refuse to even acknowledge them.

We’ve seen this over and over again with issues such as inflation, the southern border, crime, and social security.

For example, the Social Security trustees publish a report each year stating plainly that the program is going to run out of money by 2033. But no one in Washington wants to talk about it. Joe Biden has even pledged to veto ANY efforts to reform the program.

Biden’s top officials also repeat the bold-faced lie that “the border is secure”, while actively encouraging illegal immigration. The federal government even sued Texas to stop the state from securing the border on its own.

The people in charge demonize and defund police, decriminalize theft, and elect progressive prosecutors who let violent criminals go free.

It’s the same dysfunction with federal spending. These people can’t even acknowledge that a $35 trillion national debt is catastrophic. Most politicians happily ignore it, and others come up with more outrageous spending to further the debt spiral.

They cannot acknowledge the problem, let alone discuss it rationally. Merely passing a budget now routinely devolves into a crisis.

Our view of where this trend leads is clear:

1. Inflation is coming.

There is little hope of responsible spending. The government’s own projections forecast an extra $20 trillion in new debt over the coming decade, and frankly that’s optimistic.

History shows that explosions in national debt are financed by the Federal Reserve creating new money– which ultimately causes inflation.

When the Fed created $5 trillion of new money during the pandemic, we got 9% inflation. How much inflation will $20+ trillion cause?

And the worse inflation becomes, the more urgency the rest of the world will have to replace the dollar as the global reserve currency… which will result in even MORE inflation in the US.

It’s a vicious cycle in which inflation will create more inflation. We project this is 5-7 years away.

2. Social Security is not going to be there for you.

Social Security is not a political problem; it’s an arithmetic problem. And the math just doesn’t add up.

Every year the US Secretary of Treasury signs the report saying plainly that, by 2033, Social Security’s trust funds will run out of money. Benefits will have to be permanently cut by 25% and then become worse over time.

3. Higher taxes are virtually guaranteed.

Politicians love claiming that people should pay their “fair share” but can never quite define how much that means.

And they have already moved the goalposts on who exactly owes society more— the “billionaires” became the top 1%, then quickly shot up to the top 5%, then 10% and soon it will be the top 25%.

Higher taxes won’t just be federal. State and local taxes— from sales tax to property tax— are very likely to cost more, while your governments provide much less.

4. Continued social chaos.

Every time it feels like the lack of civility and unity across Western Civilization can’t get any worse, something new erupts.

The latest is university students screaming “from the river to the sea” and “Just Stop Oil” while defacing artwork and public monuments. Rising tides of socialism and racial animosity never seem to ebb, and idiotic wokeness just won’t go away.

These social divisions will likely continue to grow.

5. Maybe most importantly, major geopolitical disruptions.

As the financial and social decline of the US becomes increasingly obvious to the rest of the world, adversaries are becoming more emboldened.

Nations like China, Russia, North Korea, and Iran are likely to grow more assertive, and there will be significant calls to replace the dollar as the global reserve currency.

Soft war incidents like spy balloons, manufactured pandemics, cyberattacks, etc. will persist— and if we’re very lucky, there won’t be a shooting war. I give it 50/50.

It’s exasperating. Anybody over the age of about 35 remembers a time when it wasn’t like this.

Yet now chaos is the norm. I’m not saying this to be dramatic– it’s important to be intellectually honest.

Part of being intellectually honest means acknowledging that, again, the US is still a great country with an incredibly powerful economy, boasting some of the most valuable businesses in the world.

And Americans still enjoy an extremely high standard of living— albeit one that has been disrupted in recent years by the combination of inflation, crime, and social chaos.

The most exasperating part is that these problems are fixable.

The US government could spend responsibly, encourage capitalism and innovation to grow the economy, and its debt problems would melt away. The dollar would remain valuable. US leadership might even earn back global trust.

But with the current people in charge, I wouldn’t hold my breath. And I also wouldn’t put all my hopes and dreams on the voters smartening up anytime soon.

Yet there are still plenty of solutions that independent-minded individuals can execute without relying on the government.

For example:

Problem: Future inflation will pose a major problem to one’s savings.

Solution: Invest in assets which do well during, or even benefit from, inflation— real assets such as energy, mining, and productive technology. Right now many of these are selling for record low prices, yet poised for substantial growth.

Problem: An overrun border and rising crime rates threaten cities and living standards.

Solution: Obtain a second residency in a foreign country where you really enjoy spending time, or even obtain a second passport. This way you and your family will always have a place to go if the need ever arises.

Problem: Social Security’s trust funds will run out of money within a decade.

Solution: Maximize contributions to retirement accounts— including a special type of 401k which could allow you to double contributions and direct where funds are invested. This lowers your taxable income, puts more money away for retirement, and allows the investments to grow tax-free.

There are solutions for people who, unlike the government, are willing to recognize the problems and actually do something about it.

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It was March 23, 2010, when Barack Obama signed his infamous “Affordable Care Act” into law.

And in theory it was a nice idea. Healthcare in the US was incredibly expensive, and he wanted to bring costs down. But the execution was abysmal.

Since 2010, the number of uninsured Americans is still far, far beyond their most conservative projections. Medical costs in the Land of the Free have soared to record highs, vastly outpacing both inflation and wage growth.

According to the US Labor Department’s Consumer Expenditures data, for example, Americans spent 6.6% of their household budgets on healthcare back in 2010 before Obamacare was enacted.

That share has now risen beyond 8%. This means that Americans are spending more money on healthcare than before, and in many respects, they’re getting lower quality care: longer emergency room wait times. Longer referral wait times. More bureaucracy.

So, sure, making healthcare more affordable was a nice idea. But the execution was terrible.

And with Obamacare’s execution, one needn’t look any further than the debacle that became the healthcare.gov website.

