The Financial Crisis the World Forgot

by | Mar 24, 2021 | Content Updates

You and I can profit if we prepare for the financial crisis that most of the world forgot… or wants to ignore.

There is a crisis just waiting to happen.  Frankly I’m surprised it already has not… and let me add quickly hope I am wrong, that we’ll avoid what could be another economic disaster, but this time without a fast arriving life boat. Recently the world  almost saw the meltdown of credit markets.

Before we look at that meltdown, let me clarify what “credit market” means. Credit markets are the places where companies and governments borrow money from investors, in return for various promises to pay in the future, such as investment-grade bonds, junk bonds, and short-term commercial paper. These credit markets are huge, much larger than equity markets and in many ways far more important.

Economic professor Yuval Noah Harari, points out the importance of these markets in his book “Sapiens: A Brief History of Humankind”.

He wrote: “In 1568 the Dutch, who were mainly Protestant, revolted against their Catholic Spanish overlord. At first the rebels seemed to play the role of Don Quixote, courageously tilting at invincible windmills. Yet within eighty years the Dutch had not only secured their independence from Spain, but had managed to replace the Spaniards and their Portuguese allies as masters of the ocean highways, build a global Dutch empire, and become the richest state in Europe. The secret of Dutch success was credit. The Dutch burghers, who had little taste for combat on land, hired mercenary armies to fight the Spanish for them.”

The success of  credit markets can make or break a great nation.  There have been three world powers in the past 500 years. The Dutch from about 1600 to 1750.  The British next and finally the USA.  All three super powers were built on credit.

The basic components of credit markets are productivity and trust.

Productivity comes from many individuals pooling their money to create something that makes all the individuals wealthier.  For example, let’s say that everyone in a country believes that they’ll all be better off if they have a road in their country.

It makes no sense for each individual to spend their money building just a small piece of the road.  Instead all the individuals lend the government (or a road building institution) some money.

The government (or institution) builds the road.

The road makes everyone so much more productive that they can pay enough increased tax to repay the loan and interest over a number of years.  Or the institution charges a toll that creates enough revenue to repay the loan and interest.

These projects are generally large, long term projects so a considerable degree of trust  is required.  Investors have to believe that they will get their money back with interest. Since many of these loans (bonds) are very long term (20 to 30 years or longer) investors need a way to cash them in early.   The solution is that bonds can be sold before they mature in the credit market.

What happens when trust in the credit market is lost?

www.nyt.com

Credit markets are the roots of the world’s finances. Image from the Seattle Times article “The financial crisis the world forgot” (1).

If trust in the borrowers is lost, just like in the stock market, the price of bonds can crash.  This can create an economic meltdown.

Recently, the coronavirus started a meltdown almost took place and the reasons for this disaster have not disappeared. Here are excerpts from an article in the Seattle Times “The financial crisis the world forgot” (1) that shows how close the world came  to an economic meltdown.

By the middle of March 2020, a sense of anxiety pervaded the Federal Reserve. The fast-unfolding coronavirus pandemic was rippling through global markets in dangerous ways. Trading in Treasurys — the government securities that are considered among the safest assets in the world, and the bedrock of the entire bond market — had become disjointed as panicked investors tried to sell everything they owned to raise cash. Buyers were scarce. The Treasury market had never broken down so badly, even in the depths of the 2008 financial crisis. The Fed called an emergency meeting on March 15, a Sunday.

That afternoon, the Fed announced an enormous purchase program, promising to make $500 billion in government bond purchases and to buy $200 billion in mortgage-backed debt.

As March wore on, each hour incubating a new calamity, policymakers were forced to cross boundaries, break precedents and make new uses of the U.S. government’s vast powers to save domestic markets, keep cash flowing abroad and prevent a full-blown financial crisis from compounding a public health tragedy. The rescue worked, so it is easy to forget the peril America’s investors and businesses faced a year ago. But the system wide weaknesses that were exposed last March remain, and are now under the microscope of Washington policymakers.

Keep in mind that the key to credit markets is trust.  Investors have to believe they’ll get their money back long term, that they can get it back early if they need it and that the money they get back will have retained its purchasing power.

The basic problem is the amount of debt that has been created in the US credit market.  The linchpin in this entire system is US government debt.  This should be the safest debt of all.  But it is currently hard to imagine how the huge amounts borrowed by the Treasury Department can be paid back, especially if taxes, due to reduced economic growth and pandemic stimulus, are lower.

Yet government spending and hence borrowing continues to grow.

