Money Under Fire: A Reminder of the Great Wealth Transfer Underway

Editor’s Note: The following is guest post from Chris Martenson with PeakProsperity.com

One serious predicament we face is that the current leaders in the halls of monetary and political power do not appear to understand the dimensions of our situation. The mind-boggling part about it is that the situation is easy to understand.

Our collective predicament is simply this: Nothing can grow forever.

Sooner or later, everything must cease growing, or it will exhaust its environs and thereby destroy itself. The Fed is busy doing everything in its considerable power to get credit (that is, debt) growing again so that we can get back to what it considers to be "normal."

But the problem is – or the predicament, I should more accurately say – is that the recent past was not normal. You've probably all seen this next chart. It shows total debt in the U.S. as a percent of GDP:

Debt-to-GDP-Hoisington

Somewhere right around 1980, things really changed, and debt began climbing far faster than GDP. And that, right there, is the long and the short of why any attempt to continue the behavior that got us to this point is certain to fail.

It is simply not possible to grow your debts faster than your income forever. However, that's been the practice since 1980, and every current politician and Federal Reserve official developed their opinions about 'how the world works' during the 33-year period between 1980 and 2013.

Put bluntly, they want to get us back on that same track, and as soon as possible. The reason? Because every major power center, be that in D.C. or on Wall Street, tuned their thinking, systems, and sense of entitlement during that period. And, frankly, a huge number of financial firms and political careers will melt away if/when that credit expansion finally stops.

And stop it will; that's just a mathematical certainty. It's now extremely doubtful that the Fed or D.C. will willingly cease the current Herculean efforts towards reviving this flawed practice of borrowing too much, too fast. So we have to expect that it will be some form of financial accident that finally breaks the stranglehold of failed thinking that infects current leadership.

The Math

As a thought experiment, let's explore the math a little bit to see where it leads us. After all, I did just say that a poor end to all of this is a "mathematical certainty," so let's test that theory a bit. I think you'll find this both interesting and useful.

To begin, Total Credit Market Debt (TCMD) is a measure of all the various forms of debt in the U.S. That includes corporate, state, federal, and household borrowing. So student loans are in there, as are auto loans, mortgages, and municipal and federal debt. It's pretty much everything debt-related.

What it does not include, though, are any unfunded obligations, entitlements, or other types of liabilities. So the Social Security shortfalls are not in there, nor are the underfunded pensions at the state or corporate levels. TCMD is just debt, plain and simple.

As you can see in this next chart, since 1970, TCMD has been growing exponentially and almost perfectly, too.

(The R2 is over 0.99, for you science types):

Total-Credit-MD-10-24-2013 1-46-39

I've pointed out the tiny little wiggle that happened in 2008-2009, which apparently nearly brought down the entire global financial system. That little deviation was practically too much all on its own.

Now debts are climbing again at a quite nice pace. That's mainly due to the Fed monetizing U.S. federal debt just to keep things patched together.

As an aside, based on this chart, we'd expect the Fed to not end their QE efforts until and unless households and corporations once more engage in robust borrowing. The system apparently 'needs' this chart to keep growing exponentially, or it risks collapse.

Okay, one could ask: Why can't credit just keep growing?

Here's where things get a little wonky. But if you'll bear with me, you'll see why I'm nearly 100% certain that the future will not resemble the past.

Let's start in 1980, when credit growth really took off. This period also happens to be the happy time that the Fed is trying to (desperately) recreate.

Between 1980 and 2013, total credit grew by an astonishing 8% per year, compounded. I say 'astonishing' because anything growing by 8% per year will fully double every 9 years.

So let's run the math experiment as ask what will happen if the Fed is successful and total credit grows for the next 30 years at exactly the same rate it did over the prior 30. That's all. Nothing fancy, simply the same rate of growth that everybody got accustomed to while they were figuring out 'how the world works.'

What happens to the current $57 trillion in TCMD as it advances by 8% per year for 30 years? It mushrooms into a silly number: $573 trillion. That is, an 8% growth paradigm gives us a tenfold increase in total credit in just thirty years:

Credit-market-debt-grown-8-pct

For perspective, the GDP of the entire globe was just $85 trillion in 2012. Even if we advance global GDP by some hefty number, like 4% per year for the next 30 years, under an 8% growth regime, U.S. credit would be twice as large as global GDP in 2043 (!)

