—
According to Dennis Tubbergen, a partner with Retirement Lifestyle Advocates, that statement is not as crazy as you may be thinking it is.In this month’s issue of the company’s newsletter, Dennis explores this question and offers some historical references to help answer the question and offer some strategies for consideration.
As everyone is now undoubtedly aware, a $900 billion Pandemic relief bill was recently passed as part of a $2.3 trillion spending package.
The reality of the situation is that there is only one way to fund this enormous spending bill; more money creation.
History teaches us that whenever a government reaches the point that the only way to fund its profligate spending is through additional money creation, that government is on a path that is irreversible.
As Tubbergen has often stated previously, we are not debating the ‘what’, we are only debating the ‘when’.
History teaches us that this cycle has existed for as long as governments have existed.
Governments start with a balanced budget initially. Then, due to warfare or welfare or both, budgets develop deficits.
These deficits are initially funded through borrowing. Government’s issue bonds in which investors invest, loaning the government money to make up the shortfall between tax revenues and spending in exchange for interest payments and a promise from the government to pay the investor’s principle back at some future date.
At this point in the cycle, investors are confident of the government’s ability to pay them their interest and return their principle to them.
If deficit spending continues, governments are forced to sell more bonds to still more investors. As debt levels rise, and the government becomes a poorer credit risk, the government might have to offer investors more interest to make up for the additional investment risk.
As deficits continue to widen, the government will eventually find itself in a position that investors don’t want to loan the government money by purchasing bonds no matter what the interest rate is. When that happens the only remaining option is money creation.
Once money creation starts, it never stops. It only intensifies until such time as there is a reset.
A reset can occur in only two ways.
One, deficit spending stops. That creates a deflationary reset similar to the reset experienced in the 1930’s. Markets crash, prices fall and unemployment soars as the economy collapses into a deflationary depression. Debt is purged from the system through defaults.
Two, deficit spending continues as does money creation. Inflation is the result. If money printing continues after inflation begins, even more inflation is created, and eventually, confidence in the currency is lost. When confidence in the currency is lost, a new currency needs to be established at which point the debt in the economy gets redenominated to the new currency. Then deflation takes over the economy and markets crash, prices fall, and unemployment skyrockets.
It seems obvious now that we are now on the latter path.
That is where we now find ourselves as Tubbergen discusses in detail in this month’s “Special Report”. He’ll examine several historical examples of other governments that reached this point and that in EVERY circumstance the outcome was the same.
If you’d like to learn more, you may request a copy of Dennis Tubbegen’s “Special Report” by visiting www.RequestYourReport.com.
You can also learn more about Retirement Lifestyle Advocates by visiting their website at www.RetirementLifestyleAdvocates.com
.
Release ID: 88993760