The Battle for America
Editor's note: We continue our "2020 in review" Holiday Series today with an abridged version of our June 3 Digest...
At the time, we were seeing social unrest in cities all over the country, just as our founder Porter Stansberry predicted years ago would happen. While some of the details might've changed since then, we believe the overall message is as important as ever...
The Battle for America
It's happening right before our eyes – again...
Protests in the streets... American cities literally on fire... More than 40 million people unemployed.
Meanwhile, the "reality" gap between Main Street and Wall Street is as large as it has ever been...
As we write here in early June, the tech-heavy Nasdaq Composite Index is back near its pre-pandemic February highs, while the benchmark S&P 500 Index and the Dow Jones Industrial Average have each rebounded 40% from their March lows...
... in the same week that a U.S. president threatened to invoke the 213-year-old Insurrection Act, which has typically been used during civil unrest stemming from racial and labor conflicts... and frustration of the poor.
Most recently, the act was used to help quell the 1992 Los Angeles riots... and to stop looting in the U.S. Virgin Islands after Hurricane Hugo in 1989.
It was the same story in the 1960s after Martin Luther King Jr.'s assassination, including here in Baltimore, where violent protests happened just blocks from our present-day headquarters.
We can't go back and rewrite history, of course... All the things that have led to where we are as a country today have already happened, for better or worse.
The only thing we can do now is live in the present and prepare accordingly for the future... while maybe learning a bit from the past.
As students of history and human nature, we know the story that's being written about America today is one as old as the Bible itself...
Longtime Digest readers know Porter essentially predicted what we're seeing unfold today...
He wrote an entire book, The Battle for America, about the idea.
In the book, Porter, our company's founder, connected the dots between cycles of societal upheaval in American history, populist movements, and the concept of a "Debt Jubilee" that typically coincided with times of polarizing politics...
The book is now in its fourth edition, as our editors keep adding evidence to Porter's thesis. Most recently, we addressed the massive government response to COVID-19, how the crux of the book is more timely than ever today, and why investors should be prepared for the fallout of the next Jubilee. As Porter writes...
If you study American history, you'll see that Debt Jubilees occur only in a unique type of extreme political environment.
After all, a Jubilee is a radical measure.
The government essentially steals money from one group and hands it to another. In order for this to occur, four elements must be in place...
- The wealth gap must be getting dramatically bigger.
- There must be cultural threats from those with different values or from outsiders (in other words, minority populations and immigrants).
- The government must be ineffective at providing solutions.
- And there must be growing anger toward the "elites."
Sounds familiar, doesn't it?
The economic part of the story is many centuries old...
As Porter writes in the second chapter of The Battle for America...
The concept of a Jubilee comes from the Bible (The Old Testament), the Book of Leviticus, Chapter 25.
A Jubilee in the Jewish tradition was said to occur roughly every 50 years. It was a time for total forgiveness of debt and the freeing of slaves.
Pope Boniface VIII proclaimed the first Christian Jubilee in 1300. And rulers throughout history have occasionally used a Jubilee to reset the financial system – especially when the poorest citizens are threatening revolt.
And there are, of course, consequences for everyone when one of these events happens.
Now, Porter couldn't have imagined largely disorganized and massive "stay at home" orders and an expensive economic shutdown in response to a dangerous pandemic as the catalysts today...
But much like the COVID-19 outbreak has accelerated trends that were already in place, it has also exposed existing problems and an underlying movement that has been happening for years...
In fact, Porter even put a year on when the peak of this phenomenon would arrive again – 2020...
The pandemic may have been the trigger, but the gunpowder has long been in the chamber...
The frustration has been simmering...
When you've heard ideas from Democratic presidential candidates like Bernie Sanders and Elizabeth Warren about "Medicare for All," free college, and universal basic income... this was part of the story...
When COVID-19 hit our shores, not only were those with lower incomes the most likely to lose their jobs (40% of those making $40,000 or less lost a job in March), they were also infected with the actual virus most frequently, as we wrote in the April 22 Digest.
And more recently, when Congress decided to send stimulus checks directly to these and other Americans, and the Federal Reserve printed trillions of dollars to pay for it and other bailout programs that may or may not have reached "Main Street," it was part of the story...
Today, when you combine everyday Americans' glaring economic stress – most don't have a few hundred dollars in savings – with COVID-19 anxiety (now, in early June, a reported 1.8 million cases in the U.S. and counting) and the flash point of racially charged police brutality and the potential resurrection of the Insurrection Act, you have a familiar American socioeconomic story that has reached a breaking point once again...
These movements, Porter writes in Chapter 2 of The Battle for America, happen "every 30 to 40 years." And as he noted...
