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As the Worm Turns – Episode 028

logoThere’s not enough imagination in the world to make this stuff up. Our economy and financial house are being run like we’re a banana republic … and we’re the country with the currency upon which all other countries base theirs. We have been the world’s economic superpower for years, but that distinction is quickly drawing to a close.


Off The Grid Radio

Released: December 31, 2010

Welcome to Off the Grid Radio, better ideas to bust you and your family out of today’s global control grid. Now here’s today show.

[0:00:28] Brian: Ladies and Gentlemen, once again, welcome back to Off the Grid News – the radio version of As always, I’m Brian Brawdy, here with Mr. Bill Heid. Bill, how are you this morning?

Bill: You know? I’m a little cold, Brian, but warming up. This room is warming up. I’m thinking about maybe shedding the sweater … I won’t shed too many articles … but it’s warming up. But it’s cold outside. Baby, it’s cold outside.

Brian: It is. We’re well below zero yesterday and this morning. At least, for me, at -6, that’s cold enough to get your attention.

Bill: It’s a little chilly.

Brian: I wanted to get right into it. We’re talking a lot of late about New Years’ resolutions. You know, I was thinking Bill, what better way to jump start the New Year than talking to an expert. Truly, a person that’s not only called by other people an expert, but someone that’s proven it time and time again. This would be a great show. If we could get some advice from that expert, that would allow us to set our New Year’s resolution – not just “I want to lose some weight,” or “I want to run a marathon later this year …” but some really important things given the current state of the world, the state of our economy, the state of our government and the like. I’m pretty fired up about today’s guest and he’ll be with us for the entire hour.

Bill: It’s a wonderful thing. I’d like to introduce Porter Stansberry. Brian, do you want to do … his basic bio and then I’ll give you a little more?

Brian: Sure. Now that Bill stole all my thunder … the guest this morning is Mr. Porter Stansberry. Porter founded Stansberry & Associates Investment Research, a private publishing company based in Baltimore, Maryland, in 1999. As you know, if you recognize him name, or if you do not recognize his name, it is now the largest business of its kind in the world. Porter oversees the staff of investment analysts whose expertise ranges from value investing to insider trading to short selling. Bill, if it goes down in this realm, Porter Stansberry is on top of it. That would be my intro and now, Bill, back to you.

Bill: Well thank you again, Brian. I would like to say a couple of words about Porter and his newsletter “The Porter Stansberry Investment Advisory.” I first heard about Porter when I was in Belize. We’ve talked about Belize and you’ve been in Belize with …

Brian: I have.

Bill: So one night, Joel Nagel, our attorney, had Porter come in and tell this story. We were all sitting at this little bar. The temperatures were much different that night than they are right now. Picture the warm breeze wafting across … so we sit down and have a few beers and we’re getting ready to hear this story. Porter starts telling the story of what happened in the Great Depression. It was jaw-dropping and I looked around – I remember looking around at everyone in the room. Everyone was spellbound by this story. I’ll give you an example – today for example, I’m looking at a story – and I was reminded of Porter this morning. I’m looking at a story this morning about safes selling in Ireland – the number of safes that are being sold. People are freaking out and they’re everyone’s buying a safe and grabbing their money. The first thing I thought of was Porter. And Porter, welcome to our show.

Porter: Thanks guys. Thanks for having me. I’m going to have to make sure my wife hears that introduction.


Brian: We’ll give it to you in a podcast.

Bill: We’ll give you the edited version if you like.


Bill: Do you want to tell us a little bit, because we hear so much about black swans and I think most Americans think that the Great Depression – the origins were basically here. But with so much focus on Euro zone debt, what could be a black swan today that could come today that would resemble that? Maybe you just want to tell us about the Great Depression, how that got started overseas.

