04/15/09 Baltimore, Maryland It’s going to be a real disaster…
The current administration’s economic strategy will create an unmitigated disaster – not only our country’s worst financial calamity, but the greatest economic disaster in recorded history.
I first warned my readers about what was happening last December, in a letter titled The End of America:
“The coming great inflation will destroy America’s economic leadership. It will lead – eventually – to the return of settling international obligations in gold instead of paper dollars. And this will happen much faster than anyone expects.
“By the time Obama leaves office, you will not be able to exchange dollars for any sound currency in the world without permission from the U.S. government. The price of gold will be well over $2,500 per ounce. Most importantly, commodities will no longer be priced in dollars either, but instead in the currencies of the leading producer. Americans haven’t experienced anything like this since the Great Depression.”
Since I wrote that first warning, I have become much more concerned and much more afraid. What the president has done is actually worse – much worse – than even the dire scenario I had envisioned. Not only is the administration planning on enormous deficit spending this year, but the current plan calls for increasing deficit spending for the next decade – spending that will more than double our entire national debt during his presidency.
The Congressional Budget Office produced the following graphic, which compares the deficits of the 1980s and 1990s to the current and future budgets. Assuming Obama remains in power over the next eight years and assuming these deficits aren’t actually much larger (which almost always happens), the Congressional Budget office estimates the president’s budget will add more than $10 trillion to the total federal debt by 2019 – approximately as much total debt as was outstanding at the beginning of 2007.
Obama plans to borrow more money over the next eight years than all of the other presidents – combined.
It’s very hard to put this in perspective. The numbers have become so large they’re almost meaningless. “Twenty trillion” has 13 zeros: $20,000,000,000,000. Nobody can think about a number that large. But consider this… In 1980, the entire federal debt totaled $930 million. Assuming we’re paying 5% on our debt in 2019, we will spend more money on interest than our entire national debt of 1980.
This level of debt is going to be a huge problem because no one will want to pay the money back – ever. And it can’t be financed forever. The poor will blame the rich. The rich will leave and take their wealth offshore. And absolute chaos will follow. The dollar will be completely destroyed.
Now… I know… you’re thinking, “I’ve heard all of this before. But the end of the world somehow doesn’t happen. We find a way out.”
Not this time. In fact, when I wrote last year that the dollar would cease to be the world’s reserve currency much faster than anyone expects, I’m sure no one took me seriously. But since then, we’ve heard two of the world’s leading powers – China and Russia – both openly suggesting a new world reserve currency must be created. Putin is even talking about using gold to settle international trade. It will happen because no one will want to be a creditor to the United States.
As more and more people try to get out of the dollar, the government will be forced to forbid the free exchange of dollars into other currencies – and perhaps even to forbid the purchase of gold bullion. This will happen. I guarantee it. And it will happen during the Obama administration.
That’s why it’s critical for you to take precautions now, while you still can.
The first thing you should do, if you haven’t yet, is buy gold bullion. It’s easy: You just call a few coin dealers, find out who offers the lowest premium on bullion, and wire them the money. Once you have the coins, they’re easy to hide, easy to store, and easy to transport. There’s no law (yet) saying you can’t take bullion out of the country. If things start moving that way, you should have enough time to get the bullion out before the law passes. If not… well… you can clip your coins easily and use the gold to pay for whatever you might need.
I also believe you should immediately buy gold stocks. In fact, I’m convinced you’ll never have a chance to buy gold stocks this cheaply again… Gold stocks have never been cheaper compared to the price of gold itself. This is an amazing, once-in-a-lifetime opportunity. I truly hope you’ll capitalize on it.
The second thing you should do is move as large a percentage of your financial assets as possible out of the country. Unfortunately, I don’t know enough about this yet to offer any good advice. I’m working on it.
And the third thing you ought to do is to build a stimulus package for yourself. I realize it’s paradoxical. But the coming crisis will make lots of people rich. It’s not hard to generate a paper fortune in a huge inflation. All you have to do is own the most important economic assets: energy, communication, and transportation. Thing to do right now is buy the assets you know the government has to have for the economy to function. These assets will remain in private hands, and their values will increase the most.
I can tell you what happens to countries that go bankrupt. I’ve been to Argentina. I’m familiar with the history of Mexico and Great Britain. We’ll see the same things here, shortly: inflation, huge tax increases, capital flight and, eventually, capital controls.
It will probably take decades for Americans to realize socialism doesn’t work. But that clarity might not happen during my lifetime. And I don’t want my assets to be stuck inside a banana republic in the midst of a huge socialist experiment. I’m graveyard serious: If you do not take precautions and prepare yourself and your family for the inevitable collapse of our currency, you will suffer incredibly over the next decade.
Good investing,
Porter Stansberry
for The Daily Reckoning
Porter Stansberry
Porter Stansberry founded Stansberry & Associates Investment Research LLC, a private publishing company based in Baltimore, Maryland, in 1999. His monthly newsletter, Porter Stansberry's Investment Advisory, deals with safe value investments poised to give subscribers years of exceptional returns. And his weekly trading service, Porter Stansberry's Put Strategy Report, shows readers the smartest way to book big gains during the ongoing financial crisis.
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And where are you going to sail off to, Neverland?
I doubt many countries will be receptive to Americans once they have their own economic Depressions to contend with.
How would you rate the prospect of gold bullion ownership becoming illegal. I have been advised to buy rare coins as a safeguard against such a event.
Buy Silver! It will move higher with gold, but will not have the same interest of the government. Its also used in many industrial and medical applications which removes some from the world stocks faster.
Do not buy rare coins as you will pay a huge premium over spot. Gold will trade on the black market. Less than 22% of the gold in circulation was called in on FDR’s order. Where do you think those pre-1933 coins come from?
By the way I am going to Neverland, right next to Fantasyland.
Please Porter, please give us some advise on Canada’s situation. How do you think they will manage? Would you run there?
Thank you so much!
Good article but you puzzle me by you comment on socialism.
I have never understood this USA hatred for socialism. Socialism by itself is neither a good nor a bad thing; it is simply a redistribution of wealth from one set of people (the tax payer) to another group of people, or to all people (health, roads, police, welfare).
Where the Americans seem to fall apart is this image that socialism implicitly has no boundaries and will suck the life out of the USA. If you don’t use socialism with boundaries and for the right reasons then of course will suck the life out of the country but please, a little common sense here, thats what budgets and steering commitees should be used for.
Most people will donate to a charity but only what they can afford and want to, no-one is stupid enough to donate their entire pay packet every week though, except maybe priests and nuns. Socialism is the same, you only socialise what you can afford and want to. But you USA folk insist on doing it the wrong way and calling its evil afterwards, well DUH!!!!. I mean honestly which group of idiots thinks that banks, insurance companies and automobile factories should be socialised, probably the same group of idiots who are about to spend more on social security then they take in tax.
Limits and Common sense, who needs em.
Don’t forget to learn to grow your own food like vegetables and meat…find room for that…And take care for safety and protection: buy weapons, bulletproof jackets, and form small groups with people you trust (back to the tribes ha!! ha!!)
Anyway, I still love this planet…
Get out of debt. Stay out of debt. Have a place to live that is paid for and affordable. Save as much as you can, as quickly as you can. Have a years gross income in gold and silver bullion. Pray.
Yawn, same on nonsense. Everyone on the planet is holding gold parties. Gold serves no purpose at all. Oil will eventually go way up, gold won’t do a damn thing.
Who is going to buy your gold in a collapse? No one. Think…then post.