This article was originally published by Michael Snyder at The Economic Collapse Blog
The Dow Jones Industrial Average provides us with some pretty strong evidence that our “stock market boom” has been fueled by debt. On Wednesday, the Dow crossed the 20,000 mark for the first time ever, and this comes at a time when the U.S. national debt is right on the verge of hitting 20 trillion dollars. Is this just a coincidence? As you will see, there has been a very close correlation between the national debt and the Dow Jones Industrial Average for a very long time.
For example, when Ronald Reagan took office in 1991, the U.S. national debt had just hit 994 billion dollars and the Dow was sitting at 951. And as you can see from this chart by Matterhorn.gold via David Stockman, roughly that same ratio has held true throughout subsequent presidential administrations…
During the Clinton years the Dow raced out ahead of the national debt, but an “adjustment” during the Bush years brought things back into line.
The cold hard truth is that we have been living way above our means for decades. Our “prosperity” has been fueled by the greatest debt binge in the history of the world, and we are greatly fooling ourselves if we think otherwise.
We would never have gotten to 20,000 on the Dow if Barack Obama and Congress had not gotten us into an extra 9.3 trillion dollars of debt over the past eight years.
Unfortunately, most people do not understand this, and the mainstream media is treating “Dow 20,000″ as if it is some sort of great historical achievement…
The average began tracking the most powerful corporate stocks in 1896, and has served as a broad measure of the market’s health through 22 presidents, 22 recessions, a Great Depression, at least two crashes and innumerable rallies, corrections, bull and bear markets. The blue chip reading finally cracked the 20,000 benchmark for the first time early Wednesday.
During the current bull market, the second longest in history, the Dow has more than tripled since March 2009.
Since Donald Trump’s surprise election victory, the Dow has now climbed by approximately 2150 points.
And it took just 64 calendar days for the Dow to go from 19,000 to 20,000. That is an astounding pace, and financial markets around the rest of the planet are doing very well right now too. In fact, global stocks rose to a 19 month high on Wednesday.
So where do we go from here?
Well, if Donald Trump wants to see Dow 30,000 during his presidency, then history tells us that he needs to take us to 30 trillion dollars in debt.
Of course that would be absolute insanity even if it was somehow possible. Each additional dollar of debt destroys the future of our country just a little bit more, and at some point this colossal bubble is going to burst.
But you can’t tell most of the “financial experts” these things. Most of them simply believe that the “market always goes higher over time”…
The “market always goes higher over time,” Todd Morgan, chairman of Bel Air Investment Advisors. “The lesson here is that through wars, recessions, elections, impeachments, financial crises, and on and on, investing for the long term in high-quality stocks is the key to building wealth. … We are telling our clients that you can’t time the market. Think long term. Stay the course. We expect the market to see Dow 30,000 in my lifetime, and for my grandchildren to see Dow 50,000 in their lifetime.”
My hope is that the market will continue to go up. But nobody can deny that valuations are already at absurdly high levels, and the only way that this party can keep going is to continue to fuel it with more and more debt.
But for the moment, there is a tremendous amount of optimism out there, and most experts expect the Dow to continue to set new highs. In fact, CNBC says that whenever the Dow crosses a new threshold like this it usually means good things for investors…
CNBC looked at market data from the past 30 years and zeroed in on the times when the Dow has crossed levels like 2,000, 3,000, 4,000 … all the way up to the 19,000 level it hit in November. At those times, investors can typically expect traders to push it up even higher, according to data from Kensho. Not only does the Dow go up, but it outperforms the S&P 500 index along the way.
But as USA Today has explained, not all Americans are benefiting from this stock market rally…
The breakthrough came just four trading days into Trump’s presidency, a whirlwind in which the billionaire has reaffirmed his commitment to strengthen the U.S. economy and create more jobs and higher wages for workers. Still, nearly half of Americans have not benefited from the so-called “Trump Rally,” which has generated more than $2.2 trillion in paper gains for the Wilshire 5000 Total Stock Index since Election Day. The reason: only 52% of Americans polled by Gallup last April said they “have money invested in stocks” — the lowest stock ownership rate in the 19 years Gallup has tracked the data and down sharply from 65% in 2007 before the financial crisis.
Hopefully the good times will continue to roll for as long as possible.
But there is no possible way that they can keep going indefinitely.
For decades, our debt has been growing much faster than our GDP has. By definition, this is an unsustainable situation. At some point we will have accumulated so much debt that our financial system will no longer be able to hold up under the strain.
Many were convinced that we would reach that point before the U.S. national debt hit 20 trillion dollars, and yet here we are.
So how much higher can we go before the bubble bursts?
That is a very good question, and I don’t know if anyone has the right answer.
But for President Trump, this is going to present him with quite a dilemma.
Either he can keep the debt party going for as long as possible, or he can try to get us to take some tough financial medicine right now.
If an attempt is made to deal with our debt problems now, we will experience severe economic pain almost immediately.
But if the can keeps being kicked down the road, our long-term prognosis is just going to keep getting worse and worse.