They started development for the Obamacare website as soon as the legislation was signed. Its cost was originally supposed to be $93.7 million— which itself is an astonishing figure for a website. But, as usual with the government, spending quickly spiraled out of control.

According to an internal Inspector General report at the Department of Health and Human Services, healthcare.gov ended up costing a whopping $1.7 billion. And a separate analysis from Bloomberg had the total at $2.1 billion.

(It turned out, of course, that a senior executive at website development company was a college classmate of Michelle Obama’s at Princeton.)

Well, the Biden administration is not about to be outshined by the Obamas when it comes to gross financial mismanagement. And that leads us to our latest Inspired Idiot of the Week: Transportation Secretary Pete Buttigieg.

Buttigieg is already a distinguished passionate ignoramus.

When a train derailment last year was spewing toxic chemicals all over the town of East Palestine, Ohio, Buttigieg couldn’t be bothered to deal with it… because he was too busy making sure that automobile manufacturers were using female crash test dummies.

(He later on blamed Orange Man for the train derailment).

When it came time to spend $1 trillion from the federal infrastructure bill, Buttigieg went on a series of bizarre tirades claiming that “racism is physically built into some of our highways” and wailed that there were too many white construction workers.

And when a Singapore Airlines flight hit major turbulence last month, Buttigieg immediately shrieked “climate change” as the reason… even though major turbulence events were far more common 60+ years ago than they are today.

His latest crusade is the ill-fated cause of electric vehicles— which US consumers have been soundly rejecting. Today only 8% of consumers buy electric vehicles… and that number is falling.

Electric vehicle demand is so bad that auto manufacturers are starting to seriously scale back production and investment. It was only a few years ago that several major brands insisted they were going 100% electric… only to see their sales plummet.

They’re now walking back those designs and resurrecting the good ole’ internal combustion engine.

This is where the Biden administration has stepped in, recently mandating that, by 2030, 50% of passenger vehicles sold in the US must be electric or hybrid. Again, that’s more than 6x higher than today’s level.

It’s not enough that the government is ignoring consumer demand. They also want to make sure that you pay out the nose.

Like it or not, other countries (especially China) manufacture electric vehicles for far, far less than the US automaker can produce.

Yet rather than allow consumers to comply with the mandate by purchasing cheaper, foreign EVs, Team Biden is slapping huge tariffs on those cars. So, they’re going to force you to buy an EV, and they’re going to force you to spend a ton of money on it.

They’ve also completely ignored basic infrastructure issues.

US energy supply and demand fundamentals are so out of whack that there will likely be electricity shortages within the next 10 years… and that’s even without factoring in the massive new electricity demand from EVs.

A big part of this shortage is demand from power-hungry AI data centers. But there are major supply challenges as well.

Government policy at the state and federal level has forced many electric utility companies to shift to incredibly expensive and inefficient wind and solar production, while shutting down cheap nuclear power plants.

Naturally there are plenty of times when the sun doesn’t shine and the wind doesn’t blow, so the end result is less reliable electricity.

Consider that over the last 15 years, thousands upon thousands of acres of solar panels and wind turbines have been installed across the US. Yet over the same period, total electrical generation in the US has barely moved. In fact, electricity generation today is almost at the same level it was back in 2007.

Electricity supply is simply not growing to keep up with demand. And again, that’s before taking into consideration the huge bump in electricity demand that will take place when the EV mandate goes into effect in 2030.

There’s also a ton of other infrastructure to take into consideration… like the electrical charging stations that will need to pop up all over the country. Every lonely highway, every small town, every backwoods speed trap, is going to need to bring in new, expensive electric charging equipment.

And this is where Pete Buttigieg is once again on the case; he has trained his gaze now on building charging stations across America… and allocated $7.5 billion to do so.

How my charging stations do the American taxpayers have to show for this $7.5 billion investment?

7. As in… 1 2 3 4 5 6 7. Seven.

Buttigieg admitted this himself on TV recently, downplaying his failures by suggesting that it will ultimately be the responsibility of consumers to charge their vehicles at home. So, it’s ultimately your problem.

Buttigieg is one of the purest representations of an Inspired Idiot. They don’t even bother trying to understand the problem, let alone the solution. When confronted with a problem, they beat out one of the accepted lines— racism or climate change or Orange Man.

They push idiotic, impossible mandates and then issue contradictory tariffs without even realizing what they’re doing. And just like Obamacare, their mandates make people worse off.

And even when they only have ONE JOB to help the process along— build some charging stations— they can’t even manage to get that right.

With a $7.5 billion budget and just seven charging stations to show the taxpayers, Pete Buttigieg is putting the Obamacare website to shame. And he’s only getting started.

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This entire week has been full of eye-rolling— borderline eye-gouging— cowardice and deceit in the halls of Congress.

It started on Monday when none other than Dr. Anthony “the Science” Fauci appeared in front of the House Oversight Committee for two days of testimony. And every time the guy opened his mouth, we found out more about just how absurd and corrupt the COVID regime really was.

He acknowledged, for example, that the infamous six-foot social distancing rule “sort of just appeared,” and “wasn’t based on data.”

Given that Fauci asserted so much intellectual superiority throughout the pandemic— all of which was supposedly based on his unparalleled command of science— the revelation of this notably unscientific social distancing commandment is a monument to incompetence and hypocrisy.

But the most recent damning evidence comes from Dr. David Morens, one of Fauci’s most senior advisors.

Morens corresponded through private emails with Peter Daszak— the man who secured US government funding for gain-of-function research at the Wuhan Institute of Virology— with Morens coaching Daszak on how to violate federal law in the grant process.

He also bragged to Daszak that they didn’t have to worry about Freedom of Information Act, or FOIA, requests. Morens said he would simply communicate with Fauci on his private email, because Fauci was “too smart” and knew how to avoid scrutiny and oversight from the public.

