American Consequences - June 2020

What the President Promised Me

The Millennial Investor

Behold the Money Tree



E D I T E D B Y P . J . O ’ R O U R K E


JUNE 2 0 2 0


“A merica is being blown to not for the reason you think. P.J. pinpoints three enormously powerful forces behind this division in his letter from the editor. Welcome to 2020... It’s either the end of the beginning, or the beginning of the end. Arguing for the “worst is yet to come” is financial analyst Mike DiBiase, who sees a tidal wave of corporate defaults and bankruptcies that cannot be stopped. Joining him is Bill Bonner, who shows how counterfeit money from the Federal Reserve inevitably results in corruption, poverty, and chaos in America... along with the former finance minister of Greece, Yanis Varoufakis, who looks ahead 10 years at what he expects will be a “lost decade.” Don’t miss journalist Alice Lloyd on the smithereens,” writes our editor in chief P.J. O’Rourke... though crisis-conditioned approach of the millennial investors... and how it will dictate the future of the financial landscape. Plus, financial analyst Alan Gula explains the “Magic Money Tree” that is MMT... and why you had better understand it if you have any money invested in the market. Dan Ferris speaks with Bill Browder about one of the craziest and most horrifying stories we’ve read yet about the financial goings-on in Russia. And of course, we turn to the lighter side, too... • We try our hand at predicting pandemic winners and losers... like Jeff Bezos, dogs,

cats, garden plots, folks trying to get by on their looks, and high school jocks. (Try and figure out which is which.) • P.J. brings us “Killing Time: Part II” as the boredom continues at the O’Rourke house. • And as always, we’re watching Twitter, so you don’t have to. Journalist Salena Zito talks with one of the few made-in-America mask makers... while Chaos Chronicles editor Kim Iskyan takes a look further abroad to show how America “wins” the post-pandemic world. Former congressman Dr. Ron Paul explains the necessary separation of medicine and state. And John Stossel shares why you do have a choice this fall for someone besides a big- spending, big-government candidate with the Libertarian Party’s presidential nominee. Keeping the peace and leaving folks alone sounds pretty good to us. Finally, executive editor Buck Sexton shares what President Donald Trump promised him personally... “No second lockdown, no matter what,” he assured. Read and share our latest magazine with free-thinking, freedom-loving folks... and tell us what you think at feedback@ Regards, Steven Longenecker Publisher, American Consequences


June 2020


Four Billionaires Poured a Fortune Into This One Medical Stock

Joel Greenblatt invested over $40 million. Ken Fisher, around $28 million. Richard Pzena put in around $15 million in shares. Even Buffett’s Berkshire pumped just shy of $200 million into this single stock. Why? Maybe it’s because the medical announcement of the decade is coming soon from one company. And it could send the share price of this company higher than its ever soared before. The best part is this surge in price is likely to happen regardless of what the markets do. And a major announcement could

send it soaring within months or less. This situation reminds me of when my research firm’s readers saw 130% gains in barely three months on a similar medical breakthrough. The difference is – that involved a relatively narrow medical problem. This brand-new drug discovery is MUCH bigger. It's the first ever to fight one of the deadliest diseases in the world – affecting 44 million people. Fortunately, one of the best biotech stock experts in the world explains every step of this unfolding deal... and why the biggest upside is still ahead. You can watch this full explanation, right here…


WHO’S REALLY BEHIND THE RIOTS Have you looked at pictures of the rioters? There’s one thing that unites them... But it’s not race. Once you understand who these individuals are, and what’s really behind their anger... you’ll understand what’s really happening in America right now... You’ll also start to see why this upcoming election is almost guaranteed to create a nightmare for Baby Boomers.

Get the full story right here...


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46 Masks Made in America By an All-American Company BY SALENA ZITO 50 A Different Presidential Candidate BY JOHN STOSSEL



Letter From the Editor BY P.J. O'ROURKE


Editor in Chief: P.J. O’Rourke Editorial Director: Carli Flippen Publisher: Steven Longenecker Executive Editor: Buck Sexton Managing Editor: Laura Greaver Creative Director: Erica Wood Contributing Editors: Bill Bonner, Mike DiBiase, Dan Ferris, Alan Gula, Kim Iskyan, Alice Lloyd, Dr. Ron Paul, John Stossel, Yanis Varoufakis, Salena Zito General Manager: Jamison Miller Advertising: Ricky D'Andrea, Jill Peterson Editorial feedback: feedback@

10 From Our Inbox

16 A DeadlyWave That Cannot Be Stopped BY MIKE DIBIASE 24 Pandemic Winners and Losers BY THE AMERICAN CONSEQUENCES STAFF

54 A Chronicle of a Lost Decade Foretold


58 The Knee on All Our Necks BY BILL BONNER

62 Killing Time, Part II BY P.J. O'ROURKE

26 Separation of Medicine and State BY DR. RON PAUL

66 How America Wins the Post-Pandemic World BY KIM ISKYAN

30 The Millennial Investor BY ALICE LLOYD

76 A ConversationWith Bill Browder BY DAN FERRIS

38 Behold the Magic Money Tree BY ALAN GULA

88 The Final Word


American Consequences



From Editor in Chief P.J. O’Rourke



June 2020

T he protests all across America are obvious, but what’s most obvious about them is not what’s most important... The message is more fundamental than the mess. The vandalism and the looting are unnatural catastrophes, and they don’t convey much more meaning than catastrophes of the natural kind.