And if we try to delay the inevitable indefinitely, at some point the laws of economics are going to make our hard choices for us.
So let us celebrate “Dow 20,000”, but let us also understand that it is far more likely that we will see “Dow 10,000” again before we ever see “Dow 30,000”.
This article was written by Michael Snyder and originally published at his Economic Collapse blog.
Michael T. Snyder is a graduate of the University of Florida law school and he worked as an attorney in the heart of Washington D.C. for a number of years.
Today, Michael is best known for his work as the publisher of The Economic Collapse Blog and The American Dream.
If you want to know what is coming and what you can do to prepare, read his latest book Get Prepared Now!: Why A Great Crisis Is Coming & How You Can Survive It.
Damned if we do, damned if we don’t.
No soft landing.
History does not repeat itself, but it often rhymes.
– Mark Twain
Makes me wonder what they know, that we don’t.
You’re Buying, They’re Selling: Big Bank Execs Dump $100 Million In Stock As Market Soared
“Shortly after the melt-up in US bank stocks began following Trump’s election victory, we noted heavy insider-selling (and options expiration) among Goldman Sachs executives.
Well the selling never stopped, as WSJ reports executives at the biggest Wall Street banks (including JP Morgan, Goldman Sachs, and Morgan Stanley) have sold nearly $100 million worth of stock since the presidential election, more than in that same period in any year over the past decade.”
http://www.zerohedge.com/news/2017-01-24/youre-buying-theyre-selling-big-bank-execs-dump-100-million-stock-market-soared
This build up and admitted “heavy insider selling” by the major Wall Street banks makes me think back to 2008.
Goldman Sachs was also involved in “heavy insider trading” in 2008. That didn’t end well for the country.
Goldman Fraud explained (article April 2010)
https://www.rt.com/business/goldman-fraud-explained/
This Statement: “The cold hard truth is that we have been living way above our means for decades. Our “prosperity” has been fueled by the greatest debt binge in the history of the world, and we are greatly fooling ourselves if we think otherwise.”
*** What’s this WE SHIT? I have not been living above my means, and this is NOT MY National DEBT. It is the MICM Military Industrial Complexes Debt they profited off of, and the politicians, and we got the Tab.
Sit Down Strike/ Quit working on their Grid and paying any of their Grid Taxes. Only way you can do this is to get fully off their Grid in Protest.
QUIT the RAT Race- Sell your high priced house in the City, take a third of your profit and go buy some Rural land in the boonies, and start living on it. Solar for power, a few out buildings, and some farm animals / garden, etc. No restrictions/ permitting and do it now and get grandfathered in, for later inspection a decade down the road. Lots of advantages having a Low Income on the Grid; but a greater standard of living while Off the Grid, fresh air, less stress, no bills or debts, just wake up and drink the coffee, go walk your property and see what you need to do today, chase the dog around, go fishing, skin a coon, dig a well, shoot your guns, some target practice, exercise your freedoms. Create your own “Cocoon Homestead.” Be totally independent as much as possible, and watch your OPSEC. Blabber mouths get penetrated.
Obama is laughing his ass off.
trust me, thats is NOT what he is doing with his ass
and I sure as hell dont want to explain myself
bless you
Exactly.
Sorry, no place else to post this. Madeline Albright, former Secretary of State, claims she is ready to register as a Muslim. A secular Jew registering as a Muslim? What gives? Follow the money. She waged war against the Serbs in order to steal Kosovo and hand it over to Albanian Muslims. Why? She and Ret. Gen. Wesley Clark (secular Jew), now have major energy investments in Kosovo. Pay off for stealing an entire country. Can’t talk bad about Muslims if they pay your check.
Ever notice she always wears a broach and, as far as I have seen, she never wears the same one.
Maybe she can wear a star and crescent broach, indicating her great love of the ravages of islam.
It’s a compound interest exponential function as the graph shows. It’s a Ponzi scheme. As such, it requires constant growth of debt to pay off past debt + compound usury.
If the growth of debt stops, the whole thing crashes. That means US .gov debt will most likely double again in the next eight years. The people are tapped out so the .gov has to step up and take on more debt. It’s what’s called Modern Monetary Theory and is the current OS of the banks and governments of the world.
The interest rate can never normalize again at around 6%. The debt repayment would become too great.
It’s a worldwide debt bubble. No one escapes it. Even Russia and China will eventually be swallowed up by it. It will go on until everyone is taxed or squeezed dry and living in a box down by the river.
Haven’t heard the latest “leader of the free world” mention anything about Constitutional money. In fact, he brags about using bankruptcy law to his favor. Nothing wrong with that, but he remains status-quo with the current system controlled by private banks, so it will be debt to the moon.
My wife called my attention to the news touting 20K. “See, it fine, dear.” Then she went back to playing games on Facebook.
Uh-huh.
All Clear! 🙂
Oh, BTW. The timing of the all the ex-Obama senior admin staff suddenly vacating their positions in DC…
I’ve been reading warnings for years from Wall Street numbers crunchers that said, when the Dow breaks 20,000 watch out, a big correction will follow in just a couple months. It may take a black swan event to trigger it, but those corrections always happen around the big resistance points and 20,000 is huuuge.
