Why, How To Protect Yourself From The Collapse Of The Dollar

“Trust us. We’re from the government.”

That’s just what those in power are telling you to do. Does it reassure you?

If you rely on the government to protect your hard-earned savings, you might as well give up now. If, however, you would like to protect your family’s future from the worst effects of this crisis, this article is a brief introduction to why and how you should do it.

There are still people around who are wondering “if” or “when” the American dollar is going to collapse. But I can tell you that there is no if or when; the collapse of the U.S. dollar is happening right now. The depression it is causing is highly visible. The people are already in the streets: in the United States and around the world.

The only reason it’s not 100 times worse is because of high level international political deal-making. The banksters hope that if all the major fiat currencies go down together, no one will really notice. Under their plan, you will see the same number of dollars on your bank statement and the exchange rates with major foreign currencies will stay more or less constant. All that will be gone is the true value of your savings: the purchasing power. This is what I call “stealth devaluation.”

In November, for example, the Federal Reserve, Bank of Japan, European Central Bank, Swiss National Bank, Bank of Canada and Bank of England jointly announced a plan “to make more dollars available at cheaper prices in an effort to ease liquidity strains in financial markets.” In plain language, that means they are printing yet more dollars.

That’s right. The economy has failed because “they” created and spent too much money. Yet, those in power think they can solve the problems with yet more doses of the same medicine.

Or do they? Don’t underestimate their cunning. I believe they know full well that what they are doing will not solve the problem at all. In fact, it will only postpone the final outcome, making it even worse in the process. Politicians are concerned about winning the next election — not about the debts that our great-grandchildren will have to pay off.

Whatever politicians’ goal, it’s far too late in the day to waste time pointing fingers across the political divide. Actions speak louder than words — or, in this case, they offer better asset protection.

First and foremost, you should focus on securing what you can get out of this mess — no matter how big or small your portfolio. In practical terms, that means globalizing your assets so they are no longer dependent on the dollar. As Terry Coxon wrote recently: “By keeping all your assets in the country where you live, you commit, ahead of time, to ratify whatever policy your home government might adopt, no matter how objectionable, unreasonable or pernicious that policy happens to be.” Or as Bob Livingston put it, “There is no substitute for getting money out of the United States. The time is coming when it won’t be legal.”

We can already see the imposition of currency controls, like supposed anti-money-laundering regulations. We know that U.S. banks are making it exceedingly difficult to wire money overseas, sometimes even refusing outright to send money according to client instructions. Meanwhile, because of onerous U.S.-imposed regulations that in many cases run contrary to local laws, thousands of foreign banks have no choice but to refuse to do business with Americans, which is another form of indirect currency control.

Finally, the draconian foreign asset reporting guidelines released by the Internal Revenue Service just before Christmas leave no doubt that the U.S. government is serious in its wish to know everything about everything you own, anywhere in the world. The only reasons they could legitimately need this information would be for full-scale capital or exchange controls and/or the imposition of a wealth tax — a form of tax on assets rather than income, unknown in the U.S. until now.

Then, isn’t it too late to go offshore? If privacy is a thing of the past and everything has to be reported, what is the point of moving money overseas?

Of course, that is what they want you to think. But it is still 100 percent legal and ethical to do what you like with your own money. There are no official capital controls yet — and there are simple actions you can take to avoid them when they come. Here are a few:

  • Retirement accounts are first in the firing line for government seizure. Right now, you could legally take your individual retirement account and invest it in physical gold stored in a Swiss vault or foreign real estate (how would they force you to repatriate that)? But laws already being discussed would force you to invest your retirement accounts domestically, in “safe” things like government bonds — all in the name of “investor protection” of course.
  • There are still pockets of the world with strong economies and healthy banks; Singapore and Hong Kong come to mind, for example. You can still open a simple multi-currency bank account in these places without leaving home.
  • There are countries where you can quickly and relatively cheaply establish a legal and official foreign residency — a bolt-hole if the going gets too tough — that can also lead to a complete second passport in as little as three years. Privacy, freedom and property rights in these countries are much greater than in the United States.

Last but not least, there are still quite a few places on Earth where, with a small, speculative part of your investment portfolio, you might actually be able to get extremely rich.

Sure, protecting and growing your assets internationally will take some effort. But freedom, unfortunately, is not free and cannot be taken for granted. The time to start learning about it is now.

–Peter Macfarlane

The U.S. Government Wants To Take You Down With It

Have you ever wondered why the State of the Union speech involves so much pomp and posing?

You don’t have to be an astute political analyst to realize the whole charade is propaganda designed to make people feel good about the government. But why bother?

Why risk embarrassing yourself on Jon Stewart’s "Daily Show" program by saying something stupid… or something that’s exactly the opposite of what you promised last year?

For example, in 2009, President Barack Obama said, "Done right, earmarks have given legislators the opportunity to direct Federal money to worthy projects that benefit people in their districts and that’s why I’ve opposed their outright elimination."

But this year, the same President, standing in the very same room, talking to essentially the same audience, said exactly the opposite. He was grandstanding to the new political mood and scolded the assembled lawmakers. He issued a "warning" that he would veto any bill that contained so much as a single earmark.

What a phony. What a liar. Why go on national TV and prove it? 

If Obama doesn’t want to, who’s going to force him? His government is the world’s only superpower, with troops in more than 100 countries. It listens to every phone call that’s dialed. It reads every email that’s sent. It watches every road. It looks at every financial transaction.

