What Could Go Wrong with Addison Wiggin

george grombacher 0:02
Addison Wiggin is a writer, a publisher and a filmmaker. He’s the host of the Wigan sessions. It’s a show covering the financial markets, economy and politics. And he’s the host and editor of essential investor. The third edition of demise of the dollar is available now and third edition of the financial reckoning day of financial reckoning day. We’ll be coming out middle of October. Welcome Addison.

Addison Wiggin 0:28
Yeah, great to be here. Thank

george grombacher 0:29
you. excited to have you on the show. Tell us a bit about your personal lives more about your work, why you do what you do?

Addison Wiggin 0:37
Yeah, I have been most of my adult life, I’ve been fascinated by financial markets. And I’ve been writing about, I have a sort of a central question that I asked whenever I start getting interested in the topic, and it’s kind of a gloomy one. But I asked what could go wrong. There’s many things that go on in the financial market, that don’t make a lot of sense. You know, the obvious ones are where we have a blooming, skyrocketing financial, national debt, we’re up over 33 trillion, when I first started getting concerned about the national debt, it was 2.9 trillion. So I’ve been following the the just crazy politics that go behind that kind of spending and borrowing and spending and spending and borrowing for three or two and a half decades, and and the pattern with which the government is run and the way they spend money is is unsustainable, but it has gone on way longer than I expected. Another area that I focused on is just the value of your money. The book demise of the dollar is sort of a historical look at what happens when governments try to manage fiat currencies like what we have and a fiat currency is basically a currency that has has value by decree of the government. So they go hand in hand, the government is spending way more money than they take in in tax receipts. And then the only way they can make up that deficit on an annual basis and the national debt is by printing more money. And every time they print money, the purchasing power of the dollar goes down. Since 1971, when the dollar was taken off the gold standard, or the Bretton Woods exchange rate system, as it was known, the dollar has lost 98% of its value. And there’s the past couple years, we’ve gone through a couple year bout with historic inflation. And just really quickly, following the financial crisis of 2008, the government dropped interest rates to zero and, and printed tons of money by buying assets directly in the market. It’s a program called quantitative easing. And so for 10 years, we had all this money flowing into the market. And finally, after the pandemic, he reared its head as as massive inflation. And that’s really the only time that people begin to pay attention. So I’ve been pretty busy on podcasts and, and my own show, talking about the impact of inflation on people’s ability to buy stuff that they need. You know, just basic houses, cars, tuition, food, gas, everything has gone up. And for the first time you need this past couple years, people are wondering why. So a lot of the historical work that I’ve been doing, in my own writing the books I published, trace what could go wrong when the government is as propagated as is and if people have to spend the money that they print, we’re all in the kind of same boat when he loses value, and then everything costs more. It’s not an easy situation for a lot of people.

george grombacher 4:02
So looking back 2.9 trillion, you’re like what’s going on here? We’re sounding the alarm. This is a huge problem. And now 33 point 33 trillion.

Addison Wiggin 4:14
Yes. So it’s kind of crazy.

george grombacher 4:17
You talk about how it’s not sustainable, but it’s sustained for this long have have we finally come to the end of the rope figuratively?