Porter: Yeah. Let me begin with a real simple point because this is something that everyone can understand. It’s real simple. If you’re trying to cross a river and you know the river is 10 feet deep, and you know you can’t swim, but the river has an average depth of five feet, and you’re six feet tall – is it a black swan when you drown? Because people keep saying that “these things are black swans,” and it’s not true at all. Just because something is safe most of the time, doesn’t mean it’s safe. You certainly wouldn’t send your children to go to school in a brick schoolhouse if 20 percent of the bricks were defective, right? And if the building fell down you wouldn’t be surprised. So I think a lot of the things that people claim from the investment community are black swans are not at all. They’re inevitabilities. In reference to the Great Depression, one of the inevitabilities was the failure of European banks. The reason why the European banks failed during the Great Depression is really very simple – the governments had accumulated far more debts than they could finance and the banks had lent far more money to people like governments than the governments could ever pay back. The whole system was designed to fail. One of the biggest and most important failures of the Great Depression was Creditanstalt. Most people have never even heard of that name because it was a long time ago and it’s Austrian history. Who knows it? But Creditanstalt was actually the largest lender to Eastern Europe in the 1920s and early 1930s. Its failure was what set off the collapse of the gold standard in 1931. The Germans had to go off the gold standard to bail out Creditanstalt. Then when the Germans went off, then Great Britain had to go off. That led, eventually, to the seizure of gold in the United States, actually, in 1933. It was really the beginning of the bad dominoes – the collapse of the global monetary system, in the 1930s. It happened with Creditanstalt. The interesting part of the story, and the ironic part of the story, is that today the largest lender to Eastern Europe is – guess who? It’s still Creditanstalt, but now Creditanstalt is owned by an Italian bank called UniCredit. UniCredit is kind of like the poor unfortunate guy that everyone’s friends with that has the worst luck in the world. He’s the guy that falls off the ladder. He’s the guy who steps into the elevator shaft. Things just keep happening to him. In Creditanstalt’s case, Creditanstalt was a major investor in guess who? Bernie Madoff. So they lost something like $4 billion to Madoff, and they had to go get bailed out, and the only person dumb enough to bail them out was Muammar Khadafy, the Libyan dictator. You can’t make this stuff up. I mean, it’s really an incredible story. Now, UniCredit is still massively upside down. They have the worst capital ratios of any major bank and they’re balance sheet is all fabricated. Sooner or later the European crisis that’s been building with these sovereign debt problems – the real tipping point is going to come when UniCredit fails. I don’t know if you’ve been following the story or not, but their CEO just resigned about two months ago. You can tell that things are really moving quickly to a head there.

Bill: I guess the important part too is, maybe where we get the word black swan is, you’re saying these things are totally inevitable and I totally agree because I read your newsletter. But I think to Americans they look like black swans because psychologically Americans are so provincial, we’re focused on buying little gadgets and putting new apps on our phone. We don’t realize what’s going on in the world. What seems – what is inevitable seems like a black swan to just the average American because we’re so narrow-minded, Brian, wouldn’t you agree?

Brian: Porter – what I’ve called them before is black ostriches – you want to call it a black swan because you have your head buried in the sand, not seeing the different things that are going on around you. Then obviously with Porter’s newsletter it makes it a little easier not to act like an ostrich, but I agree. Those things are coming. You go into grizzly bear country, that time of year when all the grizzly bears are out, you know you’re going to be hungry and you run around with pork chops tied to your body – you’re going to have a grizzly bear encounter. Then people go “can you believe the chances of Brian running into a grizzly bear?” Well, yeah! [laughs] It was an inevitability for sure.

Porter: Yeah, I tell you guys, unfortunately, it makes my job terribly easy. At one time, General Motors had over $400 billion in debt on its balance sheet and it had had to borrow money to pay the interest on those debts for 19 out of the last 20 years. For me, predicting that General Motors was destined for bankruptcy was like doing simple arithmetic. It was two-plus-two. And yet, just because the public had yet begun to be aware of that possibility, we were shorting the stock when it was still above $40 a share. It becomes very easy to do well financially if you’re willing to look at the basic numbers and if you’re willing to have the real facts. Unfortunately, people living with the Wall Street Journal and CNBC, they’re never, ever going to find these things out.

Brian: And Porter, I would say, before we run to a quick break, that’s the benefit of the Stansberry and Associates and your newsletter. It gives us that ability not to act like ostriches and see the light at the end of the tunnel. Porter, if you would, stick around. We’re going to run to a quick, hard commercial break. Ladies and gentlemen, come back. Mr. Porter Stansberry with us for the entire hour. Come on back!


Brian: Ladies and gentlemen, welcome back to Off the Grid News, today with Mr. Porter Stansberry who founded Stansberry & Associates Investment Research, a private publishing company based in Baltimore, Maryland in 1999. Today it is the largest business of its kind. You only have to talk to him for a couple of minutes and hear his passion to know this is something that he is … he’s really into, Bill, and he’s got a unique blend of knowledge and chutzpah. He’s got a unique blend of digging what he does and still the backing to cover it.

Bill: And as a writer, knowing how to present it. I think one of the most recent newsletters in October covered the power grid. When I got mine – true story, Brian – I’ll check and see when the newsletter is out and if it’s not out I get a little fussy. So I’ll go to his site and see why – where is the newsletter?

Brian: Jeremy, did you hear that? Bill says he gets fussy …

Bill: a little fussy. Where’s the newsletter at this month? Anyway, October I got one, and the headline was “The Power Grid will Fail within 36 months,” and a lot of our listeners are very tuned in to power grid issues of all kinds. We’ve had other guests on … Porter, let’s talk a little bit about what are the macro factors shaping up this power grid problem?

