Deadly Coronavirus, Federal Debt Threaten the American Empire

 What, me worry?

—Alfred E. Newman

We’re here on the Pacific Riviera waiting out the collapse of the American Empire. And we’re going to make the jolly most of it.

Yesterday, we got in a helicopter to take a look at the coast.

 

Coronavirus Bill Bonner

The Pacific Riviera

‘This country has been in a serious depression for the last three years,’ said our man on the scene. ‘The economy turned down in 2017. It’s been going down ever since. The International Monetary Fund says it contracted 5.7% last year.

‘A lot of landowners are giving up. They bought in the boom years. Now they just want out.’

We decided to have a look.

And what did we find? More in a minute…

The coronavirus has us teetering on the edge

Meanwhile, Humpty is still teetering. But he hasn’t fallen yet. In fact, yesterday, he managed to scoot himself a little more solidly onto the wall. At the end of the business day, the Dow was up 1,173 points.

Not bad. But what does it mean?

That the coronavirus is nothing to worry about? That record debt levels…with deficits ‘as far as the eye can see’ …are nothing to worry about? That Joe Biden is nothing to worry about?

What’s to fear from Joe Biden? He’s a known known. A hack politician. If elected, he wouldn’t change much of anything. Same goofball programs and dumbbell policies. Same Deep State running the show.

He would probably end the foolish import taxes on Chinese goods. That would be a plus. But there’s no way he would do what needs doing – balancing the budget and liquidating the Federal Reserve.

Nope. Sleepy Joe is an honest politician. He’s been bought; he’ll stay bought.

But the coronavirus? Who’s got it in his pocket?

 

 

State of emergency

A report yesterday told us that the coronavirus is 30 times more deadly than the Hong Kong Flu of 1969. Instead of killing 0.1% of those who get it, it carries off 3%.

This is about the same as the Spanish Flu of 1918. That epidemic was first spotted at an army base in Kansas in January. It took a summer holiday and then came back, nastier than ever, in the fall.

By the time it left, 675,000 Americans were dead…and 50 million worldwide. A similar tally today would mean 2.1 million Americans will die.

Ol’ Humpty is already having a hard time staying on the wall. And the virus won’t make it any easier. The risk is not the virus itself, it’s what happens when people try to avoid it.

Nobody wants to die. And many of us have ‘compromised immune systems.’ We’ll stay away from the planes, bars, and conventions that once knew us.

California has declared a state of emergency. Italy has closed its schools. Ford, GM, the United Automobile Workers labor union, and Apple have restricted travel.

More coronavirus trouble afoot

‘Oil consumption just fell off a cliff,’ reports CNN Business.

Greeters at Walmart might prefer to take a month off, too. So might the Homeland Security agents take a break from riffling through passengers’ underwear (they know it is a waste of time).

But everybody who stays home cuts into the ‘more’ that a debt-soaked economy depends on. Companies need more sales, not less. Consumers need more income, not less. The feds need more tax revenue, not less.

The Financial Times:

According to the Institute of International Finance, a trade group, the ratio of global debt to gross domestic product hit an all-time high of over 322 per cent in the third quarter of 2019, with total debt reaching close to $253tn. The implication, if the virus continues to spread, is that any fragilities in the financial system have the potential to trigger a new debt crisis.

Corporate debt rose some $6 trillion over the last 10 years. They service debt with income, not with higher stock prices.

Already, 12% of U.S. corporations do not earn enough to make their debt payments. Low rates from the Fed help keep these zombies alive – devouring resources and making the world a poorer place.

Debtors need income. And income is what the Coronavirus threatens.

JPMorgan tracks global Purchasing Manager Indexes. This tells us how much buying the corporate sector is doing. It just registered its biggest drop since 2009.

And guess what? U.S. workers need income too. They can’t stay home. Some 34 million workers don’t have ‘sick leave.’ They only get paid if they show up. Every day they stay home cuts into their income…and their spending, which further cuts into corporate revenues.

There’s more trouble afoot, in other words.

Meanwhile…

Gringo prices

We trip along the coast, sans souci.

There’s a lot of beautiful coastline between Rancho Santana and the Costa Rica border. And some bargains.

‘They were selling these houses a couple of years ago for $350,000,’ said our guide, pointing to some modern-looking houses near San Juan del Sur. ‘Now, they’re going for $250,000.’

The bigger parcels, too, have been marked down. We were flying over a large valley with about 3,000 acres, including nearly a kilometer of ocean frontage.

‘The owner wanted $20 million for this. Last week, he called to tell me he’d take $14.’

Still a lot more than it is worth, we thought. Reading our mind, he continued…

‘Of course, that’s the gringo price. A lot of property changes hands at lower prices. But they’re not going to sell to you at those low prices.’

The farm, where we are moving our animal operations, cost us about $1,000 an acre. The locals probably would have paid $500. We can get cheaper land in West Virginia. But not with a view of the Pacific Ocean.

And, in case of a deep, global depression we could probably live comfortably in either place.

But wait…news flash…

This morning investors woke up and came to their senses. Stocks are dropping again. As we go to press, the Dow is down 700 points.

People are wringing their hands…they’re pacing nervously…they’re sweating…and putting on their masks…

What to do?! Buy? Sell? Move to Nicaragua?

Stay tuned…

 

Regards,

Bill Bonner

 


Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance.


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