Hello.
My name is Porter Stansberry.
A little over ten years ago I founded Stansberry &
Associates Investment Research. It has become one of the largest
and most recognized investment research companies in the world,
serving hundreds of thousands of subscribers in more than 120
countries.
You may know of our firm because of the work we did over the
last several years – helping investors avoid the big disasters
associated with Wall Street's collapse.
We warned investors to avoid Fannie and Freddie, Bear Stearns,
Lehman Brothers and General Motors and dozens of other companies
that have since collapsed. We even helped our subscribers find
opportunities to profit from these moves by shorting stocks and
buying put options. To my knowledge, no other research firm in
the world can match our record of correctly predicting the
catastrophe that occurred in 2008.
But that's not why I created this letter.
I reference our success and experience with Wall Street's
latest crisis because we believe there is an even bigger crisis
lurking – something that will shake the very foundation of
America.
And that is why I've spent a significant amount of time and
money in the past few months preparing this letter.
In short, I want to talk about a specific event that will take
place in America's very near future... which could actually
bring our country and our way of life to a grinding halt.
This looming crisis is related to the financial crisis of
2008... but it is infinitely more dangerous, as I'll explain in
this letter.
As this problem comes to a head, I expect there to be riots in
the streets... arrests on an unprecedented scale... and martial
law, enforced by the U.S. military.
Believe me, I don't make this prediction lightly and I have no
interest in trying to scare you.
I'm simply following my research to its logical conclusion.
I did the same when I tracked Fannie and Freddie's accounting.
The same with General Motors. And Bear Stearns and the rest. And
when I began giving this warning in 2006 no one took me very
seriously... not at first. Back then, most mainstream
commentators just ignored me.
And when I presented my case and exposed the facts at economic
conferences, they got angry. They couldn't refute my research...
but they weren't ready to accept the enormity of its conclusions
either.
That's why, before I go any further, I have to warn you...
What I am going to say is controversial. It will offend many
people... Democrats, Republicans, and Tea Partiers, alike. In
fact, I've already received dozens of pieces of hate mail.
And... the ideas and solutions I'm going to present might seem
somewhat radical to you at first... perhaps even
"un-American."
My guess is that, as you read this letter... you'll say:
"There's no way this could really happen... not here."
But just remember:
No one believed me three years ago when I said the world's
largest mortgage bankers Fannie Mae and Freddie Mac would soon
go bankrupt.
And no one believed me when I said GM would soon be bankrupt
as well... or that the same would happen to General Growth
Properties (the biggest owner of mall property in America).
But again, that's exactly what happened.
And that brings us to today...
The same financial problems I've been tracking from bank to
bank, from company to company for the last five years have now
found their way into the U.S. Treasury. I'll explain how this
came to be. What it means is critically important to you and
every American...
The next phase in this crisis will threaten our very way of life.
The savings of millions will be wiped out. This disaster will
change your business and your work. It will dramatically affect
your savings accounts, investments, and retirement.
It will change everything about your normal way of life: where
you vacation... where you send you kids or grandkids to
school... how and where you shop... the way you protect your
family and home.
I'll explain how I know these events are about to happen. You
can decide for yourself if I'm full of hot air. As for me,
I'm more certain about this looming crisis than I've been about
anything else in my life.
I know that debts don't just disappear. I know that bailouts
have big consequences. And, unlike most of the pundits on TV, I
know a lot about finance and accounting.
Of course, the most important part of this situation is not what
is happening... but rather what you can do about it.
In other words: Will you be prepared when the proverbial $@*%
hits the fan?
Don't worry, I'm not organizing a rally or demonstration. And
I've turned down every request to run for political office.
Instead, I want to show you exactly what I'm doing personally,
to protect and even grow my own money, and how you can prepare
as well.
You see, I can tell you with near 100% certainty that most
Americans will not know what to do when commodity prices –
things like milk, bread and gasoline – soar. They won't know
what to do when banks close... and their credit cards stop
working. Or when they're not allowed to buy gold or foreign
currencies. Or when food stamps fail...
In short, our way of life in America is about to change – I
promise you. In this letter I'll show you exactly what is
happening.
You can challenge every single one of my facts and you'll find
that I'm right about each allegation I make.
And then you can decide for yourself.
Let me back up and show you in the simplest terms possible what
is going on, why I am so concerned, and what I believe will
happen in the next 12 months...
The
Greatest Danger
America Has Ever Faced?
In short, I believe that we as Americans are about to see a
major, major collapse in our national monetary system, and our
normal way of life.
Basically, for many years now, our government has been borrowing
so much money (very often using short-term loans), that very
soon, we will no longer be able to afford even the interest
on these loans.
Again... I say these things as an expert in accounting and
financial research.
You may not think things are THAT BAD in the U.S. economy, but
consider this simple fact from the National Inflation
Association:
Even if all U.S. citizens were taxed 100% of their income... it
would still not be enough to balance the Federal budget! We'd
still have to borrow money, just to maintain the status quo.
That's absolutely incredible, isn't it?
Yet I've never seen this fact reported anywhere else.
Normally I study these kinds of numbers when I'm looking at a
business to invest in or to recommend to my readers. But lately
I've spent most of my time looking into our national balance
sheet, because as the banking system collapsed in 2008, all of
the bad debts were absorbed by the world's governments.
For example, when Fannie Mae and Freddie Mac collapsed in the
summer of 2008, the U.S. government responded by simply
guaranteeing all of their outstanding debt.
Since then these companies have recorded hundreds of billions of
losses – all of which were passed along to the government.
Yes, you can still get mortgages today. And yes, Freddie and
Fannie are still in business. But costs associated with these
programs are piling up at the U.S. Treasury – and they are
enormously expensive.
These losses and trillions in other private obligations
are now the responsibility of the U.S. government.
The problem is, even before this crisis, our government was
deeply in debt. With each additional commitment we sink further
and further into debt... closing in upon the moment that we can
simply no longer afford even the interest payments on our
obligations.
According to even my most conservative calculations (using
numbers provided by the Congressional Budget Office) a debt
default by the U.S. government would be inevitable – were it
not for one simple anomaly... the one thing that has saved the
United States so far.
I'm talking about our country's unique ability to simply print
more money.