Addison Wiggin 4:26
Well, it most recently, I’ve identified three things that I think are happening that could potentially make 2020 for a very interesting year in the financial markets in the economy in general. And obviously we have a presidential election election coming up. So one thing has happened. You know, we’re talking about sustainability. How long can this go on? Well, the fact is, it can go on for a very long time until something breaks the bubble. We’re in what what we would historically call A major debt bubble. People have been able to finance their stuff for a very long time at low interest rates. But now in the attempt to battle inflation, we’re going into an extended period of rising interest rates. And that’s going to be very difficult for people who have loaded up on debt. And at the national, corporate and personal debt levels, we’re reaching historic highs, obviously national debt is, every day it goes to a new high because we’ve never done this time before. But corporate debt is at an all time high in 2023, just the first half of 2023, we had more corporate bankruptcies than the prior 10 years since the 2008 financial crisis. And that trend continues. And then at a personal level, this is a kind of an astounding fact, during the pandemic, a lot of money was shipped directly to to consumers from the government that stimulation in response to the pandemic lockdowns and for the most part, people couldn’t go anywhere they couldn’t spend it. So we had a high savings rate we had near historic high savings rate. But all that money has already been spent. And people are turning to their credit cards to keep up their spending in a rising interest rate era. So what we have now is we have historic high consumer debt levels, and a savings rate that’s below zero now. So we in the two years since 2021, personal debt has skyrocketed to historic levels, and savings rate has plummeted to historic levels. So that happened in a very short amount of time post pandemic. And the we’re starting to see the effect of that in two ways. One is big retail companies depend on middle class shoppers to make their budgets and we’re already seeing same store sales in places like Walmart, and target. And big box stores even even, like hardware stores, like Home Depot are showing that the consumer is getting tapped out. And so that’s part of the state of sustainability factor is how long can consumers sustain this borrowing to spend in a rising interest rate area, that’s that’s one factor I’m keeping an eye on and I suspect we’re gonna see a lot more corporate bankruptcies in 2024, because consumers won’t be able to keep up their spending except on on debt loads, that are experiencing rising interest rates. The second thing that I think no one is prepared for I’ve been talking about this, mostly because I’m fascinated by it. But we, for nearly four decades, we have been outsourcing our jobs and manufacturing to countries overseas. But most notably China, China built out their infrastructure by taking on projects from US corporations and European corporations that were seeking cheap labor, cheap resources and cheap transportation. Well, we’re entering what I call an era of the end of cheap because to in order to finance all of the the outros for infrastructure and for factory building, and and these ghost cities that we hear about in China, they have financed all that on their own debt bubble. And for the first time we’re seeing their growth rate has dropped from an 8% annual rate for a long period of time, which is extremely fast growth. We’ve seen China leapfrog other countries to become the second largest economy in the world. But that now their growth rate has slowed to it’s probably going to be around 2% in 2023. And across all strata of their society, we’re seeing debt, debt, rearing its head, they basically are in their own aggressive debt bubble in the same way the United States is but their, their financial infrastructure is less sophisticated. Their banking system is not regulated as as well. And they have a strange method of buying up companies in rural areas. The government itself buys companies in rural areas and makes them take on debt in order to build out roads and factories. And those companies that are effectively forced to do that by the government are finding that they can’t make enough revenue to pay back their own debt. And the government tries to help them but the only way that they can get out of it is the same way the United States is trying to do is is spending money that the government prints and so we have an issue where the Chinese government has been forcing the growth of the economy. And that’s coming to an end because they’re not able to finance, finance the debt loads that they’ve taken on. So it’s kind of an interesting story. And people ask me, Well, why should I care what’s going on in China. And the fact is, we’ve been dependent on China for a very long time for the cheap stuff that we buy in the same big box stores that I just mentioned, are already having trouble meeting their their own books. So we have at the same time that we have a slowdown in consumer consumption, we’re also have this and the end of the era cheap is coming along. And it’s going to make it very difficult for big, big companies that you’d find on on Wall Street to make ends meet, and that forces a condition I call a balance sheet recession, there’s there’s a lot of talk about Will we go into recession, because of the measures the Fed is taking to, to reduce or to get control of inflation. But the real danger, in my opinion, is balance sheet recessions on Wall Street on these big companies that are showing losses. And they have to figure out how to manage those losses before they report earnings. If they do report earnings, bad earnings, like Target and Dick’s Sporting Goods, Walmart, they’ve all reported less same store earnings than then in previous years, and they immediately get their stock sold off. So the impact of the balance sheet recessions that we’re expecting to see is that you have you have more strain on the stock market, the stock market has already been riding high on things like artificial intelligence that carry the market for most of this year. And it’s not being replaced by the general general strength of retail companies, which generally make up a big part of the strength of the stock market. So I expect we’re also in addition to a slowdown in consumer spending, I expect the stock market is going to begin to fall to it. And when that happens, then people really start getting nervous because they’re so dependent on their 401 k’s are raised and those kinds of things, their pensions, they’re all wrapped up in these big blue chip companies. So I expect 2024 is going to be an interesting year in the economy and an interesting year in, in the stock market. And when you have these things converging you have, we’ve seen more and more violence in things that the protests that get out of hand, random mass shootings, that they have not only captured the attention of the media, but they’re happening with a little bit of frequency. And that generally happens the last time we had anything like this was in the 60s and 70s, when it was just general disruption in in the economy, and people are stressed because of the financial their financial situation, they tend to do really stupid things they take to the streets more often. We see strikes all over the place, we’re at the highest level of striking workers since the 1970s. Right now, you can see just on a surface, you can see the economic stress and tensions starting to appear in a way that it it makes it difficult for the mainstream media to to keep up the narrative that the economy is strong. And that’s the third thing that I think it’s going to be a challenge in 2024 is we have the presidential election, generally, President who preside over a failing economy or a slowing economy, don’t do well in the election. But this is going to be a different year, because we have Biden who’s getting on in age, we have Trump who’s getting on in age, we have the sort of leaders of the two parties that that have a mindset of the old world are not taking into account the wave of enthusiasm of young people to put younger people or younger representatives in Congress or in the White House. And there’s a huge divide politically, not just between left and right. But between the old and the young. And that’s going to make the

