The Weekend Edition is pulled from the daily Stansberry Digest.
Let's ignore stocks for a day...
Today, we're not talking about using the stock market as a wealth-generating tool...
We're ignoring the benchmark S&P 500 Index, the Dow Jones Industrial Average, and the Nasdaq Composite Index... in order to tell the true story about our nation's economic health.
Think about what else you see in the economy today...
We're seeing record amounts of consumer debt. We have credit-card delinquencies rising at higher interest rates than we've seen in 15 years...
We're seeing a spike in "inventory shrink," which is corporate speak for more people stealing from retail stores...
We're seeing a U.S. government paralyzed, most notably when Congress was unable to make any decisions for three weeks without a speaker of the House – until a new one was finally chosen this week. (Now, one of the first orders of business will likely be more spending that ups the national debt higher than the $33 trillion it already sits at.)
And we're still seeing high inflation... largely the result of pandemic stimulus efforts, on top of a financial reality warped by decades of "easy money" policies.
We could go on.
So, instead of looking at stock prices and the latest earnings reports coming out... what if the financial media, politicians, corporations, Wall Street asset managers, and I used another, more grounded number to measure economic health?
This number shows what's really going on for most Americans...
Think of it as the "Net Worth Index"...
Before I go any further, this idea might sound familiar to longtime readers.
I wrote about it in the Digest back in the summer of 2020, when a Federal Reserve-juiced market was on its way up to new all-time highs... while more than half of Americans didn't have jobs, and people were rioting in the streets.
It's a message that our founder Porter Stansberry has been trying to get across to everyday Americans for more than a decade. Some of the details have changed over the years, but the climate remains the same. In fact, it's radically worse in some cases...
You could calculate a measure like this in a lot of different ways. But today, let's do it by comparing the share of net worth held by the richest 1%, 10%, the middle class, and the poorest 50% in the U.S.
I want to draw your attention most to the trend among the richest 1%, compared with the group that makes up the top 50% to 90th percentile (which is roughly the middle class).
The richest of the rich are the only group that has gotten richer in the past 30 or so years... while most everyone else has gotten relatively poorer. And the middle class has suffered the biggest decline...
The richest people in this country have been getting a larger share of the wealth for decades... while most Americans have been largely unable to keep pace.
It's also interesting to note that as I put this chart together, I found out the Fed stopped reporting the share for the "richest 1%" in the first quarter of 2022. So we did the simple math based on the other three sets of data to figure out the numbers.
You've probably seen this wealth gap in your community and don't need data to back it up. But here's where I'm going with all this...
At times like these, the frustrations of the American public have tended to boil over...
When the gap between the rich and the poor is large and continuing to grow, an unexpected, panic-inducing event – like say, a pandemic – can spark major age-old stories and trends of violence, political and financial upheaval, or even war.
For instance, it started with the creation of the Federal Reserve in 1913, in the wake of the Panic of 1907. After that, most Americans saw their wages fall in half.
It happened in 1933 after newly elected President Franklin D. Roosevelt passed an executive order to restrict gold ownership. Almost every American saw the value of their savings and wages fall immediately by around 30% – setting off the worst aspects of the Great Depression and leading to violent insurrections in Washington.
It also happened in 1971, when the U.S. dollar came off the gold standard. This began the financial crisis of the 1970s, which lasted a decade and spawned domestic terrorism across the country. It's also when wage growth began to seriously lag productivity gains.
Most recently, it happened with a pandemic and the government response...
If you ask the Federal Reserve, the U.S. Department of the Treasury, and Congress, the solution to our country's ills is always massive money-printing...
Over 10 days in March 2020, the Fed created trillions of dollars of "fake money"... more than it had created in the previous 30 years before the financial crisis of 2008 and 2009.
Today, even after trimming its balance sheet by about 15% since early 2022 to supposedly fight the inflation it created, the Fed still has nearly $8 trillion of assets on its books – double the number before the pandemic.