A webpage at the Peter G. Peterson Foundation shows 11 charts about how the US national debt is growing. (2)

The Peter G. Peterson Foundation is an American foundation established in 2008 by Peter G. Peterson, former US Secretary of Commerce in the Nixon Administration and co-founder of the Blackstone Group, an American financial-services company. This non-partisan and non-profit organization, says it works across party lines to increase awareness of America’s key fiscal challenges and to advance solutions that put our nation on a more sustainable fiscal path.

These charts are disturbing but what’s most disturbing is that the charts end in 2019 before the pandemic.  Since then the US debt condition has deteriorated… a lot.

Here are three of the eleven charts.

The first chart shows how the debt would have grown under current policies  in place in 2019.

US debt

The second chart shows how tax income has fallen.

US debt

The Corporate tax fell to 220 billion in 2020 and is projected to fall to just 164 billion in 2021.

The third chart shows how interest cost will rise if interest rates in credit markets go up.

US debt

Looking at all 11 charts (I recommend doing so) is sobering, again, especially so since 2020 figures turned out much worse than expected.

Yet government spending grows.

This weeks New York Times article: “Biden aides are set to recommend spending up to $3 trillion to help the economy, cut emissions and fight inequality.” (3) shows the problem.

Here’s an except of that article: First: a huge infrastructure plan.

After months of internal debate, President Biden’s advisers are expected to present a proposal to the president this week that recommends carving his economic agenda into separate legislative pieces, rather than trying to push a mammoth package through Congress, according to people familiar with the plans and to documents obtained by The New York Times.

The total new spending in the plans would likely be $3 trillion, a person familiar with them said. That figure does not include the cost of extending new temporary tax cuts meant to fight poverty, which could reach hundreds of billions of dollars, according to estimates prepared by administration officials. Officials have not yet determined the exact breakdown in cost between the two packages.

As stated, I hope I am wrong and for the record, I have been puzzled how the debt has grown, interest rates have dropped and inflation has stalled for quite some time.  Yet I do not think that any of us can dismiss the seriousness of the risk that there will be a credit market disaster.

The way to profit from such disasters is to survive them and be able to prepare for the next recovery. The fortunes are made during the recovery. of economic meltdowns.

My plan is to live as a Pruppie… mostly like a Yuppie, expecting everything to grow and move upwards.  I embrace all the wonderful technology and great benefits of our global society and am making every use of them that I can.  Yet I also think like a Prepper, who prepares for disaster.  Life is too short to live in a bomb shelter expecting the worse, but because we could see a credit market disaster, I do things I love so even with a meltdown, I have a good chance to ride through the storm and be in good shape to really surge ahead in the recovery.

See more about being a Prepper below.

Gary

CHAOS CREATES MANY OPPORTUNITIES FOR YOU

Cash in on the new normal.

If the pandemic has taught us anything it’s that the so called “experts” really don’t have a clue how to solve this problem. We cannot rely on their information. Instead, we need to plan for and prepare for our own “new normal” if we want to survive.

The pandemic is not the only problem.

The global response to this viral outbreak is just one signal of a world that’s sliding into a devastation and disorder.  The worst turmoil is still to come because of the economic destruction.

With mounting debt, we are well into an economic collapse that will be worse than the pandemic.

The current social economic archetype has already killed millions and destroyed the finances and lives of far more.   Worldwide, unemployment is at an all-time high.  Many businesses have been destroyed.

Governments are trying to solve the problem by throwing money on the fire and are they are being crushed in debt in the process.

Yet, this is just a beginning. It is estimated that it will take 10-15 years to recover from the economic devastation.

To survive the coming economic downturns, you’ll need to learn the importance of adjusting how you live, work, invest and take care of yourself for the next ten to fifteen years!
You can’t rely on governments to bail you out.

Adapt!

That’s exactly what Merri and I have been doing for the last 50 years.

3 d

We have learned the power of being able to adapt to constantly changing markets all over the world and created a not-so small fortune while doing so.  That’s why we’re uniquely qualified to teach you how to not just survive but to PROSPER during the challenging times ahead. Chaos always creates many opportunities for those who know how to spot them and take advantage of them. A good example has been the mass exodus from urban areas to more rural areas.

Since many are working from home, they can live anywhere. There is a shortage of good housing in rural areas now. Merri and I are buying then rehabbing houses to full the gap.  We saw this opportunity coming and jumped in early.

We let readers know of the risks of a pandemic, back in 2016.

Many are already enjoying a safer more secure and financially stable lifestyle already despite the lockdowns and crumbling economy.

Instead of waiting for things to get better, start preparing for things to get worse, much worse.

You also need to learn how to spot opportunities which are all around you. As the economy changes, the opportunities will change too.

