Sean Goldsmith: So taking us back to what we were previously discussing in your single-stock analysis, when you started talking about the fall of all these major U.S. corporations, you got a lot of heat from your subscribers. You had people e-mailing in with legitimate hate mail. Have you seen the same thing when you're talking about the "End of America"?
Porter Stansberry: It's interesting. You say things like: "Hey, if you're a shareholder in General Electric, you better watch out because it has way too much debt. It'll never be able to repay it. And sooner or later, the equity investors are going to get wiped out." And the people who own GE write to say, "I'm going to burn your house down because you're negatively impacting the value of my investments."
When you talk about risk to the whole economy, you get some people who respond, "Saying this about the government is un-American." But for the most part, people are more receptive. I think people recognize these risks in the macro way somehow in a different way than they recognize the risk to individual companies.
SG: You think it's just too big of a concept for them to grasp?
PS: No, I'm actually kind of saying the opposite. I think that people have an instinct, a feeling, that something has gone wrong with government. They know in their hearts the government can't run enormous deficits forever and can't finance things like free medical care for the whole country. They know in their hearts this is unsustainable. So when I point out the actual details behind why it's unsustainable, I don't think people are that surprised by it.
SG: So what I'm confused about is how can the U.S. possibly go bankrupt if it's still rated triple-A by Moody's and S&P?
PS: I understand your question is asked in jest because Moody's and S&P rated everything triple-A that went bankrupt in 2008. Moody's is doing its best to be diplomatic about America's credit rating. But everyone knows America is a long way from triple-A. Everyone already knows this, just like everyone knew that subprime mortgages were not really triple-A.
But Moody's keeps warning, very publicly, America is going to lose its triple-A status. You see this in the bond market, where corporations now are paying less to borrow money than the government is because, in many instances, corporations are a much better credit risk than a bankrupt government.
SG: So the question everybody wants to ask is, how do you protect yourself? And before you answer, I'm sure a lot of people in their retirement accounts are buying Treasury Inflation-Protected Securities, commonly known as TIPS. And we've recently seen a breakdown in the TIPS market when it should be going up, but it's actually performing worse than regular bond funds. Why?
PS: I personally think it's a little bit crazy to buy an "inflation-protected security" because the issuer of both a regular Treasury bond and the inflation-protected security is the U.S. government. If the U.S. government is bankrupt, it can't really afford to pay back its Treasury bonds. Therefore, it will depend on inflation by printing money to pay them back. That's the situation we're in right now today.
So you are going to extend credit to a known defaulter. You're going to extend credit to a known counterfeiter, whom you know is going to default on its bonds. So on the one hand, you already know it's going to default – otherwise you wouldn't be interested in the "inflation-protected security." I mean why do you have to have an inflation-protected security if you've got a credible government? You don't.
By even issuing an inflation-protected security, the government is admitting it's not really going to pay back these debts. It's just going to print a lot of money. So why would you depend on them to actually give you the real value of the inflation? They will never do that. The inflation-protected security will never pay you even a fraction of the real loss of purchase power that's coming because of the hyperinflation that we're about to experience.
The idea just seems to be so oxymoronic to me that I can't even believe there's a market called inflation-protected security. I mean, think about that for a second. "OK. No, really. No, really – we'll pay you back. We're going to just screw over all the other guys, but you – you're special. We're actually going to pay you back." I don't believe any of it.
SG: If history's any indicator, as inflation becomes more of a mainstream issue and more people start to accept it, I can guarantee that we'll see Vanguard and Barclay's and all these huge fund management companies pushing TIPS, ETFs, and TIPS-managed accounts down people's throats. And that'll probably be a good idea when it's really time to short them.
PS: That's right, that's right.
SG: So I believe we've proven the point that you don't want to buy TIPS, so what do you buy? What do you short? And outside of the stock market, what are you doing to protect yourself?
PS: The simple answer is, you have three well-known ways to protect yourself from inflation: own energy, own agriculture, and own sound money. The way you go about owning those things are many and varied. I don't think we really need to get into all the details here. Obviously, you can buy corporations. You can buy equity in companies that specialize in energy assets or in agricultural assets. Sound money just means buying gold and silver. There's lots of ways to do that.
And the fourth thing I would strongly recommend everybody over a certain net worth do – and you'll have to decide for yourself if this makes sense considering your own net worth – is get a portion of your assets outside the U.S. Look, this thing is starting to fall apart. The government is going to quickly realize it can't continue to have this amount of fiscal deficit every year. Sooner or later, the inflationary pressures of these huge fiscal deficits and money-printing is going to catch up with us.
The moment that happens, they're going to have to take serious steps toward a balanced budget. And the only way they're going to do that is by taxing everything that moves (or doesn't move). And the things that don't move are your assets, and they're going to go after them.
There's no doubt in my mind. You want to have some assets that the government doesn't know about that are outside the U.S., and you can still buy some things outside the U.S. that you legally don't have to report to the government. And of course, that's one of the things that we talk about in the video that people have been watching on the Internet.
SG: And we'll give everyone a chance to view the video at the end of this interview. So in which banks and in which countries are you holding your offshore assets?
PS: What offshore assets, Sean?
Goldsmith comment: Tomorrow's Digest is the last installment of our "End of America" interview. Porter discusses his escape plan if things in the U.S. disintegrate. He also tells you exactly how he would fix this problem if he held public office. (Keep in mind... Porter will never run for public office.) And if you still haven't seen Porter's "End of America" video, watch it here...