Again, Morens was one of Fauci’s top lieutenants, and the men have known each other for years.

But when asked about Morens in the hearing, Fauci acted like he barely knew the guy and gave a slimy, cowardly response: “It is conceivable that I communicated with him. . .”

And then Fauci proceeded to throw Morens under the bus, saying his correspondence with Daszak was an unethical conflict of interest, and should be punished. But Fauci, of course, should not be punished…

Not to be outdone by Dr. Fauci, Attorney General Merrick Garland testified before the House Judiciary Committee on Tuesday to respond to concerns about the weaponization of the Justice Department.

Garland found it incomprehensible that anyone thought there was a double standard in the justice system. Rather than acknowledging citizens’ realistic concerns, he instead insisted that any hint of impropriety or double standards constituted “baseless and extremely dangerous falsehoods.”

Garland then nearly teared up as he proudly claimed that he has devoted his entire career to the rule of law and does “not pay attention to the political parties.”

And for good measure, he added that he “will not back down from defending our democracy.”

Yet at the same hearing he couldn’t manage to answer a question about whether he (or a family member) had ever profited or benefited from a case he was prosecuting.

For a guy riding around on his high horse to supposedly save democracy, a simple “no” should have been pretty easy. But apparently that’s too high an expectation of the country’s top public servants.

These two hearings— Fauci and Garland— grabbed a ton of headlines this week. But there was actually another Congressional hearing that, frankly, was equally important… but absolutely no one is talking about.

And that was a rather bland meeting of the House Ways and Means Committee featuring testimony from the Chief Actuary of Social Security.

Now that sounds about as exhilarating as watching paint dry… hardly comparable to the popcorn theatrics in the Fauci/Garland hearings.

But Social Security is pretty critical, directly impacting the lives of literally every working American and retiree. Most people are either paying into the system, or they’re collecting from it.

Yet the Chief Actuary stated plainly that Social Security’s key trust fund will run out of money and be fully depleted in less than a decade— sometime between April and November of 2033.

This insolvency “should come as no surprise,” he said, since for the last 13 years, the Social Security Trustees have been saying this in their official annual report. And bear in mind, the program’s trustees include the United States Secretary of the Treasury, Secretary of Labor, and Secretary of Health and Human Services… so not exactly a bunch of crazy conspiracy theorists.

The Chief Actuary also reiterated that, once the trust fund runs out in nine years, retirees will immediately have their benefits reduced by more than 20%, as the only source of funding to pay benefits will be payroll tax revenue.

But it will only get worse from there— in large part because there simply aren’t enough young workers to support a growing number of retirees.

US birth rates have been declining for decades and keep hitting fresh historic lows year after year. This is a huge problem for Social Security.

Fewer babies today mean fewer workers in the labor force 20 years from now, which means fewer people paying into the Social Security system. Yet 20+ years from now, there will be more and more retirees receiving benefits.

This math is totally backwards; a well-functioning Social Security system meaning having far more workers paying into the system to support a much smaller number of retirees.

This is known as the worker-to-retiree ratio. And in large part to America’s historically low fertility rate, that critical ratio gets worse every year.

So, based on current trends, if you’re in your 20s or 30s now, Social Security is simply not going to be there for you when you hit retirement age in a few decades. You will pay taxes for your entire working lives only to have this promise yanked when it becomes your time to collect.

Maybe the plan is to import tax-paying workers into America through immigration. In fact, perhaps that’s why Joe Biden has opened the borders to millions upon millions of migrants. He’s trying to save Social Security. I’m sure that’s the reason.

Except none of those people has legal status, hence they aren’t paying into the system… in fact many of them are beneficiaries of generous taxpayer-funded benefits. How any of these progressive politicians are still in power is beyond my comprehension. But I digress…

The Chief Actuary bluntly stated that the only way forward is for Congress to either cut benefits, i.e. default on the promises they’ve made to US citizens for decades… or to substantially raise taxes.

Neither is a good option. But even if we want to pretend that these are real ‘solutions’ to the Social Security problem, it’s worth noting that nothing is being done about it. No politician wants to touch Social Security. Joe Biden insists he will veto any legislation to overhaul the program.

Social Security is a ticking time bomb that everyone is willfully and deliberately annoying. It’s irresponsibility at its highest.

The younger you are, the more important it is to plan for this if you expect to ever be able to retire.

Retirement planning is boring, yes. Especially if you’re young. If you’re 18 years old, it’s virtually impossible to imagine your life 10 years from now, let alone 50.

And yet you’ll blink one day and realize that you just turned 45. It really goes quickly.

Time is on your side, and there are plenty of sensible ways to set aside your own retirement money.

Self-directed IRAs, solo 401(k)s, and other plans are tax-advantaged and extremely flexible. They allow you the freedom to maximize your investment options, minimize fees, and also ensure you don’t just have to hand over your savings to the Blackrocks of the world.

This is absolutely a fixable problem… as long as you’re willing to take action and exercise a little bit of discipline.

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Next month will mark 80 years since the US dollar was formally anointed as the world’s reserve currency.

It was July 1944. And with the war in Europe near its denouement, governments were already trying to plan what the postwar world would look like. Most urgently, they needed to figure out how to rebuild their devastated economies.

Just think about the mess they were in: nearly every industrialized country in Europe had been destroyed by war. Manufacturing and farming were both in the dumps, and they had very little savings to invest in economic revival.

They also had a gigantic mess when it came to international trade. Dozens of countries each had their own currencies, so commercial trade meant each government keeping 20-30 currencies in reserve.

France, for example, would have to hold Austrian schillings, British pounds, Spanish pesetas, Italian lira, Dutch guilders, Soviet rubles, etc. in reserve, just to be able to trade.