You see, the U.S. government has one very important weapon to
use in this crisis: It is the only debtor in the world who can
legally print U.S. dollars. And the U.S. dollar is what's known
as "the world's reserve currency."
The dollar forms the basis of the world's financial system. It
is what banks around the world hold in reserve against their
loans.
That's a secret that most politicians don't understand:
As things stand now, the U.S. government can't go broke in any
ordinary sense of the word because it can simply print dollars
to pay for its bad debts. (It's been doing so since March of
2009).
That might sound pretty good at first. Since we can always just
print more money, what is there to worry about...?
Well, let me show you...
You see, as things stand today, America is the only country in
the world that doesn't have to pay for its imports in a foreign
currency.
Let's say you're a German and you want to buy oil from Saudi
Arabia. You can't just pay for your oil in German marks (or the
new euro currency), because the oil is priced in dollars.
So you have to buy dollars first, then buy your oil.
And that means the value of the German currency is of great
importance to the German government. To maintain the value of
its currency Germans must produce at least as much as they
consume from around the world, otherwise the value of its
currency will begin to fall, causing prices to rise and its
standard of living to decline.
But in America...?
We can consume as much as we want without worrying about
acquiring the money to pay for it, because our dollars are
accepted everywhere around the word. In short, for decades now,
we haven't had to produce anything or export anything to get all
the dollars we needed to buy all the oil (and other goods) our
country required.
All we had to do was borrow the money.
And boy did we. Take a look at this chart...
Even as late as the 1970s, America was the world's largest
creditor. But by the mid-1980s we'd become a debtor to the
world. And since the late 1990s we've been the world's LARGEST
debtor.
Today, our government owes more money to more people than anyone
else in the world.
And that was before the financial crisis!
In short, with all of these bad debts piling up, we've had to
begin repaying our debts by printing trillions of new
dollars. The impact of this is only just now beginning to be
felt.
And once our creditors figure out what's happening, they're
going to be very angry.
I believe they will either completely stop accepting dollars in
repayment... or greatly discount the value of these new dollars.
I'm sure you think that sounds crazy, but as I'll show you, it
is already happening.
And that will make our consumption-led way of life impossible to
afford.
Just think about the price of oil...
Access to cheap oil has been America's #1 gift of owning the
world's reserve currency.
This has made gas cheaper in the U.S. than almost anywhere else
in the developed world. I know you may think gas prices have
skyrocketed in recent years... but look at how much less we pay
than other developed nations...
- United States: $2.72 a gallon on average
- Oslo, Norway: $7.41........ (172% higher)
- Berlin, Germany: $6.82.... ( 151% higher)
- London: $6.60................(143% higher)
- Rome, Italy: $6.40............(135% higher)
- Paris, France: $6.04...........(122% higher)
- Tokyo, Japan: $5.40..........(98% higher)
- Toronto, Canada: $3.81......(40% higher)
And here's the thing...
If oil is no longer priced in dollars, the price of oil for
Americans will skyrocket immediately. It will change our lives,
overnight.
Airline travel will get much more expensive. The cost to ship
goods by truck to grocery stores around the country will get
much more expensive. Farming itself will get a lot more
costly... so will commuting to work... taking a taxi... just
about everything we do will suddenly get much more expensive.
And just remember: In order for prices to start skyrocketing,
all that has to happen is that other countries start preferring
payments in something besides U.S. dollars.
The U.S. dollar has been the world's currency for decades now...
so most Americans don't have a clue about what the repercussions
are of losing this status.
You might think this could never happen... but it happens all
the time when countries get too far in debt or when they consume
too much or produce too little.
In fact, the same thing happened to Great Britain in the 1970s.
Most people don't know this, but British Sterling was the
reserve currency for most of the world for nearly 200 years...
for most of the 18th and 19th centuries.
It continued to play this role until after World War II, when
America was forced to prop up Britain's economy with foreign aid
– remember the famous Marshall Plan, when we gave billions to
help European countries rebuild?
Unfortunately though, Britain pursued a socialist national
agenda. The government took over all of the major industries.
Like Barack Obama, Britain's leaders wanted to "spread the
wealth around." Pretty soon the country was flat broke.
The final straw for Britain came in 1967, when things got so bad
the Labour Party (the socialists) decided to "devalue"
the British currency by 14%, overnight. They believed this would
make it easier for people to afford their debts.
In reality, what it did was make anyone holding British sterling
14% poorer, overnight, and it made everything in Britain, much,
much more expensive in the coming years.
And for the country as a whole, it ushered in one of the worst
decades in modern British history.
Most Americans don't know about Britain's "Winter of
Discontent" in the late 1970s, when the government put a
freeze on wages. There were continuous strikes in nearly every
sector... grave diggers, trash collectors... even hospital
workers. Things got so bad at one point that many hospitals were
reduced to accepting emergency patients only.
In 1975, inflation in Britain skyrocketed 26.9%... in a single
year!
The government also imposed what was known as the "Three
Day Week" in 1974. In short, businesses were limited to
using electricity for only three specified consecutive days'
each week and they were prohibited from working longer hours on
those days. Television companies were required to cease
broadcasting at 10.30pm... to save electricity.
The extreme problems in the economy led to Britain being
nicknamed, "the sick man of Europe."
Just how bad were things, exactly?
Well, listen to several Brits tell of their experiences. Their
stories were collected recently by the BBC television channel...
John
Blackburn, from Wetherby said:
"I was a control engineer at Huddersfield Power Station
at the time and part of my duty was to switch off the supply
to various substations around the town, according to an
official rota. On many an evening shift I would have to switch
off the power to my own home before going back for a
candle-lit supper!"
Richard Evans, from London, recalls:
"My mother had to cross a picket line to get into the
maternity hospital (they told her she couldn't come in....).
My Grandmother had to bring in food for her to eat, and clean
towels and bedding."
David Stoker, Guildford, said:
"I lived in the North East near Newcastle and I vividly
remember my grandmother and I walking from one shop to another
in search of candles to buy. All were sold out. Innovatively,
butchers placed string down cartons of drippings which we
bought... These worked although the smell and risk of fire
made them less practical than candles."
Imagine... Britain was a global superpower for 150 years. But
when they started intentionally devaluing their currency, things
went straight down hill.
Maybe you don't think something similar can happen here... but
I'm telling you... it's already underway!
