And The Winner Of The Next Half Trillion Dollar Bailout Is...

And The Winner Of The Next Half Trillion Dollar Bailout Is...

Notes From The Field By Simon Black     May 4, 2020  Bahia Beach, Puerto Rico

At precisely 4pm on Friday October 17, 1975, New York City’s government would have a $453 million debt to repay.

But literally the night before, the city’s government had only $34 million on hand.

It was the makings of an epic financial crisis: the wealthiest city in the world was about to declare bankruptcy.

New York City’s mayor Abe Beame had called US President Gerald Ford numerous times begging for federal assistance, but Ford refused. The nation had bigger problems to deal with.

New York was desperate.

But with only hours to spare, they managed to convince the powerful Teachers’ Union to use its gigantic pension fund to buy up the bonds and save the day.

The plan worked, and New York City was very narrowly able to escape bankruptcy.

But that wouldn’t happen today; a number of state and local governments are teetering on the edge of default, and public pension funds are in no position to bail them out.

Pensions are actually a huge part of the problem.

New York’s Teachers’ Retirement System-- the same union that bailed out the city in 1975, is today technically insolvent.

According to the pension fund’s most recent financial report, the fund is about 40% short of being able to pay out its obligations.

And the numbers are similar across the board for New York’s Fire and Police pension funds as well.

And New York is definitely not the only problem spot.

Public pensions in the State of Illinois are 60% underfunded, on average. And more than 65% in New Jersey.

In fact, only TWO states in the Land of the Free have fully-funded public pensions as of 2019: Wisconsin and South Dakota.

So, most pension funds are in serious trouble and in no position to bail anyone out.

State governments are even worse off: Illinois’ debt is rated one level above junk, and the state legislature asked the federal government for a $40 billion bailout.

California, New Jersey, and New York are also lining up for a federal bailout.

And amazingly enough, Congress is actually considering a $1 trillion bailout for state governments.

Plus, last week, the Federal Reserve announced that it will step in and buy $500 billion worth of bonds from states, counties, and municipalities.

So that’s another $1.5 trillion for state and local governments, on top of the trillions of dollars worth of bailouts they’ve already made.

Remember-- all of this money is just being conjured out of thin air. These politicians and central bankers believe they can print all the bailout money they need without ever having to make a difficult decision.

But this solution is a ridiculous fantasy: you cannot borrow or print your way to prosperity.

If that were the case, Zimbabwe would have become the wealthiest country in the world long ago.

It’s perfectly fine to remain optimistic and hope that, maybe just maybe, the virus will just magically disappear, everything will go back to normal, and there will never be any consequences from all of this money printing.

And while I’m at it, I can also hope that the Dallas Cowboys decide to make me their starting quarterback next season.

But back here on Planet Earth, it’s far more likely that the virus will be around for a while... that decisions will continue to be made by weak leaders whose greatest fear is not being re-elected… and that all this money printing will eventually become a problem.

Let’s be frank: there are VERY few instances throughout history where so much money has been created without any nasty consequences.

We know the famous stories like hyperinflation in Zimbabwe and the Weimar Republic.

Then there are stories from ancient and medieval times, like the insufferable inflation of China’s Jin and Yuan dynasties (both of which used paper currency and printed it freely).

Even in the United States in the 1970s, cheap interest rates and expansion of the money supply led to some of the worst inflation in US economic history.

You really don’t need a PhD in economics to understand that conjuring trillions of dollars out of thin air might hurt the long-term value of the currency.

This is why I keep writing that real assets make so much sense.

There is no sure thing right now. But real assets like productive land, profitable businesses, and precious metals tend to be safe havens at a time when governments and central banks are willing to sacrifice the currency.

Compared to the amount of money that’s being printed right now, precious metals are actually fairly inexpensive.

Gold is undervalued relative to the money supply, and silver is downright cheap relative to gold. LINK

Again, there is no sure thing. And we could see a real roller coaster ride in prices.

But if you believe (as I do) that they’re going to continue printing money to bail everyone out, then there’s a very strong, long-term case to own precious metals right now. And especially silver

While silver looks like an incredibly compelling opportunity right now, there’s one problem…

Silver demand has gone through the roof because of Covid, and investors are now paying 20%, 50%, even 100% above the price to get their hands on physical silver.

We think that’s crazy.

So we put together a special report for members of Sovereign Man: Confidential, providing step-by-step details about how to buy silver through the futures market for a fraction of these insane premiums.

 To your freedom & prosperity, Simon Black, Founder, SovereignMan.com

https://www.sovereignman.com/trends/and-the-winner-of-the-next-half-trillion-dollar-bailout-is-27730/

Silver Hasn’t Been This Cheap In 5,000 Years of Human History

Silver Hasn’t Been This Cheap In 5,000 Years of Human History

Notes From The Field By Simon Black     April 30, 2020  Bahia Beach, Puerto Rico

More than 4,000 years ago, the city of Kanesh was quickly becoming an important commercial trading hub within the ancient Assyrian Empire.

Kanesh was located in the dead center of modern day Turkey, so it was perfectly situated on the route between the Mediterranean and the Black Sea, and between Europe and Asia Minor.

As a result, Kanesh became a popular trading post. And merchants, scribes, and moneylenders from all over the Assyrian Empire traveled there to profit from the boom in copper, tin, and textiles.

What’s extraordinary about this period of history is how many records remain from those day-to-day transactions.

The Assyrians borrowed the writing system from ancient Mesopotamia and routinely chiseled their commercial trades on clay ‘cuneiform’ tablets.

Tens of thousands of these tablets have been discovered by modern archaeologists, so we have an incredible amount of detail about ancient financial transactions.

For example, one tablet on display at the Met in New York City documents the terms of a loan that originated in Kanesh some time in the 19th century BC.

According to the table, an Assyrian merchant named Ashur-idi loaned 3kg of silver to two traders, with 1/3 of the amount to be repaid in one year’s time.

This was fairly common back then: gold and silver were both used as a medium of exchange in ancient times. But this was before coins existed, so transactions would be settled based on weight.

In ancient Babylonia, for instance (which rose to power after the Assyrian Empire faded), the cuneiform tablets from that era tell us that the price of barley averaged about 17 grams of silver per 100 quarts.

And merchants would use elaborate scales to weigh gold and silver when exchanging their goods.

Gold and silver were also exchangeable for each other. Another tablet from ancient Babylonia during the time of Nebuchadnezzer states that 5 shekels of silver were worth ½ shekel of gold.

(A shekel in ancient times was a unit of weight, equivalent to about 8.33 grams.)

