RISKS vs. Rewards:
- The KEY Question – Inflation, Devaluation, Fiscal Management?
The Love of My Life and I bought our first home in 1975 for $38,950. Back in the dark ages when I was a young man it was referred to as a “Richmond Rancher”, three bedrooms, one and one-half baths, brick, no garage or porch. The seller was a widow who had drowned her sorrow by drinking her inheritance. When the house appraised for only $38,500 I agreed to accept the old washer, dryer, and refrigerator as $450 in value because I knew she needed the money.
We lived in that house for three years, three months, and 11 days. Since I was in real estate, we bought the house I wanted because I knew it would be a great investment. When something went wrong with that house, The Love of My Life would smile at me with a twinkle in her pretty blue eyes and say “YOU wanted this house, You get it fixed”. I am far from perfect, but I am trainable. The house was a great investment. The experience was a great training exercise. There are so many ways to be wrong when you are not focused on the right question.
Over the last two weeks we Americans have finally begun to receive the facts about what we now know was the “Faux Russian Collusion” caper. This was not just a rogue election dirty trick compounded by lying politicians. It appears various government agencies were used against a political opponent. The proper term is Sedition. In other words, the media and Democrats gave us three long, agonizing years of asking the wrong questions.
Knowing the right questions is critical because the answer to them will forecast the economy over the next several years. So, let us work to identify the questions, then the KEY Question(s), so we can forecast the future economy.
Here are the facts:
- By their own words and track record, the Democratic Party “Never Wastes a Crisis to Build its Political Base”. That does not reflect a concern for the average Joe or Jane, but rather a lust for power… whatever the cost to Joe and Jane.
- Every observer agrees that the “Russian Collusion” was a successful political strategy because the Democrats won the House of Representatives in 2018.
- We know the Mueller commission cost taxpayers $30 Million.
- We do not know the dollar cost of the Schiff led “secret inquiry” which produced 57 transcripts of folks saying under oath that they knew no facts to support their public statements to the media that alleged Russian Collusion.
- While we cannot yet determine the total cost of “Never Waste a Crisis” including the faux impeachment, it includes the out of the tax payers pocket costs, plus the Wuhan Virus, plus the future risk of others repeating the mal-behavior, and the total destruction of the credibility of the media. Individually those are all HUGE costs. Collectively?
But the first KEY QUESTION is “What occurred during the Obama Administration that the election of a non-politician outsider would uncover, an action so severe as to outweigh the risk and danger of Sedition with an attempted coup via impeachment against President Trump?” The juice always has to be worth the squeeze, so whatever occurred had to be HUGE. Historically, the answer is usually money. If true here, the secondary question is “How many had their hands in the till?” But the second KEY QUESTION is “What happens to the USA economy when the facts become known?” This will get ugly. Cinch up your saddle, folks.
This behavior reminds me of the sad joke called “government” in places like Venezuela. You know, where a socialist party takes a wealthy country with a thriving middle class, exporting food and oil to the world, and successfully “transforms” it into an impoverished, starving, tin dictatorship, socialist workers’ paradise with an annual inflation rate of 1,000,000%.
Despite The Fed becoming the dominant investor in the U. S. Treasury market similar to the behavior of the central banks in the typical Latin and South American tin dictatorships, Pelosi and her gaggle now want More Deficit spending, More US debt. The loss of credibility of the media makes one wonder if the pattern of Democratic governors locking down their states versus the Republican Governors opening up their states is another “Never Waste a Crisis to Build your Political Base” maneuver.
Here are two absolute facts:
- No government can support everyone so they can do nothing. Each time it has been tried, it has failed.
- We shut down our economy to let the medical community get prepared for the impact of this disease gifted to us by President Xi. Now adults should be able to make the decisions that are in their best interest without a governor trying to exercise power they do not have constitutionally.
Pelosi, AOC, The Squad, and the rest of the Democrats in Congress apparently want to live in the Venezuelan worker’s paradise. Resist! Gag. Call me a dinosaur, I have no interest in living in Venezuela. May I please have my USA back? Can we donate the Democrats to Venezuela? Apparently, they will be happy there. Talk about “Never Waste a Crisis to Build your Political Base” they will have a field day!
Reflecting Margaret Thatcher’s statement “Socialism works until you run out of other peoples’ money”, here are some questions that thinking adults are/should be asking:
- At historical normal interest rates, can the USA afford our current projected debt without eliminating Medicaid, Medicare, all of the social programs, and doing away with our defense? “NO”.
- At what point do tin dictators get their central bank to buy the country’s debt which leads to their currency becoming worthless as inflation soars a la Venezuela? We are way to close.
- China’s debt to GDP is 400% and rising. The USA is now perhaps 120%. What will happen to the world economy when China implodes? Everyone gets hurt amid severe deflation if not a global war.
- What does history tell us about similar experiences?
Here is some pertinent history:
- The last time our USA debt to GDP ratio was this high was immediately after WW II. The Fed kept interest rates low for 15 years until the late 1950’s while inflation diminished the Federal Debt until it became manageable. The monetary event called inflation (consumer prices increasing) is what an economist calls devaluation of the currency. The effect on prices is the same pain.
- That home we bought for $38,950 in 1975 would sell today for $200 – $250,000.
- Countries that aggressively pursue this path, the worse the debt to GDP the worse the day of reckoning.
Until the complete facts are known about what occurred in the Obama Administration, the uncertainty is a MAJOR RISK that will affect our economy. Reflecting on the TWO KEY QUESTIONS above should lead you to ask yourself “How do I prosper in an economic period of cycles of deflation followed by inflation… and repeat? Cash is great during deflation, but over the next 15 years all of your assets in cash would be the equivalent of having a ton of ice cream deposited on your front lawn in July. Impressive, but it will melt away. At the same time, there is an equally bad situation called being land poor.
Not every tract of land will benefit its owner the same. Learning that difference is the reason I became a land broker and a student of the land market. Wise financial management requires a balance of cash, financial assets, and real estate…and staying focused on Him.
“Take care, brothers and sisters, that none of you may have an evil, unbelieving heart that turns away from the living God”.
(Hebrews 3:12, New Revised Standard Version, Oxford University Press)
Starting next week, we will focus on the “REWARDS” coming from the Wuhan Virus if we remain a capitalistic economy. Capitalism builds wealth, socialism consumes it.
I serve an awesome God. God plus one human makes a super majority.
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