MIAMI – Guggenheim investment fund’s global chief investment officer Scott Minerd predicts a 40% decline for the Dow… mostly in 2019. He says the U.S. economy is on a “collision course with disaster.”
He’s right – at least about the “collision course.” It is the smash-up we’ve been exploring this week.
Exactly how and when it will occur, we don’t know.
All we have to go on is the “why”… which tells us that you can’t get rich by borrowing money… especially when you’ve already borrowed too much.
Glazed Delusions
Candied, glazed delusions are always more popular than the raw, uncooked truth. And the delusion that you can get rich by borrowing more and more money has provided direction, false comfort, and phony growth for the last 30 years.
The fantasy economy it created left the two biggest economies of the world playing a cartoonish game – like characters in comic strips or professional wrestling.
On the one side, dressed in red, white, and blue tights, was the American Dreamer, who – since the ’70s – believed he could get rich by issuing fake money.
Remarkably, his sometimes tag-team partner… sometimes blood-feud enemy… believed it, too. The Great Red Hope thought he could get rich by taking America’s fake money in exchange for real products made in his vast new factories.
The Americans spent money they didn’t have. And they were China’s best customer. Fake money went from America to China… and then China lent its earnings back to the U.S.… where it stimulated more borrowing… and more spending!
Then, China built more factories to satisfy the new demand.
Cumulatively, the U.S. trade deficits over the 30 years toted to nearly $20 trillion (in today’s dollars), almost as much as the U.S. debt. And all of it was a debit to the Americans and a credit to the foreigners.
