The Unpayable Debt Bomb

by Lowell Ponte

 

America’s combined government and personal debt just hit $41 Trillion, equivalent to $329,961.35 per household – the greatest debt of a nation and its people in human history.

 

But why worry? Treasury Secretary Steven Mnuchin says that by September 29th the government will run out of money and be unable to pay its bill. But by then Congress – unable to reduce its addictive spending – will raise the debt ceiling so politicians can borrow and print trillions more.

And private sector citizens – almost half of whom, as we discussed last week, live paycheck to paycheck and do not have $400 in savings to pay for an emergency – have likewise seen their average FICO credit score, their personal “debt ceiling,” raised to 700.

Roughly 70 percent of America’s Gross Domestic Product (GDP) comes from consumer spending, and most of the rest comes from government spending. With infinite credit, what could go wrong?

In this human-made Eden of ever-expanding credit, some have begun to notice odd things. Why has the credit card company VISA started bribing merchants to accept only plastic, and never cash, in customer payments?

Banking giant JPMorgan Chase, reports ZeroHedge, “has banned cash payments for credit card debt, mortgages, and car loans. It has also banned the storage of ‘any cash or coins’ in safe deposit boxes.” Your bank is now required to spy on you by the government.

The European Union (EU), along with President Barack Obama, endorsed the radical legal doctrine of the “bail in” – that your bank account actually belongs to your bank, not you, and can be seized to pay the bank’s debts. But now the EU is proposing account freezes that could prevent you from withdrawing your money. (In the U.S., Attorney General Jeff Sessions favors civil asset forfeiture of “suspicious” cash a person possesses.)

The serpent in this Eden has a name – “financialization,” the transformation of our economy from the making of goods and services to the conjuring of wealth by speculation, leverage, and the manipulation of interest and money.

President Dwight Eisenhower warned Americans of the “military-industrial complex,” as Craig R. Smith and I explored in our 2016 book Money, Morality & The Machine. In the economic crisis of 2008-2009, America experienced a “quiet coup” d’etat, we quoted a former chief economist of the International Monetary Fund as saying.

In that coup d’etat, said Simon Johnson, “the finance industry has effectively captured our government.” The international banks, and the money and credit manipulators have surpassed even the defense industry in controlling the best government that money can buy.

How much “wealth” do the forces of financialization wield in our world? No one can be sure, but in just the trading of derivatives – mostly futures contracts based on interest rates, Treasury bonds, foreign currencies, and similar things – the best estimate is that yearly trading in the past has reached at least $1.2 Quadrillion. That’s 1.2 Trillion dollars multiplied by 1,000. Such a debt bomb can never be paid, only detonated or debased.

No wonder the financial serpents push so hard to rule a globalized system based on a “cashless” economy and credit that can be conjured in any amount out of thin air. And no wonder that working people here and in Europe feel pushed to the brink by a system that chokes their income, provides high-interest credit serfdom instead, and sends prices into the stratosphere.

This is why the United Kingdom voted to exit the European Union, and working Americans voted for populist nationalist President Donald Trump. It’s why wise people build their future not out of paper currency, but with hard metal and bedrock values that can survive financialization’s crash.

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To schedule a fascinating interview with Lowell Ponte, contact: Sandy Frazier at 516-735-5468 or email sandy@mystic-art.com.

For a free copy of Money, Morality & The Machine (see pages 86-89 for our Simon Johnson coup d’etat discussion) or the new “Crisis Timeline,” contact: David Bradshaw at 602-918-3296 or email him at ideaman@myideafactory.net

Credit, Cash & The Coming Crash

By Lowell Ponte

The good news is that in 2017 the average American has been given a FICO Score of 700, the highest average level of creditworthiness ever.

The bad news, paradoxically, is that roughly half of American families now live paycheck to paycheck. According to research by the Federal Reserve, 47 percent of us do not have enough money set aside to pay for a $400 unexpected repair or hospital emergency room visit, and 27 percent of us have no savings at all.

If a crisis happened, 21 percent of those questioned told a Bankrate.com survey that they would pay using a credit card. This is almost double the number who would turn for financial help to relatives. But, ironically, 24 percent of families living paycheck-to-paycheck said that credit card debt was the biggest reason they could not save much.

Between 2003 and 2013, the inflation-adjusted net worth of the typical household plunged by 38 percent, owing largely (but not entirely) to the crisis of 2008-2009 and the huge drop in the prices of homes, which millions had used as appreciating savings and then as their own ATM machines to pay for other things.

Politicians had forced banks to give mortgages to millions the bankers called “Ninjas,” people with “No income, no job, and no assets or savings.” This easy money caused a flood of homebuyer demand and skyrocketing prices.

But when home prices began to fall, many no-money-down Ninjas abandoned their homes rather than pay more than the underwater houses were worth. The bad mortgages on bank balance sheets here and abroad led to taxpayer bailouts of our biggest banks and nearly collapsed the U.S. economy.