Porter: The macro problem is very simple. American regulatory authorities don’t want there to be big increases to coal power plant infrastructure and they have made it very expensive to maintain coal power plant infrastructure. The result of that is there is a very, very serious financial problem with the largest coal-fired power plant companies which provide all the base load power for the US power grid. Politically it’s a really amazing phenomenon to watch the leaders of the country, which is the Saudi Arabia of coal, turn against their greatest natural resource and drive coal-fired power plant businesses to the brink of bankruptcy. You combine this problem, which has been several decades in the making, with soaring prices for coal due to large exports to China, and you’ve got a recipe for a real serious financial problem in the coal-fired power plant companies. Real simple, this whole problem will become crystal clear to you when you realize that Southern Company, which is the second largest coal-fired power plant company in the United States, they’re balance sheet is now levered two-to-one and they’re spending a billion dollars a year on interest. That’s a fact. They’re spending a billion dollars a year on interest and they’re levered two-to-one. How they got that way is that they’re consistently operating their business on a negative capital basis and by that I mean they don’t make enough money in revenues to pay for the maintenance of their power plants and the payment of their dividends. As a result, they’ve been borrowing money – lots and lots of it, and more every year – to make ends meet. How long can you do that before the whole thing collapses?

Bill: They’re doing it at low interest rates, my assumption is, Porter, so I guess a further question would be – what happens when interest rates go up just a little?

Porter: That’s the core of the problem. And that’s what I’m trying to warn people about, because there’s no doubt in my mind that interest rates are going to go up. They’ve come down to a point where it’s very dangerous to assume that you can maintain these debts because the interest rates have been manipulated lower by the government and they’re completely unsustainable. Your question is exactly the problem. As interest rates and inflation return, these companies are going to have a massive problem. The real problem for me, what makes me angry about this kind of thing, is that power plant companies, unlike some other kind of operating business – these companies operate more like a public trust. The power has to come on. That’s not an option. That’s not like a commodity we can live without. And you know, dang well, that when these companies roll over into bankruptcy, the government is going to have bail them out completely. They’re too important to fail. So the managers who have been managing them have been paying these dividends that are unsustainable for years, and those dividends are going to eventually end up as a taxpayer liability and that makes me very angry.

Bill: That’s a good reason to be angry. I was in China not too long ago and to concur with your newsletter, it melded at a good point with where I was at, going to China and driving up and down the freeway in China you realize the pace of industry growth and the amount of coal that they’re actually burning. I was in one of those famous Beijing traffic jams and guess what is in all of the trucks in those Beijing traffic jams? Coal.

Porter: Coal. Absolutely. More than 70 percent of all the electricity in China is coal-fired. China has become a very large importer of coal. If you’ve watched some of the deals that have been happening in the coal industry, you’ve seen that anybody that exports to China is getting bought at a large premium. These are all signs that coal prices are going to go higher and of course coal prices have doubled in the last year. These coal-fired power plant companies of the US – they have some real big problems ahead of them because their main cost, of course, is coal and that is going to go up and continue to go up. Then they have this hidden liability and the hidden liability is the current low interest rates. So as those debts roll over and have to be refinanced, they’re going to have to be refinanced at much higher rates. At the same time, their operating results are going to be collapsing because of higher coal prices. It’s a very, very dangerous situation. And it’s so inevitable that I’ve been trying to raise attention – now. I’ve met with 60 Minutes about this story and I’ve published it in my newsletter. I’m trying my best to warn people about it so that we don’t get to the point where the problem is so big that it causes any kind of a real, actual crisis.

Bill: So this problem – this is another situation, Porter, where this is not a black swan. And you feel just as confident about the collapse of this grid in the format that you’ve suggested as you did about the price of GM when it collapsed?

Porter: Yeah. As you know from reading my newsletter, I don’t make any kind of claim unless I can show you exactly in the numbers what the real problem is. I promise, if you go look at the cash flow and the balance sheet of Southern Company, all these things I’m saying will jump right out at you. I mean, it’s right there in black and white. You don’t have to be a rocket scientist to figure this out. I don’t have a crystal ball. I have the same Bloomberg terminal that’s providing me with data on these companies as every other broker in the United States has. I just spend my time looking at the numbers instead of trying to sell stocks or issue bonds.

Bill: So it’s a giant Ponzi scheme. The other one is, I would say – and I think in the newsletter it was mentioned – is American Electric Power, which the symbol is AEP. People can check these things. Southern Company is SO. They’re both on the New York Exchange. You can go check their numbers yourself and look and see what kind of debt they have stacking up. As you say, there’s no crystal ball here. You just have the guts to connect dots and say this is what’s going to happen.