This implies a 10:1 ratio between silver and gold.

We’ve discussed this ratio several times; the gold/silver ratio has existed for thousands of years, and up until the 20th century, it remained within that ancient range of between 10 to 20 units of silver per unit of gold.

In modern times, gold and silver are no longer used as a medium of exchange. But there’s still been a long-standing ratio that has persisted for decades.

One ounce of gold has typically been valued at 50 to 80 ounces of silver. Rarely does the ratio go higher (or lower). And when it has, prices have always corrected.

As of this morning the ratio is 112, meaning it now takes 112 ounces of silver to buy one ounce of gold; and today’s level is spitting distance from the ratio’s all-time high of 120, which it reached last month.

And when I say “all-time high,” I mean it. Ancient cuneiform tablets prove that silver has never been so cheap relative to gold in literally thousands of years of human history.

If history is any guide, this means that the ratio should eventually narrow, i.e. the price of silver should rise and/or the price of gold should fall, bringing the ratio back to its more normal range.

And there are plenty of ways to potentially make money from this.

The Chicago Mercantile Exchange, for example, offers a financially-settled futures contract for traders to speculate on the Gold/Silver ratio.

But the CME’s gold/silver ratio contract is very thinly traded and difficult to purchase, so it might not be the best approach.

In theory, one way to speculate that the gold/silver ratio will return to historic norms would be to ‘short’ gold contracts and go ‘long’ silver contracts, i.e. speculate that the price of gold will fall while the price of silver will rise.

But, personally, there’s no chance I would bet against gold right now.

I’ve written for the past several weeks that I approach this entire pandemic from a position of ignorance and uncertainty.

EVERY possible scenario is on the table, and no one can say for sure what’s going to happen next.

There are very few things that are clear. But in my view, one thing that has become clear is that western governments will print as much money as it takes to bail everyone out.

According to the Congressional Budget Office, the US federal government will post a $3.6 TRILLION deficit this Fiscal Year due to all the bailouts. Plus the Federal Reserve has already printed $2 trillion.

Frankly I think they’re just getting started.

With this incomprehensible tsunami of government debt and paper money flooding the system, real assets are a historically great bet.

We’ve talked about this before: real assets are things that cannot be engineered by politicians and central banks-- assets like productive land, well-managed businesses, and yes, precious metals.

And they all tend to do very well when central banks print tons of money.

Farmland, for example, was one of the best performing assets during the stagflation of the 1970s.

And financial data over the past several decades shows that whenever they print lots of money, the price of gold tends to increase.

Right now, in fact, the price of gold is relatively cheap compared to the current money supply.

And the price of silver is ridiculously cheap compared to gold. Again, silver has never been cheaper in 5,000 years.

This is why I’d rather just own physical silver. I’m not interested in betting against gold because I expect they’ll continue to print money. In fact I’m happy to buy more gold.

And while we cannot be certain about anything, there’s a strong case to be made that the price of silver could soar.

PS. Silver demand has gone through the roof because of Covid, and investors are now paying 20%, 50%, even 100% above the price to get their hands on physical silver.

We think that’s crazy.

To your freedom & prosperity, Simon Black, Founder, SovereignMan.com

https://www.sovereignman.com/trends/silver-hasnt-been-this-cheap-in-5000-years-of-human-history-27720/ 

The First Time They Sent Me To The Gas Chamber

The First Time They Sent Me To The Gas Chamber

Notes From The Field By Simon Black    April 28, 2020  Bahia Beach, Puerto Rico

The first time I was sent to the gas chamber was in late July 1996.

I’m not being dramatic-- that’s literally what they called it.

I was 17 years old… a brand new cadet at West Point undergoing my first summer of basic training.

It’s affectionately known as ‘Beast Barracks’, and one of the highlights is a few days’ worth of Nuclear, Biological, and Chemical training.

The culmination of this is going through the gas chamber; it’s basically a small room filled with tear gas… the same stuff that riot police use on protesters.

You walk into the chamber in your full gear: hazmat suit (they called it a MOPP suit), gloves, and mask. And at a certain point, they make you rip off your mask, inhale all that poison for a few seconds, and make your way to the exit in utter misery. It was one of the worst experiences of my life up to that point.

Naturally they post some giant man in front of the exit (who still has his mask on). And he makes you recite your name and service number before he steps aside and you’re allowed to leave.

When my turn came up, I took a deep breath and ripped off my mask. Immediately I could feel the gas on my skin like a thousand knives digging into my face.

I couldn’t hold my breath anymore and inhaled, instantly burning my lungs and causing pain I couldn’t have imagined before.

The big guy at the door barked at me to state my name. I was in such agony I couldn’t even remember.

Finally took pity on me and kicked me outside. I felt daylight on my face again, along with a stream of gooey snot running from my nose to my boots. And my eyes were so swollen I could barely see.

But amazingly enough my day was about to get a lot worse.

Later in the day, we went through another training session that changed me forever.

West Point develops its cadets to be leaders and Army officers. And that afternoon, they trained us how to respond in case we were ever leading a unit that came under chemical or biological attack.

I’ll never forget the procedure.

As soon as there’s any evidence of chemical or biological agents in the vicinity, the platoon leader immediately gives the order for all troops to put on their protective gear.

But at a certain point, perhaps after several hours and your unit has moved on from the area, you’re supposed to conduct a series of tests to see if you’re in the clear.

The Army provides testing equipment to determine if there are any traces of chemical or biological weapons in the area. But like most things in the military back then, the tests were far from accurate.

So, in order to be absolutely certain, the platoon leader was supposed to approach the lowest ranking soldier in the unit, relieve him of his weapon, and order him to remove his gas mask.

That soldier was like a canary in the coalmine; if he lived, we could be sure that we were out of the chem/bio danger zone.

And it was my responsibility as the leader to look someone in the eye and order him to put his life at risk.

I knew when I joined the military that I would be putting my own life on the line.

But it hadn’t yet dawned on me that, as a leader, I’d have to order others to do the same.

The sergeant in charge of our training could sense the looming dread in the room, and he told us, “If you’re not willing to do that, then you’re not fit to be a leader.”

I must have instantly aged 10 years when he said those words. And he was right: on rare and extraordinary occasions, some leadership positions require making gut-wrenching decisions.

But many of the ‘leaders’ we have today aren’t willing to make those gut-wrenching decisions. They’re far more concerned about electability, political legacy, TV ratings, and poll numbers.

They say things like “I can’t let people die” as justification to suspend freedom and shut down the economy.