The protesters, while rebelling against government, aren’t intent on overthrowing it. Yes, they’d like to be rid of some of the people who govern us (and who wouldn’t?), but only – it seems – to replace them with people they like better. And, at least at a city and state level, who protesters would like better isn’t clear, either. The meaning of widespread protests in a democratic nation is different from the meaning of widespread protests in an authoritarian state. Under dictatorship, people are protesting against a system forcefully imposed on them by a self-selected elite. Under democracy, we the people form the system, determine how and with what degree of force the system will be imposed upon us, and elect our own elite to do the imposing. Widespread protests in a democratic nation mean that we’re mad at ourselves. As well we should be... America’s Constitution was ratified in 1788, “in Order to... establish Justice, insure domestic Tranquility... promote the general Welfare, and secure the Blessings of Liberty...” None of which it did for a whole bunch of Americans – slaves, freed slaves, Native Americans, or women... It took 80 more years for the 14th Amendment to the Constitution to be ratified.

Destructive people are always among us. They are the friends of chaos, and when their friend is unleashed, they rush to embrace him. Thieves are always among us, too. Protection of property and law go hand in hand. When law is chased away, property is too. Under the circumstances, property can’t be expected to stick around and hang out with its rightful owners. Even the violence is less meaningful than it seems. Despite some brutal attacks – from and on the protestors – this isn’t a rebellion. A rebellion requires a clear objective. Although the protestors are quite clear about what they object to , they are less clear about what they want to achieve in an ultimate sense. The protesters’ demands – justice, ending racism, and eliminating violent, bigoted, and incompetent behavior by the authorities – are so inarguable they almost cause a consensus headache. People of goodwill have been trying to achieve these goals for hundreds of years. In the case of the first demand – justice – people of goodwill have been trying to achieve it for thousands of years.


American Consequences



The 14th Amendment is unequivocal: “No state shall make or enforce any law which shall abridge the privileges or immunities of citizens... nor deny to any person... the equal protection of the laws.” And the 14th Amendment ended with what should have been a knockout punch to inequity: “The Congress shall have the power to enforce... the provisions of this article.” Yet it took another 96 damn years for the Civil Rights Act of 1964 to be passed. And it’s been 56 years since then, with minorities and the marginalized still treated like crap. No wonder we’re mad at ourselves. Meanwhile America has been undergoing changes that exacerbate this underlying fury and make even the majority of Americans dissatisfied with our country. The result is much worse than protests. We are not a polarized society. To be “polarized” assumes two poles, such as a MAGA-hat-wearing Arctic and a BLM-poster- carrying Antarctic. The situation is much more complex than that. We are a Big Bang society, with the American singularity flying apart in every direction at the speed of light. Three enormously powerful forces are causing America to be blown to smithereens. 1. A disconnect between the government and the governed... Government size and scope has expanded to the point where it has become a universe of its own, in a galaxy far away from ordinary citizens. The sovereignty of America is supposed to reside with the American people.

But who among us got to vote on whether to close down our economy and lock ourselves in our homes for months? A black hole of bureaucracy has been created, sucking every aspect of government accountability into its dense and incomprehensive abyss. The political classes are space aliens living on another planet ruled by different laws of physics where the only gravity is fundraising, the only thermodynamics are their quarrels with each other, and where the sun shines out their asses. 2. A disconnect between our economy and our home economics... Finance is decoupled from the business of making a living. They are flush with cash and well-provisioned with goods over at the stock market while we, at the supermarket, scrimp on house brands – Okey-Dokey canned beans, Have-A-Loaf white bread, and Good- E-Nuff bathroom tissue. The business of making a living has been divorced from work. The work has been shipped overseas where people are willing to do it for pesos or renminbi or rupees instead of money. Money has lost any relationship to value. George Floyd was arrested – and killed – for spending twenty dollars in the form of a banknote that had no actual value. The U.S. Senate and House of Representatives are spending hundreds of billions of dollars in the form of banknotes that have no actual value. Are members of Congress at risk of police brutality?


June 2020

to make the arguments worth arguing against. Where is today’s William F. Buckley of conservatism? Where is today’s John Kenneth Galbraith of liberalism? Where’s the Republican Ronald Reagan? Where’s the Democratic Tip O’Neill? Where’s the Milton Friedman extolling free markets? Where’s the John Maynard Keynes critiquing free markets’ effects? Where, especially, is the Martin Luther King, Jr., making the current protests peaceful, dignified, and powerfully effective?

