Editor's note: Today, we're sharing the second half of an essay from our founder Porter Stansberry. In this adaptation from his Stansberry's Investment Advisory special report, Porter covers why the U.S. government has only one option left to "bail out" consumers – and who's going to get stuck with the tab.
The U.S. is swimming in debt...
As we covered yesterday, some economists say this doesn't matter – because those trillions of dollars are never going to be paid back. Besides, the U.S. government isn't going to default outright.
But private debt is another story...
Like the government, businesses and consumers are loaded with debt. However, unlike the government, households and corporations don't have a printing press to pay it off.
All of this is leading to one thing. And if you're not prepared, it could jeopardize your financial future...
U.S. corporations owe a record $10 trillion today. And U.S. household debt is at record levels as well – more than $14 trillion.
This includes $9.6 trillion in mortgage debt, $1.7 trillion in student debt, $1.3 trillion in auto debt, and $1 trillion in credit-card debt.
Consumer spending comprises 70% of the economy. Maxed-out consumers have limited ability to spend – as they have past debts to service. When consumers stop spending, the economy grinds to a halt.
The government can't have it.
Worse, the COVID-19 pandemic and associated "social distancing" measures have now exacerbated the consumer debt problems...
Consumers now have to service this massive debt in a slowing economy, where many of them are now unemployed.
More than 40 million Americans have lost their jobs since mid-March. And while some parts of the economy have begun hiring some of these workers back, layoffs in others continue to roll in, pushing the unemployment rate up to 20% based on claims filed. That's twice the rate we reached in the Great Recession of 2008. And it's the highest level since 1934.
Many households do not have the income to service the debts they still owe. It's impossible for them to get out of the hole they've dug.
Of course, debt that can't be repaid won't be repaid...
The government knows that a "Debt Jubilee" is the only way out – total debt forgiveness. It's the only way to keep our consumer-based economy going, maintain balance in our society, and prevent large-scale civil unrest.
It's not a new concept in the U.S. A Debt Jubilee happened here in the 1840s...
The laws were temporarily changed so that debtors could be discharged of their debts... without the consent of the creditors. Back then, over a period of 13 months, more than 40,000 people were able to wipe away their debts before the act was rescinded.
Today, of course, it will be tens of millions of people... and trillions of dollars.
The Debt Jubilee has already started piecemeal. We've seen $1,200 coronavirus stimulus checks, forbearances (mortgage, rent, and student loan), an extra $600 weekly in unemployment benefits, and payroll loans with the potential of forgiveness under the Paycheck Protection Program...
Make no mistake, this is the start of a new Debt Jubilee.
Next, the Jubilee will expand to accelerated student-loan forgiveness... followed by bailouts of large cities and states – putting these entities on a better footing to meet pension obligations.
Down the road, it will expand to universal basic income – which is a regular payment to qualified individuals.
Once the population is prepared through enough piecemeal measures, a full Debt Jubilee is likely.
As in the past, the politicians will likely disguise this Jubilee under a different name. They might call it a "National Restoration" or "Patriotic Solvency."
They'll pass an act like they did in 1841... or invoke an executive order like the one in 1933 (Executive Order No. 6102)... or simply issue a mandate to the secretary of the Treasury (which they did in 1971).
It's impossible to know which mechanism the government will use. But however it does it, it all means the same thing... The government will wipe away trillions of dollars in debts for those who have gotten in way over their heads.
Of course, someone will have to pay for it. And that someone is you.
But if you know what's coming, it doesn't have to hurt you...
As we discussed yesterday, the dirty secret of the "debt doesn't matter" policy that allows for a Debt Jubilee in the first place is that it hollows out the store of value function of our currency.
Because we know this, we can use it to our advantage... Your job is to hold high-quality assets that will serve as a store of value to protect your wealth as the currency is debased. Owning gold and gold stocks is one way to do this. And there are other actions you can take as well.
But for now, the most important thing you need to know is this...
Whatever you may hear from politicians and the media in the coming months, the tab for this Jubilee only gets paid in two ways – with higher taxes, and the loss of the dollar's purchasing power. Don't forget it.
Editor's note: If you understand what's coming, you can actually make money... And it goes beyond gold. The big gains will likely come down to seven specific investments – each with the potential to rise 1,000% or more as America's money-printing problems continue to ravage our banking system. Porter hosted an online broadcast yesterday to bring the details to our readers... Watch a replay right here.
The U.S. government's expansive debt system is great if you're a politician or a massive corporation. But since you're probably neither of these, ever-increasing debt means your money doesn't go as far... Read about the full effects of our money's erosion right here: The Dirty Secret Behind 'Debt Doesn't Matter.'
"Today, the vast majority of America is in bad shape," Porter wrote in 2018. "And the poorest citizens are calling for a radical solution." With a global pandemic, social unrest, and a looming election, we could be seeing the perfect storm for a massive change... Get the full story here: How Americans Lost 69% of Their Savings.
Hard assets like gold will likely soar as people lose confidence in the U.S. financial system. And this gold producer will be a big winner as the price of the metal keeps rising...
THE DIGITAL WORLD IS CRUSHING THIS ELECTRONICS COMPANY
Today's chart shows an electronics maker that makes the wrong electronics...
The world today is all about instant access. When folks take a photo or create a document, they want the ability to share it with anyone in the world in two clicks. The coronavirus outbreak accelerated this trend, forcing people even further into the digital world. And today's company isn't ready to help them...
Canon (CAJ) sells digital cameras, scanners, and printers. After smartphones crushed its digital-camera business, office printers became the $20 billion company's biggest segment. But offices around the world are closed – instead, people are working from home. Folks are getting by without printing out most of their documents. Canon's sales fell more than 25% in the most recent quarter, and the company lost $82 million – its first-ever quarterly loss.
CAJ shares fell along with the rest of the market in March... But unlike most stocks, this one continued dropping. Shares are down nearly 40% over the past year, and they just hit a multidecade low. COVID-19 accelerated the trend away from Canon's products... And its struggles won't end soon...