Porter: Yeah, and I also believe it’s mostly a matter of incentives. One of the big problems with General Motors, with that bankruptcy, was that General Motors was the largest issuer of debt in New York City. It was also the largest advertiser in the United States in terms of supporting newspapers, especially local newspapers, from the dealers. So no one had an incentive to say “boy, this isn’t going to last,” because – all the banks in New York are making money issuing the bonds and all the newspapers in the country are making money advertising cars. So no one wants to be the guy who says “this is a big problem.” My business model is purely subscription. I rely on the support of my customers. I don’t make any money. I’m not going to stay in business unless I tell people the truth.

Bill: Why don’t you make another little prediction? And I’m going to turn it over to Brian for a little break. This can’t but help turn into huge spikes in electrical rates too, Porter, if you want to make a quick comment before we go to break? On where’s electrical rates in this country – where’s that going?

Porter: You’re exactly right. The problem with that is, I can’t make any real firm prediction about that because electrical rates are totally dictated by politics. I can only tell you that the electrical rates are too low to sustain the balance sheets of these businesses.

Brian: Let’s end it on that. We’re going to go ahead and go to a quick commercial break. Porter, Bill – we will be right back to Off the Grid News. Listen to this little riff and then we’re back.

[0:23:26-0:28:15 break]

Brian: Ladies and gentlemen, welcome back. Once again, Off the Grid Radio – the radio version of Today, as always, here with Mr. Bill Heid and our very, very special guest, Mr. Porter Stansberry. Bill, I know that you wanted to talk about a more recent newsletter that came shortly after “The Power Grid will Fail,” but Porter’s newsletter “The Secret Meeting about Food and the Growing Risks of a Global Famine.”

Bill: That was November’s issue and, again, my mouth dropped, because so many of our listeners resonate with that idea of – there’s the distribution available for food – three days in the supermarket. So every one of our listeners knows that when I see a headline like this, what in the heck’s going on? So Porter, why don’t you tell us a little bit about your secret meeting and why that led you to the conclusion that we’re really at risk with respect to our food security.

Porter: Well, it was certainly a very unusual invitation I received. Luckily, a lot of very senior people across corporate America subscribe to my newsletter. Again, they do so because they know that I’m really looking into the numbers of things and that when I make a prediction it’s based on the facts and the accounts, not just some sort of a crystal ball. I’m not saying “10 years from now something might happen,” I’m saying “look at these numbers. This company is heading for bankruptcy,” or “look at these numbers. This company’s heading for growth.” I got invited in November from one of my best contacts – a guy I’ve known for over 10 years. He’s one of the wealthiest people in the world, in fact. He invited me to the biggest penthouse on Park Avenue that I’ve ever been in. It was enormous. He had a seated dinner for 30 people. Most of the people there were very senior members of the largest global food companies. I agreed not to name names, because it was an off-the-record meeting, but there were several CEOs in the room. There were several leading political figures including a senator. The concern that the global food companies have is that there will be a famine that breaks out in the next 12 to 18 months because of the risk of a currency and trade war. We saw this happen in 2008 when prices for commodities went sky-high. Various exporting countries put limits on exports, so they stopped exporting things like rice. That caused the financially weaker countries, particularly in the western hemisphere, to suffer famine conditions. The food companies were saying “we can see the handwriting on the wall. We know the dollar is going to hell in a hand basket. We know that a currency war has already broken out. And we know that will lead to a trade war. And when the trade war breaks out, we don’t want you blaming us for food shortages, because we’re warning you right now it’s going to happen. We’re warning you right now that we’re stockpiling everything we can. And we know that it will not be enough.” So they were trying to give the heads up to people like me who could get the word out, and the people like the politicians who could do something about, hopefully, the policies, so that this problem could be minimized. But there’s no doubt in these food companies’ minds that we’re heading towards a very, very serious global food shortage that will be brought on by the currency wars and the trade wars that are now under way.

Bill: We hear this from folks like Glenn Beck and we know that there are insiders that watch Jesse Ventura’s show. You know the government is storing food underground and so forth. But then to hear, again, from the wealthiest, the best, the brightest, our own food producers saying “there’s not going to be enough” – that should make you sit up and take notice, don’t you think, Brian?

Brian: Absolutely. And I listen to Porter speak and my mind starts running wild. There was a report I saw just the other day that they say that there very well could be the worst draught in America’s southwest, where we get a ton of food from as well, the worst draught in 200 years because of the way things are going and the Colorado River doesn’t have enough water to support it. It just snowballs, Porter, to where I hear you speak and then I go “wow!” I’ve tied together two or three other stories that I hear about, and we’re taking it from all angles.