In fact, the exchange value of the U.S. dollar has fallen about
8% so far this year. And its rate of decline is accelerating.
What happened to the British currency is now happening to the
U.S. dollar.
Not only will the price of gas, oil, and other commodities
skyrocket in America, almost EVERYTHING we consume will
immediately get more expensive. All the clothing, furniture, and
household goods we import from China.
All the food we get from Central and South America... all the
electronics, televisions, computers, and cars we get from Asia
and Europe.
In fact, it's happening, right now before our eyes: The price of
gold is up 85% since the financial crisis. Oil prices have
doubled. Soy beans are way up. Copper prices are up more than
170% since 2009. Cotton prices are up 80%... in just the
past few months, since July of this year!
As Wesley Card, the head of a clothing company that includes
brands like Dockers and Anne Klein, recently said: "It's
really a no-choice situation. Prices have to come up."
The chart below shows how much a few key commodities have
skyrocketed in price, just since the beginning of 2009...
Of course, skyrocketing commodity prices are just the beginning.
There are other disastrous consequences to the U.S. dollar
losing status as the world's currency...
For example, there would be much less demand for U.S. dollars
around the globe, so interest rates will skyrocket. Instead of
getting a mortgage at today's incredibly low rates of 4.5%, it
might cost you 8% or even 10% or 15%.
Imagine what that would do to housing prices!
Stock prices will likely plummet by at least 40% in a matter of
weeks as a result of this event in the currency markets.
It will cost every American business A LOT more money for
supplies and materials. No one will be able to get a loan... and
no bank will want to make loans.
In short, when the U.S. dollar loses its spot as the world's
'reserve currency,' it will cause a brutal downturn in the
economy, which I expect will be about 10-times worse than the
mortgage crisis of 2008.
You see, what will also happen as a result of this currency
crisis, and the end of the U.S. dollar as the world's reserve
currency, will be massive inflation, the likes of which we have
never seen before.
When everyone is trying to get rid of their dollars, the
government is printing more and more to pay debts, and no one
wants to own them, the crisis will reach epic proportions.
Just look for example, at what happened to one European country
that faced this type of crisis in the 1990s...
This is what happens during a major hyperinflation in the real
world.
By the early 1990s, the national government of one European
nation had spent nearly all its savings. So what did they do
next? Simple... they began to steal the savings of private
citizens by limiting people's access to their money in
government-controlled banks.
And of course, to finance the daily operations of maintaining
their basic infrastructure, they started printing money, big
time. Even so, the country's basic infrastructure began to fall
apart. There were potholes in the street, broken water pipes...
elevators that never got repaired... and entire construction
projects that simply shut down, before being completed.
At this point, the unemployment rate was more than 30%.
Not too bad, right?
But it got worse... much worse.
You see, once you start down the dangerous road of printing
money, things can get extremely bad, very quickly.
As San Jose State University Economics Professor Dr. Thayer
Watkins, an expert on countries that try to inflate their way
out of big debts, wrote on this particular disaster:
"The government tried to counter the inflation by imposing
price controls. But when inflation continued, the government
price controls made the price producers were getting so
ridiculously low that they simply stopped producing. bakers
stopped making bread... slaughterhouses refused to sell meat to
the stores... other stores closed down"
So what did the government do next to try to curb inflation?
Well, one bright idea they had was to force stores to fill out
government documents every time they increased prices. They
thought that this would slow down price increases, because the
paperwork would take so much time!
But like many government plans, this one had terrible,
unintended consequences.
Since stores had to dedicate an employee to do nothing but
register this paperwork, and since the process took so long,
stores began to raise prices on basic goods at even higher
rates, so that they didn't have to come back and file more
paperwork!
Incredible, isn't it?
Then, of course the government did what all governments do
during periods of hyperinflation: They created a new currency...
which basically removed six zeroes from the old one. So
100,000,000 old units were soon worth 100 new units. Of course,
this didn't work either... it never does.
Between October of 1993 and January 1995, prices increase by,
get this: 5 quadrillion percent. That's...
5,000,000,000,000,000%
In other words, a loaf of bread that cost $1 in 1993, suddenly
cost $50,000,000,000,001
Yes, that's $50 TRILLION.
I know, it's laughable... but I can guarantee that the people of
this once proud European country weren't laughing one bit,
especially those living on a fixed income.
Of course, at this point, the country completely fell apart. As
Dr. Thayer Watkins wrote:
"The
social structure began to collapse. Thieves robbed hospitals
and clinics of scarce pharmaceuticals and then sold them in
front of the same places they robbed. The railway workers went
on strike and closed down the country's rail system."
At this point, businesses and citizens across the country
basically refused to take the local currency.
Instead, everyone started dealing in German Marks. Keep in
mind, the daily rate of inflation was nearly 100%.
Can you imagine the panic in a society when the price of just
about everything doubles... every single day? It was absolute
pandemonium, and the economy basically came to a grinding
halt. It was like living in a war zone. Truckers stopped
delivering goods. Stores, restaurants, and gas stations all
shut down.
In fact, the only way to get gas was to buy it on the side of
the road, from someone selling it out of a plastic can.
Steve Hanke, an Economics professor at Johns Hopkins, wrote
that:
"People
couldn't afford to buy food in the free market – they kept
from starving by either waiting in long lines at state stores
for irregularly supplied rations of low-quality staples, or by
relying on relatives who lived in the countryside.
For long periods, all [the] gas stations were closed, with the
exception of one station that catered to foreigners and
embassy personnel. People also spent an inordinate amount of
time at the foreign-exchange black markets, where they traded
huge piles of near-worthless money for a single German mark or
US dollar note."
The number of operating busses dropped by 60%... and busses
were so crowded that drivers couldn't even collect fares.
Government ordered blackouts left people without heat and
electricity for long periods of time.
In another ridiculous government move, they actually made it
illegal to NOT accept a personal check.
Imagine... you could write a check... and in the several days
that it typically takes for a check to clear, inflation would
wipe out almost all of the cost of covering your check.
Of course, as is typical, the government took none of the
blame. As Dr. Thayer Watkins reported, the government's
official position was that the hyperinflation occurred
"because of the unjustly implemented sanctions against
the people and state."
Again... I know what you are thinking... "just because it
happened in Europe doesn't it mean it can happen here,
right"?
Well guess what...
