The 'End of America' is here...

 People get upset when they hear the phrase "End of America"...

 

It's simply a thesis we formulated years ago that the U.S. dollar would lose its place as the world's reserve currency due to the massive amount of debt the U.S. government was – and still is – accumulating.

 

Since we originally released our End of America video in 2010, the markets have gone up (it's amazing what a few trillion dollars can do to goose markets). But the fundamental problems supporting our thesis have only worsened.

 

 Porter is going to update everyone on the End of America in Miami Beach tomorrow at our inaugural Stansberry Society event. I (Sean) got an early look at his presentation, titled "Top Signs the End of America Is Here."

 

Porter has filled it with incredible charts and data showing the slow deterioration of our country and its currency.

 

 The Federal Reserve now has expanded its balance sheet to nearly $4 trillion. It holds more than $2.2 trillion in Treasurys.

 

And the only reason we are able to make payments on our debts is because interest rates are artificially low. But eventually, the market will reject the insanity, and interest rates will rise.

 

 And in addition to an unsustainable debt load, the U.S. is selling its trophy assets to finance those debts...

 

As Porter wrote in the October 18 Digest:

 

A building – One Chase Plaza – was sold yesterday in New York for $750 million.   Not surprisingly, the building was bought by a Chinese asset-management firm, Fosun.   Since 1996, the Chinese have made 51 major acquisitions in America, including deals to own or control iconic U.S. assets like computer giant IBM, carmaker GM, meat producer Smithfield Foods, U.S. power company AES Corp., major airplane lessor International Lease Finance Corp., investment bank Morgan Stanley, and private-equity firm Blackstone Group. They've also bought trophy real estate around the U.S., like the GM Tower.   These deals didn't happen by accident. They happened because the U.S. continues to consume far more than it produces. We finance this consumption with debt that's owned in large measure by foreign creditors. Take the U.S. Treasury debt, for example. At nearly $17 trillion, this is the world's largest pile of obligations. If you exclude Treasury obligations held by the U.S. government and the Federal Reserve, 54% of the remaining obligations are held by foreign creditors. And these foreign debts continue to grow rapidly – at about $500 billion annually.   Debt service on these obligations allows our foreign creditors to continually buy America's best assets. Today, foreign creditors directly own and control U.S. assets worth more than $25 trillion. That's roughly a third of all the wealth in America. And that's far more than what Americans own overseas: Americans only own about $20 trillion of foreign assets.   Every year that goes by, our foreign rivals will earn more on their American assets than we're able to earn on our foreign investments. They will grow wealthier and wealthier... while we become poorer and poorer in comparison.   As Warren Buffett famously said about this situation 10 years ago: "We have entered the world of negative compounding – goodbye pleasure, hello pain."

 As the U.S. sells off its productive assets to foreign creditors, our nation's productivity benefits foreigners. Take a look at this chart, based on one originally published by the Economic Policy Institute think tank. Based on Bureau of Labor Statistics figures, the chart shows the cumulative growth in hourly productivity for the total economy compared with cumulative growth in inflation-adjusted hourly compensation...

 

 

 And foreign purchases of U.S. property are accelerating...

 

Last year, foreigners invested a record $38.7 billion in commercial property, according to real estate brokerage Jones Lang LaSalle. That's a 44% increase from 2012.

 

Canada led the way with $11.9 billion, followed by China with $3.1 billion

 

Jones Lang LaSalle believes Asia will play an even bigger role this year.

 

 And China isn't only buying property... It's buying gold. Lots of it...

 

In 2013, China was the largest importer, producer, and consumer of gold. You'll learn the exact figures in Porter's presentation.

 

 Meanwhile, China is selling U.S. Treasurys... In December 2013, China shrank its Treasury holdings by $47.8 billion – the most in two years.

 

 You may have also noticed the recent plunge in China's currency, the yuan. You can see the currency's recent fall in this chart of the WisdomTree Dreyfus Chinese Yuan Fund (CYB)...

 

 

The yuan has fallen 0.8% this week – its biggest weekly fall on record.

 

 Some people are speculating that the People's Bank of China (PBOC), the nation's central bank, is manufacturing the weakness in its currency ahead of the National People's Congress (an annual legislative meeting) in early March.

 

Under PBOC policy, the yuan can only fluctuate in a 1% trading range from a level fixed against the U.S. dollar. Widening that band would be a move toward liberalizing the yuan.

 

Already, China has trade agreements with Brazil, Australia, the European Union, and other nations. Most international trade is conducted in dollars (that's the power of the world's reserve currency). But China can trade with these partners in its own currency (without converting to dollars).

 

 Last year, the yuan surpassed the euro as the second-most-used currency in the world... It made up 8.7% of global trade in October 2013 compared with 6.6% for the euro. In 2012, the yuan only made up 1.9% of trade compared with the euro's 7.9%.

 

 If the world rejects the dollar in favor of the yuan – or any other standard for trade – it would end our ability to print a limitless number of dollars and issue limitless amounts of debt... and that could be disastrous for our economy and most Americans' standard of living...

 

 But there's still a chance to pull America back from the brink: The massive energy boom happening in our country. Thanks to technologies developed over the past decade – like hydraulic fracturing ("fracking") – we've tapped massive amounts of oil and gas (notably from shale-rock basins).

 

The U.S. is fast on its way to becoming a major supplier of energy to the world... And that would create a massive boost to our economy... assuming the government doesn't get in the way.

 

 This is just the outline of the story... Porter will cover everything in much more detail on the stage... And he may share an investment idea or two.

 

We look forward to seeing all Stansberry Society members and other attendees in Miami Beach tomorrow. Unfortunately, if you're not already registered, it's too late to attend.

 

 However, you can still watch a live webcast version of our conference in its entirety. But you've got to sign up tonight... You can learn more here...

 

 

 New 52-week highs (as of 2/27/2014): Advent Claymore Convertible Securities Fund (AVK), Brazil Resources (BRI.V), CF Industries (CF), Carrizo Oil & Gas (CRZO), Enterprise Products Partners (EPD), Corning (GLW), SPDR International Health Care Fund (IRY), iShares DJ U.S. Home Construction Fund (ITB), Eli Lilly (ELI), PowerShares Buyback Achievers Fund (PKW), ProShares Ultra Technology Fund (ROM), ProShares Ultra Health Care Fund (RXL), ProShares Ultra S&P 500 Fund (SSO), Cambria Shareholder Yield Fund (SYLD), Targa Resources (TRGP), United Technologies (UTX), and Walgreens (WAG).

 

 A light mailbag today... Send comments and criticism to feedback@stansberryresearch.com.

 

 "I inherited a few stamp book albums (maybe 10) that my Grandma collected during the late '70s early '80s. Apparently nobody collects them anymore. Would you hold or sell them? I really know nothing about the subject. Except that nobody collects them anymore. Does Van Simmons, one of your go-to sources on rare coins and collectibles, deal in this sort of thing? They have been sitting in my house for many years now. Any opinion on what to do." – Paid-up subscriber Mark

 

Goldsmith comment: Thanks for writing in, Mark. We suggest you call Van directly at David Hall Rare Coins. You can reach him at 1-800-759-7575. Tell him Sean Goldsmith sent you.

 

Regards,

 

Sean Goldsmith

Miami Beach, Florida

February 28, 2014