November 10, 2017
Written By Gary Christenson, Contributing Writer For Miles Franklin
Shelter From The Storm
The Dow Jones Industrial Average (DOW) reached another all-time high. Interest rates in the U.S. are yielding multi-decade lows, some say multi-century lows. Trillions of dollars in global sovereign debt have negative yield and European junk bonds yield less than 10 year U.S. treasuries. “Official” unemployment is low. Borrowing is inexpensive. Things are good, so they say!
Really? Do you believe the above is a fair and accurate representation of our economic world? If so, how do you explain the following?
1) Global debt exceeds $200 trillion and is rising rapidly. This massive debt will not be paid back in currencies with 2017 purchasing power. Debt must be rolled over in continually DEVALUING dollars, euros, yen and pounds.
2) The economic system rolls over maturing debt, adds more, and pretends repayment will not be problematic. Those who hope this will remain true ignore the lessons of history, including sky-high interest rates in the late 1970s, the Asian and Long Term Capital crises in the late 1990s, many defaults and hyperinflations in the last century and the credit-crunch-recession-market-crash of 2008.
3) Official inflation statistics show that consumer price inflation is low – supposedly in the two percent range. However, if you pay for health care, hospital bills, prescription drugs, Obamacare, beer, cigarettes, college tuition, fresh vegetables, processed food, auto insurance, and many other necessities, you know better. The Chapwood Index agrees with your experience. Their statistics show consumer price inflation is much higher than official numbers.
4) National debt – the official debt of the U.S. government exceeds $20.4 trillion – more than the U.S. Gross Domestic Product. The debt has increased exponentially (straight line on a log scale chart) for the past century.
5) Interest paid on the official national debt is approximately $500 billion per year and climbing. An irresponsible Congress will not manage within a balanced budget, therefore the U.S. will pay more interest each year.
6) U.S. government expenditures increase every year. Since annual revenues are less than expenses by a trillion or so, the shortfall is borrowed. Hence national debt rises every year and interest must be paid on ever-increasing debt.
7) Debt, out-of-control expenses, and economic craziness are universal in our current system. Race, gender, and political party make no material difference. Why should they? Corporations, politicians, lobbyists, military contractors, Big Pharma and individuals want more dollars to spend every year and the government satisfies everyone by adding to the debt load.
8) Debt and currency in circulation rise far more rapidly than growth of the economy which must support the debt.
HENCE PRICES RISE.
Do you remember prices in 1970? If you don’t, examine the following overview.
WHAT COULD IMPROVE OUR FINANCIAL WORLD?
WHAT COULD MAKE OUR ECONOMIC WORLD WORSE, BUT WE HOPE DOES NOT OCCUR?
The world will muddle through its problems in spite of wars, pestilence, corruption, central bankers, and self-serving politicians. Based on centuries of economic history, we should expect increasing financial trauma, periodic market crashes, devalued currencies, debt defaults, and … someone else will be blamed.
WHAT CAN WE DO FOR SELF PROTECTION?
Graph silver prices divided by the official U.S. national debt.
Silver prices have increased less rapidly than exponentially increasing national debt for 25 years, and are currently selling for multi-decade lows compared to national debt. National debt will increase 8 – 10% per year and silver prices will rise more rapidly in coming years.
Graph silver prices divided by the S&P 500 Index.
Silver prices are currently near a two-decade low when compared to the S&P 500 Index. Silver prices will rise and the S&P will correct, possibly soon.
Based on 25 years of history, silver prices are inexpensive compared to the exponentially increasing national debt and stock market prices. Silver prices will rise compared to both, perhaps soon.
Market Recap: 9 Nov, 2017
About Miles Franklin
Miles Franklin was founded in January, 1990 by David MILES Schectman. David’s son, Andy Schectman, our CEO, joined Miles Franklin in 1991. Miles Franklin’s primary focus from 1990 through 1998 was the Swiss Annuity and we were one of the two top firms in the industry. In November, 2000, we decided to de-emphasize our focus on off-shore investing and moved primarily into gold and silver, which we felt were about to enter into a long-term bull market cycle. Our timing and our new direction proved to be the right thing to do.
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