Lux Lucet

David Stockman

This time last week it was 75 degrees and sunny. Today? Well, let’s just icy roads and accidents made the morning commute a little more exciting than usual. How can the weather change so much in seven days?!

Well at least one thing hasn’t changed over the last week, and that’s the dicey state of the nation’s economy. With the stock market hitting records level, that may seem like an odd thing to say. But the economy is not the same things as the stock market.

In fact, the past several years have seen an almost inverse relationship take hold between the performance of the Dow Jones and S&P indices and important economic indicators. In a normal, rational economy, if corporate earnings decline or unemployment spikes signaling a economic slowdown, the stock market should decline.

But in today’s Keynesian casino markets, bad economic news is good news from the markets perspective. Why is this? It all has to do with the Federal Reserve’s interest rate policy. You see, bad economic news means big money speculators believe the Fed will continue its policy of suppressing interest rates to near zero to stimulate economic growth. On the other hand, if the economy appears to be doing well, the market starts to think the Fed may hike interest rates, making stocks a less attractive opportunity. Thus the stock market goes down.

In short, it’s a stupid economy that rewards fraud and punishes success.

And after over eight years of stupidity such as near zero percent interest rates, we are now faced with simultaneous Fed created bubbles in stocks, bonds and real estate, which will all at some point burst. And that leads me into today’s story…

Stockman Speaks

In an interview earlier this week with Greg Hunter, David Stockman essentially declared the end of the world as we know it – at least economically speaking – is nigh.

For old guys like me, Stockman needs no introduction. Named by Ronald Reagan and the incoming administration’s first director of the Office of Management and Budget, Stockman was the youngest person appointed to a cabinet level position in the 20th century. He quickly rose to national prominence during his short stay in office, eventually leaving over a dispute about federal budget deficits (Stockman was against them).

Following his stint with the Reagan administration, Stockman spent several decades out of the public eye making a fortune in private equity. But the past several years have seen his return to the spotlight as a financial commentator.

For my part, I believe he’s one of the keenest economic analysts in the business, a man whose commentary should be taken seriously.

His interview with Hunter runs about thirty minutes, and I highly recommend watching and re-watching it. To briefly summarize Stockman’s comments: Donald Trump was elected because the current corrupt financial system benefits the bi-coastal elites at the expense of main street America; economic and federal budget messes Trump has inherited are far greater than the crisis Reagan faced as he entered office in 1981; Trump’s promises of corporate and middle class tax cuts, ramped up military spending and refusal to cut entitlements will serve to compound these problems; a budget showdown with Congress is upon us, with the current debt ceiling holiday – this arrangement was struck by Barak Obama and Speaker of the House John Boehner in the fall of 2015 – set to expire on March 15.

In all fairness to Stockman, he doesn’t actually say the economic world will end on March 15. What he does say is that the date will represent the start of a period of economic and political turmoil, and that the financial markets, sitting as they are at records highs, have not taken this into account.

Says Stockman of the current stock bull market, “This is delusional. This is the greatest suckers’ rally of all time.”

Perhaps the most surprising revelation in this interview is Stockman’s view that this time it’s different. Specifically, he’s talking about the way he anticipates Trump will handle the budget showdown. Stockman believes that Trump has been advised that, in the absence of a budget deal, he has the authority to “allocate spending.”

What does that mean? Simply that in the absence of a budget deal the president has the authority to decide whom will be paid. He can decide which bills get paid, and which ones get put in the drawer.

Stockman thinks this could go on for months, and be very disruptive to financial markets.

But What If Stockman’s Wrong?

There’s an old saying among stock market analysts: never mention a date and a price in the same sentence. By putting a date on the start of the next round of economic troubles, Stockman has taken a bit of a chance. The truth is, no analyst, no matter how gifted, knows for certain what’s going to happen in the future. Perhaps March 15 will signal the start of major problems. Perhaps the day will come and go as any other.

For my part, I hope Stockman’s right. Not because I’m rooting for disaster, but because America desperately needs a moment of financial truth.