Porter: Yeah. And let me be clear about where my position is on all this, because it’s real important to me not to ever offer a forecast for something that I can’t really prove. I’m not making any forecasts based on weather. I’m not making any forecasts based on crop yields or anything like that. What I’m saying is, if you look back at the Great Depression, when our economy went south, the global economy goes south. Certain things always happen, one of which is all the countries in the world are going to try to devalue their currencies to gain advantage in trade. We’re already doing that right now. When that happens, countries around the world respond by putting up trade barriers. We’re already seeing that as well. So as this problem grows, the big problem with the trade war is, it stops the food supply. The whole world has become so integrate that we can’t feed people around the world without free trade. So the big risk to the currency war is interruptions in food supplies and that is what the global food companies are talking about. So I think that you can look at things from the agricultural perspective, which is we’ve got some serious problems in arable land and these kinds of things for the long term, but I’m talking about a short-term, immediate crisis that’s going to be caused by politics, not by farming.

Bill: And then the reactions to the reactions. I think, when you look at government, there’s always a reaction to whatever happens, and it’s usually the wrong reaction.

Porter: Exactly. We want to slap a tariff on Chinese steel imports to help our domestic steel industry and that’s definitely a real serious possibility. Then China says “OK, fine, we’re not going to buy any of your agricultural products.” Well, that sets of a chain reaction of problems and they can have really serious consequences for global food supply.

Bill: And we have here, in the Midwest, I think most Americans, again, thinking provincially, think that America’s the breadbasket. And we are in some ways, but as you said earlier, the division of labor has become so pronounced that yes, we produce corn and soybeans and wheat and feed those to livestock, but as you go beyond that, look where a lot of our produce that’s in the average grocery store comes from. It’s not from the United States.

Porter: No, it’s not. It’s from Mexico and Chile and lots of other places. But there’s a follow-on problem that people don’t think about which is – let’s say, for example, as you guys probably know, China became a buyer of corn from the US for the first time in 16 years this year. That’s pushing up prices of corn. That’s making the farmers very wealthy. Sending land prices in Iowa through the roof. All these things are great. Except for, what happens to the poorest of the buyers? What happens to the people, let’s say, in Honduras or in Haiti or in the Dominican Republic? Because when I’m talking about a global famine, I’m not necessarily just talking about people in America. I’m talking about the people all around the world. This is not just an American problem and when you start using corn for things like gasoline, there are repercussions that go out throughout the global economy.

Bill: Those are the costs that I think the average person doesn’t understand. It’s easy for someone in Iowa, which is where we live, right on the Mississippi border here, Porter, so this is corn country. We’re right in the Mississippi Valley, the basin where farm ground is already $7,000 an acre. What we’re talking about here – we’ve been talking about bubbles – what this could do is put another bubble in agricultural land.

Porter: There’s no doubt in my mind that that already is underway. That you are going to see that continue to expand and it’s going to become a very important economic problem. Because China will not import corn forever. And corn will not be used for gasoline forever. So a lot of the farmers, if they’re going into debt to buy the land at this price, sooner or later they’re going to have a big problem.

Bill: Do you think food prices – we’ve said this before on the show and I just wanted to get your thoughts as long as we’re going to stick on food here for a few minutes. Where do you see food prices in the United States going? Do you see this actually putting pressure on food prices here? Upward pressure? Or do you see it putting downward pressure because if we’re not exporting some food items that we do have, will they actually go down?

Porter: Well, there’s no doubt in my mind that you’re going to see upper pressure on food prices for a long time. And when I say for a long time, I mean for at least the next 24 to 36 months. There’s going to be a huge upward pressure on food prices because of the collapse in the dollar. You’re going to see that happen. Over the longer term, I don’t believe that food prices at these levels are sustainable. There’s no doubt that you guys, out in Iowa, it’s going to be a nice couple of years, because you’re going to have some really high prices for your products around the world. Up until the moment that trade barriers get enacted and the whole thing collapses. So enjoy the good times and expect some volatility.

Bill: Don’t borrow a lot of money to buy agricultural ground, right?

Porter: Don’t. I’m sure you guys know the history of Iowa land prices. The last time they peaked I think was in the late 1850s.

Brian: For those listening, I think that’s great advice. We’re going to go ahead and prepare for one more break. We’re here with Mr. Porter Stansberry, founder of Stansberry and Associates Investment Research – a private publishing company based in Baltimore, Maryland. Ever since 1999. He has now grown to be the largest business of its kind and he’s the head of it. And he’s here with us right after this commercial break.


Brian: Ladies and Gentlemen, welcome back once again to Off the Grid Radio, as the announcer says, “getting you ready to prepare for the worst. Most certainly, our guest today is helping us in a tremendous way. We’re on with Mr. Porter Stansberry. Bill, before I throw it to you, this is the perfect example of when I say “we should record our commercial breaks” – Porter’s got me so worked up, I can’t even finish the rest of my diet pop. I just listen to him speak and I’m looking for a wall to bounce off of.