A much, much simpler solution was for every country to use the same currency to trade with each other. And there was no question about which currency would be the right choice: the US dollar.

In 1944, the United States still had a strong and powerful economy. It had robust capital markets and a well-developed financial system. It was the only country left standing.

So, representatives from more than 40 nations gathered that summer in picturesque Bretton Woods, New Hampshire and formally agreed to use the US dollar for international trade and commerce.

More specifically, each country fixed its exchange rate to the US dollar, while the US dollar was fixed to gold.

It only lasted about thirty years. By the early 1970s, the original Bretton Woods deal had been completely undone. Currencies floated freely against each other (including the dollar), and the US dollar terminated its link with gold.

And yet (thanks in part to Saudi Arabia agreeing to sell oil in dollars), the US dollar has continued to remain the dominant reserve currency through today.

For the most part that was still a sensible bet; the US has been the world’s #1 economy for the past five decades. But the cracks are obvious.

The US federal debt is a national embarrassment. At $35 trillion, the debt is far larger than the entire US economy… and it gets worse every year.

The US government is also completely dysfunctional. The vitriol and enmity, among the parties and within the parties, is so extreme that virtually nothing productive or beneficial ever takes place. The business of government now is merely two sides screaming that the other is a threat to democracy.

The President barely knows where he is half the time, and the other half he spends shredding the Constitution to engage in some anti-capitalist, inflationary, fanatical woke climate agenda.

Sadly, this isn’t a one-time blip. America’s governance and finances have been deteriorating for most of this century– starting with the endlessly expensive War on Terror, through the free-spending Obama years, to the pandemic… and now the very real prospect that the next four years could look very similar to the previous four years.

America is supposed to be a reliable, stabilizing force in the world. But today’s America has lost its grip. And foreign nations have noticed.

Most people alive today don’t remember a world in which the dollar wasn’t #1 and therefore cannot fathom a world in which this is no longer the case. But it’s irrational to assume that something will continue indefinitely, forever simply because of the status quo today.

It’s not 1944 anymore. Back then there were no other options… and no one who even came close to rivaling the military and economic superiority of the United States.

Today both of those are in decline. It’s not to say the military can no longer fight or that the economy is in complete shambles. But America no longer has the unrivaled position it enjoyed for so long.

More importantly, the trend isn’t looking good. From an economic perspective, the national debt is set to increase by another $20 trillion over the next decade… likely triggering a nasty run of stagflation like the US experienced in the 1970s.

The US military, meanwhile, continues its downward slide. Recruitment is absolutely abysmal. Key weapons systems, fighter jets, tanks, and naval vessels are borderline obsolete.

The US Navy’s fleet of ships and submarines (which would be critical in any conflict against China) is the oldest and smallest it’s been since the end of World War II. Nearly 1,000 military aircraft will be retired from service in the next five years alone, and there is no concrete plan to replace them.

Nor is there any money to do so.

Frankly it is exceedingly difficult to believe that, in light of America’s declining power and prestige, the rest of the world will continue accepting the US dollar as the global reserve currency for much longer.

We’re already seeing signs of this change; plenty of countries are starting to trade with one another in different currencies, including Chinese renminbi and Indian rupee, and this trend will likely accelerate over the next several years.

I think it’s even possible there could be an event of some sort– perhaps the US government defaults on its debt, or there’s even a shooting war or cyberattack– which triggers a new Bretton Woods style conference.

The key difference between now and 1944 is that there was only one option back then– the US. And pretty much everyone had confidence in America.

That’s not the case today. Few rational people have the same level of confidence in the US government. Yet almost no one trusts the Chinese either.

But just like 1944, there is an obvious solution… and one that everyone already trusts: gold.

Nearly every country already holds gold as a reserve asset, so there would be very little change to the way they currently do business.

I’ve written about this before– I believe this is why so many central banks around the world have been on a gold-buying spree. In fact, this is THE reason why gold is near its all-time high: central banks have been buying it by the metric ton.

You have to understand that central banks aren’t speculators. They don’t care about price. They buy for strategic reasons… and I believe that the central bank gold purchases that have been occurring over the past few years are a key sign that the global financial regime will be changing.

Individual investors, meanwhile, have been selling gold.

North American investors have sold off more than $4 billion worth of gold ETFs in the first four months of this year, with $2 billion of that just in the month of April. And gold ETF holdings are now at their lowest level in four years.

Central banks are buying. Individual investors are selling. It seems pretty clear that people aren’t paying attention to the warning signs.

Yes, gold is near its all-time high. But that doesn’t mean it can’t go much higher… especially if there’s a catalyst. And there absolutely is.

As a final point, I would point out again that even while gold is near its all-time high, shares of high quality, profitable, dividend-paying gold miners are laughably cheap.

That’s because central banks only buy physical gold bullion (which as pushed up the price of gold). They do not buy gold stocks… hence many of these businesses are available for outrageous bargains.

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On August 4, 2017, the most hated person in the world was sentenced to seven years in prison.

You may remember the case: his name is Martin Shkreli.

Shkreli had quite infamously taken over a pharmaceutical company and jacked up the price of a medication by 50x, practically overnight. Media outrage ensued, and Shkreli– an young, arrogant braggadocio with far more ego than compassion, was summoned to explain himself to angry politicians in Congress.

Shkreli smirked and insulted his way through the Congressional hearing, leading countless people to conclude he was the biggest jerk on the planet.

And, shortly thereafter, Shkreli was raided and prosecuted by the Justice Department on charges of securities fraud.

Now this guy was no Honest Abe. But he wasn’t Bernie Madoff either. And it’s worth pointing out that not a single one of Shkreli’s investors lost money.