The same thing that happened in this European country –
Yugoslavia – also just happened in Iceland and Greece, but on
a less dramatic scale. Of course, the only reason the situations
in Greece and Iceland weren't worse is because of giant foreign
bailouts. Yes... that's right... more debt to solve the problem
of already existing, insurmountable debts.
It's all going to come to a head soon. Much sooner than most
people think.
Remember too that in roughly the past 100 years this type of
debt crisis has reared its ugly head in Germany, Russia,
Austria, Poland, Argentina, Brazil, Chile, Poland, the Ukraine,
Japan, and China.
And I believe it will soon happen right here in the United
States.
Don't believe me?
Well, the truth is that it's already happening at the local and
state levels. Take a look...
According to the Center on Budget and Policy Priorities, a
Washington, D.C.-based think-tank, at least 46 states face huge
budget shortfalls for 2011, on top of the deficits they still
haven't completely figured out for 2010.
The center reports that the total state budget shortfall could
reach $160 billion.
And although many states got federal help over the past year,
that aid is now gone.
So what are these desperate governments trying to do?
You probably won't believe their proposals...
* SELL EVERYTHING: The state of Arizona, for example,
announced earlier this year that it is selling $735 million
worth of government-owned buildings, but will still occupy
them by paying a 20-year lease. The government is selling the
legislative buildings, the House and Senate, the State Capitol
Executive Tower, the state fairgrounds, even prisons.
* RELEASE PRISONERS: In California, the state has taken the
radical step of opening its prison doors and releasing
thousands of inmates. About 11% of the state budget ($8
billion) goes to the penal system (more than they spend on
higher education).
So California is slashing the number of inmates by 6,500 next
year. In other words, they are cutting loose about 4% of the
prison population.
Incredibly, other states, including New York, may soon do the
same thing.
* LIFE INSURANCE: In Georgia, the government is proposing
taking out "dead peasant" policies on state
employees. When these folks die, the money won't go to the
dead person's family... but to the state coffers, to help pay
for more programs, insurance, and pension liabilities!
It's simply incredible, isn't it?
State and municipal governments are so broke, and so desperate,
that they are taking unprecedented steps to at least temporarily
avoid bankruptcy. Nearly every state in the union is talking
about legalizing some form of gambling, to boost tax revenue.
California still wants to legalize marijuana, even though it was
defeated in the recent election.
Of course, none of these ridiculous steps will work on the long
run.
And the truly amazing thing is that the U.S. Federal government
is in even worse shape than the local governments! The only
reason we haven't seen the full brunt of this crisis yet on the
federal level is because we've just continued to pile on more
and more debt.
The states can't print money... but the Federal government can
(at least for now). And for the moment, this is all that is
preventing a currency collapse of unprecedented proportions.
And this is the important point: What most people don't
realize is that the U.S. government can only continue printing
dollars... as long as the U.S. dollar remains the world's
reserve currency.
In other words, this is all going to fall apart much sooner than
people think. In fact, it's already happening...
The first steps are already well underway. It is happening right
now... before our very eyes.
"America...
must be very worried"
Like I said, most Americans don't believe the U.S. dollar could
ever lose its spot as the world's reserve currency.
But I am here to tell you... this process is already well
underway.
For example, although it went almost completely unreported in
the U.S. press, last fall, a group of the world's most powerful
countries, including China, Japan, Russia, and France, got
together for a secret meeting – WITHOUT the United States
being present or even knowing about the meeting.
Veteran Middle East report Robert Fisk reported on this even in
the Britain's Independent newspaper:
"In
the most profound financial change in recent Middle East
history, Gulf Arabs are planning – along with China, Russia,
Japan and France – to end dollar dealings for oil, moving
instead to a basket of currencies including the Japanese Yen,
Chinese yuan, the euro, gold and a new, unified currency
planned for nations in the Gulf Co-operation Council,
including Saudi Arabia, Abu Dhabi, Kuwait and Qatar."
Fisk also interviewed a Chinese banker who said:
"These
plans will change the face of international financial
transactions. America and Britain must be very worried. You
will know how worried by the thunder of denials this news will
generate."
And sure enough, after Fisk published the details of this secret
meeting, U.S. officials and central bankers from around the
globe denied these plans.
But as the old central banking adage goes... how do you know
exactly when a currency will be devalued?
The answer: Right AFTER the head of the central bank goes on
television to adamantly deny that any such transaction will
occur. (And guess who just went public in recent weeks with a
statement about how the U.S. will "not devalue its
currency"? Yes, you guessed it... U.S. Treasury Secretary
Tim Geithner.)
You see, the last thing a central banker wants to do in the
midst of a devaluation is to give people a warning BEFORE he can
devalue. So they have to deny, deny, deny. After the
announcement is made, it's too late for citizens and investors
to get out.
Like I said, what's incredible is that this story of a secret
meeting among most of the major powers besides the U.S. was
greatly under reported in the American press.
But you know what... the way I see it, it's much more telling to
look at actions rather than government press releases.
For example, here is what is happening, right now in the real
world.
When you read these facts, I think you'll agree with me that the
U.S. dollar's days are numbered, as far as remaining the world's
reserve currency.
China is getting out
Cheng Siwei, a former vice-chairman of the Standing Committee,
said that China is going to stop putting so much money into U.S.
dollars, and will instead look to the Japanese Yen and the Euro.
China holds more U.S. dollars than anyone else on the planet.
But China is getting out of the U.S. dollar as fast as they can
without crashing their own economy.
Look at this chart...
It shows that China's holdings of U.S. dollars peaked in 2009,
but China is unloading as many dollars as they can, as quickly
as possible.
And this is just one sign of the end of the U.S. dollar
standard.
There are many more...
The dollar is no longer good here
As I am sure you are aware, for years the U.S. dollar has been
accepted almost universally around the globe.
Heck, many times when I've traveled, I never even bothered to
convert to the local currency, because I knew everyone would
take my dollars.
Well, that's simply not the case anymore...
HSBC, one of the largest banks in Mexico, no longer allows you
to deposit U.S. dollars into their banks. They've done this on
the heels of money-laundering allegations, but we suspect they
also simply don't want to be stuck with tons of U.S. dollars, as
the currency continues to decline.
This move would have been unfathomable 10 years ago... that a
big bank in Mexico would no longer accept U.S. dollars for
deposit. But today it is the harsh reality.