If that comparison didn't do it for you, then just ask yourself: Why, exactly, would U.S. corporations, households, and government borrow more than $500 trillion over the next 30 years? The total mortgage market is currently $10 trillion, so might the plan include developing an additional 50 more U.S. residential real estate markets?

More seriously, can you think of anything that could support borrowing that much money? I can't.

So perhaps the situation moderates a bit, and instead of growing at 8%, credit market debt grows at just half that rate. So what happens if credit just grows by 4% per year?

That gets us to $185 trillion, or another $128 trillion higher than today – a more than 3x increase:

Credit-market-debt-grown-at-4-pct

Again, What might we borrow (only) $128 trillion for, over the next 30 years?

When I run these numbers, I am entirely confident that the rate of growth in debt between 1980 and 2013 will not be recreated between 2013 and 2043. With just one caveat: I've been assuming that dollars remain valuable. If dollars were to lose 90% or more of their value (say, perhaps due to our central bank creating too many of them?), then it's entirely possible to achieve any sorts of fantastical numbers one wishes to see.

Think it could never happen?

Zimbabwe-100-trillion-note

The Case For Hard Assets

This is the critical takeaway from all of the math above: For the Fed to achieve anything even close to the historical rate of credit growth, the dollar will have to lose a tremendous amount of its purchasing power. I truly believe this is the Fed's grand plan, if we may call it that, and it has nothing to do with what's best for the people of this land. Instead, it's entirely about keeping the financial system primed with sufficient new credit to prevent it from imploding.

That is, the Fed is beholden to a broken system; not anything noble.

GDP growth is very unlikely to support the rate of credit expansion that the Federal Reserve wants (or, more accurately, needs). And what will happen if it indeed doesn't? A lot of painful, awful things – but central among them is a currency crisis.

Amidst the ensuing unpleasantness will be an awakening within today's hyper-financialized markets to the huge imbalance now existing between paper claims and ownership of real things. A massive wealth transfer from those with 'paper wealth' (stocks, bonds, dollars) to those owning tangible assets (the productive value of which can't easily be inflated away) will occur – and quickly, too.

Suggesting the key objective for today's investor is answering: How do I make sure I'm on the right side of that wealth transfer?

An important component of that answer is holding some of your financial wealth in hard assets (they value of which can't be inflated away), the precious metals (e..g, gold and silver) being most easy for investors to easily obtain.

There's a preponderance of data that shows the world's major asset markets are dangerously overvalued. And when these asset bubbles start to burst, the 'save haven' markets -- like gold and silver -- that investment capital will try to flee to are ridiculously small. Investors who do not start moving their capital in advance of crisis will be forced to pay much higher prices for safety -- or may find they can't get into these haven assets at any price:

In Part 2: Using Gold to Protect Yourself In Advance of the Greatest Wealth Transfer of Our Lifetime we detail out the specifics of how much of your net worth to consider investing in gold, in what forms to hold it, which price targets are gold and silver most likely to reach, and which eventual indicators to look for that will signal that it's time to sell out of your precious metal investments.

The battle to keep gold's price in check is truly one for the ages. Not because gold deserves such treatment per se, but because the alternative is for the world's central planners to admit that they've poorly managed an ill-designed monetary system of their own creation -- which they'll avoid at any cost.

Read Part 2 of this report (free executive summary, enrollment required for full access)

The media went nuts after President Donald Trump said "Two Corinthians". But apparently, nobody cares when Joe Biden called the authors of Biblical Psalms "palmists" — twice.

During a Thanksgiving speech on Wednesday, Biden said, "I'm sure we can, we can pros-claim [sic] a palmist, with a palmist who wrote these following words, 'The lord is my strength and my shield and with my song, I give thanks to him.'"

On the radio program Monday, Glenn Beck and producer Stu Burguiere pondered whether Biden actually meant to quote a fortune teller instead of a psalmist, but ultimately decided the former vice president likely had no idea what he was reading.

