In November 2020 the US trade deficit was $68.1 billion. Paid in gold the US would have to send 2.45 million pounds or 35.77 million ounces per month to foreign countries to cover the deficit.
The US currently has $484 billion or 262 million ounces in gold. Fort Knox alone has 147 million ounces of gold.
At the current rate the US would deplete the gold in Fort Knox in 4 months and all of America’s gold in 7.5 months.
What does this mean? I guess not much…until the flim-flam of fiat for real goods goes bust. The paper based system works because the countries receiving the paper dollar in payment can turn around and spend that paper to buy goods…oil, land, machinery etc. Nothing will change unless the value of the dollar drops dramatically…then the countries will want some usable good as payment…either a product produced in America…maybe a national forest or two…or America’s store of monetary metals. The US would have to clean out fort knox to pay the foreigners…which would work for a few months. Then what? War?
Because America produces little in the way of actual goods, if something were to break regarding international relations, Americans would be getting a lot less stuff and paying more for that which they do get. It is a precarious situation.
If you want to make money in future America, manufacture a usable good that people need.
“The U.S. budget deficit…will be at least $4 trillion in total, which is $2.6 trillion more than the peak suffered under the Great Recession.”
“32 million people collecting unemployment insurance as of June 27th”
“Of course, our central bank has destroyed capitalism by ensuring the businesses that still make typewriters and white-out can continue to borrow money. This means a tidal wave of bankruptcies has been put temporarily on ice, but the size of the insolvency storm is rapidly intensifying. Indeed, 1 out of every 5 U.S. companies are now considered Zombies. Meaning, they don’t make enough profits to cover the interest expense on existing debt.
Q2 earnings season has kicked off this week, and S&P profits are expected to plunge by 44%.
AAPL, AMZN, and MSFT have a market cap that is equal to nearly 25% of the entire GDP of the United States
32% of U.S. Households did not make a full mortgage payment in July, according to a survey done by Apartment List.
The dollar is at 95.12 today, down .73%. I usually wouldn’t comment on this but if it goes below the March low of 94.61 this is going to get ugly quickly. Inflation is already surging for everything – houses, cars, boats, RV’s, even used guitars – see my recent article here. But what will really blow the lid off of prices is one, decreased supply since factories have been shut down and two, because everything is manufactured overseas the products we do get will cost more due to the falling value of the dollar.
I somewhat expected a period of deflation where many went broke and assets were sold at a discount. But it looks like we’re going straight into hyperinflation. The tell will be if you begin to see stories about wages ripping higher, as this was a foundational change during the hyperinflation of Weimar Germany.
The trend is clear – prices rising rapidly for everything. How long it lasts will be a function of how fast the Federal Reserve wants to drive American civilization into the earth. Right now, warp speed is moving too slow for them.
An apt analogy would be like jumping off a cliff, and rather than being happy with hitting the ground at terminal velocity, you carefully aim a rocket at earth, and then strap it to your back. It is the literal impoverishment of the American people and their nation, in real time. But hey, look on the bright side – your old boat’s gonna be worth more fiat in a few months.
Boat Market: A boat dealer here in town always has 200+ boats on the lot. Big, shiny, expensive, brand new boats. I drove past the other day and noticed many of the boat racks were empty, which I’ve never seen before. I called the dealer and asked about sales. He said it was a banner year and that they were running low on inventory.
A digital currency is cat nip to central planners. They can’t resist this temptation.
The future holds even less power for individuals and more power for the government, and the ability to gain more power over the people through the use of a digital currency is almost unlimited. Certainly the plans have been made, the system in place, now they wait for the opportunity.
Here are June’s stats for my zip code in North Florida.
The number of listings is falling off a cliff as prices rip higher. Average list price went from 400k to 589k, up 45% from June 2019 to June 2020. Average sale price went from 293k to 335k during the same time period.
An average sale price of 335k equals a mortgage of around $2,000 a month. With a 33% debt to income ratio required by the bank, the buyer would need to make appx. $40 an hour or 72k a year to buy an average home. The average salary in the US is 55k a year, so to buy an average home (in Florida) both spouses would have to work.
The Case-Shiller Index operates on a “three-month rolling average” basis. And the price data is collected from public records. So the release today, titled “April,” was the three-month moving average for deals whose data became available in the county deed recorders in February, March, and April.
There is also a time-lag between when a deal closes and when the data becomes available in the county deed recorders.
So what the Case-Shiller showed today were closings that had occurred in prior months and that became available in the county deed recorders in February, March, and April. This included some of the deals that closed in January and excluded some of the deals that closed in April.
This is not a secret. S&P publishes the methodology. And reporters should have studied it before reporting bull-malarkey and misinforming their readers, many of whom paid a subscription to be misinformed.
So, what the national index told us today is nearly all based on home prices before the impact of the pandemic. It will be another three months – the index to be released on September 29 – before every month in the National Case Shiller Index’s rolling three-month average fully reflects home prices of sales that closed since the beginning of the lockdowns. Each month will get us a step closer. And even then, it will take a while because house price data is sticky and moves slowly. So be patient.