3. A disconnect I wish we could make...

If only we could disconnect ourselves from the Internet and its earthquake leveling and tornado flattening of all our structures of rational discourse. No hierarchies of thought, no norms of debate, no frameworks of logical deliberation can be erected on social media’s shaky ground in the howling wind of viral content. The Internet’s pandemonium keeps the voices of reason and sense from rising above the clamor of the mob. Everyone is handed a bullhorn and no one is given a pulpit. Leadership is trivialized by the Internet. Its tide of vulgarity sweeps away leaders of every kind and deposits them beyond the reach of public attention. There is no one to make the arguments worth arguing for. There’s no one even

And where are we without these leaders? Well, look around at America’s streets, at America’s businesses, and, indeed, at America’s hospitals... Without leadership, we’re right here where we are now. THE STATE OF AMERICA TODAY From the American Consequences Staff Here at American Consequences , we respect and support the rights of all Americans to free speech – no matter what they say and no matter whether we agree or disagree. We also respect and support the right of everyone to be free from the manifest injustice of racism. But we frankly admit that we have few, if any, of the right answers to the question that is most relevant in America right now: How do we create a freer, more equitable, more prosperous American society... and continue the progress that America has made in the past century, the past decade, and perhaps, even the past year? We do not unequivocally support the demands of the protestors. We also do not unequivocally support the state and its authorities and their responses to the protests. We do not even unequivocally agree with each other, much of the time. Our sympathy will always lie with individuals – rather than with institutions, identity groups, or cultural categories.

American Consequences



with high-ranking representatives from every aspect of space exploration – military, civilian, scientific, and commercial. The exhibit hall, where all the latest space hardware is on display, is open to the public during the last two days of the Symposium. If you love space and love talking to people who are experts in the field, I suggest you attend. I don’t know if you’ll see this note, or if you’ll remember me from our troubled youth, but we often wrote poems and got drunk together, before you went off to fame and fortune, and I to abundant obscurity. I’ve been reading this magazine of yours, to familiarize myself with your ways of thinking and I have enjoyed reading it, and even copied some hotshot’s investment advice you guys were featuring. I’ll let you know how it comes out. What I’ve enjoyed the most though, is reading your wise-ass commentary, which is the main reason I signed up (along with the price) and which has not diminished with the years. – Joe M. P.J. O’Rourke comment: Hi, Joe! It’s great to hear from you! My wise-ass commentary is, as ever, probably worth about what it costs to subscribe to American Consequences . Somehow I’m doubting that “abundant obscurity” phrase of yours. (Sounds like you haven’t lost your touch for poetry.) But, if the people who’ve been prominent in America lately are anything to go by, “abundantly obscure” might be the best thing for a person

Re: Our Newest Readers Weigh In

Just found you this morning. I guess I simply didn’t pay attention to your e-mails. Anyway, this issue looks fabulous. Just what I need. Thank you marvelous people! We need you so keep going. – Barb J. P.J. O’Rourke comment: You’re welcome, Barb. We’re glad you were able to find us, or glad that we were able to find you, or however that works in the deep dark woods of electronic media. It’s easy to get lost out there and hard to get found. Let us know if you have any suggestions for how we can send up a better signal indicating our location (which we like to think of as “under the tree of knowledge”). Can we get PJ to do an update on SpaceX and the state of our space program? I love his perspective. – Tom K. P.J. O’Rourke comment: Tom, one of the things that was high on our list of future topics for American Consequences – before pandemic pandemonium broke out – was the space industry. Like SpaceX returning to the moon, we will get back to it. Thank you for your kind words. I served for a decade on the board of directors of the Space Foundation. Every spring (except, sadly, this one), the Space Foundation hosts the Space Symposium at the at The Broadmoor resort in Colorado Springs, CO. It’s the world’s largest international space industry gathering


June 2020

it’s been this way for decades and I’m still not seeing the crash happen. Maybe the Modern Monetary Theory people are right. Maybe people do believe those pieces of paper and electronic dots and dashes are real; I mean really real. For years now, I’ve felt like one of those sandwich board men that walked the streets years ago proclaiming “the end is nigh.” Your writers think people are losing faith and trust. I don’t see it in anything I read (e.g. The Economist ) or anyone I speak to.

to be. As I remember, your poems were damn good and my poems... have disappeared forever, I hope. And now I should probably explain the above exchange to the uninitiated Inbox reader. Joe and I were grad students together at something called The Writing Seminars at Johns Hopkins University a couple of eons ago. We were “studying” to be poets. (See Joe’s description of our study habits above.) The first thing they taught

us at The Writing Seminars was: “You’ve got a Frosty the Snowman’s chance in hell of making a living by writing poems – unless your name happens to be Robert Frost.” I’m lying. That’s not what they taught us – but it’s what they should have! I love the magazine and read every article, mainly because I agree with almost everything written there. This latest magazine rightly pointed out that all this new government stimulus will one day destroy the dollar (and euro, pound, yen, et al.) as has every article I’ve read on the subject since the 1980s. And that’s my feedback. Like your contributors, I believe the Western economies have gone seriously off the rails, but

Instead, it’s me who is losing faith (I lost trust in our leaders years ago). – Paul J. P.J. O’Rourke comment: Paul, I’m glad someone agrees with almost everything written in American Consequences . We the writers and editors are in no such perfect concord. However, we all do agree that it is a complete mystery to us why the fiat money balloon hasn’t gone “pop!” like a swollen pink wad of Bazooka gum. Speaking of childish things, the longevity of imaginary money reminds me of watching the Disney animated movie Peter Pan when I was seven. There’s a scene where Tinker Bell is near death and all the kids in the theater are told to clap to show that they believe in fairies because believing in fairies is what will keep Tinker Bell alive. I sat on