They also discussed the hairline fractures Biden suffered in his right foot on Saturday while playing his dog, and Glenn tossed out a few headlines he thought might work just a little too well.

Watch the video below:

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The Supreme Court slapped down New York Democratic Gov. Andrew Cuomo's COVID-19 restrictions on religious gatherings Wednesday, arguing that strict limitations on the number of people in churches, synagogues, and other houses of worship — while liquor stores, bike shops, and many other non-religious places face few or no restrictions at all — are in violation of the First Amendment.

On the radio program Monday, Glenn Beck and Stu Burguiere applauded Justice Amy Coney Barrett, who reportedly cast the deciding vote in the 5-4 ruling, as well as Justice Neil Gorsuch who took specific aim at Gov. Cuomo for limiting religious gatherings to as few as 10 people in some areas, while imposing "no capacity restrictions on certain businesses he considers 'essential'."

"It turns out the businesses the Governor considers essential include hardware stores, acupuncturists, and liquor stores," Gorsuch said. "Bicycle repair shops, certain signage companies, accountants, lawyers, and insurance agents are all essential too."

"Government is not free to disregard the 1st Amendment in times of crisis," Gorsuch wrote in a separate opinion.

Gov. Cuomo has since called the Supreme Court ruling "moot" and "irrelevant" because he had recently lifted restrictions in most of the affected areas.

"This is a trick they play all the time. They've done this with Second Amendment cases as well," Stu noted. "They'll put a ridiculous restriction in that's obviously not constitutional, keep it in place for a year while it goes through the courts, and right before it gets to the Supreme Court they withdraw the rule. So then the case gets thrown out because it's moot."

Watch the video below for more details:


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Hey Joe, THIS is how you handle terrorists

Wikimedia Commons

If you haven't seen the new Apple TV+ drama Tehran, it's definitely worth your time. It tells the story of an Israeli spy who sneaks into Iran to set up an attack on Iran's nuclear program. Now that the new Bond movie is delayed, this show has a little bit of everything to hold you over: international spies, hackers, double agents.

But I digress...

No matter how Hollywood tries to invent these stories — and this one is definitely good — they always fall short of what happens in real life. What happened in Iran this past Friday is a movie waiting to happen.

What happened in Iran this past Friday is a movie waiting to happen.

Iran's top nuclear scientist, Mohsen Fakhrizadeh, was assassinated as he was traveling to his private villa just a few miles east of Tehran. The operation involved a team of over 60 people. Around 50 logistical support agents backed up a dozen gunmen. They knew everything. His schedule, his private address, his classified movements, the route...

Fakhrizadeh was traveling in the middle of three armored vehicles. When they approached the ambush site, the hit team cut off all the electricity in the surrounding area. A car bomb was then remotely detonated, taking out the rear vehicle in the convoy. 12 gunmen proceeded to open fire on the other two cars. Iran's top nuclear scientist was dead, and NONE of the hit squad were wounded or arrested.

Now you can already guess where the blame is being directed this morning. Almost immediately, the fingers began to point at both Israel and the United States. The mainstream media is trying to paint this as an effort by Trump to sabotage a Biden effort to restart the Iran Nuclear Deal. Remember that "masterful" stroke of Middle East foreign policy? You know, the deal that included $150 BILLION — in cash — that Obama and Biden knew would be used to kill Americans and destabilize the entire region. Remember that?

They said it was impossible... but Trump did it.

They claimed their way was the only path to peace. What did they get from it? Iran spread out all the way to the literal doorstep of Israel. The elite Iraqi troops of the Republican Guard were staging in Syria, plotting that ultimate attack to take back Jerusalem. The entire region was set to explode... but then Trump scuttled the deal. What did it lead to? Historic peace agreements between the Arab world and Israel.

They said it was impossible... but Trump did it. He reimposed sanctions and launched a campaign to kill terrorists rather than give them money.

John Brennan took to Twitter this weekend to call the assassination a criminal act.

It echoes what they said when the top terrorist in the world — Qassem Soleimani — was assassinated in Iraq. Coincidentally, the Iranian government published artwork over the weekend depicting Soleimani and the, now dead, nuclear scientist standing side by side.