I have no doubt that Shkreli stretched the truth with investors; the financial industry is filled with sharks who lie to investors all the time. But those people are rarely charged or prosecuted– including the vast majority of the liars and thieves from the 2008 financial crisis.

You might remember Goldman Sachs bankers referred to their customers as “muppets” and bragged about selling them “shitty deals” and terrible investments. Zero jail time for them.

Shkreli was prosecuted because people hated him… and the government put him behind bars.

I wrote at the time that Shkreli’s arrest and prosecution represented a dark day for the justice system; it proved that you can be prosecuted in the land of the free, simply because people don’t like you.

Bizarrely I received a lot of hate mail from that article from people who accused me of defending Shkreli. I wasn’t. I was arguing that the government shouldn’t put people they don’t like in jail.

Naturally, the passionate ignoramuses cling to their mantra that “no one is above the law”. But that’s complete BS.

The amount of local, state, and federal crimes on the books could fill an entire football stadium. Every single person reading this right now is guilty of violating some rule, statute, or regulation without even knowing it.

How could anybody possibly keep up with all the rules and laws that change every single day and are constantly expanding.

In fact, just last year they added 79,066 pages to the Federal Register. Yet they also claim that ” ignorance of the law is not an excuse”. It’s absurd.

There used to be sacrosanct standards of the justice system. Victims would come forward and allege a crime had taken place. The crime would be investigated, a suspect would be found, then prosecutors would bring charges.

Most importantly, the suspect would then be presumed innocent until convicted by a dispassionate prosecutor and impartial jury.

Now that system is completely distorted.

Politicians run for elected prosecutor offices (like District Attorney or state Attorney General) with the same zeal and vigor as if they were running for President.

They’re funded by fanatical leftists like George Soros, and they make campaign promises to target and prosecute political opponents.

Then, rather than investigate a crime to find an individual suspect, they investigate the individual and find a crime… even if it means inventing a new crime by stretching the law beyond reason.

Then they select the jurisdiction most suitable for their case– where the defendant is the most hated– virtually guaranteeing that there will in no way be a fair trial.

Putting Donald Trump on trial in New York City is like putting Benjamin Netanyahu on trial in Iran and expecting the Ayatollah to issue a fair and impartial judgment.

But this is the justice system now. As I wrote years ago during the Shkreli affair, “it really paints the picture when you realize that a member of the political elite can merely point his/her thumb like Caesar at the Colosseum, and then gun toting federal agents come swarming in with a laundry list of charges.”

And it was the same thing in the recent civil trial brought by New York Attorney General Letitia James– who also campaigned on convicting Trump. She claimed that he overstated the value of his real estate assets to secure favorable loans.

But there was no victim. The banks that gave the loans said they lost no money and would be happy to do business with Trump again.

Again, though he’s neither Bernie Madoff nor honest Abe, such practices are pretty standard in the industry. Bankers know this. They’re not stupid. Of course, borrowers inflate their assets.

The practice is so commonplace, in fact, that the Governor of New York had to assure other real estate developers (who were panicking and fleeing the state) that no one else would be prosecuted for those charges. Only Trump.

The outcome of the case was so lopsided that the judge had to practically invent a new form of mathematics to justify the outrageous penalty he ordered.

In 1998, then President Bill Clinton paid $850,000 to a woman who had accused him of sexual assault. They money was part of a legal settlement which included a nondisclosure agreement to keep the woman quiet. No charges were brought against him.

Hillary, course, wiped her private email servers before handing them over to FBI investigators… which is an obvious crime. She admitted to this. No charges were brought.

No charges have been brought against Joe Biden for illegally storing classified documents. No charges have been brought against anyone on the Epstein client list.

The word justice comes from the Latin word justitia, which means righteousness. And, quite amazingly, the leftists who are cheering the perversion of the justice system right now are full of their bloated sense of righteousness.

They truly believe this is justice.

But they have memories like goldfish and have completely forgotten that the left is a tribe of cannibals: sooner or later, the leftists eat their own kind.

The people cheering right now will inevitably one day say the wrong thing. They’ll use the wrong pronouns. They have the wrong thought. They’ll fail to bend the knee, raise the fist, say the name, storm the university building, or engage in whatever ritualistic virtue signaling comes next.

Then they could find themselves at the business end of the perverted justice system that they’re cheering right now.

Who knows where it goes from here. Will the political opponents on the right ‘turn the other cheek’, or will it be full blown civil lawfare?

(If so, I would humbly suggest that Tony Fauci likely has a laundry list of actual good reasons to be prosecuted.)

The US has crossed the Rubicon.

We saw the preview during the 2020 summer of love riots, and COVID hysteria. People were, canceled, fired, blacklisted, and denounce by loved ones for daring to disagree with the narrative.

But at least it didn’t leverage the full resources of the justice system.

Now, countless people on the woke left are full of bloodlust and cheering for the perversion of the justice system. They don’t realize that one day it might be used against them.

Everybody ought to recognize this is now the legal standard in America. And to think that it ends here is naive.

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In 2007, Giuseppe Ferrarello found himself facing a monumental challenge as the newly-elected mayor of Gangi, Italy — an incredibly picturesque yet dwindling town nestled in the mountains of Sicily.

Like many rural communities across Italy and beyond, the village of Gangi was grappling with depopulation and economic decline. Once home to 15,000 people, its population by 2007 stood at just 7,000. Young people in particular were leaving to seek job opportunities in northern Italy and elsewhere in Europe, leaving behind aging parents and empty houses.

At first glance, the situation seemed hopeless. Gangi’s inland location far from the coast rendered it unattractive to tourists.

But Ferrarello refused to give up and adopted a bold strategy to revitalize his town through the “One Euro Houses program” — a pioneering initiative aimed at attracting new residents and rejuvenating abandoned properties.

