The Short Trip From a Dollar Death Spiral to “Neofascism"
- Following the breadcrumbs from an unknown presidential candidate…
- … to the dollar’s two-step death spiral…
- … to “new taxes and weird fees” (and Draconian fines)…
- … to social unrest and “neofascism”
- Plus: Stopping the Zika virus in its tracks… a solution to lousy 401(k) investment choices… timing buys for tiny gold stocks… and more!
Someone in the #NeverTrump camp has floated a rumor into the establishment media this morning: An ex-CIA officer named Evan McMullin will launch an independent run for president – not so much to win, but to ensure Trump loses.
Here at The 5, we’ve never heard of the guy. And we’re pretty well plugged into the “who’s who” of Washington – more than we really care to be, heh.
Near as we can tell, his Wikipedia entry didn’t even exist until sometime late last night. Maybe we’re all being punked?
We’d bug Jim Rickards about it this morning – seeing as he knows many CIA types on a first-name basis – but he’s hip-deep in his latest book project. He’s also preparing for a live briefing tomorrow morning for readers of Rickards‘ Strategic Intelligence.
The topic is what we addressed here on Thursday and Friday – the two-step dollar death spiral. The first step comes on Sept. 4 at a summit of G-20 leaders in China, and Jim assures us it won’t be just another photo op.
The second comes on Sept. 30 when the International Monetary Fund’s “world money” takes a huge leap toward supplanting the dollar as the globe’s reserve currency.
What happens during September is liable to be far more important than the outcome of the election in November.
“It’s the start of a new world order,” says Jim. “With centralized money, a centralized market, even a centralized government. And the IMF – not the Federal Reserve – in charge of the purse.”
Again, Jim will describe these unfolding events tomorrow at 10:00 a.m. EDT to subscribers of his entry-level newsletter, Rickards‘ Strategic Intelligence. Click the banner below to subscribe and guarantee yourself access to this live and exclusive briefing…
Today, though, our thoughts are already running ahead to the “what next” implications of Sept. 4 and Sept. 30. We also return to a theme familiar to our longtime readers.
Our executive publisher and fearless leader Addison Wiggin laid it out five years ago: When the mother of all financial bubbles finally bursts, you’ll feel it on the local level first.
“Cities and states across the U.S. are already having trouble borrowing,” he said. “And without borrowed money, these cities have been forced to cut safety programs, break financial and medical promises and even dig up roads and return them to gravel.”
Five years later, cities and states have regained the ability to borrow. But they have no desire to do so.
That’s the gist of a front-page Wall Street Journal piece this morning. “Plunging global interest rates have made borrowing cheaper than ever. But instead of spending on aging roads, bridges and buildings, many state and local governments are scaling back.”
What’s getting higher priority? “Many struggling legislatures and city halls are instead focusing on underfunded employee pensions and rising Medicaid costs.”
We’ve been harping on pensions again the last few weeks. Those aforementioned plunging interest rates are killing pension returns. Medicaid, meanwhile, eats up a quarter of the typical state budget – the biggest line item, and growing.
And politicians know there’s little appetite for tax increases, not with a persistently sluggish recovery – if that’s what you want to call it. “Even as state and local governments are looking at lower bond yields, they are facing a public that is reluctant to pay more taxes,” Moody’s analyst Dan Seymour tells the Journal.
Which raises the possibilities of “new taxes and weird fees” – another facet of Addison’s forecast from five years ago.
“Local government will try anything and everything it can to desperately raise money: They’ll pickpocket your wealth through new taxes… propose weird new fees… even conduct ‘fire-sale’ sell-offs of state-owned roads and buildings.”
To that list of new taxes and weird fees, you can add “draconian fines.”
We daresay you can find a preview of coming attractions in Ferguson, Missouri. The strife there was sparked by a white cop shooting a black robbery suspect (two years ago tomorrow, as it turns out)… but the tinder had been smoldering for years.
“The Justice Department investigation of the Ferguson, Missouri, police department,” Trinity College professor Edward Stringham wrote last week in The Wall Street Journal, “provided an in-depth account of local politicians, police, prosecutors and judges using the legal system to extract resources from the public.”
To wit, a 2010 memo from the city finance director to the police chief: “Unless ticket writing ramps up significantly before the end of the year, it will be hard to significantly raise collections next year… Given that we are looking at a substantial sales tax shortfall, it’s not an insignificant issue.”
“In a city with 21,000 residents,” wrote Professor Stringham, “the courts issued 9,000 arrest warrants in 2013 for such minor violations as parking and traffic tickets or housing-code violations like having an overgrown lawn.”
And when Ferguson rose up, you saw how it was put down. We passed along this meme in real-time two years ago…
… which coincided with a somewhat disturbing tweet Jim Rickards sent from New York a few days earlier…
We wrap up this line of thinking today with two more flashbacks from The 5‘s voluminous archives.
The first is from Addison’s 2011 forecast: “Total economic failure could bring the violence to your city… your neighborhood… your front door.”
The second is a passage from Jim’s second book, The Death of Money. “If [the exact course of] social disintegration is not predictable, the official response is. It will take the form of neofascism, the substitution of state power for liberty. This process is already well advanced in fairly calm times and will accelerate when violence erupts.”