You see, now matter how people like Brennan and Biden might try and say otherwise, this is exactly the type of person Iran's "Robert Openheimer" was: a terrorist in the same category as Soleimani (but obviously with a lot more dangerous capability).

Iran has been protecting this man for two decades. They called him merely "an academic," but denied the UN IAEA inspectors to ever question him.

The rhetoric Iran fed the global community was that their nuclear program didn't have anything to do with weapons, and that this nuclear scientist was involved in research to improve their energy programs. But in 2007, the CIA said this was a cover story. In 2008, the United States froze his assets, and the IAEA made it public that this scientist was leading Iran's nuclear weapons project.

Iran called it "Projects 110 and 111." Fakhrizadeh was tasked with finding out how to miniaturize a nuclear warhead and make it durable enough so that it could survive re-entry into the atmosphere on top of an ICBM.

There can be no accommodation with terrorists.

Obama and Biden's nuclear deal didn't stop ANY of this. Israel revealed in 2018 that Projects 110 and 111 continued. Fakhrizadeh was specifically called out as still being the main man in charge.

Biden thinks his policy of accommodation will somehow bring us the peace that Neville Chamberlain once thought was possible with Hitler. When has this borne fruit with any maniacal tyrant or terrorist... ever?!

And that's exactly what Iran and their thugs are. They're terrorists! They're not a legitimate regime. Long before ISIS, the terrorists in Iran stole a country, planning to spread their caliphate all over the world. Members of Al Qaeda, despite being Sunni, enjoy free sanctuary under their protection. They want to burn Israel to the ground. They chant "death to America"... It's actually a holiday there.

There can be no accommodation with terrorists. Biden wants peace with Iran, and he'll probably roll out a red carpet and offer them a few hundred billion more dollars. We know this doesn't work. To quote Reagan, "there's one way to have peace and you can have it in this second... surrender."

That's how you deal with terrorists, and — whether we were involved or not — another one was just taken out.

How does a sports writer know how to fix America, and America's racial dilemma?

In a special edition of the "Glenn Beck Radio Program," Outkick sports columnist Jason Whitlock filled in Tuesday for Glenn to explain how we can bring America back together, lean into racial harmony, and restore the values of our Founding Fathers. Because if not us, then who will?

Jason started out by explaining how, during a recent appearance on the program, he felt a spiritual connection with Glenn, regardless of physical differences, as both share a common passion for God and country.

"Glenn and I share a kindred spirit. A kindred passion," Jason said. "We have two things that we love and are passionate about: God and country. I am not a minister. I'm a flawed sinner just like Glenn and just like you. But I am a believer. Believers share an energy that connects them, that cuts through our physical differences and makes those differences irrelevant relevant. That's what I felt when I met Glenn, an energy and a spirit that connects us. We are broadcasters, media personalities, operating in separate spaces, trying to talk to Americans, who share our passion."

Jason went on to say that he believes there are forces operating, both outside of and inside America, that are working to separate America from God, and that much of what we've witnessed in 2020 — from the racial division stirred by the mainstream and social media, to the rioting and looting by Antifa and Black Lives Matter, to the "remaking of the sports world into a shrine that celebrates resisting criminal suspects and denigrates this great country at every turn" — are symptoms and consequences of America's enemies separating God and country.

"We are one nation under God. We are nothing without Him," Jason continued. "The flawed sinners who founded this nation baked God into this country with their Declaration of Independence. We hold these truths to be self-evident, that all men are created equal. That they are endowed by their creator with certain unalienable rights. That among those, are life, liberty, and the pursuit of happiness. The foreign and domestic enemies of this nation are baking a new American cake. God isn't an essential ingredient in this new cake. He isn't an ingredient at all. The removal of faith is sewing the disharmony that is terrorizing and destroying the United States of America.

"Why am I here today? I'm here to tell you how we take our country back, how we restore the freedoms and the liberties our enemies seek to remove in their remaking of a godless America."

Watch the video below to hear more from Jason Whitlock:

Want more from Glenn Beck?

To enjoy more of Glenn's masterful storytelling, thought-provoking analysis and uncanny ability to make sense of the chaos, subscribe to BlazeTV — the largest multi-platform network of voices who love America, defend the Constitution and live the American dream.

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