Bill: Well, the stuff we talk about sometimes during the breaks, as you say, and I say “no, no, no! Let’s save that! We can’t talk about that on the break!” Porter, the stuff we were talking about during the break – we were talking a little bit about Ron Paul and a little bit about democracy. I want to move into the debt abroad, the debt here in this country, the big collapse in bonds – how we can’t pay off all this debt. One of the comments you had made in a newsletter was something to the effect of, why a democracy – it’s like GM, it’s like the electrical grid, it’s like so many of these other things where we can just say “this guarantees its own demise.” How does democracy guarantee its own demise in an area like debt?

Porter: It’s so simple. It’s just a matter of incentives, right? When you have a majority, actually, of Americans, that are not paying any federal taxes whatsoever – none – you’re always going to win elections by promising those people benefits, because those people know they will not pay for them. So when you have a majority of the voters who aren’t paying anything, in terms of the bill, you’re always going to have an incentive to grow the government. There’s no way the minority can win because they’re being exploited by the majority. It’s really simple mathematics and understanding human incentives. It’s sort of obvious. So the compromise that always inevitably ends up getting made is “OK, we’ll do the spending that the mob is demanding, but let’s not actually pay the bill. Let’s just go into debt.” And if you look at the history of the US, that has been the story in congress year after year after year, for most of the last 50 years. Of course the compromise that was reached this month is just another echo of that same principle at work.

Bill: What are some of the lessons that we can learn from history? You have to pay debt off with something, and governments almost always – I don’t know of a government that’s ever made a decision to pay a debt off in the amount that it’s been monetarily appraised at. They always want to paper it over, don’t they?

Porter: Of course. I like to say that paper money is the bridge that allows you to violate all the rules of economics, because the central rule of economics is scarcity. There is never enough of anything to satisfy everyone. So when you make something like medical care free, essentially, you’re going to have a demand for it soar and you’re going to have lines of people waiting and the quality of service is going to deteriorate. The fact of the matter is, you can’t give health care away because it’s very expensive to provision. The number one law of economics is scarcity. Meanwhile, the number one rule of politics is patronage. Right? You get elected by promising everything to everyone. You get elected by promising to violate the rules of economics. How can they actually do that? There’s only one way, and it’s the printing press. People think that the printing press doesn’t have any consequences. You’ll remember our vice president, Dick Cheney, saying that deficits don’t matter. Well, we’re about to find out that deficits really do matter. And I’m afraid that we’re going to find out in a way that is going to be horrific for most people. That’s my main big warning. I don’t know if you’ve seen the video that I have out on the internet right now, but I’ve been trying to explain to people that we are heading into a hyperinflation, that it is inevitable, and what’s most unfortunate is that the people who are now in charge of the Central Bank, have no idea of the risk that they’re running.

Bill: They’re running tremendous risks and, of course, calibrating that to perfection. Man isn’t God; man tries to become God. I think the Fed tries to play God – tries to appropriate that position in terms of “we’re going to create a soft landing.” Looking through your current newsletter, I came across your idea of researching the Greek economy is like reading a financial comic book. Do you want to mention a few of those things? Let me say one, for example, and you can comment. It says the national railroad in Greece has annual revenues of 100 million Euros, against a wage bill of 400 million Euros. And something just as funny, the Minister of Agriculture hired 270 people to digitize photographs of Greek public lands and gave them one camera. Do you want to comment on that?

Porter: There’s all kinds of these absurdities. But I have to say, it’s more entertaining – it certainly makes you more popular – to point the finger at European governments that have engaged in absurd excesses. But guess what? America is far more in debt than Greece is. We already have – total debt to GDP in America is already 400 percent. That is the same level of Iceland, when Iceland collapsed. So we’ve been running our country like a banana republic, except for we’re not a banana republic; we’re the largest economy in the world. Our dollar is the reserve currency of every central bank in the world. So when we blow up, the consequences are not going to just be, “oh, look at those idiots in Greece,” or those idiots in Iceland – the consequences are going to be enormous. We really have no way of knowing how bad it might be, because there’s never been a world paper currency reserve standard that blew up before. So we’re heading into uncharted territory, and as fun as it is to point the finger at Greece, why don’t we point the finger at America? We’re spending 20 percent of GDP on health care and we have some of the worst health care outcomes in the developed world. We don’t live longer than anybody else. We don’t live healthier than anybody else. We’re wasting enormous sums of money in our health care program. We could go on from there … Amtrak loses far more money every year than the entire Greek rail system does. So it’s fun to point the finger, but let’s also look in the mirror.

Brian: That’s a great point.

Bill: I was going to say that it’s also fun to point the finger at Democrats, and we should, but I think so many people – we were talking about this on the break as well – so many conservatives, if you hold the flag up and talk about Dick Cheney – did I hear what you say what Dick Cheney said about deficits? “Deficits don’t matter.”

Porter: Right. He said deficits don’t matter.

Brian: But neither does a shotgun blast to the face while you’re duck hunting with a friend. Apparently that doesn’t matter either.