That’s why Merri and I keep a constant pulse on opportunities worldwide and report our findings to a special club of unique individuals that we started over 30 years ago. For decades, this club has been called the International Club, but this year we renamed it the Pruppie Club.

What is a Pruppie?

Pruppieism, the new economic and social realism.  Pruppies, like Yuppies, expect everything to expand. They take advantage of every new benefit and technology they can. Pruppies enjoy using the fruits of our ancestor’s deliberations and labors to earn in this advanced technological world.

Pruppies, also, like Preppers, engage in activity that they love that will sustain them when society and the incredibly intricate weave of our global economy and society let us down.

We need to be both, Yuppies and Preppers, Pruppies!

Take profit from the incredible new technology that gives us super powers to earn and grow wealth. Be safe and secure, when social economic tidal waves like plagues, stagflation fascism and communism overwhelm the world.

Pruppies are prepared in case everything, everywhere, or at least everything relating to their income and savings fails and the fabric that surrounds their lives disintegrates into an unknown veil.

Yet a Pruppie’s preparation is not a sacrifice, but a joy as you will see.

Learn how you can become a Pruppie.

gary-scott-orange-grove

I’m no farmer but grow citrus so I’ll always have food to swap. Let me show you how to lock in your food supply.

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Ecuador-beach-condos

I’m no builder nor carpenter, but was partly responsible for creating these condos on Ecuador’s coast (above) and in Ecuador’s Andes (below), a decade before this expat community boomedFind out the trick for spotting trends like this early.

Ecuador real estate for sale

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gary scott

I have no hatchery but learned how to raise trout like this, for fun, profit and a guaranteed protein supply.  Learn how to turn passions into protein.

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GET READY!

Enormous, economic, social, political and productivity change was already in the process.  The pandemic however has accelerated and accentuated the process. You still have time to join the few who are left standing from the 2020 disaster.

You still have time to become one who will prosper during the 2020 decade. You can be one of a small elite group who will be able to help restore a healthy world order. The world will be very different from what we have known for the past seventy years, but when looked at in a framework of longer history… it’s the same old tale.

The last couple of millennia are filled with stories of empires rising and falling.  There are basic conditions in each of these tales.

  • First the idea of debt loses its real meaning and rising to levels that are unsustainable.
  • Interest rates charged for debt fall to extremely low levels so the idea of investing for a known amount stops making sense.
  • Central monetary authorities replace innovation and increased productivity as activators of the economy.
  • Disparity of wealth widens dramatically and the spread increases.
  • There is so much divisiveness in politics within countries that social and political conflicts spiral.

We’re seeing these changes rapidly happening now!

Fwd: gary-scott-tipis

I learned how to turn land into income producing property cheap and cashed in on the glamping craze a decade before the word was invented.  I want to share this trick with you.

Social and economic deterioration restricts safety, lifestyle, well-being and peace of mind. Social and economic shifts of this nature reduce the purchasing power of income.

Inflation, for example puts pensions and savings at risk. 

Growing deception allows manipulation of medical care, finances, the value of homes, how cars are bought, the price of gas, the education and raising of children, the food we buy and eat, the shows watched and the ways we work and play.

A very large and growing part of the public throughout the Western world no longer believes in the integrity of local or national government, law enforcement, health care, banking, pensions, legal systems, educational processes, media or church, just to name a few.

However, mistrust of anything authorities say has become so deeply rooted that even health assurances as serious as the pandemic have not been believed.

I invite you to join Merri and me in expecting the world to get better… to live and earn based on that expectation but…  to also prepare for bad times as well as good.  Just in case… the world goes sideways… we will still survive and prosper.

We do not give up anything much.  We can enjoy the good parts of the new economy, as we protect ourselves from what can be bad.

Let me be clear.  I expect that the world will get better, at least for the few who adapt and avoid the dangers that the changes from the COVID pandemic will bring.

The wealth of the world, albeit with inequality, will continue to grow.  This collapse of the global economy will bring an incredible new opportunity for those who know what to do.  These profit making avenues offer enormous income potential and even work well in disaster scenarios. Join the Pruppie Club so you can wake up every day knowing that you are prepared and in charge of your destiny.

gary scott

I’m no doctor but have learned how to avoid and survive the excessively expensive western health system and its hidden agendas.  See a simple $19.95 trick  used when the COVID-`19 symptoms appeared.

JOIN the PRUPPIE CLUB HERE.  $249  and $99 a year automatic renewal, but you can cancel at any time.

(1) www.seattletimes.com/business/the-financial-crisis-the-world-forgot/

(2) www.pgpf.org/blog/2019/12/11-charts-that-show-how-our-national-debt-grew-in-2019

(3) www.nytimes.com/2021/03/22/business/biden-infrastructure-spending