the election for presidency next year, it’s going to make it much more unpredictable than we’ve seen in the past, especially where we have a rising level of economic uncertainty, economic stress. And you know, young people are willing to take those streets just for for any reason. We have vast demonstration saying and oil and fossil fuels, as if you can just flip a switch and turn up the economy and start with a new energy. It’s just not possible. But you know, there’s there’s millions of young people that are taught that that’s that’s what we need to do and how has to happen quickly, and they’re willing to shut down the economy in their in their area. Just just to prove that point, I think it’s going to make a very fractured and difficult series of primaries. And then when we go into the election itself, I think you’re gonna see a lot more protests a lot more random violence in, in society. Those are not nice things to think about. But with all these trends in place, consumers demanding the end of cheap and a political divide that we’re going through. If you do ask the question, What could go wrong, there’s a lot that could go wrong. And that’s really what I’ve tried to focus on on a daily basis is trying to figure out what’s going to happen next, it’s very difficult when there’s so much uncertainty as there, as there is right now.

george grombacher 15:50
advice to individuals, families who are listening.

Addison Wiggin 15:54
Yeah, I would say I mean, I have specific advice, because we also publish financial advice for people that are trying to manage their own money. So one of the things that I’m telling people now is don’t really look at the headlines, just recognize that these trends are in place. And I would stay away from any of the blue chip retail stores, because I think they’re gonna have a tough year next year. And they’re because the stock market has been higher than that, I think it’s value that or that it’s true intrinsic value is any, any indication that big pension funds or big mutual funds have that there’s going to be weakness in the retail sector, I think it’s going to, it’s going to go down faster than than it’s really warranted, because there are people who are stressed in the financial markets too. And they’re wondering when when the next shoe is going to drop, so to speak. And so generally, when that happens when when a sell off begins, it’s more, it’s more aggressive than it needs to be at the surpasses the point where they’re valued at at a good place again. So we are, I do believe we’re going to have a pretty serious balance sheet recession, but then when the sell off begins in Wall Street, especially retail sector, and anything that has exposure to to Russia, I mean, China’s is the is going to have a really difficult year. And the tendency is going to be to oversell so we could see a pretty dramatic pullback in the market next year. So that’s one thing I recommend to our readers is make sure that you’re if you’re using a financial advisor, or if you’re even just trying to manage your own money, make sure that you that you tell your advisor or keep in mind that stocks do go down. And we’re about to enter a pretty tough period for big blue chip stocks, which will get headlines and cause this kind of like Echo Chamber of people thinking that things are getting worse, and they’ll sell off faster. So that’s one thing. Another thing is to look at areas of the market where they’re immune to, to market crashes, and also a slower economy. And that’s the two sectors I liked our energy and commodities. and precious metals, two, I think gold always performs well, when we have uncertainty in the stock market and the economy. In the last couple of years, it’s sustained a level around 2000 For about a three year period now. So even if the stock market goes down, putting your money in gold is a good idea. And looking at the basic stuff that we need to run our economy, energy is going to be important. And I think even though there’s a social movement against fossil fuels, I think things like natural gas and oil are going to continue to rise in necessity, therefore value, therefore prices too. So in an era when the economy slows down, the dollar gets weaker than generally commodities, things that we need to make stuff and energy to do really well. So we I actually just really stayed especially with port on that idea that we’re going to have balance sheet recession and, and growth in investing in energy and in raw materials. And I think that that is going to be the story. For 2024. The biggest unknown is going to be the political situation. I think as soon as January 15, which is the first primary it’s the Iowa caucuses. I think we’re gonna start seeing a lot of uncertainty in the political arena. There’s already questioning about whether Biden should run again because of his age. So over the weekend, I was watching the financial news and something like 78% of all Americans, not just Democrats think that Biden is too old to run again, it’s when the when the talking heads when the politicians get on TV, they say, Well, we’re all behind Biden, we think he’s the right pet. So there’s some uncertainty there. And then the when the indictments against Trump play out, he’s he enlisted the people that are supporting him believe that they’re politically motivated. But there is still a process of law that probably the most dangerous one there is in Georgia, they can’t get it moved to federal, the federal system. So state law in Georgia is, is that played for I think something like 18 of Trump and his the people that he was working with to that being that are they been indicted and are accused of trying to overturn the election in Georgia violating state law, and a lot of those indictments come if they’re, they’re convicted, come with jail terms. So I think that that also is going it’s there’s no way to predict what’s going to happen. Especially when those trials begin, and they’re happening right during the primary season. So the recipe is in place to have a very difficult political year, and that’s what’s gonna raise havoc with the markets and the economy. Also, you got three big trends that are happening at the same time that that I expect 2024 to be one of the most historical years of this era, this post pandemic era.

