March to Bankruptcy

Every one of the abuses and imbecilities perpetrated by the feds over the last 25 years was financed by government spending and had the active support of both parties.The march to bankruptcy continues

Monday, March 10^th, 2025

Bill Bonner, writing from Baltimore, Maryland

It is a confusing time. But this week should clarify things.

The basic direction — both the Primary Trend in politics as well as in capital markets — appears to be unchanged.

US stocks have been in a long decline since the beginning of this century — peaking out at 40 ounces of gold to the Dow in 1999… and now down to just 14. Typically (though there are only three examples in the last 110 years — before 1924, during the 1930s, and the ten-year period, 1978-1988) the price of stocks keeps going down until it finally reaches its bottom below five ounces.

Our Law of the Conservation of Value tells us that shares don’t go up forever. They go up…and down. From a peak of 40 ounces of gold (registered only once in the last century) to a trough below two ounces (in 1933…and again in 1980).

Source: Longtermtrends.net

Since they go up and down, we see no point in buying them when they are expensive. Buy and hold only works if you buy cheap. If we wait, they’ll be cheaper. And that way we’ll avoid the Big Loss.

But what if we’ve got the Primary Trend wrong? In the news there is a lot of talk of ‘disruption’ and ‘change.’ Secretary of the Treasury Scott Bessent, for example, seems to be serious. Bloomberg:

Bessent Warns of ‘Detox Period’ for Economy

Treasury Secretary Scott Bessent warned that the US economy may see some disruption as the Trump administration shifts the basis for growth away from the government and toward the private sector.

Asked about whether President Donald Trump would shift his policy moves to prop up the stock market, the Treasury chief said that there is no such Trump “put,” as stock analysts say.

“There’s no put,” he said. “The Trump call on the upside is, if we have good policies, then the markets will go up.”

If that were true, it would be a very different financial world than we have known in the last thirty years. Until now, the feds have kept an implicit ‘put’ option in the drawer. In the event of a crashing stock market…or recessionary economy (or even some non-economic emergency)…they would rush out the stimmies, like a quack doctor administering nitroglycerine to a napping patient.

But that was before Trump II. The first time around, he was diddled and dazzled by the power elite. This time, Donald Trump has everything under control; or so many people believe.

The Big Man aims to reduce the size and scope of the federal government, they say. And he’s backed by loyal Republican majorities in the House and the Senate.

Here’s the latest presidential post:

"Democrats will do anything they can to shut down our Government, and we can't let that happen. We have to remain UNITED -- NO DISSENT -- Fight for another day when the timing is right. VERY IMPORTANT. MAKE AMERICA GREAT AGAIN.

Yes, the battle lines are clear. Republican vs. Democrat. Good vs. Evil. And now, Republicans stand tall…shoulder to shoulder — no dissent!

The trouble with this view is that every one of the abuses and imbecilities perpetrated by the feds over the last 25 years was financed by government spending… and had the active support of both parties. Bush II set the pace, with $6.3 trillion added to the wrong side of the nation’s ledger.

Then came Obama, who burdened the nation with $8.3 trillion more. Donald Trump managed almost as much damage in four years as Obama in eight, with an increase to US debt of $8.2 trillion. And then along came Biden and another $6 trillion.

We don’t see much difference. The march to bankruptcy continues under Republicans as well as Democrats.

But maybe now MAGA Republicans have seen the light…and are ready to shoulder their traditional responsibility to restrain the Democrats? Or are the reformers simply running into the unstoppable momentum of the $6.7 trillion spending machine that they created?

We should know soon. The feds are running out of money. Several stopgap measures have been proposed. Mr. Trump says he favors the House’s ‘big, beautiful bill.’ But the House’s budget measure shows little sign of any serious cost-cutting. The Hill:

House Republicans on Saturday unveiled a six-month stopgap government funding plan, which seeks cuts to non-defense programs while boosting funding for defense.

Increase spending on defense? Reduce it on non-defense? Net savings = not much.

There’s some discussion of ‘House committees seeking spending cuts;’ they’re unlikely to find any. The machine is meant to spend, not to save.

But we’ll see.

Stay tuned.

Regards,

Bill Bonner

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Research Note, by Dan Denning

In Monopoly, the Bank can never go bankrupt. As long as it has a printing press, the US government never need default on its bonds or run out of money either (it can, of course, print and devalue). But in the short-term, the money runs out on Friday, March 14th, unless Congress passes a new continuing resolution (CR) to fund the government and/or raise the debt ceiling.

Over the weekend I read a report published in February by the Government Accountability Office (GAO) called The Nation’s Fiscal Health: Strategy Needed as Debt Levels Accelerate. I wept. As you can see from the chart above, Uncle Sam is at a fiscal crossroads: reduce debt and deficits now…or proceed inevitably to debtor’s jail and a dollar crisis.

For investors, hope for the best but plan for the worst. That includes looking at investments in everything denominated dollars, but most especially commodities. If you missed it yesterday, we published a note from Bill’s son Edward Bonner (a geologist and investment advisor with Sprott) about gold, uranium, critical minerals and more.

Review that note here and contact Edward directly if you’re interested in further discussions.