Our government is so powerful it can borrow 40 cents of every dollar it spends while demanding the rest of the world use its paper money. Its own courts are afraid of ruling against it, to the point of ignoring the plain language of its own Constitution.

So… why bother with this charade?

The most important element to a stable society is the idea (the lie, mostly) that the government is legitimate. Government is violence and coercion. Government is force. And for that force to be tolerated by millions, it must appear to be legitimate.

Any information or argument that the government is corrupt or inept is dangerous because it threatens its legitimacy. That’s why there’s such a tremendous fight over the obvious corruption between state employee unions and elected officials. That’s why no one wants to explain to the American people that our Federal government is bankrupt. We’re printing money because it’s better to steal from our creditors than admit our government is inept.

And that’s why the State of the Union is such a spectacle. See The State in all its glory…

But remember this: Our State, as powerful as it is, relies on an assumption that’s made collectively by millions of Americans.

We must believe the people we saw on TV listening to the President are fundamentally good and honest people. We must never come to doubt the character of those people or the process they used to gain power.

If that happens, our State, even though it’s the most powerful in the world, could quickly collapse. It is nothing without the consent of the governed. And our consent depends entirely on its legitimacy.

I believe our government is in imminent danger of losing its legitimacy. Why?

Our Federal government is bankrupt and threatening to bankrupt several generations of Americans. At some point—one that is rapidly approaching—Americans will repudiate these debts and the legitimacy of the government that incurred them.

Unaffordable foreign debts and the obvious perfidy of "quantitative easing" will soon render our currency worthless. It is a shame upon the honor of our country that we would even consider using the printing press to finance our debts… It is a high crime that we have done so. The world will long remember the way we have treated our creditors.

Over the last 50 years, the government became a socialist tool. It steals assets from responsible, hard-working citizens and distributes them to others, mainly on the basis of political patronage. At some point, these policies become self-destructive. So many people end up on the dole; the government has no way to finance their needs. We have reached that point. Today, more than half of all voters pay zero Federal income taxes.

Our aggressive foreign policy has created billions of enemies overseas while propping up regimes that would disgust most Americans—like the Saudis.

Most critically… our government is for sale. As the price of influence in Washington continues to escalate, it will become impossible to deny the patently obvious truth: Government policy is awarded to the highest bidder and our "free" elections are essentially rigged by the massive sums spent on advertising for candidates.

While I look forward to the day my fellow citizens begin to see their government as it really is, I also fear that day… for it will surely mark the beginning of an "interesting" moment in history.

The leadership of the United States is pretending this day of reckoning will never occur… that Ben Bernanke can successfully paper over these debts along with however many trillions of additional dollars are necessary. This is the absolute height of ignorance. The destruction of our currency and our country’s standing in the world’s economy is certain.

We are already at the point where our government’s debt cannot be financed at any legitimate rate of interest… and yet our leaders show zero interest in doing anything to prevent this unmitigated financial disaster.

As many of you know, I’ve produced a video about these real problems and my suggestions for dealing with them. If you haven’t watched it yet, I strongly encourage you to do so.

Regards,

Porter Stansberry

–Porter Stansberry

Editor’s note: For more insight and actionable investment advice on high-income opportunities from Porter Stansberry, please click here for details.

Prepare Yourself For The Impending Global Crisis

By now, you should have seen Porter Stansberry’s prediction for "The End of America." His recent video was the culmination of years of research and observation, which led him to this conclusion… The United States dollar and economy are doomed. The U.S. government has printed more money and taken on more debt than it can ever repay.

But the U.S.’s situation isn’t unique. We’ve seen it play out many times throughout history. Whenever a sovereign nation becomes so indebted it can never hope to repay, it inflates. And the scary thing is, inflation is already running rampant. Take a peek at the chart below and its explanation from the most recent issue of his Stansberry’s Investment Advisory newsletter…

 

What you see here is the credit of the United States, represented by the value of a 20-year Treasury bond (TLT) versus the major alternatives to money: energy as represented by coal (KOL), agriculture (DBA), and hard money as represented by silver (SLV). 

This picture sums up the arguments and warnings we’ve been giving for years. We are not going to have a crisis. We are in a crisis right now. U.S. credit is now in permanent decline, while the value of the main alternatives to the dollar — energy, food, and real money — are soaring. 

The market is giving you a warning. Inflation is here. We are in the midst of a monetary crisis. The facts are undeniable.  — Stansberry’s Investment Advisory, December 2010

As Chris Weber points out in DailyWealth, gold has risen for 10 consecutive years. Going all the way back to 1980, Chris never found another market with the same consistency.

And he agrees gold’s rally isn’t over. Go to the grocery store and ask people if they own gold… Not gold jewelry, but actual gold bullion. Most do not. Sure, gold is making headlines. But until your waiter, auto mechanic and tailor are showing off their new Canadian Maple Leafs, you can bet gold will rally. If we do see a short-term dip down to $1,300 or $1,200, we’d treat it as a tremendous buying opportunity.

And it helps that the Federal Reserve is hell-bent on printing the dollar into oblivion. This week, the Fed released minutes from its Dec. 14 meeting… Attendees dismissed rising long-term Treasury rates as a strengthening economy (no inflation here).

Officials also committed to the $600 billion Treasury bond purchase program proposed in November. According to the Fed’s minutes:

While the economic outlook was seen as improving, members generally felt that the change in the outlook was not sufficient to warrant any adjustments to the asset-purchase program. Some indicated that they had a fairly high threshold for making changes to the program.(Emphasis is our own.)