Again, Jim has strong reason to believe the dollar will enter its death throes in just four weeks – starting on Sept. 4, leading up to an even bigger event on Sept. 30. If you want to hear his up-to-the-minute thoughts about how it will all unfold, you won’t want to miss his live intelligence briefing tomorrow morning at 10:00 a.m. EDT. Here‘s where to go if you want access – no long video to watch.
In the meantime, the markets are moving sideways as a new week begins.
The S&P 500 has shed a couple of points off Friday’s record close, now 2,182. Gold has stabilized from Friday’s drop, at $1,336. The 10-year Treasury rate is little moved at 1.58%.
The big mover is crude – up nearly 3% as we write, at $43, thanks to renewed rumors the OPEC nations might try to impose a production cap. Why they’d succeed now when they haven’t before no one’s bothering to explain…
Wal-Mart is spending $3 billion for Jet, the up-and-coming Amazon competitor. At last check, Wally World shares are down about three-quarters of a percent.
“As a Floridian and frequent visitor to my hometown of Miami, I am sincerely worried about the latest news,” writes Ray Blanco of our science-and-wealth team about the Zika virus.
Sixteen people within a one-mile-square area of the city are confirmed to have Zika, nearly all of them bitten by infected mosquitos.
“Sweltering subtropical Miami,” says Ray, “has a nearly ideal climate for the disease to spread, since this mosquito is common here. It’s a big, international city with close ties to the tropical Americas and places where the rate of infection has become particularly high.” And then there are the worries about Zika at the Olympics in Rio de Janeiro.
Pregnant women are particularly high risk; their fetuses are subject to birth defects. Other adults might be prone to trouble with the nervous system.
However, one of the companies Ray follows in Technology Profits Confidential “has leveraged its ability to rapidly design and manufacture a means to prevent infection to address Zika,” he tells us. “The company recently announced dosing of the first patient in a clinical trial of an experimental Zika vaccine”
It’s the first-ever Zika vaccine trial in humans. We’ll keep you posted…
“I too have the 401(k) dilemma – what to do with it,” a reader writes in reply to Friday’s mailbag.
“A self-directed 401(k) is a bit of a different animal, and I doubt that many companies have that option. It is extremely frustrating. I have these choices – bonds, large caps, small caps and emerging markets, all mutual funds or large bond funds. The choice is so bad I have been in cash for over a year. There is just nothing there to buy. I just keep waiting for at least a 20% correction to buy, and even then I may be hesitant to even put 50% in the market.
“I have been tempted to go to HR and see if I can roll over my current balance to an IRA in my brokerage account, if they will still let me continue my plan with matching starting at zero but still putting it all to cash in the 401(k). I do have a bit more leeway because I am 62.
“I know how many of your readers feel being trapped in a controlled program by the employer, the government and the plan providers.”
The 5: Our sympathies. But it sounds as if you know what your next step is already. At 62, you’re old enough for an “in-service distribution,” sometimes called an “in-service nonhardship withdrawal.”
Under this arrangement, you stay with your current employer but you get the choice of rolling over your 401(k) into an IRA. It’s available to anyone 59½ or older. Good luck.
“Enjoy your publication, but…” writes a reader who knows the drill, “I would like to suggest that Byron King release his new mining recommendations after the market has closed on trading days.
“On the day of his last recommendation, the share value had already increased 22% by the time I received his recommendation. I am very familiar with the volatility of junior mining stocks (I carry 35 juniors in my portfolio), and that particular stock had a fairly flat recent history until the day of his recommendation. I am not making any accusations, but it seems like there were a lot of people who were privy to that information prior to me.
“The solution is simple… make the recommendation after the market has closed unless there is a sell alert! Then everyone is on the same playing field.
“I look forward to receiving The 5 Min. Forecast every day. It is very informative, with some very good observations. KEEP UP THE GOOD WORK!
“P.S. I’m a big follower of Jim Rickards. The man has a huge brain.”
The 5: This is the conundrum with every publication that recommends thinly traded stocks, and we’re keenly aware of it.
That said, Byron’s buy alert hit your editor’s inbox at 2:10 p.m. that day – it goes out to me at the same time as everyone else – and the movement in the shares didn’t begin until right after that. Perhaps your email provider isn’t pushing everything through right away?
[Also, while it’s in the fine print of all our publications, it bears repeating: Our editors cannot invest in their own recommendations, and our employees cannot invest in those recommendations until at least 24 hours after they’ve been issued electronically.]
The downside to sending the reco after hours is the possibility that a bunch of buy orders rolls in within 15 minutes of the open the next day… and the price still runs away from you. We’re also compelled to point out shares are still trading just below the buy-up-to level that Byron set with the initial recommendation.
Still, we’ve passed along your concerns to Byron King and Peter Coyne, publisher of all our Rickards-related services. Thanks for the input and for your continued readership.
The 5 Min. Forecast
P.S. “Our world is about to radically change – and change quickly,” says Jim Rickards. “And it starts the day the U.S. dollar gives up its No. 1 status.”
Jim is convinced that day is less than eight weeks away.
“You don’t need to be an economist or banker to understand why. All you’ll need to know is what you personally have at stake.”
And how to protect yourself. Take the first step right here.