This isn’t a difficult decision, it’s just bad logic. People die every day.

You’ll never hear a governor say “I can’t let people die. . .” of heart attacks. Or hurricanes. Or diabetes.

They’ll never order a complete shut down of the economy because of a spike in automobile accidents.

These politicians are perfectly fine for people to die of every other possible way, including pneumonia (as long as it wasn’t caused by Covid).

But death from Covid? Unacceptable!

It’s truly bizarre. And they’re willing to destroy everything-- the economy, individual liberty-- just so they don’t look flat-footed or get blamed for Covid deaths.

Sorry, but that’s not what leadership is all about. You’re not supposed to factor your personal approval ratings into a decision-making process.

Leadership is not a popularity contest. And sometimes it demands the heavy responsibility of asking for sacrifice… asking others to take a risk.

But what have we been asked to sacrifice? Nothing. Stay home and watch Netflix. Take your free government money.

That’s not leadership. And that’s not a tough decision.

Frankly it’s the easy way out. It’s far more politically palatable for them to continue printing incomprehensible quantities of money, sending everyone checks in the mail, and demanding more bailouts.

Yes, there are always exceptions. But for the most part, the politicians we’re dealing with simply aren’t fit to be leaders.

They refuse to make the difficult, gut-wrenching decisions that are required of their offices. So instead they consistently take the easier route: more government power, more economic destruction, more money printing, less freedom.

And in the long run, such pitiful leadership will cause far greater consequences than the virus itself.

To your freedom & prosperity, Simon Black, Founder, SovereignMan.com

https://www.sovereignman.com/trends/the-first-time-they-sent-me-to-the-gas-chamber-27711/ 

This Is A Power Grab We Haven’t Seen Since 9/11

This Is A Power Grab We Haven’t Seen Since 9/11

Notes From The Field By Simon Black   April 27, 2020  Bahia Beach, Puerto Rico

Thousands of years ago in 458 BC, Lucius Quintius Cincinnatus was hard at work behind his plow on the family farm when a group of Roman Senators showed up with urgent news.

A foreign enemy called the Acqui had vanquished one of Rome’s armies and was rapidly approaching the city. The Republic was in deep trouble.

Cincinnatus was a former consul and renowned military leader, so in their panic, the Roman Senate unanimously appointed him as emergency dictator.

All of Rome’s individual freedoms were immediately suspended. Checks and balances were eliminated. Cincinnatus would have supreme power to do whatever he saw fit during Rome’s time of crisis.

According to ancient Roman historians, Cincinnatus told his wife, “Go and fetch my toga,” and he immediately went to work.

 Cincinnatus was legendary: he mobilized a new army, repelled the foreign invaders, and saved the city from certain destruction, all within just 15 days.

But even more importantly, Cincinnatus relinquished all of his power immediately after the victory, and returned to his plow. It was a display of virtue and selflessness that Romans celebrated for centuries.

Most dictators, of course, are not so principled.

The ancient Greeks (despite having invented democracy) routinely appointed dictators during times of national emergency. 

Very few relinquished power willingly, and several-- like Dionysius of Syracuse, Nabis of Sparta, Peisistratus, etc.-- ruled for decades.

They always found a way to extend the emergency and hang on to power. And eventually, the people simply became accustomed to their new reality.

This is still true of human nature today.

When I was a kid in the 1980s, my father used to go on business trips from time to time, and my mother would usually take my sister and I to the airport to pick him up.

Many of you are old enough to remember this-- back then, visitors used to be able to go directly to the gate, i.e. we would go through security and sit at the gate waiting for my dad as he walked off the plane.

Obviously you can’t do that anymore.

After a series of terrorist incidents in the late 1990s, followed by 9/11 a few years later, the government put its boot to the throat of airport security.

Today we stand in line for a dose of radiation while being barked at and occasionally fondled by federal employees.

If you think about 9/11 in particular, its remarkable how much power the government grabbed, and how many freedoms they took away. Two decades later, it’s clear those freedoms are never coming back.

I’m not just talking about visitors being able to go directly to the gate at the airport. That’s a tiny example.

The wider impact of 9/11 can be seen everywhere.

The government now maintains broad authority to spy on it citizens, with the NSA brazenly intercepting phone calls, emails, and communication metadata through an extraordinary surveillance dragnet.

Financial institutions submit ‘suspicious activity reports’ to the federal government to inform on their own customers, even for the most mundane transactions like withdrawing a few thousand dollars of cash.

US law now permits the indefinite detention, i.e. incarceration without charge or trial, even of US citizens. This law was originally authorized in 2001, then re-authorized again in 2013.

Plus, US federal spending absolutely ballooned post-9/11. After a few years of finally achieving a fiscal balance in the 1990s, deficit spending soared in 2001... and has remained high for the past two decades.

Even during economic boom years from 2016-2019, the government still managed to overspend by $1 trillion per year. The emergency spending authorization never went away.

Frankly most of these impacts will never go away. We’ve become accustomed to the way things are-- the spending, the lack of privacy, etc.

The last thing we should ever expect is for government to voluntarily give up power. And that’s what’s so concerning right now.

Yes, there’s a virus on the loose. A lot of people are going to die, and that’s terrible. It’s also terrible how many people die of cancer, heart disease, natural disasters, and automobile accidents.

But as I’ve written numerous times over the past several weeks, the world is not coming to an end. This too shall pass, and from a public health perspective, things will one day go back to normal.

Meanwhile they’re completely ravaging the economy. Millions of people have already lost their jobs, countless businesses will close forever, and trillions of dollars of prosperity has been lost.

The economic toll is incalculable. But that too shall pass. It may take years… but even the Great Depression eventually gave way to economic growth.

What I’m most concerned about at this point is NOT the virus, nor even the economic devastation.

I’m far more concerned at how governments have seized this opportunity to vastly expand their power.

They have us all cowering in our homes, stripped of the most basic freedoms to do just about anything.

People are being thrown off their own private property because they’re not an ‘official resident’ of the town. Others have been arrested for attending a funeral. Others threatened with jail for their social media posts.

Content everywhere is being heavily censored, with major tech companies like Google and Facebook telling us what we can/cannot say.

Governments around the world are tracking their citizens’ every movement, and now there’s talk of national health databases and special passports.

And they’re spending trillions of dollars without any thought of the consequences.

It’s a power grab we haven’t seen since 9/11. The circumstances are certainly similar: people are terrified, so the government is doing whatever it wants.

Again, the public health problems will eventually be fixed. Even the economy will some day recover.