george grombacher 21:39
Addison, what could go wrong?

Addison Wiggin 21:41
Yeah, what could go wrong? It’s kind of a fun question. If you if you approach it, right, it is useful. Yes, I asked that question. And a lot of people are like, Why don’t you know, what’s wrong with you? Like, why are you this way, I had one woman just get my face at a at one of our launch parties, actually, for a book about 10 years ago, and she’s like, what’s wrong with you? Why are you this way? And she’s really mad at me, because I was trying to understand literally, what what could go wrong, wrong in the economy. But my idea is, if you ask that question first, and then you can see sort of like the base level of protection you need for your own money, if you have earned enough money to worry about it, then then you should be asking the question, What could go wrong? And then preparing accordingly, at a basic level? And then if you have, you know, if you want to take a flyer on Kryptos, or, or something like that, then as long as you have answered the question, What could go wrong for the rest of your money than speculation in AI stocks, for example, even flying off the shelves this year, just this new wave of interest in artificial intelligence, has been driving chip chip makers through the roof. And a lot of people mistake that for a healthy stock market, but it’s really just a small bubble in one sector of the economy that’s holding the entire market up. So I think it’s important to ask the question, What could go wrong? Try to answer those questions and then manage your money at 14.

george grombacher 23:14
Well said, Madison, thank you so much for coming on. Where can people learn more about you? How can they engage? Where can they get their copy of demise of the dollar as well as?

Addison Wiggin 23:25
Yeah, oh, sorry about that financial American Day to financial reckoning day is not out yet. I just finished the edits on that it’s in Publisher land, they’re getting ready to print it, and it will be released in the third week of October. But demise of the dollar, which is really an understanding of how purchasing power is falling apart, and has been for a number of decades, and what you should do about managing your own your own money, as, as that trend continues, every crisis that the government faces, they solve it by printing more money, they don’t really have any other way to solve economic crises other than, than printing more money. And every time they do that, you lose, you lose more purchasing power. So if you want to understand how that works, and how it has worked, specifically, with respect to the US dollar, that’s why I wrote the book, because it’s a historical look of how we got in this, this situation and then forecasts of what what can happen in the future that’s called demise of the dollar. You can get that anywhere books are sold, and on my own website and go to Wigan sessions.com. And I also write a what I call the daily missive, which is just kind of a look at the markets and I’m also trying to answer the question what went wrong in that writing as well. It’s a daily email. It’s usually about a page page and a half long, not too difficult reading. You can get that by going to join the sessions.com to www dot join the sessions.com. And you can pick up my interviews with my own guests on my show, plus the writing that I do to support those interviews.

george grombacher 25:13
Excellent. Well, if you enjoyed this much as I did show Addison your appreciation and share today’s show with a friend who also appreciates good ideas, go to Wigan sessions Wi G G I N sessions.com. And also join the sessions.com and sign up for that daily missive that Addison puts out. And then get your copy of the demise of the dollar as well. So you can better prepare yourself for what could go wrong. Next can Edison right, thank you. Until next time, remember, do your part by doing your best