American Consequences



cost tens of millions of people their jobs, and unnecessarily ruined millions of small businesses. Now, if they have their way and the economy really starts to falter, they will claim to be on the side of the working class by demanding bigger welfare payments and other bureaucratic redistribution schemes instead of just taking their boot off our hands and letting us go back to work. Re: Mr. Mom I have read (almost, I’m pretty sure) all your books. Not only were they incredibly entertaining and funny, but I was educated in a manner I had never come across. You helped form my young mind (although it’s no longer young) and discover that both liberals and conservatives are always going to extremes to overstate their cases on ideology. The result: I’m unaffiliated with any political party and vote for the person who will best serve the office which they are seeking. However, I was thrilled with your editorial about being Mr. Mom and your newfound appreciation of what it’s like to be a mother, especially one that works outside the home. You now seem to understand the hardships of being the one in charge, the one to manage the children and household, while maintaining a full-time job. I applaud you for once again proving common sense eventually wins in the end, with a little effort. I hope your wife is out of quarantine and you do not easily forget this lesson. Bravo to you for sharing your story. Fair warning though, as my grandmother told me, “when they are little, they step on your feet, when they

my hands. I didn’t believe in fairies, and Tinker Bell reminded me much too much of my pesky sister. But, although Tinker went firmly unapplauded by me, the hovering little annoyance continued to survive and spread stupid, sticky fairy dust all over the place. I say to the central banks now what I said to the movie theater ticket-taker when I was seven, “I want my money back.” Re: How to Destroy America’s Cities Buck, your article was indeed, spot-on. The Deep State political Liberals and media are going to any length necessary to tear down this country and the Trump administration, with total disregard for the physical or economic health of Americans. Their intent is to disrupt this nation to the point of martial law, whereby the government can completely take over with unlimited power and control. At that point, they can implement their Socialistic agenda with the pretense of “helping the people regain what has been taken from them.” – Don R. Buck Sexton comment: Don, thanks for your note. Indeed, one of the challenges of dealing with the Left is that their policies create problems that they then claim only more of their policies can fix. We see this all the time with the economy... And in the aftermath of the shutdown disaster, it will be even more stark. Because they panicked during COVID-19 and mandated an overreaction that many Republicans went along with, they have


June 2020

On March 16 I brought my mom to live with me to secure her safety in this pandemic. Over the several weeks that she has been with me, I see a woman that has a love of life no matter what the day is like. My mom will soon be 90 but she has the spunk of a much younger person inside. I am 65 and semi- retired and I never thought that I would be taking care of my mom at this age. My dad passed away in November of 2019 at the ripe age of 97. I know my mom misses him dearly but she knows she will be with him soon. You look at life entirely different during times like this and you understand what life is really about... family. – Marco K. P.J. O’Rourke comment: Marco, bless you for taking care of your mom, and bless her for her good spirits. Tina and I know what you and your mother are going through. Tina’s dad died at the beginning of this pandemic – of heart failure not COVID-19. He was 95, a WWII combat vet, career FBI agent, and then head of corporate security for GE, so he led a full life. But the hellish thing was that, because of quarantine restrictions at the retirement home, neither Tina nor her mom could be with Tina’s dad in his declining days. And, because those restrictions are still in force, Tina and I still can’t be together with her mom. You’re exactly right about times like these making us understand what life is really about. The ancient Greeks had a specific word, agape , for love of family, to distinguish it from passionate love ( eros ) or love of one’s friends or community ( philia ). In times like these, let us all try to be as much of a family to each other as we can.

reach adulthood, they step on your heart.” As the mother of four daughters, I can only thank my dear grandmother for preparing me for that eventuality. – Lisa Marie M. P.J. O’Rourke comment: Lisa Marie, thank you for your kind words and good wishes. My wife, Tina, endured quarantine with good grace and, mercifully, never got sick. And, amazingly, the house survived. (Despite the teasing I gave them in my article, the kids did pitch in with the cooking and cleaning. Incidentally, the way to get a teenage boy to vacuum the living room carpet is to let him use the big, noisy, macho shop vacuum I’ve got in the garage.) I have to confess that my appreciation for “homemakers” – with or without full-time jobs – isn’t quite as newfound as I made it out to be. I work at home, therefore, unlike spouses who go to an office, I have been a daily witness for 20-some years to the time and effort – and patience – that go into running a household. I stand in awe – and should have written about my in-awe standing long before this. Meanwhile your grandmother “speaks truth to powerlessness.” I’ve got a daughter who just finished college and another who just started, and they do indeed “step on my heart” (to which I respond, alas, by letting Johnny Walker step on my liver). ‘Mr. Mom’ was way funny. Thank you for the needed levity on a day when most news is rather disturbing. – Eddie C. P.J. O’Rourke comment: Thanks, Eddie. But I think I’d better let Tina answer you. She says, “He may be funny to read – but you should try having him around the house all day.”

