Bill Bonner – Bill Bonner’s Diary (United States) –
BALTIMORE, MARYLAND – From south of the border, we get a bad situation worse.
“Venezuela Launches Its Own Cryptocurrency,” reports The Wall Street Journal .
The cash-strapped nation – which is experiencing hyperinflation, an extended worthless physical currency, and widespread food shortages – took the first step in its plan to raise trillions of dollars by launching a digital currency, named the Petro … An initial corner offering is expected in March.
Not interested in the world’s funniest money, issued by a desperate nation run by an incompetent crackpot?
Oh, Dear Reader, where’s your sense of adventure?
Venezuela lurches from one absurdity to the next.
It owes money all over town. It can not pay. Its creditors have cut it off.
Who wants to pay a 5,500% annual rate of inflation? Who wants a currency of no value, backed by the full faith and credit of a “sh * thole” country?
The story is complicated by US financial sanctions, dollar-denominated debt, anemic oil prices … and many other things.
But the basic plot is simple: Venezuela spent too much. It borrowed too much. Now, it is broke. It can not even keep up appearances.
But from a dear reader comes a puzzling message:
You are wasting your time worrying about the debt, as it will never be repaid and will self-destruct. You know that Congress will never run balanced budgets, so do not worry about the budget – they just want freebies. I read your writings, but sincerely do not like your writings.
We suspect the writer is right about one thing: Most people do not care about deficits.
The feds just agreed to add $ 15 trillion of debt to the federal burden over the next 10 years.
This will bring the total debt to about $ 35 trillion.
You’d expect there to be some hue and cry from taxpayers, whose sounds, daughters, and grandchildren will have to tote the load.
You’d expect that “conservatives” – the Tea Party movement in particular – would be up in arms.
They are supposed to be the voice of moderation … of restraint … of limits on what the federal government should try to do … and of realism about what it can afford to do.
If they do not stand for that, what do they stand for?
But our reader has judged the political climate correctly. There has been no outrage; as for the deficits, the public and its leaders are of one mind – no problem.
What he is surely wrong about, though, is that the resulting debt will “self-destruct.”
As far as we know, no debt has ever disappeared, gone away, leaving no forwarding address.
Instead, they are paid. If not by the debtor, then by the creditor. If by no one, then by all.
Debt is not nothing. If you have a dollar, you still have the dollar as a credit. The other party has a debt.
If he does not pay, the debt may vanish, but so does your credit. The money was not a fiction or a fantasy. It was real.
It’s been here for your daughter … or for buying a new house. Now it’s gone, so is the retirement, the wedding, or the new house.
And so are the jobs that depend on these things … and the incomes that depended on those jobs … and the spending that depended on those incomes.
We’re not arguing that the federal debt will be repaid; it will not be. We will only be disappointed when it is not.
And it is not just the federal debt that is a problem …
By feeding fake money into the system … and lending it out at the expense of paying taxes (pretending that it should be better).
It is big. It is real. And it’s coming to eat the US economy.
And what makes this especially lethal is that most people have no idea it’s coming. With little in real savings, they are unprepared for the calamity a.
Former Republican Vice President, Dick Cheney, famously said that “deficits do not matter.” Now, a Republican president – and a Republican Congress – make it clear: They do not think deficits matter, either.
And for nearly two generations, they have apparently been right.
Total debt expanded three times as fast as GDP, and nothing bad has happened. At least, nothing could be fixed by more debt!
And so, the sum also rises … and rises … and rises.
When Ronald Reagan arrived in Washington, the federal government owed less than $ 1 trillion. Now, it owes 20 times as much.
During that time, GDP has only gone up by seven times.
Businesses and households have followed suit – all increasing debt loads to the point where the average balance between debt and income – 1.5 to 1 – is out-of-a-mullet.
Overall, with $ 67 trillion of debt and only $ 19 trillion of GDP, the ratio for the entire nation is now at 3.5.
For the federal government alone, it is 5.5 (federal debt / tax revenues).
But wait. The feds can not go broke. A country that issues its own currency.
Maybe they really can make the debt self-destruct; can not they?
Yes, but for a quick look at how that turns out, make a visit to Venezuela.
We are offering some big discounts … if you pay in dollars.
TRADE INSIGHT: CHINA’S SECRET WEAPON
By Nick Giambruno, Editor, Crisis Investing
You’ve probably never heard of REE …
Rare earth elements, or REEs, are a group of 17 chemically similar elements in the periodic table that are usually found together in the Earth’s crust. REES and heavy REEs. Heavy REEs are the rarest and most valuable.
It’s not essential to understand the specific science of these elements, but here’s what you need to know …
They are used to make crucial components for advanced electronics like iPhones, electric cars, flat-screen TVs, computers, and sophisticated military equipment – like guidance systems, drones, anti-missile systems, radars, and fighter jets.
The United States’ top-line jet fighter, the F-35, contains nearly 450 kilograms of rare earth elements.
There is no substitute for these resources in these advanced electronics. The US military and the US consumer depend on them.
And here’s where things get interesting: China controls almost 90% of the global supply of REEs. Have a look at the below chart.
This unchallenged monopoly could quickly become a huge problem for the US Here’s why.
Early on in his presidency, Donald Trump said he would not handle China like the previous US presidents.
During the campaign, Trump is under threat of extinction
He also said China was sucking “the blood of the United States” and “we can not continue to allow China to be our country, and that’s what they’re doing.”
Trump can actually keep. He does not need anyone’s cooperation. Legally, he can implement the necessary policies on his own.
And there’s already signs that he can just do it. It was reported earlier that the Trump administration was considering imposing tariffs on Chinese imports of steel and aluminum.
If this happens, China will not take it lying down. They have a big card to play. REE materials that I mentioned above.
That would bring any country – including the US – to its knees.
This is not wild speculation. China has done this exact thing before.
In 2010, it was clamped down on Japan’s trade with Japan. Japan from its REEs, Japan relented.
And here’s where it gets interesting for investors.
When China restricted REEs to Japan, it caused a mania. Almost overnight, the price of REEs went up more than 10 times. And shares in rare earth miners went up by many times that magnitude. Investors who staked a claim in these miners made a fortune.
The same opportunity is here today. Investors who are willing to do some of these rare earth elements have the potential to see massive gains as China escalates.
– Nick Giambruno
PS As you saw, the Chinese control around 90% of the supply of REEs. But there’s one tiny company outside China that could see huge gains if the trade war with the US materializes. I just released a new video presentation with the details. Click here to watch it now.