Goldman to Trump: Situation Assessment, Government Bail-ins, Precious Metals Threat: Systemic Collapse

A guest post from Stewart Dougherty. Stewart included some thoughts in his email to me that I thought should be shared as a preface to his essay:


Hi Dave:
Some pretty heady stuff, particularly the part about the Fed’s balance sheet being a lie. (I am 100% convinced of this, but cannot prove it, at least not yet.) And remember, Bernanke was caught issuing $10 trillion in swaps to foreign banks, all of which was supposed to remain a complete secret. It is not as if they haven’t been caught doing what I am saying they are still doing, to an even larger degree.

I’ve stated that the “conversation” is imagined, intuited and fictional, so the small living parts of the shredded Constitution might actually protect my freedom of speech; wouldn’t that be amazing.

I believe “government bail-ins” is fresh terminology … people hear about bank bail-ins all the time … but they don’t hear about government bail-ins, which are going to affect far more people and are inevitable. (As I’ll explain in Part 2, government bail-ins are not going to be about taxes … tax increases are too slow, and oftentimes don’t even work.) Since it’s new, the term government bail-ins might gain a lot of attention.


Despite Goldman’s avid support for Hillary Clinton, fewer than three weeks after the election, Gary Cohn, the number two executive at Goldman Sachs met privately at Trump Tower with the President-elect. Ten days later, he was named to one of the most powerful financial positions in the world, Director of the National Economic Council of the United States of America.

As they say, knowledge is power, and power is knowledge; both open doors, ears and minds when they decide to. What could Cohn have said to Trump that resulted in his near-immediate hire? Using the Inferential Analytics methodology, we have synthesized a message a visitor of Cohn’s stature might have conveyed to Trump on November 29, 2016. And while it is inferred, intuited and fictional, the following transcript is deeply grounded in the nation’s current and prospective fiscal, financial, monetary and economic situation.

The Visitor: “I appreciate your invitation and it is a pleasure to meet with you today. Permit me to convey Lloyd’s congratulations. He would like to assure you that you have Goldman’s full support going forward.

“Our time is short, so I will give you a very high level situation assessment. Thousands of person hours and millions of dollars’ worth of research and analysis stand behind each of the themes I will touch on, and we can provide additional details if you wish. As one of the U.S. government’s closest financial allies for decades, particularly when it comes to the placement of the nation’s sovereign debt, we have a deep understanding of the financial dynamics at work. When I use the term “we,” it is because Goldman and the United States government have been close business partners for many years.

“As you correctly stated to the American people during your campaign, the situation is not good. It is containable at this time, but only if we continue to run substantial deficits and create large sums of new dollars, in other words, debt. With all due respect, we believe the U.S. government is going to need our help as never before in the coming months and years.

“I will briefly touch on nine topics. There are others we could discuss, but these tell the most important part of the tale. They are: 1) Deficits; 2) Debt; 3) Reporting; 4) War; 5) Perception; 6) Stocks; 7) Money Creation; 8) Currency; and, 9) Precious Metals.

“As you may know, I started my financial career as a Comex trader, and Lloyd began his as a gold dealer at J. Aron, which was acquired by Goldman. We both have extensive experience in the Precious Metals markets, and believe they are going to be of incalculable significance in the near future. I will review this topic later.

“All I ask is that you not shoot the messenger. Much of what I tell you is troubling.

“First, the deficits are structurally non-containable. The OMB itself confirms this, projecting escalating deficits for the next 50 years, with not one year of surplus during that entire time. The aggregate deficit during the next decade alone will be at least $10 trillion. If there is a slowdown or recession, it will be greater or even much greater. The deficits can only be reined by a massive political reset and wholesale reneging on the entire social contract, including Medicare, Social Security, public pensions and welfare. Such a reset would result in an economic collapse. Therefore, it is not feasible, although it could be forced upon us by endogenous or exogenous events that would take the situation out of our hands.

“The debt has gone vertical, rising from $10 to $20 trillion in eight years. Obama created more debt than all other presidents in the previous 230 years, combined. This amount does not include the federal government’s net, unfunded liabilities, which are an additional $150+ trillion, and growing by trillions per year on a GAAP accounting basis. Please understand that his shadow, unfunded debt is net of projected tax receipts; in other words, it is completely out of control.

