The Weekend Edition is pulled from the daily Stansberry Digest.
We couldn't make this stuff up if we tried...
The headline of an opinion column on the Washington Post's website last Saturday read: "A Debt Jubilee Is the Only Way to Avoid a Depression."
We've heard this one somewhere before...
Our founder Porter Stansberry has been banging the drum for years to alert everyday Americans about the (now obviously apparent) fragile condition of our financial system...
He has even written an entire book, The American Jubilee, about all the dangers lurking beneath the surface that have now reached the mainstream amid the COVID-19 pandemic.
For years, Porter has called this situation a national "nightmare" and talked about the resulting financial system "reset."
Specifically, he has shown how today's environment paralleled the times leading up to previous "Debt Jubilees," like the one in 1933...
Back then, in the throes of the Great Depression, America experienced a few key trends. The country saw a rise in "populism"... rock-bottom interest rates... and tremendous wealth inequality.
Sound familiar? It should. The same story has played out over the past decade after the 2008 financial crisis.
Importantly, Porter has recently detailed how readers can protect and even grow their wealth in times like these. But more on that later...
As far back as 2015, Porter said that within five years, we'd see a "new crisis of epic proportions"...
He added that the way we live, work, travel, retire, invest... all of it was going to change. Some of it in ways we would never expect.
As we sit here, holed up at home and staying six feet away from people outside amid the world's first pandemic in a century, Porter's words sure seem prescient – even if no one could have imagined things playing out this way.
But he took the idea further in recent years by describing in detail the idea of a Debt Jubilee... about how governments, over centuries, have wiped a heavy debt slate clean for their people – and not without consequences, of course.
The stage was set for America's next Debt Jubilee...
Much like in our March 21 DailyWealth Weekend Edition, where we wrote, "It feels like there are two different economies running at the same time," Porter explained in The American Jubilee...
We are living in a world of two different Americas. For the wealthiest 40% of the population, life is good. Asset prices are rising... and wages are finally starting to increase.
For everyone else, life is getting worse...
For the bottom 60% of America, consumer debt is high and wages are stagnant. Most of these folks would have difficulty raising even a few hundred dollars for an emergency.
These folks have less than $20,000 on average saved for retirement. Physical and mental health is deteriorating. And death rates are soaring. Premature deaths are up by 20% since 2000.
After understanding this, it makes a lot of sense that a pandemic sparked the fastest bear market ever...
Think about what has happened over the past few weeks.
Those of us who can work from home still are – as long as we can find some time among dealing with children, family, and eating and drinking – but "normal" business in the so-called "real" economy is upside down.
One-third of the country's population is literally on lockdown. We're seeing massive impacts on airlines... restaurants... tourism... and sports. Anything "in person" is just not happening. Gross domestic product ("GDP") is expected to tumble in the high double digits.
In the meantime, the health care sector – which makes up roughly 20% of American GDP on its own – is under incredible stress.
A friend of mine working as a nurse in a major New York hospital described the scene there as "apocalyptic."
Perhaps a better way to quell the rapid spread of the coronavirus would have been to test many, many more people earlier and quarantine those who tested positive for up to three weeks. (The virus apparently lived on the Diamond Princess cruise ship for up to 17 days after passengers disembarked.)
But what do we know?
We don't think many people could have predicted exactly how our leaders and decision-makers would react to the pandemic. And we don't think anyone could have imagined our politicians and workplaces telling most of us to stay home for at least a few weeks.
But as we begin to look back, financially speaking, one thing is obvious. And it's that America's Federal Reserve-juiced way of doing business – stemming from the financial crisis of 2008 and 2009 – wasn't prepared to survive the sort of supply and demand shock we've seen from the COVID-19 pandemic...
Corporate America's reliance on debt, like aircraft-maker Boeing (BA) for instance ($27 billion in outstanding debt and rising), means any disruption of regular cash flow has the potential to create widespread bankruptcies – and threaten the livelihoods of millions of Americans – as stock prices crash.
Today, we're effectively in a recession. And, just as Porter predicted, the federal government has stepped in to treat COVID-19's economic "symptoms" in unprecedented ways.
In The American Jubilee, Porter warned that calls for debt forgiveness for most "Main Street" Americans were likely to grow in the next crisis...