In 2017, our economy still suffers from the bursting of the housing bubble and its debasement of the homeowner American Dream. The typical American household, reported CBS News, in inflation-adjusted dollars is “still earning 2.4 percent below what they brought home in 1999.” U.S. household debt during the First Quarter of 2017 reached $12.73 Trillion. “That’s up $50 billion,” reports U.S. News & World Report, “from the previous peak reached in the third quarter of 2008.”

The Federal Government debt of roughly $20 Trillion exceeds America’s entire annual Gross Domestic Product (GDP). The government has stayed solvent because it could borrow endless money at almost zero percent interest, could print an extra trillion dollars each year whose value comes from devaluing our earned dollars, and could simply coerce more money out of us taxpayer serfs.

With 70 percent of America’s GDP coming from consumer spending, the government and Federal Reserve are pressuring those who issue credit to give us more, just as they did with Ninjas and home mortgages. Why not? The government long ago ended our ability to deduct credit card interest from our taxes, so the more we pay the banks, the more flows into the government treasury. This is not just bank interest; it is also indirect taxation or the borrowers.

You may get little or no additional pay, and have no additional savings. But you will get more credit – and will pay hefty interest on it. You will get easier auto loans, for example, thanks to government pressure on lenders, which already adds $1.1 Trillion to American household debt.

Student loans are easy to get, but in 2017 these reached $1.4 Trillion – with many students defaulting because politicians promise in the near future to cancel this debt, and nobody wants to pay off a debt about to disappear without payment. The parents who co-signed these loans, however, are often shafted when their children refuse to make promised payments.

As borrowing and debt increase, we also face another problem. Many analysts study recurring patterns in the economy, society, and nature to foresee what soon could be coming. Ominously, many of these theorists are giving the same dire warning – that between now and the end of year 2020, a convergence of negative patterns and the low points of several cycles will hit us all at once.

This is one of the worst convergences of negative forces in centuries! It could potentially batter the United States socially and economically. As Craig R. Smith explains in a new free “Crisis Timeline,” this can also be a disaster for the unprepared. But for those who are prepared, it could be a huge opportunity.

Globalists are eager to impose a “cashless” society where everything is credit and debt, where values are easily manipulated, and where all financial transactions are monitored and taxed by government. This is why they are squeezing you out of cash and into credit. This is why they do not want you to convert any of your paper dollars into a form of money they cannot control or devalue, such as gold.

And if the globalists get their way, an American economic and social crash is inevitable. Your credit will disappear instantly. What will you do then, without hard money? Neither a plastic card nor a worthless green piece of paper will save you on that discredited day. You can prepare now, or be helpless then.
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To schedule a fascinating interview with Lowell Ponte, contact: Sandy Frazier at 516-735-5468 or email sandy@mystic-art.com.

For a free copy of the new “Crisis Timeline,” contact: David Bradshaw at 602-918-3296 or email him at ideaman@myideafactory.net

America’s Secret Plan for the Debt Ceiling

By Lowell Ponte

Sometime this October, the Federal Government is going to run out of money. It will be unable to borrow more until Congress agrees to raise the debt ceiling, a vote that some Republicans want to use to shrink the government.

Usually this has meant that government could “shut down” briefly if debt ceiling legislation leads to deadlock. Millions of “non-essential” federal employees take a few weeks off and get paid for this vacation – on average, they get roughly $2,300 per week; or $460 per day; or $120,000 per year in wages and benefits – when they return to work.

Our national government will not go bankrupt – so long as it has taxpayers who can be squeezed for more, and its printing press can magically conjure trillions out of thin air. But such steps would hurt the economy, anger next year’s voters, and debase the value of the dollars you earn and save.

What may happen instead is “a harebrained scheme that is apt to backfire,” says Congressman Tom Cole (R.-Oklahoma), who sits on the House Budget Committee. It could be U.S. debt “default by another name,” warns former Treasury Secretary Jacob Lew.

If lawmakers cannot resolve the debt ceiling issue, then the government may employ what Bloomberg News on July 14 called a “once-secret plan written by the [President Barack] Obama administration that would lead to the first-ever default on U.S. debt.”

“Bond traders are worried that [President] Donald Trump’s Treasury secretary may have to use it,” reported Bloomberg.

The secret key to this plan is “debt prioritization,” fully paying U.S. debts to some creditors but not others. Those who bought U.S. Treasury notes, or who receive “Social Security, veterans benefits and other entitlements would be paid first,” reported Bloomberg. “Everyone else, including government contractors and federal employees, would be at risk of payment delays or partial payment.”

This. warns Jack Lew, could trigger a review of whether the U.S. still warrants a AAA rating on its debt paper. It would raise fears, writes Bloomberg, that the value of investor-held U.S. “assets could suddenly decline if the U.S. Government’s reputation for creditworthiness is damaged.”

“Using prioritization would set up a dangerous precedent,” which buyers of U.S. debt will expect to see repeated, said Steve Kang, interest-rate strategist at Citigroup, Inc. U.S. debt was downgraded for the first time by S&P Global Ratings in 2011, the year President Obama developed, and the Federal Reserve ran “tabletop exercises” of, his secret debt prioritization plan.