American Consequences



indicate that violence on American streets was “the fault of ” American officials. I agree that looters (as opposed to “protestors”) are breaking the law on their own accord... and should be punished accordingly. You’re joking right? I don’t think I condone violence by rioting in the streets in any circumstance. But Hong Kong may well be fighting for its collective life as a brutal and amoral government tightens the screws on what has been for some time a free society. World wars have been fought over less. The “similar” violence in the U.S. is simply a bunch of lawless morons trying to usurp the rights of peaceful protesters to show their frustration over what appears to be an appallingly inappropriate action on the part of a local cop. These criminals have no remorse regarding the murder of someone who deserved much better; they just either (a) want to foster unrest or (b) steal stuff. In either case they care nothing about ruining the lives of the hundreds of small business owners. While the Hong Kong situation is easily more complex, the one in the U.S. is clear- cut, IMO. Peaceful protests are allowed by the constitution in this country. Looting and burning is most definitely not. – Richard B. Kim Iskyan comment: Richard, thanks for your e-mail. I think there’s limited value in drawing a parallel between protests in Hong Kong and those in the U.S. On another front, in both cases I think it makes sense to differentiate between peaceful protestors – and bad actors who take advantage of the situation to, as you say, foster unrest and/or

Re: Violence, Supersized

According to Kim, the violence over George Floyd’s death is the fault of “American officials for abusing human rights and inciting violence.” Complete and utter bull. Violent and looting “protesters” are SOLELY responsible for their actions, and should be treated like the criminals they are. – John C. Kim Iskyan comment: Hi John, thank you for writing in. I wrote that I think there’s a good chance that other countries “will threaten similar sanctions [that is, like the sanctions the U.S. has imposed on members of government from other countries] on U.S. officials for abusing human rights and inciting violence.” Have U.S. officials abused human rights? Well, on the most basic level, human rights entail “the right to life and liberty”... that’s straight out of the United Nations definition (and it also happens to be part of the American Declaration of Independence). I think we can agree that freedom from torture is also a core human right. Watch the heartbreaking video of George Floyd’s murder, and there’s little question that he was being denied his human rights on many levels. And that incited violence. According to Merriam-Webster, “incite” means “to move to action” or “stir up.” It doesn’t entail responsibility. It implies a reaction. (And whether or not producing that reaction is intentional – that’s not the point.) Contrary to what you suggest, I didn’t


June 2020

food. So, one month meds, one month food. That is how your “rich, older American” lives! – CharliAnn O. Steven Longenecker comment: CharliAnn, we make no judgements for older folks struggling to get by. But on average, the older you are in America, the higher your net worth. And we know of no young folks getting a guaranteed $1,750 monthly payment from the government. To put your relative wealth in perspective, you would need a more than $1 million portfolio to provide $1,750 per month at a 2% dividend yield. (Or more than $500,000 if you follow the 4% rule and put down capital as well.) And while we aren’t personal finance budgeters here, that’s an awfully pricey studio apartment on your monthly income. A modest house in many places in this nation will cost you $100,000... or a $500 monthly mortgage payment. Of course, that’s what makes America great – you have the freedom to save or to spend according to your own choices. Re: If You Set Your Alarm for 2021 Looking back at PJ's "How bad could 2020 be?"... Pandemic and riots. I guess things can always get worse than we expect after all. Keep up the good work. – Chris P. P.J. O’Rourke comment: You guess right, Chris. It was the 1st century B.C. Roman sage Publilius Syrus who originally said: "There are some remedies worse than the disease." And after 2,000 years, he's still saying it.

steal stuff. The trick is to distinguish between the individuals involved in peaceful protests, and those who wreck things and steal things. My point, though, was that the U.S. has lost its remaining scraps of moral authority to criticize other countries for abusing the human rights (see my response above) of its citizens. I’m not suggesting that one kind of violence in one country or another is any different. Also, what China is doing now is accelerating the timetable of its original deal with Great Britain. Hong Kong was to remain a Special Administrative Region under the “one country, two systems” principle for 50 years, starting in 1997. China is tightening the screws, as you wrote... but it was only a question of time (27 more years, to be precise) until they’d have full justification to do just that. I’m not sure world wars have been fought over an issue like this. Re: The Knee on All Our Necks What older richer Americans? Don’t you realize that most of us are just old and POOR! We are doing our best to survive on our pitiful retirement funds, if our company didn’t discontinue them so they could pay bonuses to their CEOs, or the state used it all up in pet projects so can’t pay the retirees what is owed (i.e., Illinois). So, this rich old person gets a little more than $1,750 a month in Social Security, pays out $1,500 for a studio apartment, and if it weren’t for the little help from her family, she'd have to choose between meds and

American Consequences



By Mike DiBiase



A white “ridge” had formed along the horizon. Even worse, the ridge seemed to be heading straight for them across an otherwise tranquil sea. They didn’t have any way to escape it. Edie and her companions were sitting in the crosshairs of an incoming tsunami. They didn’t know it at the time, but a magnitude 9.1 to 9.3 earthquake – the third-strongest ever – struck that morning off the western coast of Indonesia. And as a result, waves that would rise to as high as 130 feet were racing across the Indian Ocean at speeds up to 500 miles per hour. A sick feeling came over Edie as she watched the massive incoming tsunami capsize a sailboat without much effort. The group became paralyzed with fear. They were helpless. In the next instant, Edie was thrown underwater and spun around as if she were inside a giant washing machine. The wave banged her head repeatedly against the rocky limestone cliff. Finally, the water calmed down and Edie was able to swim to the surface. She saw her boyfriend, sister, and mother also at the surface and thought to herself, “We’re all OK.” Unfortunately, everyone wasn’t OK.

