The National Debt Destroyed Poverty & Pushed Stocks Higher
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To investors,
We are living in the safest, most prosperous time in human history. You would not know it though if you read the news every morning. But just because doom and gloom rule the papers, it doesn’t mean the data is not true.
Take a look at the drastic drop in extreme poverty over the last 225 years.
We went from majority of the world living on less than $2 per day to only single digits in modern society. That is quite an accomplishment.
Much of this economic growth, which lifts citizens out of poverty and drastically improves their lives, has been funded through debt. Take a look at this national debt chart and realize that the drop in extreme poverty from 50% to 9% coincides perfectly with the explosion in US debt.
This realization presents one of the most important trade-offs in our lifetime. We can take on increasing amounts of debt, which creates short-term improvements in the lives of millions of people, but we risk blowing ourselves up with too much leverage over the long run.
How much debt is too much? That is a difficult question. Many people didn’t think the country could continue running with the current debt load. Others are warning that collapse is right around the corner if we continue on this trajectory.
Regardless of what happens, it is obvious that most people are merely sharing their opinions and the answer to our debt questions will only be known in hindsight.
Thankfully, there are some positive effects to the debt-fueled approach that central banks and politicians have pursued. Asset prices continue to rise. Stocks, bitcoin, real estate, and many other investments push higher and higher every year. We are currently sitting at all-time high prices in many stock indexes.
This may cause concern for investors. The thought process is that stocks have become overvalued and a big crash is around the corner. The historical data rejects this thought process though.
We can see that buying all-time high prices has usually produced a better financial return than buying stocks on any other day in the market.
Add in the recent Federal Reserve interest rate cut and you have a recipe for higher prices for longer. Speaking of the rate cut, what has happened since the Fed made the decision official?
Bitcoin has been the winning asset. Joe Consorti writes “Bitcoin is the best performing asset since the Fed's 50-bps rate cut. Gold & oil futures are tied for second place. It's not just a risk-on impulse following the Fed's cut—it's a repricing of upside growth and inflation risk.”
Poverty decreasing. Debt increasing. Rates cut. Money printer turning back on. Asset prices appreciating. This is the story of the 21st century. And there is no evidence that the trends will reverse over the long run. Just make sure you stay solvent enough to benefit from the current environment.
Hope you all have a great day. I’ll talk to everyone tomorrow.
-Anthony Pompliano
Founder & CEO, Professional Capital Management
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Pretty specious argument that the US National Debt is lifting folks out of poverty that wouldn't otherwise be lifted out of poverty with responsible American govt spending. But further, you show a chart of global poverty and say that "economic growth lifts _citizens_ out of poverty."
The US National Debt is a future tax on Americans' children and grandchildren. We should not be stealing from our offspring in order to questionably benefit billions of faraway strangers. This rings even more sensible as we look at global attitudes towards the US diminishing greatly (also coinciding with the explosion in national debt -- maybe these are related, too!)
Not sure correlation equals causation in this instance. Could there be other factors?