Okay. Get this. Ready? Last September I made a post here talking about how we, the USA, just hit $20 trillion in debt, and how bad that was for the future of our society.
Now, just six months later, six months later, the debt has already risen a trillion dollars, making our new total $21 trillion.
No, this is not an April fools joke. This shit is real.
It’s important you understand this accelerating, almost exponential growth of how fast America is destroying itself. Here’s what I said last time:
Think about this for a minute: it took us 231 years to get to $10 trillion in debt. It took just 11 years to get to $20 trillion. As of this moment, we’re already 16% of the way beyond that to $30 trillion (we’re $20.16 trillion already). We should be at $30 trillion in no time (particularly with single-payer health care looming over us in the next decade or so).
In the first 231 years of this country, on average, our debt grew by $1 trillion every 23 years.
In the last ten years, on average, our debt grew by $1 trillion every 14 months.
Think about that for a minute.
Seriously, stop and think about that for a minute.
Now, today, our debt is growing by $1 trillion every 6 months.
Do see where this is going?
Do the right-wingers think this is a problem?
Nope. Tantrum Trump, who is basically governing like George W. Bush (cutting taxes while skyrocketing government spending and wars), just passed a $1.3 trillion dollar spending bill. $1.3 trillion, when we’re already increasing the debt by $1 trillion every six months. The bill was 2,232 pages long… 2,232 pages of spending… just as many pages as Obamacare, which the Republicans said they hated.
Trump thinks the economy will grow in the next few years in order to take up the slack on the debt. Few things an American president have said in my life have been this wrong (or he’s just lying again; not that it matters). The USA is headed for a massive recession in the next few years, one that could hit us at literally any time, not economic growth.
What about the left-wingers? Do they think this is a problem?
Nope. The two biggest topics they’re talking about is “free” health care for everyone and “free” college for everyone, all paid for by the government of course, since the government has so much extra money laying around, you know, since it has negative $21 trillion and all.
Debt growing at an exponential rate, and both irrational factions who are in control of this country are not only not doing anything about it, but doing things that will further accelerate it.
If you’re an American, please, get your financial house in order. Get my book and develop an Alpha 2.0 financial structure so the coming chaos won’t affect you as much as it will everyone else. If you want to leave the country, great, make plans to do so. If you want to stay in the USA, that’s okay as long as you pay off your debts, get some serious money in savings (hedged by some gold), get some small, niched, location independent, international businesses going, and you detach from the system.
Don’t wait. Don’t make excuses. Don’t fart around.
Do it now.
You don’t have time anymore.
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I follow the Sovereign Man news letter where they talk about the same topic. Worst thing is that the US is not in a serious situation like a war or something where the spending can be justified. The GDP growth can’t pay for the increasing interest rate, never the less the debt itself. Either a miracle needs to happen in the form of AI singularity or they will try to dust everything further down the carpet. The US being the worlds most powerful military, I wonder what they will do when China dumps the US treasury bonds on them. Not to say that Europe is any better with Deutsche bank on the brink of collapse:p
Hey caleb what’s a timeline for a younger guy to achieve higher savings, lower debts and hedged gold investments?
My biggest thing is I recently found your financial advice last August. I had a relatively quick timeline to get my income to $75,000 but it’s taking longer than expected.
Sometimes I worry that I won’t have certain things in place by the time the next economic downturn comes.
Are there things us younger guys can do as a safe haven for the recession if we’re not at that stage where we have a strong financial house?
Yes, and my argument is that even if there was, the USA still can’t/shouldn’t spend the money, since it doesn’t have it.
The USA has truly painted itself into a corner. There is no economic or political way out.
They’ll be fucked. Yep. Hopefully this won’t happen until after I leave.
As fast as possible.
It usually does. Keep at it.
Good. Let that be one of the motivations to get this done as fast as you can. (It has always been one of mine, though not the biggest one.)
It’s all the same stuff I usually talk about. Just get the following things done as fast as you can. If you only get a few of them done, that’s better than none.
– Pay off all debt.
– Sock away some serious emergency savings in cash, 30-50% of which is hedged by gold coins.
– Don’t rely on a corporate job. Either build a side business (best) or get a second job in a completely different industry (not as good but better than nothing).
– Get your monthly expenses as low as you possibly can without severely damaging your happiness.
– Build some income, at least $1500 per month or so, from a location independent side business that would do at least okay in a Western recession (strong market or high margin products/services or international customers, etc).
Is this a good time for getting a mortgage? I’ve always been debt free and have quite a bit of cash.
