The unpredictable, unthinkable but undeniable, has come to pass. After $6 trillion of additional national debt and trillions more in Fed stimulus, the economy shrunk for the first time in 3 years. So, has money printing worked or not? The money printers will answer with a resounding, “Yes!” Had it not been for the trillions of dollars created out of thin air and injected into every arm of the economy, the economy would have disintegrated long ago. It was the money printing that saved us from losing all of our wealth.
Yup! That was a close one! How close? By some accounts, we were just minutes away from economic Armageddon. For most, that’s a difficult concept to grasp. It’s easy to understand how highly leveraged investors, did lose or could have lost everything. But what about the average person who owns some life insurance, keeps money in a money market, has a few CDs, some savings an annuity and a pension. What about that person? It seems the only risk there, is varying rates of return.
But think about it. Every cent of your paper wealth is invested somewhere by someone in some thing. Go ahead. Go down the list. Do you think the financial institution you gave your money to can provide you a rate of return without putting your money at risk? Even the balance in your checking account is at risk. If you think a bank, any bank, could cash everyone out of their savings and checking, on demand, you are ill-informed. The only way your cash is safe in a bank is if it is in a safety deposit box. Even then, cash rots, as inflation gradually eats away its value.
Put in that perspective, maybe the money printers are right – money printing saved us. God help us if that’s true. If we were really that close to economic Armageddon, guess what? We’re back! Only this time it’s worse. If the shrinking economy of 4Q ’12, is indicative of a longer term trend, then watch out. As evidenced by the recent increase in everyone’s taxes and rising unemployment, it’s not getting easier to pay bills and provide for our families. And, after incurring $6 trillion of additional debt, it’s not getting easier for the country to make its payments either.
So what’s next? Let’s play with the numbers. Between $6.5 trillion of additional debt, accumulated since the debt crisis began, and at least $3.5 trillion of Fed money printing, that’s $10 trillion of stimulus pumped into the economy. That amount is equal to roughly $33,000 per man woman and child in the country. If every person in your family did get $33,000, would that have set you up pretty well to survive the downturn or recover other losses? I’m pretty sure, 99% of the people do not feel like they got $33,000 of stimulus.
Here’s what they did get and numbers don’t lie. Prior to the debt crisis, debt per man woman and child was about $33,000. Today that number is $52,402. So, not only have most people lost equity/wealth, in spite of all the stimulus, they have gone some $19,000 further into debt. Now you see how the number of people on food stamps has grown and why so many lost their homes, their savings and many of their possessions.
So who got the $10 trillion? If the money printers are right, and printed money saved us, that means we, collectively, would have lost $10 trillion more than we did. So, back to the future. Once again the economy is shrinking, unemployment is rising and inflation is stealing more and more of our wealth. Are we back to the brink of losing $10 more trillion dollars?
How will you survive that? Will you rely on printed money as a leaky life jacket – knowing it will slowly sink you further into debt? Or, will you take some of what you have left and put it into an asset that, since the debt crisis, doubled or tripled in dollar value. Since the crisis began, the gold price has doubled and the silver price has nearly tripled. Surely, a portion of your wealth diversified into these metals would have provided significant protection to your entire portfolio.
Now, if we are back to the future, and the best case scenario for your portfolio is more printed money and rising debt, the time to consider precious metals is now. It makes common sense. What you print becomes worth less. What you can’t print preserves wealth and buying power. You can’t print more gold or silver.
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