YOUGHAL, IRELAND — At 6:41 a.m. EDT Monday, we learned that “our Country (capital C!) is doing great … We are stronger than ever before, with GREAT upward potential.”
That was the official word given out by the White House.
And yet, you have read here that the U.S. has been in decline since the turn of the century … with no one and nothing able to break its fall.
Which is it? Are we doing “great” … or not so great? Who’s right? The commander in chief … or an unknown scribbler of no importance?
Over the next few days, we will lay out the dots. You connect them.
New Record
The immediate cause for delight Monday was that the S&P 500 hit a new record … and the Pentagon hit a new victim.
As to the second, we have no opinion. No trial was held. No evidence presented. It was never any of our business anyway. And we have no way of knowing if ’twere fair or foul.
As to the first, rising stock prices are definitely a plus for those who own stocks. Whether they are good for others is a matter of puzzlement.
But wait, a quick look shows that total corporate profits in 2000 were about $600 billion. Now they’re about $1.8 trillion … around where they’ve been for the last six years. Is that great?
Remember, they changed the money system in 1971. The old money was tied to gold at the rate of $35 an ounce. The new money floats on a sea of hope and guesswork.
But you can’t buy an ounce of gold for $35 today. It will cost you almost $1,500. So, to get the old dollar figure, you have to first calculate how many ounces the current dollar figure represents, and then multiply by 35.
In 2000, gold could be had for only $260 an ounce. So earnings in 2000 (worth $600 billion in dollar terms) were equal to 2.3 billion ounces of gold … which were worth $80.5 billion. Earnings today (worth $1.8 trillion in dollar terms) are worth only $42 billion in gold terms.
Bump and Grind
We reported a week ago that, in terms of gold — our oldest and most reliable form of money — America’s corporations have lost value since 1971. “How could that be?” asked an interviewer.
In the short run, there’s a lot of bump and grind in gold values as well as everything else. Gold goes up. And gold goes down. But it doesn’t go away. And over the long term, it tends to give a fairly good measure of what things are worth.
We explained …
A couple of years ago, in England, they found a cache of golden objects that had been buried for 1,300 years. The objects had great historical value, of course, but the gold still had monetary value too.
Back then, they didn’t have iPhones or F-150s, so it is hard to compare purchasing power, but whoever buried the gold was certainly a rich man. And whoever dug it up was also rich.
By contrast, we doubt that the person who discovers a cache of dollars or euros in 3300 will feel he has found a great treasure.
The gold price of America’s stocks, over a 50-year period, is telling us that they are not as valuable as investors think … and the economy is not as great as Donald Trump believes.
But markets and economies are, after all, still cyclical. They ebb and flow, like the tides.
The tide was in full flood when The Donald plumped his ample derriere down in the Oval Office. Then, Republicans opened the sluice gates further with their Christmas tax cut of 2017. But now, the tide ebbs away.
September’s key indicators were all negative. From retail sales to housing permits and everything in between, all were down … pointing to a recession.
The GDP figures offer no comfort either. They’ve gone from a high of just under 5% in the second quarter of 2014 … to 2.3% in the first quarter of 2017, when Mr. Trump took over … down to just 2% in the second quarter and then 1.9% in the third quarter of this year. And the New York Federal Reserve estimates a further slowdown to 0.92% in Q4.
Surely a recession lies ahead. And surely, stocks will fall … just as they did after 2000 and again after 2007.
Deep Currents
Markets and economies breathe in and out. They expand … and they contract.
Mr. Trump probably made a big mistake taking credit for the last few quarters of the expansion. He didn’t cause the upswing, and now he may be blamed for the downswing … which he won’t cause either.
But this only brings us to the interesting part. Beneath the surface chop, deep currents still carry people, nations, and whole civilizations to glory … or destruction. And there, down low, what hath Mr. Trump wrought? Anything?
The next few years, we believe, will not reveal the “GREAT upward potential” that Mr. Trump foresees. Instead, we see banana peels on which we will slip up … sinkholes into which we will fall … and temptations we will find irresistible.
“Lock Him Up”
Tomorrow … we begin with Mr. Trump himself. What’s up with the impeachment? Is POTUS being “assassinated” by the Deep State, as some pundits claim? Is it a “lynching,” as he calls it? “Lock him up,” chanted the World Series fans at Nationals Park, almost all of them employed by the Deep State.
And we have some other questions too. Why do the wars in the Mideast continue when Mr. Trump vowed to end them? How come gold is telling us that we’re getting poorer when everyone knows we’re “stronger than ever”?
And what happens when the next crisis comes … and the Fed has less than 2 measly percentage points to cut … and Washington is already running $1 trillion deficits?
We will lay out what we see here Saturday … You can make of it what you will.
Stay tuned …
Regards,
Bill
• This article was originally published by Bonner & Partners. You can learn more about Bill and Bill Bonner’s Diary right here.