The exact same thing is occuring at the global scale in term of environmental resources, driven by consumerism, addiction to oil, mechanical oil fueled transportation (individual cars and airline at the front), population boom and animal based foods.
What you are talking about here is a mere subset of this, in the financial, economic and social sphere. Society, economy and finance don’t evolve in a different dimention magically disconnected from earth, we’re part of the environment in fine.
Same exponential evolution, same speed. It’s not the big government or the illuminati or whatnot. In fine it’s our individual lifestyle that is unsustainable. Because at the end of the day we’re all greedy dumb fucks who want more stuffs, bigger stuffs, more travels, further aways, more freedoms, live longer, etc…
Hey caleb great post im currently getting everything in order
this is off topic but since u mentioned ur book alpha male 2.0 in the post i just had to ask
I bought the book a while ago e book and i have a hard time reading concetrating i mean I like the book its interesting but i read SUPER SLOW espically on books that i tell myself are important and i need to soak up the info, do you have any tips? i literally would read a sentence 3-4times over over again sometimes it really pisses me off. this is ur book btw after i finish this i plan on getting the other ones from you! please any advice? im 20 btw , im actually smart amazing extroverted sales exp and a 126 iq .. any advice?
No. Wait until real estate collapses next (which it will), then buy. You’ll get a great deal. But not now.
Environmental alarmism isn’t useful. I know you’re obsessed with this topic and can’t think rationally about it, but for everyone else reading, watch this:
https://www.youtube.com/watch?v=OwqIy8Ikv-c
I would see a specialist. Reading slowly is one thing; many people have that issue. But if you seriously have to regularly read the same sentence 3-4 times over again, something is wrong that you need likely professional help with.
And this is what happens when you use debt to someone else as your currency: the “someone else” in question being the privately owned banking system. The original idea was that congress would issue money and the executive would spend it. To keep the money supply in check, taxes (mainly tarrifs) would soak some of the cash out of the system, which would be destroyed.
What happens now is that our governments issue currency based on debt on which we pay interest, which interest must be paid as more currency. It’s inevitable where this winds up.
Incidentally – the national debt graph makes far more sense plotted on a log graph. As I understand it, the only time in recent history where the rate of increase of the debt declined was under Clinton.
Deficit has been growing out of control since viet nam. I’ll buy your book if you can explain why it’s suddenly a problem.
Good luck. Nobody else can do that either.
You’re talking about a symptom and not about the underlying problem.
Oh fuck…not Prager U. That’s not exactly what I would call a “reputable source” ?
Fixed. It was around that time where the plans for the Military Industrial Complex were first thought up, and it was also around that time where the ruling elite started to understand that they could benefit at the expense of pretty much everyone if they spent lots of money on war.
Everything decisively spun out of control after World War II however. The New Deal and the Military Industrial Complex sealed the US’ fate and that’s when the deficit really became something that the ruling elite could use to their advantage.
Caleb’s book actually does explain why not only is it a problem now, its been a problem for decades and now we’re seeing everything come together.
The problem itself is that government is way too big and people are relying on it in their daily lives more and more, when we have everything necessary to be a self ruled society. We have the moral fundamentals, history lessons, technology, and money. We literally do not need a federal government any more. But because one exists, we have this spending problem.
Yeah that started the “set em up, knock em down” pattern we’ve been seeing. One presidential cycle where taxes are higher but spending is low, followed by another where taxes are low but spending is high. Only that is now beginning to end as people trust the ruling elites more and more, now spending AND taxes will BOTH be high. This will begin sometime in the 2020s.
All this being said, we as alpha 2s can sit around and play the blame game all we want, but its a massive waste of energy (its fun, but still a waste). I’ve just begun to do the things that Caleb is mentioning and am learning more and more every chance I get. Anyone else posting here should as well.
1. Go back and re-read the article. The problem isn’t the debt, deficit, or even its growth. The problem is it’s exponential growth. The debt was a tiny fraction of GDP during Nam. Today its far exceeded GDP, and the rate of growth continues to almost double every year or so. If you don’t think that will ever become a problem for you as an American living in America you, then great, carry on and don’t change a thing. In 20 years we’ll see who’s right.
2. You don’t need to buy my book, because if you seriously don’t think this will be an issue for you in the next decade or so, you don’t do anything the book suggests.
Correct, but since neither is fixable, describing the symptom is more demonstrative.
Hi Caleb. Can I have your opinion on the future of the Australian economy?
@joelsuf
…still not the underlying problem. You need to dig deeper:
Money and Debt
@CJ
I respectfully disagree, because it’s basically riding on the political diversion wave – thus not helping in any way.