But there’s going to be a huge impact to our freedom from this astonishing growth of unchecked government power. And a lot of those changes will be with us permanently.

To your freedom & prosperity, Simon Black, Founder, SovereignMan.com

https://www.sovereignman.com/trends/this-is-power-grab-we-havent-seen-since-9-11-27707/

America Finally Found The Lost City Of Gold

America Finally Found The Lost City Of Gold

Notes From The Field By Simon Black   April 23, 2020  Bahia Beach, Puerto Rico

In the early 1530s, a Spanish conquistador named Diego de Ordaz was exploring modern-day Venezuela when he first heard rumors of a nearby City of Gold.

Ordaz thought he was about to hit the jackpot. And he wasted no time ordering expeditions of the area to find this city-- what eventually became known as El Dorado.

The mission failed, and most of Ordaz’s men died. But one survivor, a crewman named Juan Martinez, claimed that he had been captured and held prisoner for 10 years in El Dorado.

Martinez told sensational tales about the city’s golden structures adorned with precious stones, and even said that the local king bathed in gold dust every morning.

Martinez also said that the people of El Dorado were all so rich with gold that no one really had to work. They had constant festivals and would often feast for seven days straight.

Europeans were instantly hooked. And more expeditions were immediately launched.

The conquistador Gonzalo Pizarro (half brother to Francisco Pizarro) was so fanatical about El Dorado’s existence that he marched thousands of people through the jungles of South America for eighteen months looking for the city.

Pizarro came up empty-handed, and most of his men died.

And yet there were still countless expeditions launched over the next several decades in search of the lost City of Gold.

Everyone desperately wanted to believe in this fairy tale-- that there was a place overflowing with money where everyone could live for free and spend their lives feasting and drinking.

Maybe this desire is hard coded in our DNA, because there still seem to be people who believe in it.

Today’s version of El Dorado is the printing press. Politicians seem to have a fanatical belief that they can conjure paper money out of thin air and pay for everything.

For instance, #RentStrike2020 is a nationwide movement in the Land of the Free to simply cancel rent.

People want months of rent and mortgage payments to be forgiven. Poof, disappeared.

And the Bolsheviks have answered their call.

Congress is now considering the Rent and Mortgage Cancellation Act which would cancel all rent and mortgage payments for the duration of the pandemic, and possibly beyond for up to a year.

And the law would be retroactive, so they’d go back in time to March 13 to cancel rent.

The government would then set up a fund for landlords and mortgage holders “allowing them to recoup their losses, so long as they agree to abide by a set of fair renting and lending practices for a period of five years.”

Some of those conditions include not raising the rent for five years, and not denying renters based on credit history, or criminal record.

This is insane. First the government will tell landlords that the contracts they signed are void. And then, if someone wants to rent your property who has a history of not paying rent, you’re not allowed to reject them.

But as long as you bend the knee to DC, they’ll print the money to pay you.

Another bill proposes to pay $2,000 per month, for the next year, to every American over the age of 16 who makes less than $130,000 per year.

This includes high school students, and people who were previously not working.

Naturally the bill doesn’t mention costs. Why bother with such a trivial detail?

But based on the number of people who qualify, the cost could easily top $4 trillion.

That’s more than the entire federal tax revenue last year! They would literally spend every penny they collected in taxes last year just for that one program.

But no one really cares anymore. There are no rules, and both the government and central bank have decided they’ll do whatever it takes during this pandemic.

What’s really remarkable is that they seem to believe all this deficit spending and money printing will produce favorable results.

If you could simply print money to become a prosperous nation, then Zimbabwe would be the wealthiest country in the world.

But that’s not how it works. Creating more money is not the same as creating value.

Value creation is difficult. It requires talented people to work hard work and produce; it cannot be conjured out of thin air by a bureaucrat.

Right now the economy is shrinking. Millions of people have lost their jobs, which means there’s a whole lot less value being created.

Yet simultaneously they’re printing more money than ever.

You don’t have to have a PhD in economics to understand the mismatch here.

But then again, politicians aren’t exactly known for their grasp of finance.

For example-- Queen Bolshevik, Alexandria Ocasio-Cortez, gleefully celebrated oil’s MINUS $40 price earlier this week, and predicted that the crash would prompt people to switch over to renewable energy sources.

What is this person thinking?? Ultra-cheap oil will compel people to use MORE oil, not less. Duh.

If anything she should hope for a $150 oil price and record high profits for oil companies. Renewable energy would be MUCH cheaper at that point, and people would have a big incentive to switch.

AOC clearly has no understanding of finance or economics… which is ironic because she’s one of the biggest fanatics of the printing press myth.

No one has to work. No one has to pay their rent. They government is just going to print money and send everyone a check every month.

It took nearly 500 years, but America has finally found the lost city of El Dorado. It’s called the Federal Reserve.

And just like El Dorado, its wealth is entirely mythical.

To your freedom & prosperity, Simon Black, Founder, SovereignMan.com

https://www.sovereignman.com/trends/america-finally-found-the-lost-city-of-gold-27689/ 

The Next Giant Industry In Need Of A Bailout

The Next Giant Industry In Need Of A Bailout

Notes From The Field By Simon Black  April 20, 2020  Bahia Beach, Puerto Rico

Well this is starting to become a trend.

Over the past few weeks, state governments across the Land of the Free have been feverishly proposing new legislation that will virtually guarantee the entire insurance industry is wiped out.

The root of the issue has to do with something called business interruption insurance.

Business interruption is a pretty common type of insurance that’s designed to protect business owners against a number of risks.

For example, let’s say you own a restaurant and you have a bad kitchen fire that forces you to shut down for a month. You’d most likely have a fire insurance policy to cover the direct damage of the fire. And a lot of companies would also have a business interruption policy to help them stay afloat during that one-month period while the business is closed for repairs.

But business interruption insurance has certain exclusions. It’s just like any other policy, and the insurers are very clear about what risks they do/do not cover.

A typical homeowner’s insurance policy, for example, covers your home against risks like theft, fire, and vandalism.

But most homeowner’s policies specifically exclude flooding. So any homeowner who wants to protect their homes from the risk of flood damage can purchase a separate flood insurance policy.

Many insurance plans, including business interruption policies, also tend to exclude things like damage caused by war, government action, and “acts of God”.

But again, any business that wants to insure against those risks is free to seek additional coverage.

That’s the whole idea of insurance: customers are able to pick and choose which risks they want to insure against, and which risks they’re willing to take.

It’s fair to say that most business interruption policies don’t cover a worldwide pandemic that shuttered the entire global economy.

