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Steve's note: My friend Porter Stansberry is the smartest guy I know. Earlier this week, he told a crowd of hundreds at the Stansberry Alliance Conference, "Nearly every article of the Communist Manifesto has been adopted by the government of the United States."
I hate to think he might be right. Unfortunately, he usually is. While you may disagree with him, you should still consider what he has to say...
Wednesday, November 11, 2009
At last year's Alliance Conference, I urged folks to buy stocks – vehemently... It was the most bullish I've been in my entire life. But now I feel the opposite way. When the facts change, I change my mind. I never thought we'd see the government running $2 trillion deficits, taking over health care, owning all the banks...
The stock market seems to believe the government can solve all of our problems with paper money and bureaucratic mandates. My bet is, it doesn't work... at least, not for long. And given the choice between earning less than 1% in the bank and buying gold at $1,100 per ounce, I'm buying gold.
Watching the government rack up debts that will be impossible to repay while narrowing the tax base (at least 50% of Americans pay zero federal income tax) at the same time is very scary. Not only has the government gone mad with spending and corruption, but it also expects about 10% of the population to pay for essentially all the costs. The math simply doesn't add up: 10% of the population can't (and won't) pay for all of the costs of a socialist federal government.
This has nothing to do with traditional party politics. Both parties have grown the size and responsibilities of government. Both parties have added to the national debt. And both parties support the narrowing of the tax base – because that's what makes good political sense in an unlimited democracy... Promise the voters they can live at the expense of their neighbors and future generations.
Unfortunately, we know from history this kind of political system can't last for long – for lots of reasons. One important reason: The rich will leave. Or they will stop working. They will hide their incomes or only invest in tax-protected vehicles. And we know the political response will be tougher laws on emigration, taxation, more money printing, and – eventually – capital controls that make it impossible to protect yourself from a massive currency devaluation.
That's the script. We've watched the same things happen dozens of times around the world following World War II and the introduction of a global paper currency standard, which allowed governments to run huge deficits and finance their activities through inflation and devaluation. We just never thought we'd see it happen here.
Today, the idea of leaving America in search of freedom and financial security seems like absolute madness. But it won't for long. And by the time most people wake up to the very real threats to their standard of living, it will be too late.
The trends I'm talking about are cultural and fiscal, not ideological. Read the original Communist Manifesto. It's nearly identical to today's government policies. Any politician who tries to oppose the landslide of modern entitlements is immediately labeled a kook and is unelectable.
Whether you think we ought to have free health care and drugs for retirees, more military spending than the rest of the world combined, a bankrupt retirement scheme based on government debt, government guarantees for the banks, etc. doesn't matter to me. I'm not interested in pie-in-the-sky ideas about how the world should work. I write about how the world does work.
And I can tell you this with 100% accuracy: You cannot support the world's reserve currency when you are the world's largest debtor, when you plan to finance annual deficits exceeding $2 trillion with progressive income taxes and money printing. Our economy is a charade. And when it falls apart, the consequences will be devastating.
More from Steve: I did my homework after I heard Porter speak, and I was surprised. Porter was right... Heavily progressive taxation, state-owned schools, government controlling the banks, printing the money, and owning manufacturing – these are not free-market ideals. They're the opposite. These are calls right out of the Communist playbook.
It's not nutty to take steps to protect yourself from the possibilities Porter brings up... It's prudent. If you'd like to learn more about what Porter sees ahead and how to profit from it, click here.
THIS IS A WHOPPER OF A REBOUND TRADE
Our gold stock "rebound trade" is turning out to be a whopper...
Last December, we labeled gold stocks as an asset with huge potential to rally if the stock market picked itself up off the floor. The "golds" took one of the roughest beatings of the 2008 credit crisis... so we expected them to rebound the hardest.
The idea we threw out to play rebound is the premiere way for "widows and orphans" to take a position in gold stocks: the exchange-traded gold stock fund (GDX). The fund is full of major gold producers like Goldcorp, Barrick Gold, Newmont Mining, and AngloGold Ashanti. If you're looking for a "set it and forget it" investment in gold stocks, this is it.
As you can see from today's chart, it's been a heck of a rebound. The GDX just reached a new 52-week high to gain 115% since our column. As long as the government dishes out "free" car credits, "free" house credits, and bailouts for everyone, expect gold – and the companies that sell it for a profit – to head higher.
In The Daily Crux