Cheers
My guess, and it’s only a guess, is that Australia / New Zealand, unlike the rest of the West, will do “okay,” not good, but not horrible. They’re as insane and as left-wing as the rest of the West, if not more so, but they have much lower levels of debt and get a lot of money and economic activity from Asia, which is rising rather than falling.
There is no helping this. The USA is fucked regardless of what you or I do. Accept it.
When you talk about cash its not clear to me whether you mean an actual cash like having bank notes sitting at home, or whether money on bank account counts as cash in your view.
I know that you recommend gold coins and I understand their advantages but the premium over spot is also much bigger, so would you say a mix of gold bars and coins is best or do you firmly stand by coins only? Would you go for fewer high value coins to minimize margins or would you not worry about margins and get many low value coins to be more flexible with the amount you can chose to sell off…
Its funny, everyone I know is either getting mortgages or talking about buying house (soon!). I am always half shocked to hear them talk about it. I honestly cant see why anyone who has been following at least a small percentage of the news in the last couple of years would think its a good idea to be buying houses and settling down not only in present economy but in western countries these days in general.
One argument Ive heard from one was that since the payment amounts are fixed if there is a currency crash he will be still paying the the same currency amounts which will be very low payments in absolute terms. I guess the idea is based on that the currency will crash sooner than the real estate market, which I am not sure is very likely.
This sounds familiar. His reading problem is probably because he doesn’t like what he’s reading because 1) its against his views and 2) he knows on some level its true. That combination is a killer, it drives people insane. I went through the same stages. I have been reading some online info similar to Blackdragon blog (but monogamous version) years ago and the stuff there often made me so pissed of I never finished reading it. After going through some more life experiences and so called cold showers I am now able to read a lot of this stuff without getting emotional and often actually think instead oh yeah that fits with what I observed so thats why its like that etc. Perhaps later in life will be easier?
Its true that world is becoming more and more chaotic and hostile. This actually natural in a way, its just entropy, all things evolve into chaos given enough time. Eventually it results in a cataclysmic event and then a new cycle begins. Such cycles happen all the time on difference space and time scales. It could be seen as unfortunate that we happen to live in the closing age of a one such cycle but on the other hand you could see it as an opportunity.
I spend a lot on food and drinks and on travel. Both things I could cut down a lot if needed. Is that knowledge fine or is it necessary you would say to start getting in that minimalist habbit. I would say having to cook myself all the time and cutting down on travel would damage my happiness quite a lot as well as my personal development (in the case of travel). Other than that I could always relocate to a much cheaper country (I don’t live in the country of my citizenship so this is a lot easier for me than for for many others) if necessary. That would mean lower corporate salary as well but if the job situation was shit because of a crash its a no brainer, once I get my own business running and it starts making decent money then of course id be relocating for most of the year to somewhere cheaper.
They both count as cash.
I firmly stand by gold coins, since gold bars are much harder to liquidate, and would be orders of magnitude harder to do so if the price of gold really took off.
That being said, you don’t have to buy the most expensive gold coins like American Eagles. You can buy the cheaper ones with some numismatic value in order to save money; I have a mix of those.
It’s up to you, and how often you travel, and how much joy eating when traveling brings you, and how much money you make.
Is it because they are harder to authenticate and because they only have melt value vs coin has some collectible vlaue and sometimes is also a legal tender and is easier to authenticate?
As far as I know the Canadian Maple Leaf has some of the lowest margins is one of the most well known worldwide coins
By the way if there really is a big collapse of financial system then gold might not be that useful, more like agricultural land, real estate, stockpiles of food and weapons…
No. Coins are easier to authenticate. Ideally, you don’t want numismatics, if you can avoid it.
Of the standard one ounce coins, yes, but for example, I own pure cold coins from the US Olympics back in the 80’s, and the margin was tiny on those. Still 100% gold and small enough to authenticate more easily. Again, something like American Eagles are much better, so I have a lot of those too.
I don’t anticipate anything quite that horrible. Read this.
They do it to impress people and because they are buying into the narrative that “if you want to be considered successful, then you MUST buy a house!” A few of my buddies have gotten suckered in like this too. Seeing them deal with foreclosures etc when the housing bubble bursts is gonna be a hell of a show. I’ll just shrug and be like “…told ya so.” I’m starting to love saying those words more and more.
It won’t get to THAT point for like 50 some-odd years. But it will probably get to that point.
Okay, now I somewhat agree with you. However your article implies an urgency that your comment retracts.