We’re not sure what it will take to hit the Fed officials’ "high threshold"… Perhaps when interest rates hit double digits, and we’re walking to the store with wheelbarrows of cash. But we’re sure the dollar will be far less valuable by the time the Fed quenches its thirst for printing.

In addition to rising interest rates, another "End of America" prediction is also playing out… soaring food prices. Last November, Porter attended a secret meeting with some of the world’s most powerful people (billionaire investors, government officials, and corporate CEOs) to discuss the looming food crisis. While most attendees tiptoed around the central issue, Porter dove in. He recalled his contribution to the meeting in the November 2010 issue of Stansberry’s Investment Advisory

Excuse me… I wonder if everyone here is merely trying to be polite… We are here talking about the risks to the global food supply chain because we all know food prices are rising rapidly and these price shocks are merely the beginning. 

We all know there’s a currency war underway — a currency war that began in 2008 with the collapse of Wall Street’s investment banks. We all know this will, eventually, lead to a trade war. And we all know that as sure as night follows day, a currency war will lead to a trade war. We know this will have catastrophic consequences for food supplies. 

But why hasn’t anyone yet pointed to the obvious problem? 

It terms of gold, agricultural commodities prices have fallen by about 50 percent over the last 10 years. 

Obviously it’s not the price of food that’s the problem. It’s the collapsing purchasing power of the U.S. dollar that’s led us to this situation. 

That’s what’s going to cause a food crisis — and an energy crisis. 

The real question we should be discussing isn’t food. It’s money. And more specifically, the lack of a sound world reserve currency.

As Porter predicted, the weakening currency caused food prices to rise. According to the United Nations, world food prices hit an all-time record last December (besting the 2008 levels that sparked deadly riots across the world). An index of 55 food commodities followed by the Food and Agriculture Organization rose for the sixth month to 214.7, above the June 2008 high of 213.5. To see how Porter recommends protecting yourself from the global food shortage — and every other "End of America" scenario — click here 

Regards,

S&A Research

Editor’s note: For more insight and actionable investment advice, consider a trial subscription to Growth Stock Wire. Click here for details.

The Only Trend That Matters

We call it "the only trend that matters."

It is the most important financial idea we could ever give to you. The fate of millions of Americans rests in a single market, where just one financial instrument trades, and…

This market is collapsing. Its downfall began, as we predicted at the time, in late 2008.

This single market determines our standard of living, our role in the world and our prestige as a nation. It directly influences the price of food and oil. And that’s not all…

Most of the world’s other markets depend on this market, too. The price of every fixed-income security in the world is based directly on this market. The prices of United States stocks depend on this market — not directly, but strongly in comparison.

Most important, the U.S. dollar depends on this market.

You see, foreign investors own trillions of this asset. As the market collapses, foreign investors will sell. As they sell, they will also unload dollars. This market is the key to the future value of bonds, stocks and the U.S. dollar. That’s why the decline of this market is the only trend that matters.

We’re talking about the collapse of the largest bond market in the world — the market for U.S. Treasuries.

The best illustration of this trend is the chart below. We urge — no, we beg — our readers to pay attention to this chart. Put a copy of it on your refrigerator. Update it weekly. Keep your eye on it. And make sure you truly understand what it means.

The chart compares the value of long-dated U.S. Treasury bonds (TLT) to the price of gold (GLD). When we say "long-dated," we mean U.S. government debts that don’t come due for more than 20 years. This chart shows the value of the bond market compared to gold since December 2008.

Whenever someone tells you he believes we are exaggerating the risks of our government’s debt load and its dependency on "quantitative easing" (aka printing money), show him this chart.

This chart demonstrates the collapse of the purchasing power of our currency as gold rises. And it shows the corresponding collapse in the credit of the U.S. government as bonds fall.

Just to be clear about this… We are not rear-looking experts. We have been warning about these issues frequently (almost continuously) since December 2008. Here’s what we wrote back then:

None of the government’s bailout plans will solve any of the problems. The government can only shift the burden of the failures. Instead of bondholders and shareholders being wiped out, taxpayers are put on the hook. These actions will temporarily resuscitate the economy — but cause a permanent decline in the value of the dollar… inflation will wipe out much of the value of long-dated U.S. government bonds, causing their prices to plummet.

In that issue, we told folks to "buy as much gold bullion as you can reasonably afford." We’re repeating these warnings again because the market for U.S. Treasuries recently "broke down" through an important level. The big government bond fund (TLT) just struck its lowest low in nine months. The decline seems to be accelerating.

When we began writing about the looming collapse of the bond market and the risks to the U.S. dollar, a lot of people called us "right-wing nut jobs" or "gold bugs." That’s not the case.

Our advisory was founded (in 1999) on the idea the Internet would change our lives in a profound way. We write about the biggest financial trends we can understand — whatever they happen to be. We have always striven to understand the facts and allow the facts to dictate our view. Now, three years after we first predicted the collapse of the Treasury market, more and more people have discovered these facts. They can look around and see with their own eyes what’s happening. Our ideas have gone from fringe to mainstream.

Despite the growing number of people waking up to these facts… and the considerable rise in gold over the past 10 years, it’s still not too late to buy gold and silver bullion. But I urge you to hurry. The secret is getting out… and precious metals are destined to skyrocket in the coming years.

Good investing,

Porter Stansberry

–Porter Stansberry with Braden Copeland

P.S. We tried to run a television ad warning about the risks to our country. As far as we can tell, nothing in the ad is even mildly offensive. But no large TV network in America has agreed to run it, not even Fox. You may believe you have the right to free speech, but not in any venue that matters. You can click here for a more detailed video on how I recommend you protect your family and your wealth from the dollar’s destruction.

