Gold News

Goodbye to Trump. Hello Real Trouble

Think the markets got confused last year...?
AMERICA'S money supply (M1) rose 70% last year, writes Bill Bonner in his Diary of a Rogue Economist.
And it looks like the combination of the increasing supply of money and the anticipation of the damage to be done by a Democrat-controlled government might have finally turned the bond market around.
The yield on the 10-year US Treasury bond – the I-beam of the entire capital structure – went up 20% in a week.
It was still preposterously low – at 1.17%. (But remember, the real yield is adjusted for inflation. So if the nominal yield is 3%, and inflation is at 2%, the real yield is just 1%. Inflation is currently 1.81%. So the current real yield on the 10-year bond is -0.64%.)
And it's still too early to know if the downward trend in yields has come to an end.
But just to be clear about it, rising yields in an economy with $80 trillion of debt is a sign of impending doom. It becomes ever more expensive to finance and refinance the debt...requiring more and more infusions of fake money.
The locomotive goes faster and faster...until it flies off the tracks.
And now, Democrats control both houses of Congress and the White House. Since the time of FDR, Democrats have always tried to get the government to do more – more welfare, more laws, more spending, more debt, and more regulation.
They recognize that the more they spend, the more powerful they become. They regulate; they control; they subsidize this and bail out that.
And then, even the rich and powerful are forced to come before them on their knees – bearing campaign contributions, speaking fees, and sinecures – and beg them for help.
Of course, Republicans know the game, too.
When they're in power, they are insufferable...even bigger spenders than the Democrats (perhaps because there is no longer anyone holding them back).
But when they are out of power, they become more philosophical and poetic. You will soon hear them fret that the Democrats are spending like drunken sailors...and the nation's finances are going to Hell in a handcart.
Unfortunately, the Republican Party is now so powerless, and so cannot act as much of a brake on the runaway Democratic train.
Does this, too, signal a major change of direction?
Again, we don't know. But we will offer you a little reflection on the value of real conservatives.
Every society needs its forward-thinkers...and its foot draggers. Some people want to bring the Trojan Horse within the city walls. Others think it might be a trick.
A society needs both. It needs those who want progress and are sure the greenest pasture is just around the corner. But it also needs people who hold onto their old Studebakers (Why not? They run great.) and think America's last great President was Jefferson Davis.
It is the polite give and take...between new and old...looking ahead but with respect for the past...that makes a healthy, balanced community.
The forward-looking world improvers always think they have solutions (mostly to the problems caused by their last solutions). True conservatives listen carefully. At first, they are uncertain. But then, after hearing the argument, they are not so sure.
Many intelligent people, for example, are convinced that new technology will make our lives richer and better. The technophiles go on and on about how this or that breakthrough will "change our lives."
And yet, we eat the same food, more or less. We live in the same houses. We exchange lovesick glances...and howl at the moon, occasionally, just as we did when we still walked on all fours.
It's been more than 20 years since the great internet-led tech breakthrough. The "dot-com revolution" was, of course, supposed to make us all richer and happier.
But we can't think of a single person who – thanks to the wonders of Facebook, Twitter, Snapchat, or the worldwide web itself – was made happier by the digital advance (though many were made richer...including your editor).
Tesla founder Elon Musk recently became the richest man on the planet. His shares in Tesla are valued at nearly $195 billion (the company is worth about as much as the GDP of Turkey).
And what does Tesla do? It produces electric cars. But battery-powered cars are not new. The first one was driven through the streets of Paris by Gustave Trouvé in 1881.
Now, 140 years later, everyone is sure that cars and trucks powered by internal combustion engines will soon go the way of lightbulbs powered by hamster wheels.
Then, too, people who know a lot more than we do insist that bitcoin is a superior form of money. It will soon make the other forms – including gold itself – as obsolete as the gas-powered auto, they say. Is that so?
As for face masks...keeping the grandchildren at a six-foot distance...and taking the vaccine as soon as it is available to it only the QAnon people who doubt it?
And who doesn't know that more "stimulus" will help jump-start the economy?
"We should be investing in deficit spending in order to generate economic growth," says Joe Biden. Borrowing money can help you create a profitable new business.
But what are the odds that government boondoggles – carefully dressed by lobbyists and masquerading as capital investment – will yield a positive rate of return?
And what's ahead for the stock market? Every thirty-something RobinHoodie is absolutely convinced that the Dow is headed for 50,000...thanks to tech breakthroughs and the feds' support.
They've priced stocks today as if the future were a done if Tesla had sold a car – at a profit – to everyone on the planet with a driver's license.
And now, in the latest step towards a glorious future, the owners of America's most important communication channels – Facebook, Twitter, et al. – decided to exclude the presiding President of the United States.
For all his obvious faults and failings, Donald Trump nevertheless spoke for a sizable portion of the US population. Will the silencing of the Trumpistas by a few Silicon Valley billionaires really lead to peace, harmony, and prosperity?
And what other "bad" ideas should be censored?
We bring this up just to remind readers that, sometimes, people you don't want to listen to – the Cassandras in the story of the Trojan Horse – are worth hearing out.
Sometimes, there really are Greeks hiding in the Trojan's horse. Sometimes, the wonders of the future – like the flying cars we imagined in 1960 – never show up.
Stock markets go down as well as up...all paper money eventually goes back to its intrinsic value (zero)...and all empires decline, sooner or later.
And sometimes, you need the old-school, grumpy-pants conservatives to remind you.
We suspect that this is one of those times.

New York Times best-selling finance author Bill Bonner founded The Agora, a worldwide community for private researchers and publishers, in 1979. Financial analysts within the group exposed and predicted some of the world's biggest shifts since, starting with the fall of the Soviet Union back in the late 1980s, to the collapse of the Dot Com (2000) and then mortgage finance (2008) bubbles, and the election of President Trump (2016). Sharing his personal thoughts and opinions each day from 1999 in the globally successful Daily Reckoning and then his Diary of a Rogue Economist, Bonner now makes his views and ideas available alongside analysis from a small hand-picked team of specialists through Bonner Private Research.

See full archive of Bill Bonner articles

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

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