And Mexico is not the only place this is occurring...
Reuters reports that the same thing has happened in 2008 in one
of Europe's most popular tourist spots...
Currency exchange outlets in Amsterdam have been reportedly
turning away customers who want to exchange their U.S. dollars
for Euros.
As one traveling American told the Reuters news agency:
"Our dollar is worth maybe zero over here," said Mary
Kelly, an American tourist from Indianapolis, Indiana, in front
of the Anne Frank house. "It's hard to find a place to
exchange. We have to go downtown, to the central station or post
office."
In India, the country's tourism minister said in 2008 that U.S.
dollars will no longer be accepted at the country's heritage
tourist sites, like the Taj Mahal. And the U.S. dollar is no
longer good anywhere in Cuba.
The New York Times reports that: "now, many shops in
China no longer accept dollar-based credit cards issued by
foreign banks... and foreigners cannot convert American dollars
into renminbi beyond a given quota."
Iran, of course, has already moved all of its reserves out of
U.S. dollars, and Kuwait de-pegged it's currency from the dollar
a few years ago:
Bloomberg News recently reported that China and Russia
plan to start trading in each other's currencies to diminish the
dollar's role in global trade. "Given the risk to the
dollar and U.S. assets from their fiscal position, they want to
reduce their dependence on the dollar as an invoicing
currency," said Bhanu Baweja, of UBS bank.
It's even happening here in the USA
Most Americans don't know that some states in the Mid-West are
already using "alternative currencies"...
An NBC News affiliate in Michigan reports that
"new types of money are popping up across Mid-Michigan and
supporters say, it's not counterfeit, but rather a competing
currency. Right now, for example, you can buy a meal or visit a
chiropractor without using actual U.S. legal tender."
What most Americans don't realize is that this is all totally
legal.
The U.S. Treasury Dept web site says that, according to Coinage
Act of 1965: "There is... no Federal statute mandating that
a private business, a person or an organization must accept
currency or coins as for payment for goods and/or
services."
I saw one report that says there are now 150 of these
alternative local U.S. currencies being accepted around the
country!
USA Today reports that the largest of these local
currencies is a currency called "Berkshares," which
are being used in the Berkshires region of western
Massachusetts.
According to the paper:
"Since its start in 2006, the system, the largest of its
kind in the country, has circulated $2.3 million worth of
BerkShares."
And even in places that do not yet have local currencies, store
owners may now actually prefer foreign currencies rather than
U.S. dollars...
In Washington, DC, just 25 miles from my office, some stores
have begun accepting euros. Of course, the euro isn't much more
stable than the dollar right now. But my point is that most
people don't understand there is NO FEDERAL REQUIREMENT in the
United States for a private store to accept dollars for non-debt
transactions.
You see, no matter what the government decides, stores and
businesses will accept whatever they believe is a strong
currency.
As Texas Representative Ron Paul wrote recently:
"If
you walk into a 7-11 to buy a soda, the clerk doesn't have to
accept your dollars, he could demand euros, silver, or copper.
But because legal tender laws backing the dollar have caused
the dollar to drive other currencies out of circulation,
[right now] it is easier for stores to accept dollars."
Well, all that is quickly changing...
Many places in Texas now accept Mexican pesos for payment.
"Euros Accepted" signs are popping up in of all
places: Manhattan. And not only Manhattan, but in New York's
favorite summer playground... the Hamptons.
There, an art gallery assistant was quoted by The Real Deal:
"I wouldn't want to discourage a sale in any way because of
a currency issue."
And it's not just small stores that are accepting other methods
of payment besides U.S. dollars.
The Chicago mercantile exchange the world's largest futures and
commodities exchange board), now accepts gold to settle futures
contracts. Until recently, the exchange typically accepted only
U.S. treasuries and bonds as payment.
These guys obviously see the writing on the wall.
This would have all been completely unthinkable 10 years ago,
but today it's a reality. And this trend is going to keep moving
incredibly fast.
That is why...
The smartest investors are taking
action...
Bill Gross, who probably knows as much about currencies and debt
as anyone in the world, runs the world's biggest bond fund. He
was quoted by Bloomberg:
"We've
told all of our clients that if you only had one idea, one
investment, it would be to buy an investment in a non-dollar
currency. That should be on top of the list."
Jim Rogers, one of the world's most successful multi-millionaire
investors writes:
"The
dollar is not just in decline; it's a mess. If something isn't
done soon, I believe the dollar could lose its status as the
world's reserve currency and medium of exchange, something
that would lead to a huge decline in the standard of living
for U.S. citizens like nothing we've seen in nearly a century."
I know... you probably still don't believe it can happen here in
the United States. But think about it...
Are we as Americans really immune to the laws of economics and
finance?
I don't think so.
And every circumstance I know of, in which a government has
tried to inflate its debts away, has ended in disaster. It will
happen here too.
As Jim Rogers says:
"History
teaches us that such imprudent monetary and fiscal behavior
has always led to economic disaster."
This is why World Bank president, Robert B. Zoellick, in a
speech at the School for Advanced International Studies at Johns
Hopkins University, recently said: "The United States would
be mistaken to take for granted the dollar's place as the
world's predominant reserve currency. Looking forward, there
will increasingly be other options to the dollar."
And this is why the International Monetary Fund (IMF) recently
published a paper calling for a new global world currency.
A paper entitled "Reserve Accumulation and International
Monetary Stability," written by the Strategy, Policy and
Review Department of the IMF, recommends that the world adopt a
global currency called the "Bancor" with a global
central bank to administer the currency.
The report is dated April 13, 2010... and no, unfortunately this
is not just a bad rumor.
This is a deadly serious proposal in an official document from
one of most powerful institutions in the world.
Do you see where this is all heading?
As Brazilian economist and strategist Ricardo C. Amaral wrote
recently:
"The
US dollar served its purpose since the end of WW II and became
the major foreign exchange reserve currency... [but] the days
of the US dollar playing that special role... has reached the
end of the line, since today that system is very sick and it
is dying a slow death...
Mr. Amaral added that we will soon see: "the major
collapse of the US dollar creating the biggest international
monetary crisis the world has ever seen..."
This is why gold and silver prices are soaring:
It's not a matter of "if" the U.S. dollar will lose
its status as the world's reserve currency... it's simply a
matter of "when."