Why The Debt Situation Is Worse Than You Even Imagined

There are few things about which history is unanimous. Land wars in Asia, for example… always a bad idea.

Paper money falls into this category. Paper money always fails and wipes out the people who depend on it.

Or as our friend Rick Rule likes to say, paper money’s track record is unblemished by success. The return of paper money to its intrinsic value (nothing) is guaranteed. All we need is time (though politics certainly help move things along).

We would not argue that organizing a system of sound money based on paper receipts is impossible. We would merely point out that keeping such systems sound and reliable has proven elusive to this point in human history.

Paper money is like many other types of idealized virtue humans cannot attain. It’s simply beyond human nature to avoid perdition. Sin, as they say, is part of man.

Every government that has used paper money has succumbed to a fatal level of borrowing. Rather than a restructuring of these debts, paper money systems allow for the rapid expansion of the monetary base to facilitate paying off debts in devalued money.

This is no different than stealing. And yet… that is what happens every time, resulting in a massive crisis and a breakdown of social norms.

It normally happens faster in democracies, where no strong interest group votes for living within the country’s means and repaying its creditors in sound money. No, people vote for more spending and more debt. And they always expect someone else to pay. Case in point… Greece.

Researching problems in the Greek economy is like reading a financial comic book. All the players are clowns.

For example, the national railroad has annual revenues of €100 million… against a wage bill of €400 million and another €300 million in expenses. The Ministry of Agriculture hired 270 people to digitize photographs of Greek public lands… with one digital camera.

In 2001, the Greek government borrowed $1 billion from Goldman Sachs to help balance the budget. The deal relinquished future receipts from the national lottery, national highway tolls, airport landing fees, and even funds promised to Greece in the future from the European Union.

The government was burning the family furniture to pay current expenses. And now, they’re out of furniture. It’s all been burned.

In total, the Greek government owes €1.2 trillion. That’s €250,000 for every adult.

Obviously, Greece cannot repay this money in sound currency. The only way out is for the Greeks to inflate the debt away — effectively stealing from their creditors with a printing press. That they haven’t done so yet is only because they no longer have their own currency, the drachma.

Instead, they are part of Europe’s common currency, the euro. And Europe is making every effort to maintain the mirage of a united economy. Unfortunately, no such thing exists. It’s merely a matter of time before the Greeks default.

The exact same thing is true about the United States — except the numbers are even worse.

Regards,

Porter Stansberry

–Porter Stansberry with Braden Copeland

 

PS: The United State’s debt situation continues to grow evident. To learn more about it and how to protect yourself from it, please click here.

An Answer To The Most Popular “End Of America” Question

I’ve been on the radio a few times in the last month. Producers are contacting us with interview requests because of our new promotional video, "The End of America."

I imagine most DailyWealth readers have seen this video already. You know the core components of our argument: The debts assumed by the Western democracies will overwhelm their economies and lead to the end of our current dollar-denominated, global currency regime. This has profound implications for Americans’ standard of living and our empire’s role in the world.

Doing these interviews and taking call-in questions from people around the country reminds me of why we made the video: People suffer from a shocking lack of knowledge about the serious financial problems facing our country. For example, the most popular question is: "When will the crisis begin?"

The question assumes we ought to ignore the collapse of the automakers, the complete destruction of America’s investment banks, the receivership of the world’s largest mortgage firms (Fannie and Freddie) and the world’s biggest insurance company (AIG)…

The question implies nothing unusual has taken place with housing prices… or in the markets for strategic commodities like lithium, copper, oil, coal and corn — all of which are soaring in the face of the moribund U.S. economy. The question assumes nothing is going on with the value of our dollar, despite silver trading near $30 and gold trading close to $1,500 — up 100 percent in only two years.

We respond to the popular question with a question of our own: What will have to happen before you’ll say we’re in a crisis right now?

How high will gas prices have to get before your neighbors notice something is wrong? How high will gold have to get? Or silver? How many banks will have to go under? How high will unemployment have to rise? How many cities will have to go bankrupt? Where’s your threshold? How bad will things have to be before you begin to see what’s really happening?

In addition to raising these questions, I’ve compiled a list of seven key facts that might spring people into taking action to protect themselves. They are the factors I believe MUST lead to the end of the global U.S. dollar standard — what we call "The End of America."

1) The price of gold has gone up 10 years in a row. We can’t think of another market that’s ever risen for 10 consecutive years. This is a historical anomaly and it means something has gone badly wrong with the world’s reserve currency (the U.S. dollar). Markets, if left to find their own equilibrium, will naturally fluctuate. Gold isn’t fluctuating. Its steady move up proves something strange is happening to our money.

2) Our government’s deficits are out of control. The government’s annual deficits now routinely surpass $1 trillion. The first $1 trillion deficit came in 2008 — and the government explained it away as the consequence of the financial crisis. But we racked up another $1 trillion deficit in 2009 and yet another in 2010.

We’ll have another in 2011 and so on. Our national debt has doubled since 2005. We’ve borrowed more money in the last five years than we had in the entire history of our government until then. This isn’t sustainable.

3) The government cannot increase tax revenues enough to cover our spending or repay our debts — ever. Our annual deficits have become completely unlinked to taxes. Total Federal income taxes and corporate taxes generate $1.1 trillion a year in revenue, and we still ran a $1.3 trillion Federal deficit last year. So even if we increased tax revenues by 100 percent, we would still have fallen $200 million short. This is totally unsustainable.

