If I Only Had a… Printing Press?

In today’s Money Morningwill ‘cowboy capitalism’ overrule Trump’s election promises?…what the Triffin Dilemma has to do with your bank account…Australia Day — the first fake news…tick-toc, ‘Doomsday Clock’ strikes two minutes to midnight…and more

Stagnating or falling wages. Flat lining productivity. Ballooning debt…

If this is the state of your household economic report, you have cause to be alarmed. Unless, that is, you’ve got a printing press stashed in your shed somewhere.

Of course, that’s a luxury you and I don’t have. (Or certainly would never admit to!) But it’s a privilege the world’s major players have been abusing since Nixon took the US off the gold standard back in 1971. That’s when your cash officially became what’s known as fiat money — a currency that’s not backed by anything except a government’s wink and a nod.

Not surprisingly, the world’s printing presses have been running around the clock ever since. And nowhere is that more evident than in the world’s biggest economy, the US.

By the end of 2017, the gross US federal government debt is estimated to be over US$20 trillion, according to the FY17 Federal Budget. That’s $20,000,000,000,000, to give the figure some due context.

It was with these figures in mind that our publisher Kris Sayce, alongside editor Vern Gowdie and analyst Selva Freigedo, travelled to Baltimore last week to interview Dr Alan Greenspan. Greenspan, as you likely recall, served as Chairman of the US Federal Reserve from 1987 to 2006. Hence, the ‘Greenspan Put’ refers to his dogged efforts to prop up financial markets by lowering interest rates at any cost.

I won’t go into everything Greenspan revealed in the exclusive interview. For that, you should check out yesterday’s issue of The Gowdie Letter. But the following quote is worth sharing with you today.

When asked about the government’s actions following the ‘breakdown in 2008’, Greenspan said,

Since the central bank can print as much as it needs to, there is no limit so you can stop any crisis cold merely by just buying up everything. The trouble is, what do you do then?

What indeed, Alan? What indeed?

Along with Dr Jim Walker, Chief Economist of Asianomics Group, our own ‘Financial Anarchists’ — Kris Sayce and James Woodburn — offer some clues in their latest podcast. It’s titled, ‘The Question Greenspan Wouldn’t…or Couldn’t Answer’.

After you listen to that, be sure to take some time to review the week gone by, and any of the Money Morning issues you may have missed. You won’t be surprised to find that debt and Donald Trump play starring roles.

Greg kicked the week off comparing the power of the word to the power of actions. Trump uttered some reasonably positive sentiments during his inauguration ceremony, highlighting the need to bring the reins of government back into the hands of the people. ‘For too long, a small group in our nation’s capital has reaped the rewards of government while the people have borne the cost,’ Trump stated. However, as Greg highlights, few have reaped more rewards from the government than Trump himself. But ‘The Donald’s’ hypocrisy shouldn’t be your primary concern as an investor. You want to know how the stock market will react. To find out where Greg thinks the markets are heading, you can find all the details in Monday’s Money Morning here.

Have you ever heard of the Triffin Dilemma? If not, you’ll want to check out Tuesday’s Money Morning. Greg uses the Triffin Dilemma to show you how debt is the oxygen that allows our modern financial system to breathe and grow. Not that this is a good thing, mind you. He also explains how the world came to be trillions of dollars in debt so quickly…and who holds most of that debt. But what happens when this debt gets ‘called in’ on a global scale? You may well find your bank’s opening hours have greatly reduced!

Still on the subject of ballooning debt — both in Australia and around the globe — on Wednesday, Greg recommended The Road to Ruin as a book you absolutely must read to get your head around the dire implications. Australia’s net debt position has reached a staggering $1 trillion. At some point the debt bomb will explode…or implode, if you will. Greg doesn’t have a timeline for you, though. As he says, that would just be an opinion, and opinions have no place in the investment world. Instead you should look for signs. But don’t expect the next meltdown to be anything like the last. As Greg writes, ‘The template for the next crisis will be completely different. And it could be years away. In the meantime, there is money to be made!’ Click here for the full story in Wednesday’s Money Morning.

On Thursday, while most of us kicked back to enjoy Australia Day, Sam wrote to you about the proliferation of ‘fake news’. And, not coincidentally, he pointed out that Australia Day is actually a prime example of fake news. Unless of course you really are celebrating the arrival of the First Fleet of 11 convict ships from Great Britain in 1788. Sam goes on to explain how he’s distancing himself from the growing flood of fake news. And he offers a warning to those who help spread it. For all that, click here.

You’re likely familiar with the ‘Doomsday Clock’. If it hits midnight, supposedly, we’re all toast. On Friday Sam wrote with the uplifting news that scientists have moved the hands to just two minutes before midnight. That’s the closest it’s been to striking the hour of Armageddon since the early 80s. So is it time to invest in your own backyard bunker? Not according to Sam. He sees an opportunity in all this fearmongering…and notes the clock has never been more than 17 minutes away from midnight. So, rather than digging a hole and battening down the hatches, Sam argues you should be hunting down the best stocks set to profit from any renewed surge of public fear. You can find all the details in Friday’s Money Morning here.

That’s all for today. Enjoy your weekend.

Bernd Struben,
Managing Editor, Money Morning

PS: I mentioned Jim Rickards’ latest must read book, The Road to Ruin , above. There aren’t many financial books that keep you turning the pages into the wee hours of the night. Or keep you awake, staring into the dark and pondering the consequences once you do finally call it a night. But then, as the title indicates, this isn’t a book intended to help you sleep well at night. What it is intended to do is give you the knowledge you need today to be ready for what lies ahead tomorrow. Click here to find out how you can get a copy for yourself.

Money Morning Australia