written by reader financial collapse

By Anonymous Questions, October 28, 2015

hi, Just found your site poking around for an answer to stansberry best investment. thanks.

do you think all the gloom and doom about the collapse of the us/world financial system is true — US trillions in debt, deflation, and so on.

thanks,

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jp10558
Irregular
jp10558
October 28, 2015 3:55 pm

I’m a new member, and far from any sort of expert on investing. That said, here’s my opinion.

I like Stansberry’s newsletters. They’re interesting, and seem to often get macro trends right, and are believable to me. Their stock picks, like everyone newsletter, are not so great. Their own reviews at the end of the year point out many products only rate a B, and they regularly have some that flat out get an F for the year. This is their own rating.

Have you read any of the paid Stansberry products? Their teasers really oversell the “End of America” and “Total Financial Collapse”, which isn’t exactly what Porter actually says in the paid content.

He doesn’t think civilization is going to end. He doesn’t think we’ll all return to bartering. He does think there are more massive credit bubbles that will hit like the 2008 housing bubble. I think there is broad consensus that the US did not really do much to prevent another 2008 sort of securitized bad debt products and leverage problem from happening again. Sub Prime auto loans, and for-profit University Student Loans both seem like they’ll eventually crash, and for that matter, Student Loans in general are getting close to the maximum I think is likely (i.e. where the immense cost of the loans starts to outweigh the earnings benefit of having a degree.)

That sort of crash could cause another 2008 crisis. Now, the other question is about the rest of the world – is the USD likely to lose it’s position as the reserve currency? Last year I would have said it was possible, and Porter sure seems to think it’s likely. Today, I’m not so sure. While printing dollars to inflate our way out of interest payment / debt problems for the nation may be considered bad, it’s less bad than confiscatory taxes, and it’s far less bad than defaulting. You might think this would have weakened the dollar, and it would, except everyone else is doing it now too because of similar economic issues. So the Dollar actually remains pretty strong.

No one really thinks the US is going to default for financial reasons. Political ones could happen, but I have to hope even the partisan congress isn’t that stupid. And China or whoever cannot “Call” our debt to them. We didn’t borrow it like a margin stock purchase. The US set out the terms of the bonds it sold, and you have to accept repayment in USD and at an interest rate and timescale the US govt set when they issued the bond. The only way anyone could get money out of US bonds RIGHT NOW is to sell them on the market, but in that case, that’s not really a problem for repayment – the US doesn’t come up with the money when someone else buys bonds on the secondary market. And it doesn’t change the US obligation either – we don’t care who we pay 0% interest to over 30 years or whatever.

So, everyone is inflating, so there’s no relative massive price changes like with Argentina currency collapse. Fiat currency is all relative as I understand it. That’s the problem with it – but it also means that even if the USD is devalued, it’s not super important to our economy as long as it stays relatively similar to other countries currencies. And the government is strongly keeping inflation around 1-2% so far, so it’s not like the price of food is going to double tomorrow. Your paycheck isn’t g