4) Special-interest groups — particularly government unions — are looting our Treasury. Self-serving special-interest groups have completely hijacked government spending. We now spend $200 billion a year on Federal pensions. We’re spending another $450 billion on welfare. This spending, combined with our defense spending ($700 billion), exceeds total Federal tax revenue and leaves nothing to pay the $200 billion in interest on our debt, nothing to pay for actual government services (like roads), and nothing to pay towards the inevitable Social Security/Medicare shortfall.

Remember… most voters do not pay taxes. It’s politically impossible to reform this interest group-based spending. These people are robbing the Treasury. They will cause our currency and eventually our government itself to collapse.

5) We’re printing money just like the banana republics we used to mock. To support the government’s runaway spending, the Federal Reserve is now continuously buying government debt. This process was commonly called "monetizing the debt" or, more simply, "printing money."

In addition to the inevitable economic consequences of monetizing debt (massive inflation), there’s another, even more serious problem: a lack of confidence in the leadership of the Fed. We would support an audit of the Fed. We would support replacing Fed Chairman Ben Bernanke. After all, Bernanke has alternately defended his decision to print massive quantities of new money and denied ever doing it. However, we are certainly aware that as people (rightly) lose confidence in the Fed and in the dollar, there will be serious consequences for our economy.

6) We can’t repay our debts. Total debt outstanding in the U.S. currently exceeds $55 trillion. That’s $681,165 in debt per U.S. family. There is simply no way to repay (or even maintain) debt of this magnitude using the income of the average American family, which is slightly less than $50,000 per family per year. Interest alone on these debts (based on a 5 percent rate) would total $34,000 per family every year. Total debt in the U.S. economy is unsustainable and can’t be financed without printing vast new sums of money.

7) Shockingly, new debt issuance in the U.S. is soaring, with the lowest-quality debtors borrowing record amounts. Despite all the evidence that the U.S. economy carries far too much debt, both public and private debt issuance soared to new record levels in 2010. Overall, more than $3 trillion in new corporate debt was issued last year — the second record year in a row.

And junk-bond issuance set a new, vastly higher record. In 2010, 509 speculative-grade corporate borrowers sold $287 billion worth of new debt. That compares to the previous record (2009) of $167 billion. Our economy has become so warped by its debt load, it cannot function without ever-larger amounts of debt.

In summary, anyone who carefully looks at these numbers must realize this is not safe and will not last long. That’s why I’m telling everyone: Don’t ask, "When will the crisis begin?" Instead, ask, "Where can I get the best deal on gold and silver bullion to protect my family’s finances?"

Good investing,

Porter Stansberry

–Porter Stansberry with Braden Copeland

P.S. Please carefully think about the facts I list above. Like it or not, these issues are going to affect you and your family in the months and years ahead. Ignoring this problem will not protect you from it. What do I think people should do right now to protect themselves? Watch this video, for free, to find out.

The Next Chapter In The End Of America

I believe we are seeing the very early stages of a great monetary crisis that will, eventually, lead people (and then their politicians) to return to gold- and silver-backed currencies. — Porter Stansberry, May 4, 2006

Four years ago, we began warning people something was seriously wrong with our money — the mighty United States dollar.

The economy was enjoying a furious bull market. Everything — literally everything — was going up.

Near the peak in February 2007, investors were no longer requiring a higher return for taking more risk — a so-called "risk premium"…

Junk bonds were trading at nearly the same prices as triple-A credits. Garbage penny stocks were trading at blue-chip prices. Dividends had disappeared. So much money and credit had been created from thin air (subprime mortgages) and thrown into the market that prices had reached a point where, as careful analysts, we could find nothing safe to buy.

We were afraid of what would happen next. We knew the country would have to make a choice. Would we write down and write off the excesses of the greatest credit bubble in history? Would thousands of banks fail? Would millions of "investors" — fools, really — lose everything? Would the slate be wiped clean, allowing a recovery to occur?

Or would something far worse manifest?

Would politicians seeking power and wealth promise to bail out unwise corporations and reckless lenders? Would the full potential of our paper money system be revealed to the public? Would there be an all-out attempt to "paper over" the bad investments and debt-driven losses?

We always knew what would happen. Our democracy — the most powerful government in history — would surely choose to print. How did we know? Because that’s what governments do… all of them… especially democracies. Their ability to print money is always too powerful a temptation to resist — to paper over… to create money from thin air… to lie, cheat and steal from the citizens via inflation.

We knew it would happen. We warned and warned it would happen.

And now it’s happening. We have proof.

Last month, some of the Fed’s secrets were unearthed. Dozens of well-connected companies received billions in bailout money from the Fed — deals the central bank never disclosed to Congress or the press…

Remember when the government promised it would only rescue companies that posed a "systemic risk" to the banking system? It was a lie. Harley Davidson got $2.3 billion in Fed money. Caterpillar got almost a billion dollars. Even McDonald’s got more than $200 million.

In all, the Fed printed up $3.3 trillion and doled it out to what seems like every big company on the planet with a lobbyist in Washington, including dozens of foreign companies with almost no U.S. employees.

Since then, the prices of gold and silver have rocketed 150 percent higher. If you took our advice and began to hoard gold and silver bullion, you’ve probably protected your net worth from the worst of the collapse of 2008 — at the very least.

If You’re New To The Story, Don’t Worry.

The curtain is about to come up on the real show. Politicians (and the press) have largely supported the Fed’s decision because, in their eyes, printing the money was better than falling into a massive recession or possible depression. And that’s certainly true — in the short run.

In the long run, these decisions must lead to more printing and eventually the collapse of our currency.