There's actually a name for this type of political and social phenomenon. It's called "Populism."
In the U.S., it happened in the 1930s...
Just like today, back then, the wealthy acquired a much higher share of the nation's wealth...
In addition, the foreign-born percentage of the population was higher than normal, creating animosity among the "common man."
In order to deal with mounting debts and print money to pay for dozens of new social programs, President Franklin D. Roosevelt made two extraordinary changes to the financial system.
First, he closed banks for four days and forced Americans to turn in each ounce of gold they owned for $20.67 in paper money. Then, the government raised the price of gold, wiping out 69% of the savings of anyone who followed these rules.
And the government essentially reneged on commitments to investors in government bonds – to the tune of an estimated $700 million a year – to wipe its own debts clean.
It was a short-term Band-Aid... The stock market boomed, but then soon fell 50% in a single year.
'Today' happened again in the mid-1960s...
As Porter wrote in The Battle for America...
If you're old enough to remember, think about the anger and resentment of the 1960s.
The Black Panthers' slogan was: "Power to the People." The idols of the day were people like Latin-American guerrilla leader Che Guevara, Malcolm X, and Muhammad Ali. All over the country, there was one clash after another...
Small farmers fought banks and railroads... union workers battled their bosses and federal judges. On college campuses, students fought anyone with authority. Election rallies routinely ended in violence.
Things were so bad, Lyndon Johnson decided not to run for re-election. Martin Luther King Jr. and Robert Kennedy were assassinated.
Here in Baltimore, the National Guard and Maryland State Police were called into the city in 1968 to quell violence and looting. And at the same time...
A major financial crisis was brewing...
The government had borrowed extraordinary sums, and were having a hard time repaying creditors.
That's because at the time, every dollar was required to be backed by gold. So the government couldn't print unlimited amounts of money out of thin air.
The government was scared again, Porter wrote...
It knew there was only one way out... another Debt Jubilee. First, we eliminated the gold backing of every dollar. Then, in 1971, President Nixon completely defaulted on our promise to pay gold for dollars to our foreign creditors.
Once again, the government simply wiped the slate clean.
Today, as we know, the vast majority of America is in bad shape...
We have societal and economic upheaval happening at the same time...
The rich get richer... and the poorest citizens, like broke and debt-saddled millennials, are again calling for a radical solution.
Millennials are the country's largest generation of voters for the first time this year. They largely blame capitalism for the world's problems and could usher in a new era of socialist policies, including a Jubilee.
But this Jubilee will be different from the ones in 1933 and 1971, according to Porter.
This time, the Federal Reserve has "unlimited QE" at its disposal and has said several times that it will print digital dollars until its computers break to take care of every stakeholder of the financial system. But the only way that private debt of everyday Americans can be resolved is if it's paid, defaulted, or forgiven...
And you can bet politicians, no matter the affiliation, will never allow tens of millions of our poorest citizens to go bankrupt... One round of government paychecks has already arrived in direct deposit accounts (even to people who have died, in another glaring example of government ineptitude), and another round of stimulus payments might be on the way.
President Donald Trump floated the idea of "back to work" bonuses... or "vacation" incentives for workers... all in the name of keeping the economy afloat – for this year at least, and likely for years to come.
But throughout history... almost on a schedule... times of 0% interest rates, seemingly endless money-printing, and populist pushes for change have eventually had unintended second-order economic consequences.
It's just that today, like back then, most people either didn't think or know about them. Or if they were in a position to understand the possibilities, they didn't admit what they thought the knock-on effects would be.
The point is, there's something you can do with this knowledge...
First off, if you already have a copy of The Battle for America – and all Alliance Partners and Stansberry's Investment Advisory subscribers do right here – there is no better time to go back and skim through the pages or read it again.
And for those of you who haven't yet read the book, we urge you to grab a digital copy now.
Given what we've been seeing on the streets of America over the past week or so, we've put together a special sale for the most recent edition of Porter's book... It's yours for just $4.95.
In the book, you'll find much more detail on the ideas we discussed today, plus thoughts on November's presidential election and why the results are so important...
You'll also get actionable information and recommendations on how to protect – and even grow – your wealth during these uncertain times...
Porter looks at the main investments you should own and the ones you should avoid... discusses the largest part of wealth that most Americans overlook – but could prevent your entire retirement nest egg from disappearing... and much more.
Click here to grab your copy of The Battle for America right now.
All the best,
Corey McLaughlin
Editor's note: Again, you can get your own digital copy of Porter's book, The Battle for America, for just $4.95 today right here. And we'd love to know... What are your thoughts on the "Battle for America"?
As always, you can send us an e-mail at feedback@stansberryresearch.com. We'll share your responses in our mailbag when we pick up