Investors know there are serious, serious problems with the U.S.
dollar, so they are fleeing to precious metals, which have
historically been very reliable when a country has major
currency problems.
In short: It's not hard to see why people are no longer
accepting U.S. dollars... and why many foreign countries are
pushing for a new world reserve currency.
The good news is, no matter what happens, I've found several
ways for you to protect your savings – and you could even make
3- to 5-times your money over the next few years.
I'll show you exactly what to do in a moment. But first let me
explain why the collapse of the dollar as the world's reserve
currency could happen much sooner than most people expect...
The
REAL State
of the U.S. Economy
I know many of my friends, colleagues, and family members are
still in serious denial.
In the world of psychology, they call this the "normalcy
bias."
You see, the normalcy bias actually refers to our natural
reactions when facing a crisis.
The normalcy bias causes smart people to underestimate the
possibility of a disaster and its effects. In short: People
believe that since something has never happened
before... it never will. We are all guilty of
it... it's just human nature.
The normalcy bias also makes people unable to deal with a
disaster, once it has occurred. Basically... people have a
really hard time preparing for and dealing with something they
have never experienced.
The normalcy bias often results in unnecessary deaths in
disaster situations. For example, think about the Jewish
populations of World War II...
As Barton Biggs reports in his book, Wealth, War, and Wisdom:
"By
the end of 1935, 100,000 Jews had left Germany, but 450,000
still [remained]. Wealthy Jewish families... kept thinking and
hoping that the worst was over...
Many of the German Jews, brilliant, cultured, and cosmopolitan
as they were, were too complacent. They had been in Germany so
long and were so well established, they simply couldn't
believe there was going to be a crisis that would endanger
them. They were too comfortable. They believed the Nazi's
anti-Semitism was an episodic event and that Hitler's bark was
worse than his bite. [They] reacted sluggishly to the rise of
Hitler for completely understandable but tragically erroneous
reasons. Events moved much faster than they could
imagine."
This is one of the most tragic examples of the devastating
effects of the "normalcy bias" the world has ever
seen.
Just think about what was going on at the time. Jews were
arrested, beaten, taxed, robbed, and jailed for no reason other
than the fact that they practiced a particular religion. As a
result, they were shipped off to concentration camps. Their
houses and businesses were seized.
Yet most Jews STILL didn't leave Nazi Germany, because they
simply couldn't believe that things would get as bad as they
did. That's the normalcy bias... with devastating results.
We saw the same thing happen during Hurricane Katrina...
Even as it became clear that the levee system was not going to
work, tens of thousands of people stayed in their homes,
directly in the line of the oncoming waves of water.
People had never seen things get this bad before... so they
simply didn't believe it could happen. As a result, nearly 2,000
residents died.
Again... it's the "normalcy bias."
We simply refuse to see the evidence that's right in front of
our face, because it is unlike anything we have experienced
before.
The normalcy bias kicks in... and we continue to go about our
lives as if nothing is unusual or out of the ordinary.
Well, we're seeing the same thing happen in the United States
right now.
We have been the world's most powerful country for nearly 100
years. The U.S. dollar has reigned supreme as the world's
reserve currency for more than 50 years.
Most of us in America simply cannot fathom these things
changing. But I promise you this: Things are changing... and
faster than most people realize.
For a moment, just look at a tiny fraction of the evidence
around us....
** 13% OF POPULATION ON FOODSTAMPS
Did you know that there are now nearly 42 million Americans on
food stamps? That's nearly 13% of the entire
population. Those
numbers are up 17.5% from last year... and the number of
Americans on food stamps has gone up every month for 19 months.
Can a country really be in good shape when 13% of the population
can't even afford to buy food?
Or how about this...
** SHANTY TOWNS COMING TO YOUR NEIGHBORHOOD
Although it's gone almost completely unreported in the
mainstream press, in a dozen or so cities across the nation
(like Fresno, Sacramento, and Nashville), there are hundreds of
people living in modern-day, Depression-era shanty towns.
The Fresno shanty town has received the most publicity, after a
visit by Oprah Winfrey. There, about 2,000 residents are
homeless. They even have a security desk at the shelter, because
the encampment has gotten so large. City officials say they have
three major encampments near downtown, and smaller settlements
along two local highways.
Also...
** 43% OF AMERICAN FAMILIES ARE ESSENTIALLY BROKE
According to a recent article on MSN Money, about 43% of the
American families spend more than they earn each year.
Look at this chart... it's unbelievable..
The average household carries $8,000 in credit card debt... and
personal bankruptcies have doubled in the past decade.
How in the world can we possibly spend our way out of the
current crisis?
We certainly can't do it with savings... the only answer is to
print more money, which will hasten the fall of the U.S. dollar
as the world's reserve currency.
** THE MYSTERY OF DISAPPEARING JOBS
There's simply no one better at bending statistics than the U.S.
government. Take the unemployment rate, for example. Back in the
1930s, anyone without a job but not retired was considered
"unemployed."
Today, however, the government calculates unemployment mainly by
counting the number of people receiving unemployment benefits.
So when people's benefits expire, they are no longer counted...
and the unemployment rate actually falls! Ridiculous... I know.
But the reality is, the true unemployment rate is much, much
higher than what the government is reporting.
If you don't believe me, look at two recent job postings I read
about last week..
In Long Island City, an estimated 2,000 people waited in line at
the local employment office – some for as long as four days!
– to apply for 100 elevator mechanic apprenticeship positions.
And in Massillon, Ohio, 700 people recently applied for a single
janitorial job... paying $16 an hour, plus benefits!
The point is, our country is not growing jobs, because the
government makes it harder and harder for businesses. With
current regulations in place, our country will never experience
the type of growth necessary to dig our government out of the
hole they've put themselves in.
I'm sure you think I'm exaggerating, but just look at what the
CEO of one of America's most important companies said just a few
weeks ago..
Intel CEO Paul Otellini said in a recent speech: "I can
tell you definitively that it costs $1 billion more per factory
for me to build, equip, and operate a semiconductor
manufacturing facility in the United States"
He said that 90% of the additional costs are not from higher
labor rates... but from higher taxes and regulatory charges,
which other nations simply don't impose.