Edie Fassnidge will never forget the picture- perfect scene along the Thai coast... In late 2004, the 25-year-old England native went on a months-long vacation with her boyfriend, Matt. They climbed Mount Kinabalu in Malaysia, bought their first digital camera at a high-tech mall in Singapore, and learned to surf in Bali. Edie’s mother, Sally, and younger sister, Alice, later met up with the couple in Thailand to celebrate Christmas. On the morning of December 26 – Boxing Day – the skies were blue, the water was clear, and the weather was calm. So the group of four decided to rent kayaks and enjoy the gorgeous scenery. They started out at Ao Nang Beach, heading south toward Tonsai Bay and Railay Beach. Along the way, Edie stopped to take some pictures. As she later recalled to Guardian ... I remember saying, “It’s so beautiful here.” We were floating along in the sea, and there was a dramatic limestone column right by us, a little island in the background, and we were all really happy. But all of a sudden, the air felt different. And Edie noticed something strange off in the distance...

American Consequences



I share this story because I believe the coronavirus pandemic is a lot like a tsunami... It appeared with little warning. At first glance, it didn’t look that harmful... It was just a strange distraction happening miles away (or in this case, on the other side of the world). But as it approached, the dangers became apparent. And its impact became unavoidable. Now, roughly four months later, we know the coronavirus is a disaster on many levels. It’s a humanitarian disaster, reportedly killing roughly 400,000 people so far. It’s an economic disaster, forcing more than 40 million Americans out of work so far. And it’s a psychological disaster, putting a strain Investors seem to be saying, “We’re all OK. We made it through. Now, let’s get on with this bull market.” on our mental health as we’re forced into isolation for months. After suffering through several months of mandatory lockdowns since the World Health Organization declared the virus a global pandemic, most of us felt a bit like Edie did that morning after the wave struck... tossed around, dazed, and confused. Like Edie, we want to believe that this nightmare is over... The lockdowns in many states and countries are ending. And with the anticipation that everything will return to normal later this

year, folks expect to see a “V-shaped recovery.” The benchmark S&P 500 Index has surged to within 10% of its all-time high. The stock market today reminds me of what Edie thought as she resurfaced... Investors seem to be saying, “We’re all OK. We made it through. Now, let’s get on with this bull market.” These days, investors don’t seem that concerned about the virus at all. They’re more anxious about something else... the fear of missing out (“FOMO”) on the market’s latest rally. You may be suffering from FOMO, too... itching to jump headfirst back into stocks. That would be a big mistake . HOPE IS NOT ENOUGH Now is not the time to relax. It’s far too early to think we’ve made it through the worst of the coronavirus pandemic. You see, pandemics – like tsunamis – rarely consist of only one wave. And in both cases, the first wave is often not the worst. That’s why you need to know the rest of Edie’s story, which she shared in the 2016 book, Rinse, Spin, Repeat... Edie’s elation at seeing her boyfriend and family in the water after the first wave didn’t last long. Glancing behind them, she noticed another wave rapidly approaching... Edie was soon underwater again, fighting for her life. Once more, she made it to the surface and gasped for air. But this time, Edie couldn’t find her loved ones. She had little


June 2020

to make the vaccine available to almost every person on the planet. We’ve never delivered something to every corner of the world before. And... vaccines are particularly difficult to make and store. There’s a lot we can’t figure out about manufacturing and distributing the vaccine until we know what exactly we’re working with. Many other experts agree with Gates’ 18-month timeline for a vaccine. Even that would be an incredible feat considering the fastest a vaccine has ever been developed is five years. That’s a long time to spend “flattening the curve.” Meanwhile, we’re flattening the economy. And that’s without considering what would happen if a “second wave” of the virus were to hit... I like to listen to doctors who don’t have politicians looking over their shoulders. And from what I’ve seen, we’re much more likely to see a second wave of the virus before we see a vaccine. Some experts say a second wave in the fall or winter is almost inevitable. What do you think a second wave will do to the market’s expected V-shaped recovery? AN UNSTOPPABLE WAVE OF BANKRUPTCIES And even if we don’t see a second wave of the virus, we must worry about another dangerous “wave”... This wave is unstoppable. And thanks to our economic slowdown, it’s already forming today.

