China and Japan chide the U.S...

The other two things America can do today to save itself...

In yesterday's Digest Premium, I (Porter) told you the U.S. government could do three things right now to turn our economy around... The first, which we discussed yesterday, is to incorporate a flat, 20% income tax.

We need to declare the federal government isn't going to be in the business of borrowing money anymore, period... And we need to have a fair, sensible income-tax policy, period.

We also need to pass a balanced budget amendment that keeps us from financing foreign wars and an endless welfare state...

We need true welfare reform, not the kind you saw in 1996, where everyone just jumped from welfare to disability. If you have some kind of an emergency situation, you can apply to the federal government for help for a limit of $5,000 over six weeks (to pick arbitrary terms). And that's it... You won't get any money from the government again.

Then, in addition to those two, we need to get out of the business of trying to regulate every single banking transaction in the world...

In the financial crisis, who got in trouble? Was it the hedge funds that are unregulated and backed with private capital? No. It was the banks that are heavily regulated and backed with public capital.

Instead, to ensure everyone's money is safe, we back the currency by gold. We'd put up 20% of every dollar in existence in gold.

We need to stop trying to regulate the banks and guaranteeing the deposits. Leave that up to the market. But guess what? You won't even have to put your money in a bank if it's backed by gold. Then, all you have to do is put it under the mattress and you'll be fine.

With those three steps… we'd have a fair and transparent tax policy. We'd have a sensible federal budget with no budget deficit. And we'd be out of the business of trying to control every dollar that's spent and the way it's banked around the world.

If we just did those three things, the size of our economy could double in five years. It would be an unbelievable boom because America is still the largest market in the world. We still control the global language of business. We still have the best computing and software companies, the best high technology. We have unlimited amounts of energy (thanks to the shale oil and gas boom), despite what the idiots in the government tell you.

But as long as we continue with the idiotic socialist policies we're currently pursuing, we are going to bankrupt ourselves just like every other socialist nation… no matter how wealthy and powerful we are.

– Porter Stansberry with Sean Goldsmith

The other two things America can do today to save itself...

Yesterday, Porter told Digest Premium subscribers that the U.S. government could do three things to restore our economic strength… And he shared the first one.

Today, he describes the other two steps…

To continue reading, scroll down or click here.

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The other two things America can do today to save itself...

Yesterday, Porter told Digest Premium subscribers that the U.S. government could do three things to restore our economic strength… And he shared the first one.

Today, he describes the other two steps…

To subscribe to Digest Premium and access today's analysis risk-free, click here.

China and Japan chide the U.S... PIMCO CEO: U.S. default 'more unpredictable' than Lehman... Volatility jumps... Blue chips hit new lows... Why you should ignore the shutdown... Jeff Clark: We could see a market rally tomorrow...

China isn't the only country pressuring the U.S. to get its act together...

Japan, our country's second-largest creditor, is also worried the value of its $1 trillion investment in U.S. Treasurys could plummet if we fail to reach an agreement on the debt ceiling... and subsequently default on our bond payments.

"The U.S. must avoid a situation where it cannot pay and its triple-A ranking plunges all of a sudden," Japanese finance minister Taro Aso said at a press conference. "The U.S. must be fully aware that if that happens, the U.S. would fall into fiscal crisis."

And Mohamed El-Erian, CEO of money manager PIMCO, worries how unpredictable a U.S. default would be (though his shop says the likelihood of a default is "very, very small"). As El-Erian told Bloomberg...

When investment bank Lehman Brothers collapsed in 2008, it sparked a financial crisis... The bank had $517 billion in outstanding liabilities. Today, the U.S. government has $12 trillion in outstanding Treasurys.

Like us, PIMCO expects market volatility to increase leading up to the October 17 deadline to raise the debt ceiling.

As we pointed out yesterday, the Volatility Index (the "VIX"), a measure of fear in the market, is at its highest point since June. The VIX is up nearly 5% today to just above 20.

We're still far away from the crisis highs, like when the VIX hit 80 during the 2008-2009 meltdown. But Porter says he looks to start selling put options on his favorite companies when the VIX hits 25... Remember, as the VIX rises, so does the value of option premiums. When investors are fearful, they will pay more for downside protection (in the form of put options)... And we're always happy to sell at inflated premiums.

The trick to consistently making money with puts is to only sell them on high-quality companies at prices you're happy to pay. And right now, some of our favorite blue chips are trading at three-month lows: networking giant Cisco, soft-drink icon Coca-Cola, and retail behemoth Wal-Mart. Meanwhile, tech giant IBM is trading at 52-week lows.

Back to the government debacle...

Just like the 2011 showdown over raising the federal debt ceiling – the current shutdown is simply about giving self-righteous politicians a forum to grandstand for the public. We don't take this too seriously.

And today, our colleague Paul Mampilly, who we featured in yesterday's Digest, details why this whole thing is just the government trying to manipulate you...

The market hates uncertainty... So when this ordeal is officially resolved, expect a market rally...

Our resident trading expert, S&A Short Report editor Jeff Clark, says we could see a short-term rally as soon as tomorrow. As he told his subscribers this morning...

As we pointed out in the September 18 Digest, wealth disparity in the U.S. is at its greatest level in 100 years...

In addition, the top 1% collected 19.3% of household income. (That includes wages, pension payments, dividends, and capital gains.) The top 10% earned a record 48.2% of total earnings, according to USA Today, which cites numbers from the University of California, Berkeley and Oxford University.

This is what inflation does, plain and simple. It destroys the wealth of the masses, while greatly enriching a select few.

Strong stock and real estate markets accounted for most of the gain in total wealth. But our friend and colleague Tom Dyson, publisher of The Palm Beach Letter, has discovered at least one other investment the rich have long favored.

It has nothing to do with stocks, bonds, gold, real estate, or annuities... but it's a way to grow your money tax-free – and at much higher rates than typical income investments. And best of all, it's accessible to even the "not yet quite wealthy." To watch a presentation Tom put together about his research, click here.

New 52-week highs (as of 10/7/13): East West Petroleum (EW-V) and short position in J.C. Penney (JCP).

One subscriber gets it... Send your thoughts to feedback@stansberryresearch.com.

"People can be such callous a-holes, and I'm not talking just about our government leaders. I'm referring to the guy who told Porter to keep his surfing stories to himself. I appreciated the skill of Porter's writing as he painted the word picture of his near death experience that day. I also recognized the less obvious intent to use a story to teach, at least to those who want to learn.

"Yes, I suppose Porter could follow that reader's advice just written "You should always use stop losses" and left it at that. Clearly, to me anyway, the story was an emotional anchor to help people retain the story and the message of using stop losses. I am glad you made it through that wave Porter." – Paid-up subscriber John P.

Regards,