We’ve pretty well burned up the financial system over the past several decades, especially since Nixon ended the last vestiges of the gold standard in August 1971, and yet governments, corporations, and private citizens continue to take on debt as if the bills will never come due.

But they will. And refusing to face the fact doesn’t change things. The sooner Americans face the fact that the country is broke, the sooner we can begin the process of dealing with the problem.

But while I hope Stockman’s right about March 15, I’m afraid he’s going to be proven wrong. Why is that? In my opinion he’s going to be wrong for the simple and unsophisticated reason that the professional can-kickers in Washington will, as they always have in the past, find some way to keep the fraud going. Their careers depend on it.

I have no idea what they’ll do to put off the financial day of reckoning. Perhaps they’ll find a way to extend the debt ceiling holiday. They did it once, why can’t they do it again? Of course, that merely will hide the problem and make the final collapse even worse. But hey, it’ll be on someone else’s watch.

The System Needs To Blow Up

Even if Stockman is wrong as to the timing of the start of the financial collapse, his analysis about the current problems in the system and its eventual collapse are, in my opinion, sound.

At one point in his interview with Greg Hunter, Stockman pointed out that the financial system is so far gone the only solution is for it to collapse.  He described our financial problems as “incorrigible,” which is to say they cannot be corrected.  A collapse is needed to allow the US to rebuild on a sound footing.

This strikes me as similar to a point that John Robbins made about Western Civilization in general. I don’t have the quote handy, but I recall Robbins talking about how far the West had drifted from its Christian moorings and the need to reconstruct civilization on the rational foundation of the Bible.

The chaos and irrationality we see in the financial system is mirrored in society at large – we don’t even know what marriage is anymore, or for that matter what restroom people should use – and the source of the collapse stems from the same source: the West’s rejection of Jesus Christ in favor of secular philosophy.

Got Gold and Silver?

Whether Stockman’s prediction comes true or events take a different turn, it seems fair to say that there is no avoiding difficult economic times. God has so constructed the universe that all debts must be paid. And the West in general, and the US in particular, have piled up the largest debts in world history. And these debts must be paid by someone. And we’re that someone.

And one of the ways we’re going to pay for these debts is through a massive currency collapse.

What do I mean by a currency collapse? Imagine the value of the dollars in your wallet falling by 30, 50, 90 percent or more. That can’t happen you say? Well not only can currency collapses happen in theory, but they have happened in actual history. Checkout this article on the hyperinflation that occurred in Weimar Germany in the 1920s.

So how can people protect themselves against the destruction of their hard earned money. Historically, holding gold and silver has been one of the best ways of protecting one’s savings against the predations of government created currency destruction.

And holding gold and silver does not mean purchasing an Exchange Traded Fund or some other form of paper gold or silver investment in your brokerage account or IRA.

You need the real thing. You need to be able to hold it in your hand. You need gold and silver bullion coins.

Where can you buy silver and gold coins? Most local coin stores carry them. There are also reliable online bullion dealers.

At any rate, almost no one holds gold and silver in any quantity. And this, I believe, is a serious mistake.

A second point about purchasing gold and silver is worth mentioning: You must store it outside the banking system. Don’t but gold and silver and then put in a bank safe deposit box. If you do that, you may as well not bother buying gold and silver at all. You need to store you precious metals where no one can come between you and them. In the financial business, it’s called eliminating counter party risk.

Please note, I’m not saying put all, or even most, of your savings in physical gold and silver. But if you don’t have any, you’re trusting your financial future to the politicians and bankers who already have destroyed about 98% of the value of the dollar over the past 100 years. And that’s a strategy for poverty.

The Bible tells us that a prudent man sees trouble coming and hides himself. When we compare the current financial system to what the Bible teaches, it is very clear that the entire world has gone off the rails. As Christians, let us not be hearers of the Word only, but doers also. Don’t wait until the dollar is crashing to take action to protect your savings. Do it now.