Bill: It’s that time of the year. [laughs] But how can these people say this? That is the most dishonest, irresponsible thing to come out of a human being who’s in office, and yet it he’s a Republican, people just say “yeah – go man, go!”

Porter: I tell you what, if we’re going to have an award for the most irresponsible thing that’s been said, I don’t know how you can’t give that to Nancy Pelosi. I’ve got about two dozen of hers on my computer. They’re just real doozies. But for me, I’d say probably the most irresponsible thing I have ever heard said by a public official, was Ben Bernanke a week ago, or maybe two weeks ago, on 60 Minutes, when he claimed that he is not printing money. That he got away with saying that, without anyone questioning him is unbelievable! I mean, Ben, if you’re not printing money, then where did the $1.8 trillion that you have spent, come from? Where did it come from? Because it wasn’t appropriated by Congress. So if you’re not printing it, just tell me, is it a charity that you’re running? Are the receipts somewhere that I don’t know about?

Brian: And I think he’s being – obviously he’s being sly, guys, because what he meant – what he had as a backup was, “it was all done digitally. I didn’t actually use green ink and paper. It was all done on my computer.” Because if that was his mindset going into it, then he should be – I don’t know if you can impeach – how that works at the Fed, but he should be outed for sure, having made that statement. I watched that same thing, Porter, and I was like, is he delusional? Is he schizophrenic? Does he not know that the rest of us are onto him?

Porter: I tell you what, he does know. And you know that he is … not that I really have any sympathy for him, but he is going to end up being the bag holder for all of our nation’s problems. And if you saw him on 60 Minutes, you know he’s aware of it. I mean, he was trembling so hard he could barely speak.

Brian: I think he’s knows it’s coming. For me, every time I hear him speak – two things, quickly, I’m going to say Porter – one, would you like to announce on our show today that you’ll be running for public office? Because I’ll be your campaign manager if you want to make that announcement today. Maybe you should be – I don’t want to say which state you live in, but start – senator – and I know that’s me being the rock-and-roll Libertarian. I know I look at life differently than everybody else – probably most of our listeners. That would be number one. And number two, what are we going to do – I say we do a Porter Stansberry cartoon. Look at how these cartoons are taking off, Bill, across the internet, describing what’s going on in the Fed.

Bill: Here’s one that I want to do. I want to do a cartoon, and I’ll put Porter in “It’s a Wonderful Life,” with Donna Reed as they’re getting ready to leave town and they look back and the guy says “I’ve never seen one before, but that looks like a bank run.” Porter, my question for you is – as we’re starting to wind down here, a couple of things – do you ever think we’ll see a bank run? I know I just mentioned this piece in the European press about everyone in Ireland’s grabbing their money and taking it home. What do you think about here?

Porter: Well, this is something I’ve been saying to some people for a couple of months now, and I got some really crazy looks at the beginning, but I don’t get those crazy looks anymore. My question to you in reply is, where have you been? How high will the price of gold have to go before you will say there is bank run underway? How high will the price of silver have to go before you say there’s a bank run under way? How high will the price of corn have to go? The price of oil? The price of real estate in Iowa? Look, it’s underway right now, guys. And if you haven’t noticed that yet, you’re not paying attention. People are fleeing the dollar. Central banks around the world were net buyers of gold last year for the first time since 1971. Why would they do that? People keep saying “there’s a crisis that’s coming.” No, no. The crisis is right now, and if you don’t know that yet, believe me, you’re in big trouble, because it’s going to be harder and harder and harder, every day for you to get out of the dollar. It is already here. You have got to wake up.

Bill: So what’s more dangerous maybe, as I hear you saying – and anyone listening, pay close attention to this – what’s going on right now in our economy, this being nibbled to death by ducks as opposed to the “It’s a Wonderful Life” eaten by alligator scenario, where the bank shuts and says “no.” This is probably much more insidious that that could ever be. Would you agree, Porter?

Porter: Sure. Absolutely. As you guys well know, the more money the Fed prints, the more value is being stolen from you as a person in a dollar economy. It’s that simple. Instead of making the people who made the bad loans pay, and instead of making their creditors take a haircut, all of us are having to pay. It’s absolutely completely repugnant and immoral and it’s terrible that Americans have to stand for this. I think that everyone who’s in power now politically is going to get slammed. Sooner or later – you’ve already seen that happen too, look at the last election. But I want to tell you guys this, if Republicans don’t wake up and start taking the people seriously, there is going to be hell to pay politically in this country.

Bill: And at some point, I think you predicted too, when we were in Belize, that our children, or our children’s children, at some point, will look back at paper currency and say “dinosaur.”