time to search before being battered by several more waves. Finally, Edie managed to climb on to some nearby rocks... and realized that she suffered wounds on her legs so deep that she could see her bones. Dehydrated and physically drained, Edie somehow found the strength to hike up the rocks and along the shore until she was rescued. While being treated, she reunited with Matt, who had also managed to survive. Sadly, her sister and mother weren’t as fortunate... They died that day, along with nearly 230,000 other people in the deadliest tsunami in world history. We can learn an important lesson from survivors of tsunamis like Edie... No matter what, be prepared for more than one wave . Look, I’m not a pessimist... I hope there isn’t a second wave and that things go “back to normal” soon, too. But hope alone is not enough. Hope is what’s driving the stock market today. The market rallies on every glimmer of hope, every promising study of a potential vaccine... no matter how small or early-stage they are. Microsoft founder Bill Gates has poured billions into studying viruses and finding vaccines. He said we shouldn’t expect a vaccine in less than 18 months. And even after that, Gates knows it’s still an uphill battle. As he wrote on his Gates Notes blog in April... We need to manufacture and distribute at least 7 billion doses of the vaccine. In order to stop the pandemic, we need

American Consequences



It’s a massive wave of bankruptcies . The list of companies that have defaulted on their debt grows by the day. It includes rental-car giant Hertz Global... retailers JC Penney, Neiman Marcus, J.Crew, and Pier 1 Imports... newspaper publisher McClatchy... burger joint Krystal... telecom Frontier Communications... and oil and gas producers Diamond Offshore Drilling and Whiting Petroleum. And this is just the beginning... The list will get much longer in the months ahead. Many more companies will follow in the footsteps of these victims... Other companies teetering on the edge of bankruptcy include retailers Lord & Taylor, Sur La Table, Party City, GNC, and Guitar Center, as well as energy firms Chesapeake Energy and Denbury Resources. Bloomberg estimates that nearly two-thirds of publicly traded restaurants are at risk of going under.

The high-yield default rate equals about 4% today. That means only 4% of all corporate borrowers have defaulted over the past year. Thanks to the coronavirus and its effects on the economy, credit-ratings agency Standard & Poor’s (S&P) currently forecasts that the default rate will rise to 10% by the end of the year. While that’s a big jump in a short span... I believe it’s too conservative . To know where the default rate is headed, you need to look at the number of companies whose credit has already been downgraded. Credit downgrades always precede defaults. And as you can see in the chart below, downgrades have soared to unprecedented levels... So far this year, S&P has downgraded the credit of more than 1,650 companies. That’s already more than any year on record... and we’re not even halfway through. We’ve never seen anything like this... It tells us that the number of defaults (bankruptcies)



100 200 300 400 500 600 700 800 900



Where do you think the default rate is headed?














Source: Standard &Poor's, Bloomberg


June 2020

ratings issued most of this debt. And companies on the lower end of the credit spectrum – high-yield or “junk” borrowers – are out of luck... The Federal Reserve is doing little to help these companies. Even before the coronavirus kick-started the latest credit crisis, around one in every five companies were considered “zombie” companies. That means they could barely afford to pay the interest on their debt. It has now gotten much worse for the companies with poor credit... Credit is now starting to dry up... Banks are again tightening credit, making it more difficult for companies to borrow money. And it goes beyond that... In the latest Federal Reserve survey of large and small banks across the U.S. on their lending standards, banks reported their largest quarterly increase in tightening... ever. As you can see, credit is now tighter than at any time since 2008 ...

is about to soar higher than ever before. During the last financial crisis, the default rate peaked at 12.2% in 2009. It’s likely to surge well past that number in this credit crisis. The first wave of the coronavirus has already exacted tremendous damage... Remember, U.S. corporate debt was already at an all-time high (more than $10 trillion) before the crisis began. The crisis is causing most companies to burn through cash and borrow like there’s no tomorrow. Corporate debt is growing larger with every passing day. The thing is... credit can dry up extremely fast. That’s why American companies have been busy maxing out their bank credit lines and issuing bonds to investors while they still can... U.S. companies have issued a record $1.2 trillion in bonds so far this year, according to market-research firm Dealogic. That’s up nearly 80% from the same period a year ago. Companies with investment-grade credit



Banks just tightened credit to a level not seen since 2008






2008 2005 2002 1999 1996 1993

2020 2017 2014 2011

Source: Federal Reserve Bank of St. Louis

American Consequences



around two years, on average, for the default rate to peak from the time that defaults started spiking like they’re doing today. If we follow a similar pattern this time, it could mean that the default rate might not peak until late 2021 or early 2022. This is especially concerning because we’re on the verge of an economic depression for the first time since the 1930s. We were in relatively short recessions when the default rate peaked in 1991 and in the early 2000s, each lasting about eight months. The comparisons with the early 1930s and 2008 are much more appropriate to what’s happening today.

This is important... High-risk borrowers are hurt the most when the banks start tightening credit. They rely on banks to “roll over” their debt – using new loans to pay off their debt as it comes due. Without access to credit, they’ll simply die. With plummeting sales and access to credit cut off, these zombies are already dropping like flies. It’s another reason I believe the massive wave of bankruptcies is just getting started.

And for many individual investors like yourself, that could be devastating... A wave of corporate bankruptcies could wipe out many stock investors... The U.S. default rate has only passed 10% four times over the past century – 1932, 1991, 2002, and 2009. And as you can see, stocks perform horribly when that happens... On average, stocks fell 53% from their peak as the default rate soared. Notice that it took

With plummeting sales and access to credit cut off, these zombies are already dropping like flies. It’s another reason I believe the massive wave of bankruptcies is just getting started.