The government seems hooked on perpetual borrowing, which could become much more expensive for taxpayers and users of the U.S. Dollar if fears of America not paying its debts become widespread. The government would have to pay much higher interest to borrow money by selling its debt.

(As Craig R. Smith and I discussed in our book Money, Morality & The Machine, Alexander Hamilton was the lionized “founding father of our national debt” and its use as a marketable asset to be sold. But now, our $20 Trillion debt threatens to sink the dollar and American taxpayers.)

Imagine America’s political future if paying interest to Communist China has a priority higher than paying what is owed to government employees and contractors who are U.S. residents and citizens. This would be Uncle Sam defaulting and reneging on our debts. No wonder so many are diversifying their portfolios by converting a portion of their dollars into gold, which cannot be devalued by running a few trillion dollar bills off a printing press.

Source:

See Saleha Mohsin and Liz McCormick, “Markets Worry Trump May Have to Use Obama’s Secret Debt Ceiling Plan,” Bloomberg, July 14, 2017. URL:
https://www.bloomberg.com/news/articles/2017-07-14/trump-may-have-to-use-obama-s-secret-debt-plan-worrying-markets

To schedule a fascinating interview with Lowell Ponte, contact: Sandy Frazier at 516-735-5468 or email sandy@mystic-art.com.

For a free media copy of Money, Morality & The Machine, contact: David Bradshaw at 602-918-3296 or email him at ideaman@myideafactory.net

HOW TO RESCUE YOUR RETIREMENT

By Lowell Ponte

Every day 10,000 Baby Boomers reach age 65, and this will continue until 2029. Many need to protect their life savings and prepare for retirement.

Boomers expected a comfortable retirement, but for many the autumn of life seems to be going another way. Private sector pensions enjoyed by 39 percent of their parents will now provide retirement income for only about 15 percent of Boomers. Their American Dream nest egg in the form of a home with an ever-increasing price went bust in the economic crash of 2008-2009, which initially destroyed up to 40 percent of family net worth.

The government and Federal Reserve have pressured banks to pay less to depositors in interest than the rate of inflation, a policy economists call “financial repression.” This forces savers either to lose purchasing power or to move their money out of safe accounts and into the stock market casino, a gamble that could burst like a risky bubble.

Many are now thinking of betting their futures on annuities, which, in our latest free White Paper The Annuity Trap, monetary expert Craig R. Smith and I describe as “the oldest, trickiest and stickiest of financial snares.”

Annuities, which “guarantee” to provide regular money in exchange for a lump sum payment, were sold in ancient Rome. The medieval church and Renaissance kings sold them to raise money because annuities are very lucrative – for those who sell them.

After 2,000 years, annuity contracts have refined how to squeeze cash out of customers. If you buy the wrong kind of annuity and soon die, your family might lose much, or even all, of the money you invested. (If this sounds familiar, it is because Social Security, which by law guarantees you nothing, is modeled on annuities.)

If you change your mind and try to leave after buying an annuity, you may have to pay a “surrender charge” of as much as 20 percent of what you paid, and you could be required to pay such a charge for up to 15 years. If annuities are such a good deal, why do insurance companies use a confiscatory penalty to keep buyers from leaving? It’s like a man who invites a woman to dinner, then padlocks the doors so she cannot escape.

Annuities come not from banks, but from insurance companies and are not backed by any federal entity such as the Federal Deposit Insurance Corporation (FDIC). One of the world’s biggest insurance companies and sellers of annuities, the American International Group (AIG), was bailed out in 2008 by the Federal Government to keep it from going under. The rating services that give top grades to insurance companies today are the same ones that back then led pundits to call AIG “safer than the U.S. government.”

Annuities come in three basic types. Fixed annuities promise to pay a fixed amount during the life of a retiree, but inflation can destroy a fixed payment’s purchasing power. Variable annuities are mutual funds inside an insurance policy, but the ups and downs of what they pay, as well as fees, restricted profits, and tax problems make them less profitable than simply owning a mutual fund or stocks directly. Indexed annuities tie payments to an index such as the Standard & Poor’s 500, but with very complicated limitations; Kiplinger calls this “an annuity you really should avoid.”

Even if annuities worked as buyers hope – and few do – buyers are still at risk of losing control of their savings, of being caught in “the Annuity Trap.” Soaring inflation, rising taxes, and government confiscation to pay for a swelling welfare state can also devour their investment. An annuity cannot guarantee security or a retirement free from life-shortening stress and worry.

People are right to be afraid, and to seek security; the signs that things are coming apart are all around us. But the way to “insure” your portfolio is to escape promissory paper, including paper money that politicians can confiscate via inflation. People would be wise to convert a portion of their savings into the universal store of value, gold. Baby Boomers need to act decisively to provide true security for their golden years.

To schedule a fascinating interview with Lowell Ponte, contact: Sandy Frazier at 516-735-5468 or email sandy@mystic-art.com.

For a free copy of the White Paper The Annuity Trap, contact: David Bradshaw at 602-918-3296 or email him at ideaman@myideafactory.net