In the intervening 20 years I believe folks like you will realize the US can do this much longer than you think. Competing nations/currencies are on the same train to nowhere, and they will derail first. When japan and most of europe go down in flames, it’s time to urgently prepare for the worst here.
If you think the dollar will crater soon it’s a great time. You would almost be getting a free house if you saved in something like gold that doesn’t hyperinflate. I happen to disagree with that.
Incorrect. It will take you several years to get from zero to where I recommend. You don’t want to wait around for 10+ years for the country to collapse and then try to figure out how to start a business. You need to do that right fucking now so that when it happens, you’re already covered.
That could be true, but none of my data suggests this. Therefore I’d rather not bet my entire financial future on the US being just fine in 10-20 years. If you want to take that gamble, be my guest.
And as I’ve said many times before, if you do the things I suggest and America does great, even better for you; you’ll make even more money. You lose nothing by taking my advice, but you potentially may lose a lot by not.
Correct and I’ve said this many times, particularly about Europe, which has even less time than the US.
I remember, back in the day, whenever a new trillion dollar milestone (like 7, or 8 trillion) hit, it’d be all over the news. Then they realized no one gives a shit, and now no one even cares, not even local news shows.
Still I am not sure if it does even make any difference. Its clear the government will never pay it back, nor can they pay it back anymore. The fact that the debt keeps increasing means people keep giving a government money. And to be honest if people are that stupid to do that then I understand the government takes advantage of it, why not take these donations? Its not like a government debt means anything. If an individual or a company owes money there are legal things that can be done (though not always). If a government owns the money then what can happen? Do you think the other governments and individuals will come with pitchforks to washington demanding their money back?
The point is the dollar has been backed by military power and the force of (usually implied and not overt, unless you are Russia/China and are in the habit of not obeying…) intimidation.
If it has been so for so many years, why should it change?
This is, I suppose, the commenter’s thought.
(This doesn’t mean your approach isn’t the wisest. It is.)
You (or someone else) made that point here before, and I’ll repeat my answer: Because your nation will eventually collapse because of it, and it will happen regardless of how smart or stupid your lenders are.
Sure, you can throw a party now (which is what Americans are doing), but this party will come to an abrupt end, and you don’t want to be in the vicinity when it does (I certainly won’t be).
No, instead I think the government will either default on its obligations, sending our economy back into the stone age, or it will hyperinflate the debt, making a loaf of bread cost $100.
Name one empire that’s been able to do this forever.
Hell, forget forever, name one that could do this for 100 years.
Okay, I agree with that. If someone is lazily sitting around just making ends meet, he should immediately start working toward a better life. That has nothing to do with collapse scenarios. Any normal recession will be a risk that he loses his job and becomes homeless. At no time in the past 50 years have jobs been secure.
In a collapse scenario, poor people may starve. Middle class and richer people risk losing everything to inflation. But it’s easy to protect against inflation, and YES YOU CAN wait until the last year or two. There is a foreign exchange market where you can instantly trade your inflating dollars for any world currency you prefer.
Better brokerage accounts make that easy. But you have to look past the consumer garbage like $7 trade dot com.
Inflation helps debtors and screws lenders. If you have a mortgage and savings in a stable currency, you could end up getting a nearly free house. Just make sure you have a fixed rate loan 🙂
You have no idea if the collapse will be inflationary and neither do I. It could very easily be deflationary instead. Read this.
Good luck with your plan of precisely anticipating both the timing and the nature of the collapse. I’ll stick with my plan.
Yes that is the argument people make when getting mortgages, that if its fixed rate and there is a big inflation they get a near free house, assuming they have savings in another currency / gold / etc. But the question then is how much a house will be worth in collapsed/collapsing country? Will you still want to live there?
This has never happened in history and whilst its theoretically possible its far from reality. Its on the level of preparing for an asteroid strike/alien invasion.
Two questions remain for me. First, in 2008 my bank was Wachovia which went bust and was bought by Wells Fargo. At the time I didn’t have much money so didn’t care much. If there is a recession, with the comeback of subprime mortgages, it’s likely some banks would go bust again and that would be scary given that most of my net worth is in cash. Fortunately I have some of my money in an Scandinavian bank (from the time I worked in Europe.)
Then if one wants to wait for the recession to invest in stocks and real state, then what is worth investing in right now?
That feels even less safe.
To me, the actual numbers aren’t as important (though are menacingly large) as the ratios.
The rate of change in debt to gdp has slowed somewhat in the last few years. But the debt/gdp crossed 75% in 2008 and 100% in 2013.