Default Wave Beg.

Default Wave Peak

Stock Market Bottom

Default Rate Peak

Stock Market Decline*





15% -86% Depression




w12% -20% Recession




11% -49% Recession




12% -57% Recession


12% -53%







* From peak before default wave


June 2020

Receive up-to-the-minute news, market research, and expert commentary that typically costs $50,000 a year, and requires a net worth of at least $1 million… 100% FREE . Market Commentary Market Headlines Top Headline Stories Moving The Markets Today Your DIRECT LINE to Wall Street

What can you do to protect yourself – and even profit – as this cycle plays out? Plain and simple... you should hold a lot of cash. That will protect you if stocks sell off. And even better, it will allow you to capitalize on fantastic opportunities as the crisis unfolds... You’ll be able to once again buy shares of great businesses at fire-sale prices. But investors will sell more than just stocks... When crisis strikes, they’ll also dump corporate bonds. No one wants to hold bonds when the default rate begins to soar – even safe bonds of companies that can survive. Bond prices will plummet to bargain- basement prices. It happened in 2009, and it will happen again. But the thing is... savvy investors can make a killing buying cheap, safe bonds. That’s the strategy my colleague Bill McGilton and I employ in Stansberry’s Credit Opportunities . The best time to invest in corporate bonds is as a crisis strikes... like the one we’re about to enter. You can earn stock-like returns while taking on far less risk than actually owning stocks. But don’t take my word on it... Learn more about our bond strategy from a longtime subscriber’s experience – and find out how to claim instant access to Stansberry’s Credit Opportunities at an all-time low price – right here.


American Consequences



WINNER HIGH SCHOOL GEEKS Didn’t have a life anyway and got an “I’m at school” excuse to never leave their bedrooms. LOSER HIGH SCHOOL JOCKS Hard to virtually stuff a freshman into his locker.

WINNER DUMBWEDDING PRESENTS All those never-used bread machines we were so happy to find in the attic. LOSER OURWAISTLINES

WINNER DOGS A dozen daily walks? “Arf!!!”

LOSER CATS Social-distancing

skills pushed to the limit with everyone at home.

WINNER JEFF BEZOS The Amazon CEO has seen his fortune boom as deliveries soar, with predictions of Bezos becoming the world’s first trillionaire in a few years. LOSER JEFF BEZOS Regulators in Washington, D.C. have another arrow in their quiver for potential antitrust breakup actions. WINNER FACIAL HAIR Men everywhere are embracing the no-shave look. LOSER THEWIVES AND GIRLFRIENDS WHO HAVE TO KISS THEM


June 2020

WINNER ZOOM LOSER All of us stuck in Zoom meetings... LOSER-LOSER People who have their laptops accidently positioned so that everyone on the Zoom meeting can see your cat using the litter box... LOSER-LOSER-LOSER People who have their laptops accidently positioned so that everyone can see you failed to wear pants to the meeting...

LOSER THE STOCK MARKET WINNER THE STOCK MARKET LOSER People who didn’t get their money out of the stock market in time... WINNER People who didn’t get their money out of the stock market in time... LOSER Anybody trying to figure out the stock market... LOSER RESTAURANTS With one in four expected to go out of business permanently. WINNER DINERS With tables now required to be farther apart, you can hear your dining companion easier than the lout at the table next to you. WINNER THE LONE RANGER Although he had to move his mask down over his nose and mouth. LOSER TONTO Needed to self-quarantine for 14 days because Kemosabe refused to practice social distancing with outlaws.

WINNER PERFECTLY TENDED GARDEN PLOTS LOSER OVER-WATERED HOUSE PLANTS “We’re having a little drink, Mr. Philodendron, wouldn’t you like one too?”

American Consequences



June 2020

By Dr. Ron Paul

Coronavirus Shows Why We Need

I t seems like only yesterday... Americans were denied the right to go to their churches. They were denied the right to visit their loved ones in the hospital. They were denied the right to open their businesses and go to work to provide for themselves and their

Separation of Medicine and State

families. They were denied the right to go to restaurants, bars, and hair salons. No laws were passed denying these rights. Even that would be illegal and immoral. But what happened was worse. They were denied these basic rights by governors, county judges, and even local mayors who used the coronavirus outbreak as an excuse to rule by decree. They stole power that was not theirs to take and wielded it at all levels to force America into three months of house arrest. Then, in the midst of stay-at-home orders across the country, the same governors and local officials who locked Americans in their homes suddenly came around with their keys and threw open the doors. Suddenly, not only was it OK to go out into the street, it was required to go out into the street!

What happened? A cure? A miraculous vaccine? No. The officials who locked Americans up found a cause they felt required Americans in the streets to protest. Police had killed a black man, George Floyd, in their custody in Minneapolis, and suddenly the need to protest trumped the need to “stay home, save lives.” They stole power that was not theirs to take and wielded it at all levels to force America into three months of house arrest.


American Consequences


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