“Debt is now increasing at an accelerating rate, with $1.4 trillion added last year alone. This debt can never be paid in future dollars having value anywhere even close to today’s, but for now at least, we are still able to peddle it. We do know that for us to successfully distribute the debt in the future, interest rates will have to go higher, which will compound the fundamental deficit and debt problems. Otherwise, we will have to print money on a scale never before seen, which will further damage the value of the dollar. There is a limit to how badly currencies can be damaged; they can and do go into freefall. Several are, as we speak.

“The so-called economic recovery has been false. The Obama administration, with the full support of the Fed created $10 trillion in counterfeit dollars and threw them at the economy, funding everything including non-stop wars, Food Stamps, a vast expansion of government, subsidized Obamacare, solar panel cronies, fund-raising and golf trips, you name it. It’s all included in the nation’s deliberately and, frankly, fraudulently inflated GDP. We understand; it had to be done, and we helped make it happen by being expert debt pushers.

“Some like to think that we can grow our way out of the deficits and debt, but our analysis disagrees. Assume 4% GDP growth. Given an $18 trillion economy (ours is not, as explained above, but let’s say it is), 4% growth means a GDP increase of $720 billion in Year 1. Let’s say the federal government is able to collect in taxes 25% of the gross GDP increase, a wildly optimistic assumption. That would produce $180 billion in incremental revenue. But the structural deficits, as reflected by the increases in debt, exceed $1 trillion per year. Even 4% GDP growth will hardly make a dent in the fiscal hemorrhaging. And to prime the pump for such growth, the government will have to spend a few hundred billion dollars per year on infrastructure spending and the like. This will fully negate the incremental taxes. So we have to dig a deeper fiscal hole for the privilege of digging an ever deeper fiscal hole.

“This leads to topic #3, Reporting. At this point, out of necessity, virtually every government economic statistic ranges from being “massaged” to outright false. GDP is particularly misleading. If we deducted government deficit spending and the multiplier effects it creates, the United States economy would immediately collapse. If that were to happen, we cannot credibly forecast a scenario that would restore it to growth. Economically, it would constitute an existential event.

“Obviously, we cannot openly admit the reality of the situation, or even let it become known. Therefore, the government must doctor the reports. Given the interrelationships among economic reports, we now have to lie about everything. If we just lied about certain metrics, say, GDP and employment, then the other metrics, if not similarly fabricated, would contradict the fabricated reports. We would be unable to explain the inconsistencies and contradictions. We have to lie about unemployment, GDP growth, retail sales, wages, money supply, the cost of Obamacare subsidies, current deficits, current debt, the true fiscal trajectory of Medicare, Medicaid and Social Security, government pension underfunding, projected deficits and debt, and all the rest. When it comes to false reporting, we’re in a box; there’s no alternative to it.

“This is one reason why the Alternative Media are so dangerous to us, and why we need to eliminate them. There are many talented analysts in that domain. They know the truth, and that we’re not telling it. The fact is that fake news comes from us, not them, as they are revealing to a growing army of citizens.

“In addition to false reporting, there is War. War is just like the Fed; it is never audited. This deliberate lack of oversight is how $6 trillion can go missing at the Army, alone. The Army’s missing funds are a small portion of the total amount that has disappeared into the military spending vortex. War spending is critical to topline GDP, and we can play a lot of non-detectible games with it. The saying, “War is the health of the state,” was coined for us. If we stopped fighting wars, GDP would crater. Wars are a necessary constant going forward, even if we have to invent them.

“This brings us to Perception, one of the most important factors of all. In reality, the economy and dollar have become a confidence game. We know that if confidence in an inherently dysfunctional system is lost, only a reset plus time can restore it. But as we discussed earlier, a reset is socially, politically and economically impossible. If the 200,000,000 U.S. citizens currently dependent upon the government to some degree were deprived of even a fraction of their payments, economic and social entropy would result. In fact, the people want more, not less. Free college; free or massively subsidized health care; a $15 minimum wage; the list goes on. Politicians have told them they can have these things, so there is a vast disconnect between popular expectations and fiscal reality.

“Stock market indices are one of the few tools we can use to create positive perceptions. We have successfully created a false perception of economic health by taking stocks to new highs. We have also deliberately engineered a “wealth effect,” which has artificially spurred spending and GDP, and boosted the so-called “animal spirits.” Doing these things has disguised reality and bought us a lot of time.

“But the real reasons we have manipulated stock markets higher go further. First, without a levitated stock market, the pension funds would collapse. Which would ripple through the economy in a massively destructive way.

“Second, federal, state and local governments need the capital gains-related tax revenue produced by the artificially propped-up stock markets. Dow 20,000 will produce a 2017 tax windfall, which is required to offset the damaged economy’s tax shortfalls. The stock markets are a crucial money machine when it comes to tax generation.