Porter: Well, yeah. Actually, it has nothing to do with our grandchildren. My son Traveler is three years old. A lot of times when I’m doing financial research I think to myself, will my son use this company’s product or service? Because that gives me whether or not it’s really a good business, it has a real mode, et cetera. When I look at paper money, I’m trying to imagine me trying to explain to my son, why I accepted it in payment for goods and services. And there’s no way you could explain it to them. The other analogy I used in Belize was, imagine if a Martian had landed on the earth and he had never heard of any kind of paper money system. He would think we were all fools for agreeing to hold and accept paper money as payment for goods and services. It’s not worth anything. It has zero intrinsic value. And it’s controlled by a corrupt government in Washington, D.C. Why would anyone accept it?

Brian: Again, the black ostrich. And also, just to let you know, I’m checking right now on the website I’m going to buy that website, you’re darned right I am. I just ask that you come back to our show, Porter, when you’re running. I’ll vote for you. Again, be forewarned, Libertarian bent and all, I’ll vote for you when you run.

Bill: And let’s do one more thing before we close out, Brian. Porter, I heartily suggest, everyone that’s listening to this subscribe to your newsletter. I do. It’s the most valuable piece of intelligence that I get every month. How can they subscribe?

Porter: You can just go to our website, is the easiest way. And if you’re on the internet, I’m sure you’re going to see our banner ads and stuff advertised as well. Click on any of those and sign up. My letter is very inexpensive. It’s $49 per year, and if you don’t like it I’m happy to always refund your money and we can part as friends. I’m not in the business of ripping anybody off.

Bill: It’s one of the best investments that you’ll make.

Brian: I’m on that website right now, Bill. Again, it’s You hit on the products tab – the SRA?? products tab. Porter, I’m looking at signing up right now myself. Would you say the investment advisory is a good thing for a guy like me?

Porter: Yeah. That’s the newsletter that I write. It’s called Stansberry’s Investment Advisory. I have other products and services too, if you’re interested in specialized things like research on oil and gas companies. We have all that stuff. But I wanted to say in regards to the president issue, I’m probably going to get two votes – you and my mother.


Brian: That’s OK. I dig your mom already. Listen my friend, I’ve been in political realms for a while and have helped other people in public office. You decide to do it … here’s the thing, Porter, and then I know we have to go. I think people around our country are waiting for one person – and I ask Bill all the time, who is that one person? To stand up and go “look, you’ve been bamboozled.” We’re throwing our grandchildren – and as you just said, even our children – under the bus. It’s going to be tough. It’s going to hurt. But we have to do it right now. And I think when that one person comes, people are going to start to wake up. No more black ostrich. And I think that person will be at 80 percent at the polls within a month. Whether it’s just me and your mom voting for you, have your wife give me a call I’ll make sure we get three votes. Bill will vote. Jeremy will vote.

Porter: No, no. My wife wouldn’t vote for me. She knows me too well.


Brian: Jeremy, let’s edit that part out. I’m sure she thinks you’ll be a lovely candidate for president. Alright, Porter, I know we promised we would only hold you for an hour, and we’ve done that. So, Bill, any parting thoughts before we let Porter run?

Bill: No, just thanks, Porter, for the time and again, I would encourage everybody, for $49, that is super cheap for what you’re getting. Subscribe to it and enjoy. We’ve got tough times coming and you need the information. That’s what we try to provide but Porter goes into depth on the economic level that we can’t touch, so subscribe.

Porter: Let me just also repeat, my newsletter is done very well. You can try it and if you don’t like it, believe me, no hard feelings. I’m happy to send your money back. We have plenty of subscribers, but I think it would help with your readers if they’ve agreed with some of the things I’ve said.

Brian: Alright, my friends. As always, you’ve heard me say “an hour across the table from a wise man is worth a year’s study in books.” And we most certainly have had that wise man with us for the full hour today. Porter, personally, I thank you very much. I’ve learned an absolute ton from you.

Porter: Guys, I really enjoyed it. I hope that you’ll invite me back. It was a lot of fun.

Brian: well, like I said, when you’re going to announce for president, have your mom call me and we’ll do it right here at Off the Grid News. Porter, thanks so much for your time. Alright, Bill, unbelievable. Unbelievable. It just makes me want to pace. He gets started talking and you think about whether it’s the food shortage or the grid. This is brilliant research.

Bill: It’s brilliant research and I’ve been reading it for a while. I’ve suggested it to you before. I think I’ve brought it into the show before and said “look at this story.” It’s been great…a blessing to me.

Ladies and gentlemen, as always, thank you so very much for hanging out with us at Off the Grid News. As you know by now, be sure to email us your questions, your comments, your critiques, your suggestions at [email protected]. You can find us on Facebook – And as always, follow us on Twitter @offgridnews. On behalf of Bill Heid and the entire staff here at Off the Grid News, I’m Brian Brawdy. Thank you so very much for giving us an hour of your time.

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