The Debt Crisis Damage Has Already Been Done
On a recent Rebel Capitalist Pro member live Q&A with George, a member asks,
“If central banks create fiat from thin air, which gets us more into debt…and knowing that fiat is just numbers typed into a computer…then why not just delete the debt? Will that resolve the problem?”
George quickly responds with, “because it's a liability.”
The debt, like treasuries, is a liability for the government but it's an asset to the counter-party. There is counter-party involvement. Hitting the delete key and wiping out the debt will lead to massive problems for the counter-party involved.
Many institutions own government debt. They rely on it. The knock-on effects of deleting this debt would cause more harm than good for the economy as the transfer of insolvency moved away from the government to the counterparty that trusted the government in the first place.
Why A Debt Jubilee worked For Germany in 1948 but won't work today
One side of the argument claims that Germany got away with a debt jubilee in the late '40s, therefore we should be able to do it again. This claim is short-sided and doesn't take into consideration the size of our economy in 2021 and the stakeholders involved.
Today's global economy is much larger than Germany's in 1948. Plus, Germany basically told all foreigners who held Germany's debt to go pound sand. So foreign investment lost out big time.
Foreign investment in 1948 simply did not have the global impact foreign investment has today. So the same forgiveness would not work for nations like the US, today.
The West Is A Debt Junky Married To A Drug Pusher
Unfortunately, the debt jubilee argument doesn't solve the debt crisis. Forgiving the national debt is like paying off your drug addict cousin's credit card and expecting him to get clean.
He won't get clean. He'll just run up his credit card again and buy more dope. This time it will probably kill him.
Central Banks own a printing press, and they are married at the hip to their big government counterparts. Big governments are addicted to the printing press and can't break away. It a sad reality.
Government is too big, too bloated, and bureaucrats have been running the economy much like they run the government, poorly.
Resetting The Debt Held At The Federal Reserve
The Federal Reserve is sitting on mountains of debt. They are the borrower of last resort, and so they sit on a lot of debt. Could we hypothetically hit the delete button at the Fed and eliminate some of the debt without consequence? According to George, yes. This is possible.
Bank Of Japan
The bank of Japan owns approx. 60% of the Japanese government bonds (JGBs) issued and technically, if they hit the delete button on that debt, and didn't tell anyone, then how would anyone know?
Debt Jubilee's only make the problem worse
But again, a debt jubilee (or debt forgiveness) will not solve the underlying issues of big government. Big government has a spending problem. It's too big and it's operated by morons who prefer to kick the can down the road, then tackle the problems at hand.
Unfortunately, there is no easy button. Debts will get bigger, fiat currency will continue to devalue, Jerome Powell and Janet Yellen will continue to deflect the problems their institutions created for the populous and many good, hard-working people will see their wealth and purchasing power stolen.
We are quickly moving into a world where real assets will contain the most value. These will be things like Real Estate and commodities.
Historically speaking, there is nothing new to see here. We are at the tail-end of a massive debt cycle, and the only things capable of propping up the global western economies will be financial creativity, inflation, taxation, and outright propaganda coming from the banking cartel and politicians that put us here.
As an investor, it's your responsibility to protect your wealth. Your government is only interested in extracting your wealth from you. They are not your friend.
There is nothing the central banks or big governments are offering that you want. Their fiat is a melting ice cube, the stock market is in a crack-up boom, and bonds are a joke.
Even physical Gold and Silver prices give the impression of being artificially held back during these times of uncertainty.
Cryptocurrency shows promise but it's not without its own headwinds. For one, euphoria is in the air. Crypto is in a mania bubble and will correct at some point. Don't get caught up buying at the top. How do you know? We don't time markets, so we can't tell you.
However, everyone is talking about it, which is a warning sign.
Invest in sectors poised for growth
Those of us who follow Lyn Alden, Chris MacIntosh, and George Gammon are paying close attention to sectors poised for growth. Again, we're big on commodities and we are well diversified across the board.
Unlike bitcoin, which has had a major bullrun, is unlikely to see a 5x return anytime soon. It's sitting at roughly a $1 trillion dollar market cap. What are the chances it will go to a $5 trillion market cap any time soon?
It's not impossible, but if you take into consideration risk/reward, then there are plenty of cheap companies in amazing sectors that stand to outperform bitcoin with very little risk.
You'll find them in Rebel Capitalist Pro. Both Lyn Alden and Chris MacIntosh bring up great stock picks weekly, which gives you an opportunity to build a portfolio that most money managers could only dream of.
The best investments of your life are taking off. If you can't see it, then you need to sign up for Rebel Capitalist Pro and start getting involved.
You get access to premium newsletters, live q&a, dividend and growth portfolios, a community forum, and a macro investing education you can't get anywhere else for the price.
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