Cypress Semiconductor CEO T.J. Rodgers agreed that the problem
is not higher U.S. wages, but anti-business laws. He was quoted
in an interview with CNET News: "The killer factor in
California for a manufacturer to create, say, a thousand
blue-collar jobs is a hostile government that doesn't want you
there and demonstrates it in thousands of ways."
Few Americans today realize that we have the second
highest corporate tax rate in the world. And since
Japan's new prime minister just announced that he plans to
reduce the country's corporate tax rate by 15%... the U.S.
will soon have THE highest corporate tax rate in the world.
Why would anyone want to start a business here, when they can do
it for less money...and keep more of the money they make... by
locating elsewhere?
It's just another good reason to avoid the U.S. dollar...
So is this:
** DEBT-RIDDEN U.S. COMPANIES
Did you know that in 1979, there were 61 American companies that
earned a top-level AAA credit rating from Moody's?
Today, there are only four: Automatic Data Processing, Exxon,
Johnson & Johnson, and Microsoft
Does this sound like an economic recovery to you... when only
four companies in the entire country are stable enough to earn a
triple-A credit rating?
Me neither. But it's nothing compared to what's going on in the
housing sector...
** A CRAZY LAS VEGAS ECONOMICS STORY
You want to know how crazy things are in the U.S. right now...
Consider the bizarre state of the Las Vegas housing market,
where The New York Times reports that building is booming again
in a city where nearly 10,000 new houses are empty, thousands
are in foreclosure, thousands of regular people have simply
stopped paying their mortgages and average prices are down more
than 60% since 2006.
What could possibly be driving this building mania?
Well, it turns are that buyers don't want homes that were built
during the boom, because they sit in neighborhoods that look
like ghost towns, and because many of these never-occupied
houses are filled with cockroaches and other critters.
So local builders are doing the worst possible thing they could
be doing in Las Vegas right now... building more homes! Similar
scenarios are taking shape in Phoenix and other U.S. cities.
Of course, this might look good for economic numbers, but all it
does is make the situation much, much worse in the long run.
Want to see another crazy trick some businesses are using to
artificially boost their earnings numbers?
This is just incredible to me...
** OUR HOPE FOR THE FUTURE: NEW JERSEY'S HOMELESS
If you've been reading my work at all over the past few years,
you know that I am extremely bearish on the "for
profit" education sector, such as University of Phoenix.
What could possibly be wrong with these institutions that offer
inexpensive education to tens of thousands of students across
the country?
Well, to me it's just another symptom of how distorted and crazy
our economy and country has become. Here's what I mean...
One of the crazy practices institutions employ is to actually
enroll homeless people into their programs.
You probably think I'm making this up... but even Business Week
recently ran a report on this practice.
Why would they do this?
Well, because these folks qualify for federal grants and loans
used to pay for college tuition fees. According to reports I
read, the University of Phoenix, for instance, relies on federal
funds for more than 85% of its revenues.
At another for-profit school, Drake College of Business, almost
5% of the student body at its Newark, N.J., campus is homeless, Business
Week recently reported.
Of course, the majority of these students will never be able to
repay their loans. But the colleges certainly don't care...
that's the government's problem... not theirs.
Once again, it's the taxpayers like you and me who will be left
holding the bag.
And here's another good reason why investors are afraid of
holding dollars right now...
** IN THE STOCK MARKET, IT'S 1937 ALL OVER AGAIN
One of the most worrisome problems in the stock market right now
is that we are basically repeating the exact same situation that
occurred from 1937 to 1942.
Most Americans think we've had this amazing stock market
recovery since the financial crisis of 2008... and we have to a
certain extent.
But we are by no means out of the woods.
In fact, during America's last real economic collapse, in the
1930s and 1940s, we saw a similar drop and recovery... before
the markets crashed all over again.
In fact, the situation is eerily similar.
Look at this chart... it's one of the scariest I've seen in a
long time. It shows an overlay of what happened in the stock
market in 1937 compared to 2008.
In both situations, we saw big crashes, of about the exact same
magnitude... then a big recovery, again of about the same size.
But what will happen next?
Well, if history is any guide, we could well have another big
leg down in the stock market. That's exactly what happened 70
years ago.
And with all of the problems left unresolved in our economy
today, it could certainly happen again, especially if the U.S.
dollar loses its reserve status.
As The Wall Street Journal reported:
"Over
the last year the stock market has followed a path eerily
similar to 1937. First, a strong, rapid run to a recovery high
– same pace, same magnitude. Then a correction – again,
the same. Will we continue on the path that led the correction
of 1937 into a collapse in 1938?
The point is, the cards are seriously stacked against us.
This looming currency crisis is inevitable.
Almost every state in the country is on the verge of bankruptcy.
We have borrowed an impossible amount of money, which we'll
never be able to pay back.
Our economy is an absolute mess. Taxes are sky high already...
and will certainly go much higher over the next few years. And
nearly all of the world's major financial players are preparing
for an alternative to the U.S. dollar as the world's reserve
currency.
To me, it is so obvious that we are about to experience a
serious currency crisis, that I can't believe people can deny
this reality with a straight face.
Again, if you don't believe a currency crisis is coming, just
take another look at the price of gold and silver compared to
the U.S. dollar over the past decade.
It's obvious that smart investors want to hold gold and silver,
not U.S. dollars.
Anyone with any sense or basic understanding of economics can
tell that the U.S. dollar is doomed. And it's going to have
major repercussions, which the average American has not yet even
considered.
So, what can you do?
Well, I've done a lot of research on this, and have found that
there are a surprising number of simple things you can do to not
only protect what you've currently got, but to also potentially
make quite a bit of money as this currency crisis unfolds.
Here's what I recommend...
What
You Can Do to Protect
Yourself and Actually Make Money
So what should you do... to protect and possibly even grow your
wealth in the next few years?
Well, there's a series of pretty simple financial moves I
believe you should begin making, immediately.
And here's something I want you to keep in mind: I'm really only
going to talk about your finances here.
As far as protecting your family... well... it depends on your
circumstances. If you live in an urban area, I recommend making
sure you've got somewhere you can go in case there are riots or
food and water shortages. I think there's a very good chance
we'll see that in the next two years.
Wherever you're going to wait out the chaos, I recommend you
have basic food, water, and medical supplies to last you for at
least six months.