Under the program, buyers could purchase local derelict houses for a symbolic price of just one euro… but with strings attached. New owners had to commit to restoring the properties within four years.

Ferrarello’s idea was successful in attracting foreign investors. And over the next few years, the little hamlet was recognized as the “Jewel of Italy,” and named one of the “The most beautiful Italian villages.”

New residents and tourists from Europe and beyond arrived, to the delight of the local businesses and artisans.

And over the following years, several towns across Italy, Spain, France, and even the UK launched their own projects offering housing at a ‘symbolic price’.

At face value it seems like a stupendous bargain to buy a house in Europe for just 1 euro. But are these offers really worth the strings attached?

Super cheap real estate deals across various EU countries exist because the properties are worthless to their current owners. These often-dilapidated homes are located in small towns far from major population centers and tourist attractions, and many have been abandoned for generations, requiring extensive renovation.

Property taxes, though modest, make these properties a burden. And buyers typically must commit to spending at least €35,000 to renovate the property within two to three years.

If you fail to meet these obligations, you risk losing a €1,000 to €5,000 insurance deposit held by the municipality, losing the property, or both.

Other costs include €1,500 in legal fees, and roughly €3,500 for mandatory civil engineering and architectural plans.

There’s also no guarantee that €35,000 will be enough to complete renovations; many of these properties are “historic,” meaning you can’t do whatever you want. Plenty of local regulations will government what you can and cannot do.

Therefore, renovating a small, 100 square meter (1,076 sq.ft.) home can cost between €60,000 and €160,000 to bring it to a livable and rentable condition.

Engaging in such a project could certainly benefit adventurous souls with ample free time.

But there are other challenges as well. You either need to speak Italian and be prepared for the complexities of southern European bureaucracy, or you’ll have to spend even more money on project managers.

Even if you persevere through the purchase and renovation process, consider the most probable outcome — an illiquid property in a tiny village lacking appeal to both Italians and foreigners alike. Because most of these towns aren’t as successful as Gangi at reigniting their tiny economies.

But if owning a beautiful home in Italy is your goal (and part of your Plan B), it probably makes more sense to just look at the wide selection of regular cheap properties available throughout the country.

After all, owning an Italian home does offer the allure of breathtaking scenery, cultural richness, relaxation, outdoor activities, and even an investment potential… all in one picturesque package.

Even for as low as €60,000 to €160,000, you can find a nice Italian property with no strings attached — no hunting for reliable information, no applying for remodeling and construction permits, no actual renovation, and no time wasted.

Properties almost anywhere in Italy remain remarkably cheap, as the country has, so far, missed the real estate boom experienced by its European neighbors.

As of March 2024, the average Italian property price per square meter stood at €1,850, just 6.6% higher than the nationwide low recorded in February 2020.

Property prices in Spain average €2,098 per sq.m., and €2,596 in Portugal.

And 22 provinces (out of 106) across Italy have current province-wide prices below €1,000 per square meter. That’s definitely cheap.

For example, in Gangi, the original “€1 house” village, this 151 sq.m., 3-story house in the town center offers great views, is in livable condition, and is selling for just €35,000.

(Personally, I’d rather pay 35k for the finished home than have paid 1 euro and gone through all the time, money, and work to renovate it.)

And it’s not just the cheaper southern Italy that has these deals.

Genoa — a famous port city just south of Milan, and the birthplace of Christopher Columbus — is still 47% below its 2012 peak, with plenty of options below €1,000 per square meter.

Biella — less than 90 minutes from Milan and situated right at the foot of the Alps, next to lakes, mountains, and ski resorts — offers this spacious and modern 250 sq.m. apartment located right in the town’s historic area, selling for €155,000 — a very inexpensive €620 per square meter.

Now, believe it or not, this article isn’t really about buying property in Italy. To some people, Italy may be their idyllic retirement dream. Others couldn’t care less. The larger issue is how to think about a “Plan B”.

Remember, the central idea behind a Plan B is to mitigate risks by taking sensible actions — actions which make sense regardless of what happens (or doesn’t happen) in the future.

For a lot of people, a big part of their Plan B is having a second property overseas. A second home abroad, combined with residency or citizenship, is sort of like an insurance policy: you might not ever need it… but in case you ever do, you’ll be damn glad you have one.

A second residence means that you’ll always have a place to go in case, for whatever reason, you need to leave your home country. This could be enormously valuable to you and your family.

But even if that day never comes (and hopefully it doesn’t), it’s hard to imagine you’ll be worse off for owning a nice property in a place where you really enjoy spending time– which you were able to purchase on the cheap and generate modest cashflow while you’re not using it.

For some people, Italy ticks that box. For others, it doesn’t. And for others, buying a second home isn’t the right move either. Everyone has unique, individual circumstances.

The key idea is that we can apply this same logic to other elements of a Plan B, including our finances.

For example, we have long argued why inflation will grow and become a major problem for the US dollar in the coming years; it will be extremely difficult to take on $20+ trillion in new debt in the next decade without serious, serious inflation.

Real assets are a major inflation hedge. And right now, many real assets– including key commodities and the companies which produce them — are historically cheap.

We’re talking about high quality gold or copper miners that generate fantastic profits, have virtually zero debt, and pay 8%+ dividends… yet their shares trade at laughably low valuations.

If our inflation thesis plays out as expected, these types of companies will do extremely well, and shareholders could be richly rewarded.

But even if inflation never materializes (which is highly doubtful), it still makes sense to consider owning a strong, profitable business that pays a great dividend.

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In the year 1712, an English ironworker and part-time Baptist preacher named Thomas Newcomen finally put the finishing touches on a new invention that had been more than a century in the making.

Newcomen called it the ‘atmospheric engine’, and it was essentially a very crude, rudimentary steam engine that he used to pump water.