But there’s a growing trend now where state governments are proposing new legislation that would RETROACTIVELY force insurance companies to protect their policyholders against Covid.

This is totally nuts. The state governments are the ones that forced businesses to shut down.

Now they expect the insurance companies to pay for the consequences, even though the policies specifically state that they don’t cover this type of risk.

They might as well demand pay for every other uninsured hazard. Did your house flood and you didn’t have flood insurance? Well let’s retroactively force the insurance companies to pay for that too.

Pennsylvania, New York, Illinois, New Jersey, and several other states have proposed similar legislation, or threatened regulatory action.

(This trend is also picking up steam overseas; in the UK, for example, lawsuits are already pending against insurance companies for not paying out Covid-related claims.)

And given that just about EVERY business would qualify for this retroactive Covid coverage, there’s simply no way that the insurance industry would be able to afford such an indemnity.

Think about it-- the federal government made $350 billion worth of loans available to small businesses earlier this month, and that money was 100% used up in about 2 weeks. And they just agreed on another $300 billion this morning.

So most insurance companies would be wiped out if this legislation passes… i.e. CUE THE GOVERNMENT BAILOUT of the insurance industry.

Just like airlines, hotels, hospitals, etc., the insurance company would be standing in line to suckle on that sweet taxpayer bailout teet, probably to the tune of another half-trillion dollars.

Of course, it goes without saying that the government doesn’t have the money for any this.

We’ve explored the government balance sheet many times in the past: Uncle Sam is already in the hole by MINUS $23 trillion according to the Treasury Department’s most recent financial statements.

And, over the last few years, even when the economy was incredibly strong, the federal government still managed to lose more than a trillion dollars a year.

Now that they have a real crisis to contend with, the deficit is going to swell to an unimaginable figure.

Frankly it doesn’t matter whether or not the insurance companies end up footing the bill.

If the insurance companies are forced to pay up, the government will likely bail them out. Otherwise the government will bail out businesses directly.

Either way, it’s pretty obvious the government is going to spend an unbelievable amount of money they don’t have… which means the central bank (Federal Reserve) will keep printing more money.

That’s how the system works: whenever the government wants to bail someone out, the Federal Reserve first conjures the bailout money out of thin air, and then ‘loans’ it to the Treasury Department.

Crazy, right?

The Federal Reserve has already printed trillions of dollars since this crisis started, and that may only be the warm-up round.

The longer this lasts, the more money they’re going to print… and the more they’ll end up debasing the currency.

We are obviously living in extraordinary times, and it’s perfectly reasonable to hope for the best.

But it would be irresponsible to willfully ignore what the government and central bank are doing here.

Conjuring infinite amounts of money out of thin air could have incredibly destructive consequences on the currency.

And that’s why, as I’ve written before, it’s definitely time to consider owning some real assets.

To your freedom & prosperity, Simon Black, Founder, SovereignMan.com

https://www.sovereignman.com/trends/the-next-giant-industry-in-need-of-a-bailout-27670/ 

They'll Wreck The Currency If They Have To

They'll Wreck The Currency If They Have To

Notes From The Field By Simon Black 

April 21, 2020  Bahia Beach, Puerto Rico

Nearly seven centuries ago in the mid-1300s, the first major outbreak of the Bubonic Plague forced Europeans into some of the harshest social distancing measures in history.

As Boccacio wrote in The Decameron in 1353, the hysteria was so extreme that “brother abandoned brother. . . fathers and mothers refused to see and tend their children, as if they had not been theirs.”

When people sensed the worst was over, they slowly came out of their homes.

There was no grand re-opening of the economy like some department store suddenly under new management. People remained highly mistrustful of one another, continuing to avoid even the most basic interactions with friends, family, and professional colleagues.

Commerce was slow and the economy remained depressed for years.

And just when it seemed that the situation was finally starting to improve, the plague struck again in 1360. And again in 1374.

Medieval Europeans quickly realized that if there was just a single rat left on the planet carrying the disease, then another wave of the pandemic could begin anew.

And that made it next to impossible for anything to return to normal.

Only a handful of industries flourished after the plague. People still needed to eat, so agriculture did well.

And as more people remained in relative isolation, science began to advance at a pace never seen in western Europe.

But most industries suffered immeasurably.

Commercial trade dwindled. Italy’s woolen textile industry practically ceased to exist. Many prominent banks in Europe collapsed. And there were even government debt defaults.

Today our circumstances are obviously different. The world has some of its brightest minds working to eradicate this pandemic, and they have a pretty great track record.

And while there are certainly a lot of challenges to deal with, we’re still able to produce certain goods and services, ship them across the globe, and order online for home delivery.

But there are some similarities that are difficult to ignore.

Right now most people are barricaded in their homes while policymakers wait for this virus to die off.

But that’s not how biology works.

Just like in the 1300s, if there’s even a single carrier of the coronavirus remaining, then the whole thing starts over.

That person transmits the virus to 2-3 people, those people transmit the virus to 2-3 other people, and the exponential growth curve begins again.

Lockdowns don’t kill off the virus. They just reset the clock.

I’ve been writing about this for a while: what happens if there’s a second wave of outbreaks? Do we all go on lockdown for another two months and send the economy into another tailspin?

Even when they do lift the lockdowns, countless industries will be hideously disfigured; do we really expect crowded bars, airplanes, sports stadiums, and shopping malls to return to normal?

Even something as basic as office space could take an enormous hit.

I wrote last week that big businesses could be downsizing-- permanently reducing their work forces and cutting back on office space. Even Disney acknowledged that they will reduce office space.

It’s hard to imagine that trend won’t have a major impact on the entire commercial real estate industry, from agents to construction companies to property owners, to the banks who own the mortgages.

Retail stores have been totally vanquished, and the bankruptcies are piling up; this could impact millions of workers in the retail sector and trigger a wave of defaults against the banks who loaned money to retail giants.

And you probably saw yesterday that the price of WTI crude oil crashed BELOW $0.

We’ll talk about that more in another letter... but it’s fair to say that low oil prices will force a lot of oil companies out of business.

And that will impact workers in the sector who stand to become unemployed… and, yes, the banks who loaned money to oil companies.

[According to a recent report from investment firm KBW, some banks, like Oklahoma-based BOK Financial, have more than 100% of bank equity tied up in loans to oil companies!]

I’ve been writing about this theme since the pandemic started: there will be some banks that don’t make it. They simply won’t be able to withstand the loan losses.

And it’s not just the energy sector.

Banks with loans to retail companies could take a hit. Banks with commercial real estate loans could take a hit.