20K on the stock market scares me some. Great to see it but, I keep remembering the Big you are the Harder you Fall!!!
Sgt.
The numbers I monitor most closely is my blood pressure. The next number is my weight. The dow/jones and national debt are further down under these in importance.
Neither my hubby, who taught college accounting, nor his stockbroker, will believe me when I tell them this cannot keep going indefinitely. Is there anything I can do to financially protect myself? I’ve got a little kitty I’ve been saving up for three years now. I’ve got about 6 k in it. Thanks in advance.
and you are right,they are wrong.
Babycatcher:
This is true.
A woman married a nice guy who unfortunately drank like a fish. She would get money from him to shop for groceries, etc. She lied to him about the prices, always getting more money out of him. Finally one day she came clean and admitted she had fleeced him. She handed him the paperwork. She had stolen from her own husband for ten years. But in those ten years, she paid off their thirty year mortgage. Her husband never touched another drop of Booz.
I have no advice.
__
Babycatcher:
Here’s what I would do. Take some of that stash and buy a deserted lot in Chicago or Detroit. President Trump is looking into sending in the National Guard. Once the inner cities are cleaned up and the criminals are either behind bars or have turned over a new leaf, property values will soar.
Babycatcher ~ I don’t pretend to be any kind of financial expert… but for what it’s worth, here is a possible option —
Six thousand is not sufficient to provide a long-term cushion, no matter how it’s invested. I feel that the best course of action is to start a micro-business that will focus on a common need that many people will require even under lackluster economic circumstances.
The first thing that comes to mind is perhaps recruiting a few friends & relatives who need some part-time work and opening up a little home-care agency that provides companionship and personal care for seniors who can’t be left on their own. Or maybe you could start making good hearty one-pot meals… casseroles, stews, etc. — for busy parents who don’t have time to cook and who are apprehensive of the preservatives, stabilizers, and synthetic chemicals that may be lurking in take-out or deli food. You can probably think of other opportunities based on conditions in your area.
If you do something like this, you might want to consider putting maybe 40% of your profits back into the business; putting 40% into preps that will sustain you in a SHTF scenario; and keeping 20% in cash, hidden where you can access it any time but nobody else knows the location.
While this suggestion may not work — after all, I have no idea where you are located or what your individual situation is — the best results from a fairly modest amount of capital might come from establishing a small business that produces a steady cash flow. Best of luck to you ~ KV
It has been repoted that Ron Paul believes that president Trump is trying to stave off a world wide economic crash.
He may be right and if it happens it will not be Trumps fault although he may be blamed for it.
Also, prepare for a warm spring and a hot summer in the streets of America. George Soros said overseas he was going bring Trump down. Game on.
What will keep Trump from charging on the credit card; this cutting millions here and there is just window dressing – trying to win confidence; the quality of life of the state demands a funding burn rate that can’t help but lead to more huge deficit spending; on the same scale that its been on. I think the money will be spent at the same rate it has been, but will channel to different agencies and on to different subcontractors. This will align US corporations to be tier 1 contractors; international corporations will subcontract to them, ensuring US companies getting the biggest cut of the trickle down. The US can keep printing money until other G5 nations cannot (or will not) support exchange rates by expanding their money supply. They can opt to forego expanding their supply and be granted access to more SDR from the IMF; thats also like saying the US credit is derated. The President has no exit plan in mind for deficit spending; he’ll role right along with it – he has too much to gain personally to stop it. And hey, now they’re trying to implement the Biometric Tracking Systems for VISA applicants. But this is why we’re prepping.
Since only a bare majority of working Americans own stock which is probably from their 401k, then it seems like it’s mostly the high rollers betting against each other. No matter how one looks at this, this is a mess.
Don’t be fooled. The markets are going higher, and expect the dow to hit 26-28k….as the deficit spending and money-printing will continue. They WILL kick this can down the road a bit longer. How long is anybodys guess. My play is to not only to stay in the market, but continue to buy more undervalued junior mining stocks (specifically silver), and gold/silver bullion coins (in my possession). Then the inevitable collapse will happen, and happen fast: My guess is 3rd or 4th quarter 2018…..PMs and mining stocks (hard assets) will skyrocket in price as investors panic exit the blue chip securities and paper markets and flock to safe haven assets. And the collapse will be global, with an ensuing depression the likes of which the world has never seen.!!!!!!!!!
I agree; they’ll keep printing; no exit strategy.
Dollar General share prices have been going UP UP UP. Not hard to figure out why.
People are in survival mode and trying to get more bang for their buck in todays jacked
up economy. They are actually siphoning off the Walmart shoppers. And they keep on
building new stores. When I left Shitcongo in ’06 there were almost no dollar stores there.
Now they are everywhere up there. Optimistic I am not.
The private-central-bank owners are just creating money out of thin air to buy stocks, and inflate the Dow, to create the illusion that the economy must be booming. However, with a price/earnings ratio of $1.30/$1.00, any private investor buying stocks now, would have to be nuts.