Remember, you won't be able to count on the government during
this crisis. Think about it... if the government couldn't even
save the city of New Orleans during hurricane Katrina, how in
the world will it save an entire country when all hell breaks
lose?
And as I said earlier, the truth is, the government won't even
try to save individual American citizens... the government will
be much more concerned with saving itself.
As far as taking care of your money – to make sure you don't
lose money and even use this situation to come out quite a bit
ahead – well, that's where I can help you.
All of the moves I recommend are simple and fairly
straightforward to implement – at least right now. If you wait
to do these things, however, they will almost certainly get very
expensive, difficult, and even impossible to do.
If you do these things now, not only will you be better prepared
to weather the coming storm, I believe you could also make quite
a bit of money over the next few years.
And if I'm wrong... well... that's the best part... I think
you'll still make very good gains.
Even if all we get out of this crisis is a mild inflation, you
will still be set up to do very, very well.
So here are the specific steps you should take...
STEP #1. GET SOME OF YOUR MONEY BEYOND THE REACH OF THE
U.S. GOVERNMENT (it's perfectly legal, and a lot easier than
you think)
I know you probably don't believe me when I tell you that the
U.S. government is going to implement policies to save itself,
which are unimaginable right now.
But remember, desperate governments will do very desperate
things. That's why they outlawed the ownership of gold 80 years
ago.
That's why they are already talking about
"nationalizing" automatic 401(k) and retirement
plans... and it's why it might soon be against the law to open a
foreign bank account, or to move your money overseas without
paying outrageous taxes.
The good news is, I met recently with a man who is considered
one of the top "asset protection" attorneys in
America.
In short, I learned that there are four simple investments you
can make right now, which you DO NOT have to report to the U.S.
government.
Don't get me wrong...
When and if you ever sell these things, years down the road, you
are still required to pay taxes on your gains. But the great
thing is, while you are holding these investments, so long as
you play by the rules, neither you nor anyone else is required
to report them to the government.
And this benefit should be obvious...
The less the government knows about where you have your money,
the better. They simply will have a very hard time taking what
they don't know you have.
I am personally putting a fairly significant portion of my
portfolio into one of these assets. And I plan to hold it for a
long time. No matter what happens, I know I'll have a
significant amount of money that is beyond the government's
grasp.
I'm not going to tell you exactly what I'm doing here in this
letter, but I will explain everything in full detail in my new
report, called: The 4 Investment Assets You Do NOT Have to
Report to the U.S. Government. And I will gladly give you
access to a copy, free of charge.
In addition to explaining how I'm protecting my own money, I'll
show you three other places you can put your money, which you
legally do not have to report to the U.S. government.
Of course, normally it would cost you thousands of dollars to
meet with my asset protection attorney, and to take advantage
of his best strategies. But I'll reveal everything you need to
know to get started in this report.
Plus, I'd like to send you the information on...
STEP #2: HOW TO ACQUIRE THE WORLD'S SAFEST ASSETS, WHICH
ARE LIKELY TO PERFORM BEST DURING THIS PERIOD.
What I'm talking about here is buying as much gold and silver as
you can reasonably afford. I know... gold has had a huge run,
jumping more than 300% in the past decade.
But believe me, when the U.S. dollar loses its status as the
world's reserve currency, this early run is going to be a mere
afterthought.
I will be surprised if gold does not reach $5,000 or $6,000 an
ounce in the next few years.
The smartest money managers in the world, people like George
Soros, David Einhorn, and John Paulson, have all recently taken
huge positions in gold. And I think you are crazy to not do the
same.
How should you do it?
There are many options. And my research firm has recently
published a great book, called The Gold Investors Bible,
which details in full all of the best ways to own and hold gold
bullion.
In this volume, we reveal dozens of secrets about the gold
industry... specifically the best ways to buy, sell, and store
your gold. It explains whey some gold coins are better than
others. How to buy gold with ZERO dealer markup. How to easily
and safely store some of your gold overseas, very cheaply...
where to hide it... and so much more.
Not regularly available for sale, this book is valued at $24.
I'd like to give you instant access to a copy, totally free of
charge.
And what about silver?
Well, I believe silver will serve a unique role during this
currency crisis.
Let me explain...
For most of recorded history, the price of gold has been around
16 times the price of silver. This ratio – the so-called
"silver ratio" – has fluctuated from time to time
based on silver discoveries and attempts by governments to
regulate the silver-to-gold ratio. But... in a free market,
where demand for silver as money exists, I'd expect the natural
supply and demand balance to lead to a silver price around 1/16
times the price of gold.
Based on the historical ratio, with the price of gold around
$1,400, the price of silver should be around $87. It's not, of
course. Today, silver is trading around $27. Today then, gold is
selling for more than 50-times the price of silver.
What explains the difference between hundreds of years of
history and today? Why is silver still so cheap relative to
gold?
When silver is "demonetized," as it is now (meaning
it's not being used for money, but just for industrial
purposes), supplies soar as people sell silver for gold and
other currencies.
On the other hand, during periods of monetary crisis, demand for
silver as money pushes the silver ratio heavily in silver's
favor.
For example, the ratio returned to its historic range (16)
during World War I. It happened again in the early 1970s, when
Nixon abandoned the gold standard. It also happened most
famously in 1979-1980, when it seemed as if America was really
entering a serious money crisis
Most people don't know this, but silver is actually the
best-performing asset of this century... not gold.
As my friend Chris Weber pointed out in his November 1st
newsletter, Gold has risen from $256 to $1,365 since 2000. That
is a rise of 433%. Silver has risen from $4.02 to $24.96. That
is a rise of 521%.
And in the days that Chris has written this, silver has jumped
another 7%!
In short, silver is the best hedge against a money crisis.
As the dollar fails, silver will once again be in demand as
money.
And as this demand materializes, the free market price of silver
will likely return to around 1/16 the price of gold. When gold
hits $2,000 an ounce, and assuming the price of gold is 16 times
the price of silver, silver should be worth about $125. My
multimillionaire friend and currency expert, Chris Weber,
believes silver will likely hit $187 an ounce.
Porter Stansberry
Founder, Stansberry & Associates Investment Research
December 2010
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I have been warning for over two years of a financial crash that will make the
2008 events look like a time of prosperity in comparison. Below is a
report that verifies this with integrity, as many facts are thoroughly presented
to confirm this prognosis.