And banks’ consumer loan portfolios will undoubtedly take a hit as millions of newly unemployed people stop paying their bills.

There will likely even be sovereign debt defaults, and banks will take a huge hit from those.

There’s more than $250 TRILLION worth of debt worldwide, much of it owned by banks. If even 1% of that debt goes to zero, a number of banks won’t survive.

And if you think that bank failures aren’t possible, please remember that oil prices hit MINUS $40 yesterday. Nobody thought that was possible. And yet it happened.

EVERY scenario is possible.

And this leads me to a very central idea:

I don’t know if the stock market is going to rise or fall. I don’t know what’s going to happen to oil prices.

But I have a strong suspicion that the government and central bank are going to keep working together, printing incomprehensible sums of money to bail everyone out-- especially banks.

This ‘whatever it takes’ monetary policy could come at an extremely steep price.

The last thing politicians care about right now is the value of the currency. And history tells us that inflation is almost always the preferred tool of a government in crisis.

If they have to conjure $10 trillion out of thin air to bail out the economy, they’ll do it… even if it wrecks the currency.

This is an enormous implication worth preparing for today.

To your freedom & prosperity, Simon Black, Founder, SovereignMan.com

https://www.sovereignman.com/trends/theyll-wreck-the-currency-if-they-have-to-27685/

Why It Makes So Much Sense To Own REAL Assets

Why It Makes So Much Sense To Own REAL Assets

Notes From The Field By Simon Black 

April 16, 2020   Bahia Beach, Puerto Rico

Earlier this week we talked about why the economic consequences of this pandemic could last a lot longer than what a lot of people expect.

Now, I say all of this from a position of complete ignorance and uncertainty. Nobody knows what’s going to happen next, or how long this pandemic will last.

But to simply expect that everything will return to normal in a few weeks-- and willfully ignore the countless other possibilities-- seems a bit foolish.

Worldwide, the number of deaths from Covid-19 reached 138,000. That’s more than double the number of deaths from 10 days ago. So it’s still growing.

Singapore was initially successful in controlling the virus outbreak. But they’re now experiencing a nasty second wave of infections.

In the US alone, more than 20 million people have lost their jobs so far, and the government’s $350 billion program to bail out small businesses has already run out of money.

It’s great to hope for the best. But let’s be realistic: there are a lot of reasons why the economic consequences of this pandemic could be long-lasting.

And that’s what brings me to real assets.

If the negative consequences linger, it’s reasonable to expect that governments and central banks will shovel piles of cash into their economies at a feverish pace.

Most developed nations have started this already.

In Australia, the government has passed at least $130 billion in stimulus measures so far-- a princely sum in a country where the population is just 25 million people.

The British government has passed hundreds of billions worth of loan guarantees, grants, and tax cuts.

Germany’s government has passed more than 750 billion euros worth of loans and stimulus programs.

Canada’s central bank slashed its benchmark interest rate to 0.25%, and cut bank reserve requirements, in addition to billions of dollars in stimulus programs.

And the United States government has spent trillions of dollars already; plus the Federal Reserve has conjured more than a trillion dollars out of thin air to loan money to banks and businesses.

It’s likely they’ll keep printing money if the economic pain persists.

Second wave of outbreaks? Print another trillion dollars to bail out businesses.

Massive corporate layoffs? Print another 2 trillion dollars to bail out employees.

Skyrocketing loan defaults? Print another 5 trillion dollars to bail out the banks.

Now, consider that they’d be printing all this money at a time when economies are shrinking by 20% or more.

So we’d see a tidal wave new money flooding into an economy where fewer goods and services are being produced.

This is precisely how a currency loses value: if there’s less stuff in an economy, but more paper money, it means all the stuff has to become more expensive relative to the paper money.

That’s ultimately what inflation is.

Throughout history whenever this situation has arisen, it’s almost invariably been a good idea to own real assets, i.e. direct ownership of an asset that cannot be conjured out of thin air by a central bank.

Real assets include things like productive land, shares of a well-managed private business, or physical gold and silver.

These are assets that cannot be willed into existence by a government or central bank. And they don’t simply exist on paper, or as an entry on a balance sheet.

They’re real. And they tend to do very well in an inflationary environment where ridiculous sums of money are being printed.

Most people don’t have an easy opportunity to buy productive land or shares of a well-managed private business.

But gold and silver are totally within reach. And here’s something really interesting about them:

The chart below shows you the ratio over the past 50 years between the price of gold and the “M0 monetary base”.

As you can see, right now this ratio is well below its long-term average.

(M0 is just one method economists use to measure the supply of money in the US economy. But using other methods, like M2 money supply, the ratio is still below its long-term average.)

This low ratio suggests that the gold price is cheap relative to the amount of money in the economy right now. And it stands to reason that the amount of money in the economy is going to increase a LOT.

And that means the price of gold could also increase a lot.

But if gold is relatively cheap, silver is even cheaper.

As I wrote to you on Monday, the gold / silver ratio is near an all-time high. In other words, it takes twice as much silver to buy a single ounce of gold relative to the long-term average.

So while there’s a good case that the price of gold can increase quite a bit, it’s possible that the price of silver could rise even more.

There are, of course, risks. Nothing is certain, especially in this environment.

But there are some inexpensive ways to bet on rising gold and silver prices where you could make potentially 10x your money or more, even with limited amounts of capital.

We’ll talk about these next week.  For now, stay safe and healthy.

https://www.sovereignman.com/trends/why-it-makes-so-much-sense-to-own-real-assets-27658/

To your freedom & prosperity, Simon Black, Founder, SovereignMan.com

5 Reasons Why The ‘V-Shaped Recovery’ Is A Fantasy

5 Reasons Why The ‘V-Shaped Recovery’ Is A Fantasy

Notes From The Field By Simon Black 

April 14, 2020  Bahia Beach, Puerto Rico

The big story over the last few days has been ‘reopening the economy’.

And that’s certainly a nice idea. Countless people have been living in despair over the last month, and the prospect of everything going back to normal soon feels really great.

I certainly hope for the best.

But a couple of weeks ago I quoted James Stockdale-- one of the toughest men who ever lived-- talking abut how he cultivated the mental strength to survive 7 torturous years as a Prisoner of War in North Vietnam.

And I thought it would be relevant to re-post his advice here.

When asked, “Who didn’t make it [out of the POW camp],” Stockdale replied,

Oh that’s easy. The optimists. They were the ones who said, ‘we’re going to be out by Christmas.’ And then Christmas would come, and Christmas would go.