Regards,

–Porter Stansberry with Braden Copeland

PS: The next chapter in the end of America will most likely end our monetary system. To learn more about this collapse, please click here.

How America Became A Communist Nation

The root of the problem the world is facing right now isn’t really governments… or banks. The real problem is simply a very bad idea — the idea that the State ought to sit in the center of society. Let me explain…

The last 100 years (since 1914) saw not only the end of the classic gold standard, but also the fantastic ascendancy of the nation-state.

These two trends are inherently and dangerously related.

Until World War I, the central government of the United States, for example, played a small role in the lives of its citizens. Its powers were strictly limited, as were its revenues. It was specifically barred from taxing citizens directly. It was a humble government that interacted with the individual states in the union, but didn’t interact much with individual citizens.

The first signs of change came after the Civil War. "Progressive" ideas began to emerge. Most of these ideas came from Germany, from philosophers like Karl Marx and Friedrich Engels. The core of these ideas was that the State itself was superior to its citizens. Therefore, the argument went, society ought to be organized to better accomplish the goals of the State.

Today, most Americans have no idea that the foundations of our modern State are based — nearly verbatim — on the demands of Marx’s Communist Manifesto.

In 1848, Marx threatened to organize a worker’s revolution unless European governments:

1. Abolished property rights and applied all rents towards public purposes.

[Modern corollary: Don't pay your property taxes, lose your house. So who really owns your house?]

2. Levied a heavy, progressive income tax to equalize wages.

[Modern corollary: Combined Federal and State marginal income and payroll taxes approach (or surpass) 50 percent in many U.S. states.]

3. Abolished all rights of inheritance.

[Modern corollary: The estate tax.]

4. Confiscated the property of all emigrants.

[Modern corollary: The 2008 "Hero's Act," which forces people leaving the U.S. to pay the equivalent of their estate taxes on the global assets before they turn in their passports.]

5. Centralized access to credit in the hands of the State by means of a national bank and an exclusive monopoly.

[Modern corollary: Fannie Mae and Freddie Mac, which make more than 90 percent of all of the mortgages in the U.S. and have dominated the market for mortgages for decades.]

6. Centralized the means of communication and transport in the hands of the State.

[Modern corollary: AT&T was a legal monopoly for decades. AMTRAK is a ward of the states. The government owns all the roads. And the State controls all air traffic.]

7. Provided free education for all children in public schools.

[Note the emphasis on public schools. Paying for education isn't enough. What counts is indoctrinating the kids in glorifying the State.]

8. Produced a common agricultural policy to maximize the productivity of the land.

[Modern corollary: Massive ethanol and agricultural subsidies.]

Most people in democracies like these ideas for one simple reason: They hold the allure of getting something for nothing. They are the siren song of living at the expense of your neighbor.

These ideas became extremely popular over the last 100 years all around the world. As a result, as democracy spread, so did these ideas. Politicians of each party and persuasion throughout the Western world quickly adopted them as their own (and never mentioned Marx).

As these ideas took hold, one big problem developed… How do you pay for them?

Progressive politicians believed they had the answer. They just took Marx’s big innovation: A progressive income tax. Let the rich pay!

It’s a popular idea — but it never works because decisions to add more benefits don’t take into account the expense of paying for them. It doesn’t take long for the budget to get out of control. Or said another way, everyone can’t live at the expense of his neighbor. His neighbor can’t afford it… and he moves.

More serious, the flaw in communism is obvious. Communism doesn’t account for the fact that people expect to control the fruits of their labor. People don’t like their assets being stolen and their wages being heavily taxed by a government that regulates their businesses and sends their children off to war. Incrementally, people stop working. Wealthy people flee… or hide their incomes.

Tax revenues fail to meet projections. Deficits grow. Deficit spending soars. And debts mount.

That’s where paper money comes in. Paper money isn’t only good for financing a war. It’s also perfect for closing the gap between what an economy ought to produce and its paltry real production when it has been beaten into submission by communist ideas. I like to explain it this way…

The central truth of economics is scarcity. There can never be enough of anything to satisfy everyone. The central truth of politics is patronage: Promising to give everything to everyone. Paper money is the bridge between economics and politics.

The unpaid debts of an entire generation of people in Western countries are coming due. The so-called "baby boomers" grew up in a world dominated by Marxism and Keynesian economics. These are bad ideas. They are destined to collapse.

And the collapse is here.

Regards,

Porter Stansberry

–Porter Stansberry with Braden Copeland

P.S. To learn more about America’s push to Communism, please click here.

How To Protect Your Family And Wealth From The End Of America

The International Monetary Fund (IMF) estimates the 20 largest industrial nations (known as the G20) are on course to see their combined government debt exceed 100 percent of their combined gross domestic product (GDP) within three years.

Debts of this size simply cannot be financed, let alone repaid. The first step in this great unraveling is underway — the collapse of the euro.  

In March 2010, I wrote:

Like dominoes, the highly indebted economies of Europe are going to topple. Greece was first. But plenty more problems are coming. Italy has no way to meet its obligations. Nor do Portugal or Spain

Events over the past two weeks in Greece should give you plenty of warning governments all over the world have too much debt.

What will the U.S. do when a major European financial institution fails? If the resulting contagion causes one of America’s major banks to fail, what will the U.S. government do?

The answer, my friends, is simple: It will print, print, print, and print. Here’s the important fact to remember…

The United States is the only government in the world that can actually afford to underwrite the world’s banking system. That’s not because we have any real savings, but because we control the world’s reserve currency. It’s a paper standard, which means we can always print more of it.