The idea had existed since the early 1600s, and a number of inventors had attempted to create something similar. But Newcomen was the first to develop a functioning engine, and his key breakthrough was including a fuel source (wood) to heat up water and create steam.

It’s remarkable that, even to this day, most automobile engines, generators, and electrical power plants still rely on Newcomen’s basic concept: burn a fuel to create heat, then harness that heat energy to generate motion and mechanical work.

Obviously, the design has been much improved since then; James Watt perfected the Newcomen’s invention decades later with the first commercially viable steam engines (which ultimately kicked off the Industrial Revolution).

Inventors also discovered far more efficient fuel sources.

Coal, for example, was found to have more than twice as much heat energy per pound than wood… which is a key reason why coal became the most important commodity of the 1800s. But other commodities like oil and gas were later discovered to be even more fuel efficient than coal.

Today all three are still used in vast quantities. In fact, coal-fired power plants still produce over 2,300 gigawatts of electricity worldwide, which constitutes about 30% of global electricity production capacity.

Natural gas is also responsible for nearly 2,000 gigawatts (in addition to its widespread use in heating). And oil is clearly the most dominant fuel source for internal combustion engines which power global transportation.

Now, at the end of the day, all three commodities serve essentially the same purpose, i.e. they are fuel sources whose heat energy is harnessed to perform work. And because of this, their heat energy should be priced more or less the same.

For example, a barrel of oil contains the equivalent of 5.6 million British Thermal Units (BTUs) of heat energy. So, at a price of roughly $80 per barrel of oil, this is the equivalent of about $14.28 per million BTUs of heat energy.

Oil prices do vary from place to place. But the differences are fairly minor; the West Texas Intermediate price (used primarily in the US) is slightly lower than the Brent oil price (used primarily in the North Sea), but they are within a few percent of each other.

But natural gas is a totally different story.

In Europe, for example, natural gas prices are significantly higher than they are in the US and currently trade for roughly $9.12 per million BTUs. And only a few months ago, natural gas prices in Europe were nearly $14 per million BTUs, i.e. almost equivalent to oil price when measured in dollars (or euros) per million BTUs.

But natural gas prices in the US are dramatically lower than they are in Europe… and it’s easy to understand why: the US has some of the biggest natural gas reserves in the world, while Europe has almost nothing by comparison. (This is why Europe is so reliant on Russian gas).

And since Joe Biden has banned the exporting of LNG (liquefied natural gas) from the US, there’s basically nowhere for all that excess US natural gas to go.

This is why prices in the US are less than $3, versus more than $9 in Europe. If US producers were free to export, prices in the US would rise, prices in Europe would fall, the global natural gas prices would be more or less the same, just like global oil prices.

But, at least for now, LNG exports are banned… and that keeps prices incredibly cheap in the US. How cheap exactly?

Well remember that $80 oil is the equivalent of $14.28 per million BTUs of heat energy. US natural gas prices are $2.77 per million BTUs of heat energy. So, based on the price per million BTUs, natural gas is about 80% cheaper than oil in the United States.

Another way to say it is that US natural gas is priced at the equivalent of $15 for a barrel of oil… which makes US natural gas the most underpriced conventional energy commodity in the world.

Now, I say “conventional” because there is another option that blows natural gas away– and that’s nuclear.

The energy released in a nuclear reaction from just a single cubic foot of uranium is literally FIFTY BILLION times greater than the energy released from burning an equivalent amount of natural gas. So, nuclear is, by far, the cheapest and most efficient energy… which is why China, India, Russia, etc. are all feverishly building nuclear power plants.

The West, by comparison, is shutting their nuclear plants down. It is the dumbest policy imaginable.

So, at least for now, natural gas is America’s cheapest energy source. But it probably won’t stay that way for long.

First, large tech companies, which are building build massive, energy-hungry AI data centers, are also looking at putting in their own power plants… which will most likely be powered by natural gas.

This increased demand will certainly have a big impact on price.

The second catalyst is that the export ban probably won’t last. There are lawsuits, legislation, and an upcoming election, any one of which could reverse the ban and start up LNG exports once again. When this happens, US natural gas prices could quickly rise.

In either case, natural gas producers stand to benefit substantially from higher prices. And it just so happens that shares of many of the best quality producers right now are laughably cheap, with low multiples relative to earnings, book value, and Free Cash Flow.

We’ll talk about this more in the future, but our core view is that it makes a lot of sense to own ‘real assets’, i.e. scarce, high quality, productive assets that the world truly needs (and cannot be conjured out of thin air by central banks.)

Energy commodities like natural gas, and their highest quality producers, definitely fit that description, with the added benefit that they’re dirt cheap right now.

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This morning Spain’s Deputy Prime Minister, Yolanda Diaz, released an announcement to “celebrate that Spain recognizes Palestine State. . . [which] will be free from the river to the sea.”

This comes on the heels of her boss, the Prime Minister of Spain, announcing formal recognition of Palestine as a sovereign nation, alongside his counterparts in Ireland and Norway.

Their joint statement preached that “We believe in freedom and justice” and that “permanent peace can only be secured on the basis of the free will of a free people.”

High sounding language. Too bad the Prime Minister doesn’t apply the same logic to his own country, which is inundated with its own separatist, independent movements from the Basque Country to Catalonia to Galicia.

In 2017, for example, “the free will of a free people” in Spain’s Catalonia region voted overwhelmingly (92% to 8%) to become an independent, sovereign state. Leaders of the movement were soon arrested by the Spanish government and put on trial.

But, hey, governments these days tend to be far more interested with foreign borders than their own.

The US is overrun with migrants at the southern border… yet Congress has spent far more time worrying about Ukraine’s border.

All of these European countries that are virtue-signaling over Palestine’s borders have allowed their own nations to become completely overrun with refugees… who are then coddled at taxpayer expense with free housing, food, and other welfare programs.