And then they’d say, ‘We’re going to be out by Easter.’ And then Easter would come, and Easter would go. And then Thanksgiving. And then it would be Christmas again.

And they died of a broken heart.

“This is a very important lesson,” Stockdale continued. “You must never confuse faith that you will prevail in the end—which you can never afford to lose– with the discipline to confront the most brutal facts of your current reality, whatever they might be.

There’s clearly been a lot of positive data lately showing that the growth rate of the virus seems to be slowing, and that the mortality rate is lower than originally estimated.

This is all good news.

But we’re seeing a lot of ‘Stockdale optimists’ right now who only look at the good news and refuse to confront brutal facts.

Many of the world’s most prominent financial markets have been bitten by Stockdale Optimism; stocks, for example, are way up because investors believe everything is about to return to normal and the economy will experience a ‘V-shaped recovery’.

(This means that the economy will bounce back as quickly and aggressively as it stalled.)

But anyone with the discipline and emotional courage to confront the most brutal facts of our current reality realizes that ‘normal’ is still far away.

Here are a few things to consider:

1) Hardcore PTSD

We’re now living in a world where hugging is considered an act of biological terrorism.

It would be silly to think that everyone will come out of hiding and go back to normal… packing bars, airplanes, shopping malls, elevators, offices, etc. like we used to do.

There’s going to be some serious, worldwide Post-Traumatic Stress Disorder. Millions of people will permanently change their behavior, reduce consumption, stay home, and avoid contact with others.

And this is clearly going to have a lingering economic impact.

2) RIP Small Business

Countless small businesses ‘temporarily’ closed last month. Many of them will never reopen.

Others have had to make deep cuts and lay off a number of employees in order to survive.

But even when economic conditions finally start to normalize, many small business owners will realize, “Gee I didn’t actually need some of those workers.”

They’ll do the math and determine that the business can be more profitable and efficient without all the employees. And some of those temporary job cuts will become permanent.

3) Big business downsizing

Ditto for big businesses. A typical medium-sized or large company can lay off at least 10% of its workforce with minimal impact to operations. Nearly everyone has fat to trim.

And so a lot of big companies who have laid off their workers will not hire everyone back.

Moreover, big companies now have an opportunity to shrink their overhead further by reducing their office footprints.

Executives now realize that many employees can work from home. And frankly, many employees prefer it.

This will likely reduce demand for office space, causing a steady increase in commercial property vacancy rates.

Even Disney’s Chairman Bob Iger recently said his company will reopen “with less office space.”

4) Retail was dying before this started. . .

Let’s be honest-- retail stores were already dying before this pandemic; the entire industry is being swallowed up by Amazon.

A number of major retail chains (Sears, Macy’s, Pier 1 Imports, etc.) filed for bankruptcy well before the pandemic started. Plenty of others were on the ropes.

And now with so many places on lockdown, many of them simply will not survive.

Between the continued rise of e-commerce, the lockdown consequences, and the lingering PTSD that could keep millions of people from visiting stores, physical retail is in pretty serious trouble.

Retail makes up roughly 10% of the work force in the US alone (according to estimates from the Aspen Institute), so it’s not hard to imagine a few million job losses just from this one sector… not to mention the impact to the real estate market of so many shops and malls going under.

5) Additional outbreaks

While the social distancing and lockdown measures have reduced the rate of contagion, it’s important to remember that some places (like Hong Kong and Singapore) already experienced a second wave of outbreaks after they loosened their restrictions.

Yet the ‘V-shaped recovery’ fantasy completely ignores this very real possibility… and the huge economic consequences it would have.

In fact, any of the five points I mentioned above could have a nasty impact-- to the unemployment rate, financial markets, GDP, real estate prices, corporate earnings, government deficits, etc.

But they’re all being ignored.

The prevailing narrative right now is that we’re out of the woods and the economy is about to come roaring back.

And that would certainly be nice.

Staying positive is great. Like Stockdale said, we know that we will prevail in the end.

But it’s important to be realistic-- to confront the most brutal facts of our reality. And our reality is that the consequences of this pandemic could last much longer than many people are choosing to believe.

 To your freedom & prosperity, Simon Black, Founder, SovereignMan.com

https://www.sovereignman.com/trends/5-reasons-why-the-v-shaped-recovery-is-a-fantasy-27655/

Wells Fargo Already Ran Out Of Money For Small Businesses

Wells Fargo Already Ran Out Of Money For Small Businesses

Notes From The Field By Simon Black 

April 7, 2020  Bahia Beach, Puerto Rico

That was fast! Wells Fargo already ran out of money for small businesses.

I think one of the funniest movies of the 1980s was Brewster’s Millions.

In the movie, Richard Pryor plays Monty Brewster, a minor league baseball player who finds out that he is in line to inherit a vast $300 million fortune.

In order to inherit the money, though, Brewster must spend $30 million over the next 30 days… and if he fails to do so, he forfeits the entire inheritance.

Part of the terms of his inheritance were that Brewster couldn’t buy assets. He couldn’t just acquire a bunch of real estate or expensive paintings. He had to spend the money, not invest it.

$30 million is a ton of money, especially in 1985 when Brewster’s Millions was released. And the movie is a hilarious account of how difficult it was for Richard Pryor’s character to spend so much money so quickly.

Amazingly enough, the US federal government is starting to realize this too.

Ten days ago they passed the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act with the aim of putting cash in people’s pockets.

As I wrote to you a week ago, the law includes $350 billion in emergency funding for small businesses. It’s specifically aimed at helping entrepreneurs retain and pay their employees.

A week and a half later, the government seems to have realized just how difficult it is to give away $350 billion to tens of millions of businesses.

Sure, the Defense Department blows hundreds of billions of dollars all the time. They make it look easy. But they’re acquiring really expensive stuff-- bombs, aircraft carriers, fighter jets, etc.

But similar to Brewster’s Millions, the Small Business Administration isn’t buying anything. They have to spend the money, sprinkling hundreds of billions of dollars across the economy as quickly as possible.

And to make matters even more difficult, they’re spending it in very small chunks as low as $10,000 each.

So the government and the banks are scrambling right now trying to figure out how to get this money into the economy, and fast.

Meanwhile, demand is incredibly high from small business owners who are looking to get a piece of that $350 billion.

Some bank websites have crashed. Others simply put a page up saying “We’re sorry, we’re unable to process your request.”

Wells Fargo (of course it had to be Wells Fargo…) announced yesterday on Twitter that they had already “reached lending capacity” for small businesses under this program, and they subsequently took down the application form.