“Now to money creation, which takes us deep into the Dark Side. To fund the massive deficits and levitate the stock market, we have had to create trillions of new dollars. But if the actual amount were revealed, confidence in and the value of the dollar would collapse. So we have to lie about this, too. The Fed’s balance sheet is actually trillions more dollars than what is reported.

“We inject newly digitized currency into the system by crediting trusted, proven collaborators such as the BOE, BOJ and Bank of Israel with dollar amounts that can range into the trillions, depending upon circumstances. These collaborators use a portion of these credits to buy our stocks and bonds, in accordance with strict timing, allocation and dollar amount instructions. They funnel the remainder of the funds to trusted, third-party actors, including hedge funds, merchant banks and dark pool operators, providing them, too, with specific deployment instructions. Therefore, the buying comes from many different markets and locations, which makes it look normal and legitimate.

“What exists is a small club of trusted players who deploy enormous sums of money, all of it counterfeit and undocumented, to support the positive perception, healthy GDP and strong stock market agendas. This money costs our partners nothing; we create it for them, out of nothing. The fact is that management of the dollar is far more clandestine than any of the operations conducted by the CIA or NSA, and the Fed is the most secretive and sophisticated intelligence agency on earth. Geo-financial hegemony is its mission, and dollars are its spies, operating, misdirecting and deceiving from the shadows every minute of every day, all over the world.

“While a large and increasing number of citizens now demonstrate broad skepticism about government institutions, they still have blind faith in the statistics reported by the Fed. Which is upside down, because the Fed’s figures are the most dishonest of them all. It proves the power of propaganda, particularly when billions of dollars are spent on it. If the Fed were subject to audit, which of course it deliberately and necessarily is not, none of this would be possible. And if the true size, composition and deployment of the Fed’s balance sheet were known, the entire global financial system would implode.

“That is the situation, in a nutshell. As you can see, it is fragile and untenable. We can continue to manage it in the current context, but if the context were to change, even in small ways, it could all come down. We have to prevent that at any cost because if it does come down, even our most sophisticated computer simulations cannot posit a scenario by which it could be propped back up.

There is a subtle knock on the office door. Trump realizes he is out of time. He says to his guest, “I understand what you have said, and need you to come back and finish.” They arrange for the visitor to return in three days, December 2nd. Trump asks, “So we can move as fast as possible then, please give me a brief outline of what we will discuss.”

The visitor responds: “Most people do not think about these issues at all, but the sophisticated ones do. We have deliberately misdirected that cohort’s attention. We have distracted them with talk of bank bail-ins and other financial gossip to keep their thinking off of what is actually a much more profound and necessary outcome: government bail-ins. We have before us a complex, four dimensional puzzle, in which the puzzle pieces represent events wrapped in time. Both the controlling elite and the people are putting the puzzle pieces in place as fast as they can, because they know their futures depend on it. The side that first completes and comprehends the puzzle will win; the other side will lose. Two of the most important puzzle pieces are currency and precious metals, both swaddled in time. Which is running out for one side or the other.”

[To be continued in Part 2]

Stewart Dougherty is the creator of Inferential Analytics (IA), a forecasting method that applies to events proprietary, time-tested principles of human instinct, desire and action. In his view, forecasting methods not fundamentally based upon principles of human action are unlikely to be reliable over time. He is a graduate of Tufts University (BA) and Harvard Business School (MBA), is a 35+ year veteran of the business trenches and has developed IA over a period of 15+ years.

29 thoughts on “Goldman to Trump: Situation Assessment, Government Bail-ins, Precious Metals Threat: Systemic Collapse

    1. Thanks, John G. Plan to have Part 2 done by January 2nd. Lots of “incoming” information right now. It’s like being under artillery attack. Almost all the data points are “hostiles.” Am sorting through it, but it’s like walking through a mine field. You just hope you can traverse it before one of the bombs blows up, triggering all the rest of them. I try not to overstate things, but this is really getting serious. Thanks for writing and Happy New Year.

  1. I’m perched and waiting for part two. Great piece of writing and probably not
    to far off of script. We are all amazed that this scheme has worked as long as it has.
    I now that time is running out and soon the triangulation of global events will set
    this powder keg off. Stay frosty.

  2. I’m perched and waiting for part two. Great piece of writing and probably not
    to far off of script. We are all amazed that this scheme has worked as long as it has.
    I now that time is running out and soon the triangulation of global events will set
    this powder keg off. Stay frosty.