The federal government is free to print all the money it needs to pay government debts. Private households are different.
The only ways out of private debt are to pay it, to default, or to have it forgiven with a Debt Jubilee.
Today, America's low-income households don't have the funds to service the money they owe. It's mathematically impossible. And politicians will never allow tens of millions of our poorest citizens to go bankrupt.
Seeking a "cure," the Fed has fired the "bazookas"...
One of the Fed's five voting members, Neel Kashkari, said in a nationally televised interview last Sunday that the central bank has the power to print money into eternity...
"There's an infinite amount of cash at the Federal Reserve," Kashkari told 60 Minutes' Scott Pelley. "We will do whatever we need to make sure that there's enough cash in the banking system."
As our colleague and DailyWealth Trader co-editor Drew McConnell noted earlier this week, this "money from nothing" idea will eventually have consequences, like inflation. But the bank is only thinking about the now...
To help stabilize the economy during this coronavirus crisis, some folks expect the Fed will print a total of more than $10 trillion. Whatever the number is in the end, it will be a lot. And we already know at least one of the outcomes...
Printing new money devalues the dollars that are currently in circulation. At some point, it's almost guaranteed to cause inflation. The prices for just about everything will go up.
But that's the last thing on our leaders' minds right now. With the U.S. economy basically at a standstill, they're far more worried about deflation – or prices dropping – due to lack of demand.
And Congress has now stepped in with Jubilee-like promises to the American public...
On Wednesday evening, the Senate approved a historic, pandemic-related stimulus package that totals $2 trillion. The House followed with approval on Friday afternoon. According to reports about the package, the framework includes...
- Direct payments of $1,200 to most individuals making up to $75,000, or $2,400 for couples making up to $150,000. The amount decreases for individuals with incomes above $75,000, and payments cut off for individuals above $99,000.
- Expanded unemployment benefits that boost the maximum benefit by $600 per week and provide laid-off workers their full pay for four months
- $367 billion in loans for small businesses
- $150 billion for state and local governments
- $130 billion for hospitals
- $500 billion in loans for larger industries, including airlines
- Creation of an oversight board and inspector general to oversee loans to large companies
- Measures prohibiting companies owned by President Donald Trump and his family from receiving federal relief
The Senate bill has also given students the opportunity to stop making loan payments for the next six months until September 30. That's a hallmark of a jubilee.
Now, let's forget for a second if $1,200 or $2,400 is enough money to get everyone through this... especially if many businesses are essentially shut down longer than imagined. (Will we get another round of stimulus if the virus endures into the summer months?)
The point is, considering the debt-loaded state of our economy – and all other major ones around the world – it's reasonable that we hear more calls for policies like these in the weeks and months ahead...
After all, the Fed apparently has a blank check – and it's not afraid to use it.
If you've followed Porter's guidance over the years...
You know that in 2000, he predicted the dot-com bust... And in 2008, he predicted the collapse of mortgage lenders Fannie Mae and Freddie Mac.
And you know he hasn't only offered up these ideas and warnings about a coming jubilee... He has also provided guidance on how to survive it.
Longtime readers know Porter is most interested in "capital efficient" companies...
These companies won't need bailouts. They're healthy enough to make it through times like we're seeing today. These companies keep providing wealth for their investors in good times and bad... forever.
Today, these factors haven't changed at all... In fact, this past Thursday, Porter recently shared what he considers to be the culmination of his life's work. In case you missed his special presentation, you can view it here to get caught up.
Without giving away too much, we can say that Porter believes there's potential for the market to rebound quicker than many experts expect...
And there's a select group of investments you'll be happy you owned when that happens. In short, Porter is making his shopping list... and, excuse the reference, checking it twice.
For all these reasons and more, we strongly urge you to check out his free presentation to see where you can put your money to work in today's wild market.
All the best,
Corey McLaughlin
Editor's note: The COVID-19 pandemic is wreaking havoc on the economy. It's hard to know where to safely put your money today. So in response to these tumultuous times, Porter is launching a way to take advantage of capital-efficient, steadfast companies... The kind that protect and provide wealth for investors in good times and in bad... forever. Click here to learn more.