The U.S. announced exactly that in November 2010, setting up an enormous $1 trillion bailout fund for the euro via the International Monetary Fund and beginning a new round of quantitative easing — this time $600 billion of new dollar reserves will be injected into the U.S. Treasury market.

Despite the enormous buying of Treasuries by the Fed, long-term Treasury bond rates have soared on these announcements. Investors have begun to flee the U.S. dollar into all other forms of savings:

  • Coal and oil are trading at two-year highs.
  • Corn, soybeans, wheat, cotton, and sugar are trading near multi-year highs.
  • Gold and copper are trading just shy of record highs.
  • Silver is trading near a 30-year high.
  • Even long-depressed natural gas is now rallying.

This list sums up the arguments and warnings we’ve been giving for years. We are not going to have a crisis. We are in a crisis right now

What’s the best way to protect yourself?

Well, if you had done nothing this year but buy real money (gold) and short U.S. Treasury bonds, you would be sitting on a significant profit.

Take a look at the chart below. Gold (the blue line) is up about 16 percent in the last year. The Treasury bond fund (the black line) is flat.

The credit of the U.S., which backs every bankrupt government in the Western world, must soon collapse. Our ongoing debts and deficits are too big to be financed in sound money. Thus, the Fed is turning on the printing presses and they will be running for a long time.

The time to act is now.

It’s critical you orient your investments so you’re long on real money and real assets and short on bad credits — starting with the U.S. government. Buy the things people need — food, energy and money. Sell things that are vastly encumbered — especially the stocks of corporations that are deeply in debt.

As you look through your portfolio, the first thing you ought to consider adding is silver. Silver is the best hedge against paper money for one simple reason: When it’s not used as money, there’s very little demand for it. When it is used as money, there’s a tremendous demand for it.

I expect gold will continue to move higher, too… much higher. If you wanted to put the U.S. dollar on a 10 percent gold-reserve standard, the price of gold would have to reach nearly $10,000 an ounce to back all the outstanding money of zero maturity. Assuming gold reaches this price, the price of silver at its full monetary value (at a 15:1 ratio to gold) would be around $650 an ounce.

I know these prices seem ludicrous today… but those numbers are real.

Remember, we’re a long way from the end of this crisis. Most people don’t even own any gold or silver yet. So now is the best time to hedge your portfolio… before the rest of the world realizes a massive inflation is underway.

Good investing,
Porter Stansberry

–Porter Stansberry with Braden Copeland

P.S. What most Americans don’t realize is this crisis is already well underway. I’m sure you don’t believe me, but please let me show you just a tiny fraction of the evidence that surrounds us. Take a look at these simple facts in the presentation I’ve posted here. I know you will be surprised. Then, you can make up your mind for yourself.

Two Of 2011’s Surest Bets

When I talk about "The End of America," I don’t mean the end of our political union (although I won’t rule that out). I’m talking about the end of the U.S. dollar as the world’s reserve currency. So how will it unfold? That’s what people keep asking me.

My answer is: The collapse of the global fiat money system is already underway.

Gold has gone up for 10 straight years. Gold is the counterbalance to fiat (paper) money. For 10 years in a row, investors around the world have been favoring gold. This trend is going to continue, and it will not stop until serious actions are taken to put a floor under the value of the world’s major paper currencies: The euro, dollar, and yen. And that can’t happen because the governments backing these three currencies are all bankrupt. The euro will die first. Just look at the numbers…

Greece, Ireland, Spain, Portugal and Italy have all made the same mistake. They responded to the collapse of real estate prices and debts by guaranteeing the private obligations of their banks with their country’s treasury. (America is doing the same, by the way.) The problem is, the debts are vastly larger than the governments can afford to repay… far larger.

So for example, when Anglo Irish Bank failed, it announced it required $35 billion. That’s equal to 25 percent of Ireland’s gross domestic product (GDP). And that’s only one of Ireland’s failed banks. Ireland will never be able to afford these obligations.

As a result, Germany, France and the other euro nations have put together a bailout plan. All of the European treasuries will act to save any member state.

Total debts owed to foreign investors in the so-called "PIIGS" countries are $2.6 trillion. The bailout package that’s been assembled totals $1 trillion. That sounds pretty good… at first.

But Italy and Spain have pledged $130 billion to the bailout. Where will they get that money? Greece has pledged $12 billion. Ireland, $7 billion. Portugal, $11 billion. Only about half this money will ever be raised and almost all that can be raised will come from France and Germany. Sooner or later, the taxpayers in those countries will say "enough" and the whole thing will unravel.

It will happen suddenly. And very, very soon.

Even if you pretend Europe can raise that size of a bailout fund, that figure isn’t nearly large enough to bail out either Spain or Italy. And both are likely to suffer a default if either Greece or Ireland defaults. That’s why interest rates in Ireland and Greece are back to crisis levels, despite the bailout promise. That’s why the euro continues to fall. And that’s why shorting the euro is one of 2011’s sure bets.

The collapse of the euro will cause all kinds of big problems this year and almost surely lead to a huge correction in commodities and a rise in the dollar. Does that mean the U.S. dollar’s problems are just a mirage? Nope. Sooner or later, the U.S. will face a stark choice…

If we let the euro fail, there will be terrible short-term consequences. So the Fed will crank up the presses yet again. Quantitative easing 3 will be another $1 trillion effort, this time focused on buying European sovereign debt. The Fed must become the lender of last resort not only for the U.S., but for the world.