In the (link to the) graph below, you’ll see debt/gdp and change in debt/gdp. I don’t know what a healthy debt/gdp would be, but I personally would be more comfortable at something at least below 75% (or even better 50%). Except for WWII, the USA has been below 75%, at least until 2008. (I don’t know about pre-1930s)
And these numbers don’t take into account what’s potentially going on in terms of inflation, etc.
That definitely seems to be a good question to be asking.
https://docs.google.com/spreadsheets/d/e/2PACX-1vTQm9pcrX7uOL31FLOJqHygdICZmPgQEfx3sdQlchtfXxLJiP_yKRVGYwv-zr0nxbW8VQyaCONPKgtA/pubhtml?gid=0&single=true
https://www.thebalance.com/national-debt-by-year-compared-to-gdp-and-major-events-3306287
That’s a huge and inaccurate overstatement but I have no wish to argue about that here since it leads into a very silly and tedious argument. To actively plan on deflation never becoming a serious problem in the US, with it’s vast amount of consumer and commercial debt, is silly. I do agree that hyperinflation is more likely though.
As I’ve said before, don’t store anything more than operating cash (around $2000 or less) in any bank. Use investment firms instead.
Use banks to manipulate your money, never to store your money.
I answer that question in various ways throughout this blog. Hit up the archive and take a look around.
Sometimes that is offered by a traditional bank as well. I assume you mean one where they invest on your behalf but that you can take out the cash any time? Some banks offer this service the advantage is that you can move the money between the normal bank account and investment account almost any time.
Irrelevant.
Also irrelevant. I don’t care about the convenience factor, nor do I move my money around very much. I want my money safe, and it’s not long-term safe in a bank.
And you think it is safe in an investment firm?
My idea about safety comes from diversification and spreading stuff across, I think we agree on that. But I dont see how one organisation is safer than another.
“Safe” is a loaded word, but do I think it’s safeER than a bank? Yes.
You don’t explain why you believe this, but my understanding is this is backwards. Banks have FDIC insurance on your deposits. If for any reason the bank goes out of business, uncle sam pays you back.
Investment firms have nothing of the kind. If the investment firm goes out of business you likely will take a loss. Some assets like stocks and bonds in your name may be protected, but the firms all borrow and lend these to each other. So you may lose them too.
If you are going to say SIPC — wrong. Look it up.
Again, you don’t explain much. But it is implied that the “crash” will be so sudden that there isn’t time to react. This has never happened in history. These things take years to play out. If you have a good brokerage account you can trade into the stable currency and ride out the storm. The problem is illiquid assets like houses that can take a long time to sell and when prices are moving down buyers sit on their hands. This happened in 2009.
I’d much rather have electronic assets that I can move in an instant, than some physical asset that is stuck in a deteriorating situation. Think about how all it takes is one bad neighbor to ruin your property value.
Inflation is really the killer. You see your savings buy less and less each month/year. It sucks. Your business doesn’t help because you can’t raise your prices fast enough to keep up. Deflation is much easier if you have savings. You can buy more with your money. Everyone loves that.
Incorrect. An investment firm’s assets can’t be raided by creditors in case of bankruptcy. Read this. It’s not total protection, but it’s also not “nothing of the kind.”
The problem with banks is that the government can dip right into them whenever the hell it wants, whenever it feels a crisis warrants it, like what happened in Cyprus. This is not true of an investment firm, or at least less true. That’s why I consider investment firms at least a little safer.
No, I never said that. I said that it will be near impossible to time when to get out before the crash occurs, unless you’re lucky, and you can’t emulate luck.
Uh, yes it has. It happened in 1987, as just one example.
Yes, but there are a lot of assumptions in that statement.
Agree completely.
http://www.mymoneyblog.com…
This is only talking about mutual funds. In 2009 brokerage companies went out of business and people lost their money, even though assets were supposedly in their name. The problem was their assets were lent out to earn interest for the firm.
Perhaps sticking to mutual funds (rather than individual stocks/bonds/futures/etc) this can be avoided. That would be good to know. However that article doesn’t explain in enough detail to make correct choices.
1987
Agreed. The stock market has crashed quickly. Given how much the economy depends on short term credit, it is possible deflation could occur quickly. We saw that in 2009 when banks stopped trusting each other’s credit rating.
Even Cyprus respected the deposit insurance max. However, gov’t can change the rules or just ignore them at will. I’m not sure why a bank or investment firm would be any safer from that. Only money hidden away in physical gold or cash would be out of their reach.
Look what’s happening now. Gov’t has decided Russians are bad. Certain individuals have been singled out to have their money taken with no due process. They are simply political enemies.