In completely unrelated news, crime rates in these same countries have skyrocketed, including sexual assault of children.

But the invasion of their own borders is not a concern. They are only interested in Palestine– which they claim to be a “free people”. This is completely naive.

Palestinians aren’t free. They are hostages of the Hamas, a terrorist organization masquerading as a government.

People in Gaza are obviously suffering immeasurably. Yet for some reason none of these Inspired Idiots in Europe are willing to state the obvious about Hamas.

Hamas hold sham elections to keep themselves in power while deliberately depriving their own people of food, water, and basic services in order to pin the blame on Israel and create sympathy for their cause.

Hamas also notably puts military assets inside of the most inviolable civilian institutions, like schools and hospitals.

Yet there’s not a word about this from virtue-signaling European politicians.

It also strikes me as quite bizarre that, while they now assert that Palestine is a sovereign nation, these same people refuse to recognize Taiwan.

So, what happened to that “free will of a free people” logic? Apparently, for these Inspired Idiots, it doesn’t apply when you’re suckling on that Chinese money teat.

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On Tuesday, September 15, 1992, the two most powerful financial officials in the British government held an urgent meeting that night to review their plan for when the markets opened the next morning.

The tone of the meeting must have felt frantic… even desperate… because the value of the British pound had been falling for weeks.

Investors and speculators were rapidly losing confidence in the UK government, mostly due to the ridiculous “Exchange Rate Mechanism” (ERM) which essentially pegged most European currencies to the German Deutschemark.

Rational investors viewed the ERM as an almost comical impossibility.

Germany’s economy was light years ahead of everyone else. Germany had vastly higher productivity, far greater savings, low inflation, high growth, and much more responsible monetary policy.

So, to even pretend that a country like Italy or even Britain could fix its exchange rate to the Deutschemark, i.e. to essentially mirror Germany’s economic performance– was a total joke.

Britain joined the Exchange Rate Mechanism in October 1990. Prime Minister Margaret Thatcher had spent years trying to keep Britain out of the ERM, viewing it as giving up national sovereignty.

But Thatcher was about to retire. And the new batch of leaders insisted that pegging Britain’s economy to Germany was the way forward.

Their experiment didn’t even last two years. By the summer of 1992, inflation in Britain was more than 3x German’s. Plus, Britain had a major budget deficit.

Financial speculators correctly recognized, given the massive disconnect between the British and German economies, that Britain would not be able to maintain its fixed exchange rate with the Deutschemark.

So, traders began short selling the British pound, i.e. betting that the value of the pound would fall because the British government would devalue its currency.

The sell-off reached a crisis on September 15^th, when the head of Germany’s central bank suggested to the Wall Street Journal that weaker countries (like Britain) would have to devalue their currencies.

That’s what led the British Chancellor of the Exchequer and head of the Bank of England– the two most powerful policymakers in British government finance– to meet that evening.

They knew that the German central bank’s comments would encourage even more traders to dump the British pound. So, the two men pledged to do ‘whatever it takes’ to defend the pound and defeat the speculators.

It didn’t work.

The following morning on September 16^th, the Bank of England did everything it could. They raised interest rates, they bought back pounds, they bought government bonds, they made all sorts of outlandish promises.

But speculators didn’t believe any of it. They could see the numbers, and they knew that the Bank of England simply didn’t have the financial resources to maintain such an unrealistic exchange rate.

One of those speculators was George Soros, who famously bet $10 billion against the British pound… far exceeding the Bank of England’s financial resources.

By the end of that day, the British central bank had exhausted its capital and was essentially bankrupt. The British government had to bail them out to the tune of 3 billion pounds, and then announce that they were formally leaving the ERM– proving the speculators right.

This is an important story to understand, because it’s likely that something similar may happen to the Federal Reserve and US dollar over the next several years.

The Federal Reserve is already insolvent.

According to its most recent annual financial statements, the Fed has just $51 billion in equity, versus a whopping $948 billion in mark-to-market losses. This means the Fed is insolvent by roughly $900 billion.

This is a big problem. Remember that the Fed is still a bank, i.e. it has financial obligations, liabilities, and depositors that it needs to pay.

For example, commercial banks like JP Morgan and Bank of America have deposited a total of $3.4 trillion of their customers’ money, i.e. YOUR money, with the Fed. And the Treasury Department holds another $700 billion deposit at the Fed.

The Fed owes money to foreign governments. They owe trillions of dollars from repurchase agreements to banks and businesses across the global financial system.

So, yeah, the insolvency of the Federal Reserve is a pretty big deal. Yet, at least for now, no one is saying a word about it.

But just like the Bank of England in 1992, sooner or later, someone is finally going to say something… and do something… about the Fed’s insolvency.

There’s a good chance that means betting against the dollar… just like speculators bet against the pound three decades ago. And that would ultimately reduce the value of the dollar, increase inflation, and trigger a new ‘Bretton Woods’ agreement in which the US dollar is no longer the world’s reserve currency.

George Soros became known as “The Man Who Broke the Bank of England”. (Though given his malign proclivity to fund progressive activists, he is known by several other names in my household, none of them reverent.)

Within the next several years there could be some Chinese or Russian financier who becomes known as “The Man Who Broke the Fed”.

This isn’t sensational. The Fed is already insolvent by $900+ billion, according to its own financial statements. Social Security is insolvent. The US government is insolvent by tens of trillions… and they further anticipate the national debt to grow by $20 trillion over the next decade.

These are facts, not fantasies.

And this is why it makes so much sense to hedge these risks by owning real assets which are scarce, valuable, and uncorrelated to the US dollar.

Gold is a great example. And as we’ve argued before, even though it’s already near its all-time high, we believe it can go much higher from here.

More on that soon.

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