That’s the last step before its eventual collapse. After that point, people will no longer flee to Treasuries when a crisis erupts. They will flee to gold.

Good investing,

Porter Stansberry

P.S. One final reminder… We’re not "headed" for a currency crisis. We’re in one right now. It’s very important you know the implications of this crisis and how to ensure your family’s financial security. You can learn how by watching this video. Click here to get started.

A Serious Warning About Muni Bonds

“To disrupt our services because we can’t make a bond payment would just be unconscionable. And as a leader I couldn’t do it.”

So explained Linda Thompson, the mayor of Harrisburg, Pa. She was explaining the city’s refusal to repay part ($3.29 million) of the $288 million it owes for an incinerator it bought. The total obligation for the incinerator comes to roughly $6,000 per citizen of the city. It is a debt that can’t be repaid and should have never been lent.

Unless you happen to live in Harrisburg you probably didn’t see this item in your local paper. And you probably wonder why we’d bother writing about it. After all, why should the impending bankruptcy of a small Pennsylvania city matter to you?

It should matter to you because it represents the next leg of the debt crisis — the failure of municipal finance. We were also struck by the logic of the mayor… who clearly views paying the city’s debts as optional.

She knows the state of Pennsylvania will be forced to bail out her city. (If the state doesn’t intervene it will be impossible for any other city in Pennsylvania to issue bonds.) And even if the state refuses, the bonds are insured by Ambac, which means, in the eyes of the mayor, it’s likely that no one will get hurt by her decision.

That’s how a $288 million loss can become irrelevant to an elected local official. Like a subprime borrower living in a house without paying his mortgage, the mayor of Harrisburg thinks paying for its debts is someone else’s problem. She’s bringing Obamanomics to city finance.

We have this warning to offer: When our elected officials no longer care about repaying hundreds of millions of dollars, the entire system of municipal finance is going to collapse. And the damage that’s going to occur will be material to our entire country.

The system that exists today was created in the 1970s. The entire system is predicated on the lie that States won’t allow losses to muni-bond holders. That’s the only reason muni-bonds are insurable: The insurance companies know there will never be a claim. They have no reserves to cover the risk of municipal losses because there have almost never been any. Over the last 40 years, the default rate on investment-grade municipal debt was 0.03 percent, according to the credit-ratings service Moody’s.

You can think of this system as similar to the subprime-credit bubble. No banker in his right mind would loan money to a person with no credit and no job who was buying a house in a slum. But once you took the credit risk away from that banker, he was happy to lend billions on deals like that because the risk became someone else’s problem. Billions in bad debts piled up. Suddenly, it was the banker’s problem again because he’d destroyed the entire system.

The same thing is about to happen in the muni-bond market: Nobody has paid any attention to credit quality because everyone believed the states won’t allow cities to go bust. As a result, a truly stupendous amount of money has been lent to cities — cities that have no hope of ever repaying the debts. Specifically, municipal debt now totals $2.8 trillion — roughly 22 percent of our country’s gross domestic product (GDP). That’s an all-time high. The amount of debt owed by cities has doubled since 2000. And the debts are now too big for individual states to guarantee.

Harrisburg is small potatoes. Mass transit systems are a much, much bigger problem. Almost every local politician in America has promised a subway, a train or a bus to take his constituents to work for next to nothing — but running these systems is incredibly expensive. In Boston, the mass transit authority is now $8.5 billion in debt and has been paying $500 million per year in interest. Does that sound sustainable?

What about all of the stadiums and arenas built over the last 20 years? Politicians love to build these things as part of citywide “revitalization” efforts. But paying for them? That’s somebody else’s problem.

Take the Meadowlands — the football stadium built nearly 40 years ago. It was torn down last year, but it has never been paid for. The New Jersey Sports and Exposition Authority (aka the State of New Jersey) borrowed $302 million to build it and never repaid the debt. Today, it owes more than $800 million and spends $100 million per year on interest for a stadium that no longer exists. California has 380 different local redevelopment agencies which collectively owe $29 billion.

This money will never be repaid.

When I warn people about muni-bonds I always get the same reply: “Governments don’t go broke.” Oh yes, they do. States face a cumulative budget gap of $140 billion in the next year — they don’t have the money to guarantee these debts. Meanwhile last year, more than 187 tax-exempt issuers defaulted on $6.4 billion of securities — the most since 1992. These numbers are going to get bigger — a lot bigger.

You see, all of this credit was only made available because lenders believed (foolishly) that there was no risk in lending to cities and states… just like they handed out all those subprime loans believing they would never default because “home prices never decline.” But after a few city bankruptcies (like Harrisburg), that thinking is going to change — forever.

With less (or no) additional credit available, how will cities and States be able to refinance at a reasonable price? Just like when the subprime credit markets shut down, the whole system collapsed because no one could refinance. The same thing is going to happen with the cities and the States.

There’s a very good chance that once the dominoes start falling, there won’t be any way to stop them without a massive Federal bailout.

Oh… one more thing… guess which bank has the most exposure to the muni-bond market? Again, just like with subprime, it’s Citigroup. It holds $13.4 billion, roughly twice as much as the other major banks.

Good investing,

Porter Stansberry

 

Editor’s Note: Local governments are no doubt grateful for the billions of dollars that have poured into muni-bonds over the past 18 months. But if some of those dollars are yours, you should know you’re not getting adequately paid for the enormous risk you’re taking.

A much safer — and more profitable — strategy is to avoid the usual income investments and look for high-yield opportunities your broker will never tell you about. We’ve put together a website detailing our favorites right now.

Click here to learn more.