How much actual money do you think
there is in the United States?
Every year in America trillions of dollars change hands. Or so it seems. People buy milk, pay babysitters. They pay their mortgages and their taxes.
But here’s the thing: There are only $1.5 trillion worth of actual dollars – physical money – in the entire world.
And most of those dollars are not in the United States. Estimates have some 50 percent to 75 percent of our dollars in overseas bank accounts or held by foreign governments.
A lot of what is left back here in the states is called “dead money.” It’s stuffed in mattresses and safe-deposit boxes. In fact, the amount of U.S. dollars being hoarded this way – that is to say the amount of dead money – is now at an all-time high.
So how many dollars does that leave actually circulating here in the U.S.? Hard to say, but there might be as few as $375 billion…
And while that might seem like a lot of money, consider that a single U.S. company – Walmart – takes in nearly twice that amount in annual revenue, and our government spends 14 times that amount in just a year…
So if there are only 375 billion physical U.S. dollars in this country…what are people spending?
They are spending credit.
As you can see, for the past 30 or so years, the amount of credit has been growing exponentially.
That’s why, although wages have been falling since the 1970s…
…And although the value of all the wealth produced in America put together has actually fallen since Reagan was president (according to our calculations)…
…America still appears to be getting richer and richer.
Everything runs on credit. Even the food on your table.
Our wealth is not real. It’s credit, stored on a bunch of Wall Street computers. All of it can disappear in the blink of an eye, because it’s not real money.
First the farmer gets a loan from the bank to buy his farm. Then he uses credit to buy supplies, fuel, fertilizer, seed…everything. After the crops are grown, the wholesaler – who got a loan to build his warehouse and processing center – uses credit to buy the raw food from the farmer so he can process and package it.
Then a trucker – who got an auto loan to buy his truck – uses credit to buy fuel so he can haul the food to a retailer. The retailer needs credit to keep the lights on, the shelves stocked, and the stores open. Each part of this chain can afford to take on that debt…because they know that eventually the consumer will buy that food…most likely using a credit card.
If the one crucial piece of that chain – credit – stops working… suddenly suburbs and cities are cut off from their food supplies… businesses can’t run…they can’t meet payroll…
Our wealth is not real. It’s credit, stored on a bunch of Wall Street computers.
All of it can disappear within the blink of an eye. Because it’s not real money. The real money required to back it up…does not exist.
It only takes 3 unpaid creditors to legally force a single US company in bankruptcy, whether they want to or not.
How much more does it take to initiate a crisis on a national scale?
We are very likely about to find out. As famed economist Herbert Stein once said: “If something cannot go on forever, it will stop.”
How can there be so little money in America,
when we have so much wealth?
What about our billion-dollar tech companies…or our big brands like Coca Cola…or new technology like driverless cars…or all that oil wealth in our shale deposits…?
Let’s look a little closer.
It is so rare for Amazon to make a profit that it makes headlines when that happens.
In Tesla’s entire existence, it has had just two profitable quarters. Meanwhile, Uber – a company “valued” at $66 billion – lost $3 billion in 2016.
And as for our oil wealth…58 oil companies went bankrupt in 2016 alone. And our great Barnett shale deposit in Texas – “the granddaddy of shale plays” – is now owned by the French (who ironically don’t allow fracking in their country, but are happy to do it here).
And what of our big brand companies? Well, are you aware of how they operate?
Take Ford. Now on the surface Ford appears to be an amazingly successful – and profitable – company. But when you look closely you see that they are actually not purely a car manufacturer. A big chunk of their business comes from loaning people the money to buy their cars.
Guess how many of those auto loans went bad during the first half of 2016 alone: $449 million worth. That’s up 34%. Do you know how high the default rate for 2007 subprime mortgages was right before the financial crisis? 8.05%. That’s it.
But here’s the most shocking part…let’s take Ford’s auto financing business out of the picture entirely. Where do you think the money to build factories…buy parts…pay their employees…and keep the lights on is coming from?
It sure isn’t coming from their cash flow. Last time I checked they had a cash surplus of $1.9 billion. Want to know how much short term debt (and other liabilities) they’re on the hook for?
$46 billion last time I checked. And short term debt is the kind you need to pay back within a year. So months from now, Ford is going to try to roll over huge amounts of debt which they cannot possibly pay off with only 1.9 billion in cash on hand.
Here’s why all that debt is about to become a huge problem: Lenders are pulling out of the market because credit growth has finally turned negative.
That likely explains why…for the first time in 35 years…people are suddenly dumping bonds…causing yields (which have been falling for three decades) to suddenly break.
Who will lend to Ford, then? More than that, who will lend to the hundreds of other companies doing the exact same thing? Coke, Chevron, Campbell’s, Kellogg’s, Harley Davidson, General Motors (which just closed five factories)…
Maybe Warren Buffett bails one or two of them out…but even he can’t save them all. And it certainly won’t be the Fed…or the government (over $20 trillion in debt after Obama spent his way out of the ’08 crisis).
The money to save our system simply isn’t there. It was spent by previous administrations to save themselves.
Today, we are out there twisting in the wind totally on our own.
[From an article published by BONNER AND PARTNERS]
As always, posted for your edification and enlightenment by
NORM ‘n’ AL, Minneapolis