Congress also passed trillions more in stimulus and spending bills in 2020 and 2021 while interest rates were near zero.
Stimulus checks and debit cards from Uncle Sam, extended unemployment benefits, and a pause on student-loan payments may have eased some panic in the short term. But they don't help the financial health of our country in the long term...
The U.S. debt to GDP ratio is at 120%. It spiked to its highest level since World War II amid the pandemic spending. And the U.S. dollar has lost 95% of its value since 1913, when Congress passed the Federal Reserve Act and "modern" central-bank policy began.
Since then, the Fed has only increased its interventions over time.
Those with fewer dollars to their name get relatively poorer every time a new one is created... and more frustrated, whether they know it or not.
Even before we all started living in a pandemic economy, the gap between America's richest and poorest families had more than doubled from 1989 to 2016. As I showed above, middle-class incomes have grown at a slower rate than those of the rich for the past 50 years.
All someone needs to do is drive around or take public transportation and look at what's happening in cities and towns all over this country to see what this translates to in real life.
If we're honest, our society is in chaos...
Trust in our institutions is badly broken.
America may still be "the best house in a bad neighborhood" in the context of the world, but that still doesn't mean everything is OK. Not even close. Real people are feeling real pain...
You can look at all kinds of examples... the number of drug overdoses, the increased reports of stealing from stores, or the political polarization that makes rational discussion nearly impossible.
Porter and many of our editors have been writing about the financial and cultural dangers of an ever-increasing wealth gap for years. And they've warned about the potential consequences, which appear to be playing out in real time now...
While the easy-money policies of the past may have been good for folks with access to Wall Street, the American economy we have today is largely unsustainable... And now, with soaring interest rates, it's facing a cost of money the nation hasn't seen since before the last financial crisis.
The problems we've touched on today will catch up with everyone's wealth eventually – no matter how well off you are, rich or poor. According to Porter, they're coming to a head right now...
Porter has written books and long talked about this idea...
In the book America 2020, Porter wrote about how 2020 would mark a pivotal time for America... when it would truly face the consequences of decades of debt creation and misplaced government interventions.
He noted that these periods of crisis and converging financial, societal, and political factors have happened roughly every 30 to 40 years – with the last one coming in the 1970s.
Throughout history – almost on a schedule – times of zero-percent interest rates, seemingly endless money-printing, and populist pushes for change have eventually had unintended second-order economic consequences...
That's why it's so critical to think ahead.
You can brace for the inevitable fallout...
Porter has been urging subscribers to prepare for years, just like he did in advance of the financial crisis in 2008 and 2009... including the blowups of Fannie Mae, Freddie Mac, and General Motors.
Porter is stepping forward with another warning now.
For those who are already familiar with him, yes – Porter is back after three years away from our business. And for those that haven't heard a presentation from him before, I urge you to listen to what he has to say...
Porter sat down for a special, free video event on Thursday at his 130-acre farm just outside of Baltimore. The latest message is so important and time sensitive that we rushed a film crew to record it.
Porter discussed the issues we've discussed here, and much more about his view on what's really happening in America... as the latest "monetary insanity," as he calls it, ramps up to a dangerous crescendo.
He also gave an update on where he has been and why he left. But, most important, he explained why a looming crisis in the financial markets is getting closer by the day... and shared steps you can take to protect and grow your wealth in this climate.
Good investing,
Corey McLaughlin
Editor's note: If Porter is right, the next several years could be very difficult for everyday Americans and individual investors. But if you're reading this, you already have one advantage... because this volatile period will be easier to endure for those who prepare in the right way. It could even set the stage for the kinds of opportunities that have been uniquely scarce in the age of easy money.
Knowing where the fallout will spread – and owning the right assets – is going to be critical. That's why Porter came forward on Thursday to share his controversial warning... and to reveal one of the top strategies he recommends right now.
If you missed the interview, don't wait... Check it out right here.