 Then the Federal Reserve reacted by announcing a new facility to ‘buy’ small business loans from the banks, which gives banks like Wells Fargo more ammunition to keep lending.

The problem, of course, is that a good chunk of these loans will never be repaid. Ever.

As I explained last week, Congress set up these loans to be “forgivable”. They’re non-recourse loans, and no personal guarantee is required. So a small business owner can take the money, never pay a penny back, and there will be no consequences (as long as the money was used for its intended purpose.)

But based on yesterday’s announcement, a ton of these loans will end up being owned by the Federal Reserve.

Bear in mind that the Federal Reserve’s total capital is just $38 billion. So $350 billion worth of small business loans (or even just a fraction of the $350 billion) would completely dwarf the Fed’s capital.

In other words, widespread loan defaults could easily wipe out the Fed’s capital, rendering the largest and most important central bank in the world insolvent.

Of course the federal government is supposed to guarantee these loans… so if a borrower defaults, the Small Business Administration will make the lender (or the Fed) whole.

But the federal government itself is insolvent! Think about it-- just to be able to make this $350 billion loan guarantee, the US government has to borrow money from… the Federal Reserve!

It’s mind boggling when you think about it: the Federal Reserve prints money and loans it to the US government, so that the US government can financially guarantee the Federal Reserve.

So bizarre.

Anyhow, we’ll talk about those consequences more later. For now, my team put together a detailed report on the CARES Act and its small business loan programs.

So if you have a qualifying business (and pretty much anyone with a pulse qualifies) and you’re interested in some specifics about how to apply for one of these forgivable loans, you can download this free report..

To your freedom & prosperity, Simon Black, Founder, SovereignMan.com

That was fast! Wells Fargo already ran out of money for small businesses | Sovereign Man 

There’s A Major Sovereign Debt Crisis Looming

There’s A Major Sovereign Debt Crisis Looming

Notes From The Field By Simon Black 

April 2, 2020  Bahia Beach, Puerto Rico

By the mid 1300s, the Republic of Florence in modern day Italy had experienced one of the greatest economic booms in human history.

In less than a century, Florence had grown from a tiny, irrelevant backwater to become one of Europe’s largest cities and preeminent financial center.

The expansion was truly impressive. Florence’s population had grown 10x. It had become a leading manufacturer in both weapons and textiles.

(Many etymologists believe the word ‘pistol’ is derived from the name of a town near Florence called Pistoia, which was renowned for its quality arms.)

And the city’s innovations in the banking industry were revolutionizing business across Europe.

Florence’s phenomenal economic success is quite similar to what the United States experienced in its early history.

Naturally, though, they managed to screw it up.

At the turn of the century in the year 1300, the Republic of Florence’s public debt was quite manageable at just 50,000 gold florins. That’s less than $100 per capita in today’s money.

By 1338, after a series of costly wars and expensive public works projects, Florence’s debt had ballooned to 450,000 gold florins. Four years later (after yet another war) it had grown to 600,000 gold florins.

This was crippling to public finances given that the government of Florence was paying between 10% and 15% interest on its debt.

To make matters worse, some of Florence’s most prominent banks had made bad loans to foreign governments-- most notably to King Edward III of England, who had suffered terrible defeat against France in what would become known as the Hundred Years War.

Edward would ultimately default on his Italian bank loans, sparking a terrible banking crisis in Florence.

News traveled quickly that the most powerful financial center in Europe was in trouble. The government was near ruin, and the banks were collapsing.

And then came the plague.

In 1348, the Black Death ravaged Florence, wiping out at least 25% of its population. The famed Italian author Giovanni Boccaccio was living in the city at the time, and he wrote about his first-hand experiences in the Decameron:

“[S]uch terror was struck into the hearts of men and women by this calamity, that brother abandoned brother, and the uncle his nephew, and the sister her brother, and very often the wife her husband. What is even worse and nearly incredible is that fathers and mothers refused to see and tend their children, as if they had not been theirs.”

Business and commerce ground to a halt. Tax revenue dried up. Florence’s government was unable to pay its debts. People were wiped out.

As local politician Giovanni Villani described the situation, “Our republic has lost all its power and our citizens have nearly all been impoverished.”

Amazingly enough, Florence’s misfortune didn’t stop there.

In the late 1340s, torrential rains destroyed local agricultural production, resulting in widespread famine.

City managers tried desperately to import food, but because Florence’s credit was so poor, few traders were willing to do business with them.

It was a historic and unprecedented fall from power; Florence had gone from being one of the wealthiest cities in Europe to literally begging for food in less than a decade.

I can’t help but wonder which countries are going to be begging as a result of our modern crisis.

Just like Florence in the 1300s, there are dozens of countries who were already in severe financial hardship going into this pandemic.

Now their tax revenues are dwindling, and they’re forced to spend absurd amounts of money to stimulate their economies.

A few years back our holding company acquired a private business in Australia that, thankfully, is holding up extremely well.

The CEO of that company called me a few days ago to tell me about some of Australia’s stimulus efforts; in addition to waiving payroll taxes, extending tax deadlines, and making direct loans to businesses, the Australian government is now directly subsidizing certain employee wages, up to $3,000 per month.

We’re seeing similar stimulus packages all over the world.

In the United States, of course, the government recently passed a $2 trillion stimulus plan… though I expect they’ll quickly realize that $2 trillion buys them about 4-6 weeks.

So if this pandemic drags on, they’re going to have to spend another $2 trillion, and another $2 trillion after that.

Remember that US government debt increased by $10 trillion in the first few years following the last financial crisis. It certainly seems reasonable to expect a repeat performance.

Some places will be able to afford such prodigious spending.

Norway, for example, has ZERO net debt. Norway’s government has such a massive financial surplus that they could tell every citizen, “Stay home and do nothing for the next six months,” and just write a check for everything. They wouldn’t need to go into debt by a single penny.

Italy, on the other hand, is a basket case.

The Italian government has no savings, and its debt burden even before this crisis was more than 120% of GDP.

Moreover, Italian banks were also teetering on the edge of disaster before the pandemic hit. I suspect most of them are completely insolvent now.

Making any forecast right now is remarkably difficult. Every scenario is on the table, and absolutely anything can happen.

But it seems pretty clear that the most heavily indebted countries are in big trouble… and we may be looking at a major sovereign debt crisis over the next few months.

To your freedom & prosperity, Simon Black, Founder, SovereignMan.com

https://www.sovereignman.com/trends/theres-a-major-sovereign-debt-crisis-looming-27612/