    1. Thank you very much, and Yes, it is amazing. But nothing lasts forever, particularly not fraudulence and deceit, and the truth has a way of exerting itself when no one is expecting it to. For the truth, it might be personal this time, given how badly it has been disrespected and trashed. Happy New Year.

  3. Great commentary, for a fiction. :-0

    I would be very surprised if Trump didn’t already know the true state of the economy and the real danger posed to the nation. I don’t think he needed an asshat from Goldman sacks to tell him that. What I need to understand is what he’ll do about it. During his campaign, Trump mentioned that he would negotiate a default with our creditors. I think that’s the plan. Extend and pretend is breaking down at several inflection points. Either he initiates and controls the default and recovery plan, or the economy and our society will experience a decay similar to Detroit. The U.S. will be run by the rich and connected while the rest of us become enslaved debtors, with no chance of rebuilding. My hope is that Trump can lead the nation without the usual mass blood letting and pillaging faced by debtor empires on the decline.

    1. Thanks for your deep, perceptive comments. Regarding a default, I would just mention that a large percentage of the “creditors” are here in the U.S. The banks are loaded with Treasuries; so are the “Trust Funds” … Social Security, Medicare, SSD, public pensions, etc. Yes, Trump could differentiate the obligations; he could say, “We’re going to default on sovereign bonds owned by China, or Japan, or other non-American holders.” Perhaps that’s why the Chinese and others are dumping them right now in unprecedented quantities; surely they recognize this risk. But the fact is that defaulting on, say, Chinese-owned bonds buys us a few months, literally. In other words, nothing. It doesn’t fix one thing. The true U.S. fiscal gap is more than $200,000,000,000,000.00. We hear the term, “too big to fail.” The U.S.’s existing and contingent debt is so gargantuan that it cannot be defaulted upon, because that would create a tsunami of consequences that would devastate the global financial landscape. The debt can only be gamed and extended. Please also keep in mind that unless there is a reset of the entire government spending structure accompanying default, nothing gets resolved. The massive unfunded contingent liabilities will still be there, and growing by trillions per year. There is no way out of this without extreme, socially and perhaps nationally disruptive pain. Trump is probably getting a tutorial that this is a lot more complicated than even he might have thought. (And I do agree with you that he already knows it’s bad; he said so during his campaign; he just might not know exactly how bad it really is, and how there’s no solution that does not carry extreme, consequential risk.) He is clearly a business genius, and if anyone has the ability to tackle this problem, it’s him. But he needs to unravel 50+ years of sheer, deliberate, for-profit fiscal fraud, and that might be impossible, without unleashing a lot of collaterall damage. Just one person’s take. Thanks for writing and Happy New Year.

      1. Thanks for the reply. I admit at a fundamental level I don’t know the extent of our decay, moral debasement, and the depths of our national bankruptcy. My income insulates me. I see..but not really. It feels surreal and impossible no matter what reality dictates. Don’t get me wrong…I’ve lived in the poorest regions on the planet. I know where we’re going at a gut level. It’s just so unbelievable, like dying. Just something you know happens but really don’t think it could happen to you. Our nation senses impending disaster, but like myself finds it hard to internalize. My liberal friends “feel” it even more. I think that’s the real source of their bitter dislike for Trump. He’s the trumpet signaling the end of what was American post WWII exceptionalism. The barbarians are at the gate.

    1. Thanks, Marcus. Am focused on January 2nd for Part 2. Huge amount of “incoming” right now. Lots to sort and incorporate. The current environment is starting to make 2008 look boring and banal. I hope the members of this great community are using their time wisely right now, because this has become an extremely high risk environment. The current normalcy is a real gift, and should be exploited. Best regards and Happy New Year.

  4. Poof! Now you see them and now you don’t. That is how the Fed is running the treasury bond market, plain and simple. Who is buying the trillions in US Govt. debt? $1.4 trillion last year + 400 billion sold by foreign Govt.’s. The entire thing is a fraud of epic proportions. The Fed has no balance sheet! It’s all made up BS. It was said recently by Jim Sinclair that markets no longer exist. None! it is all a computer manipulated fraud run by the Fed and US Ttreasury.

  5. You have just described a running, Travesty of a Nation, Totally Bankrupt, playing a Grand Bluff against the Rest of the World.

    I am very interested to see your take on this Paper Pauper of Western Hegemony vs The China/Russia Gold Hoard.

    1. Thanks for your message. Part 2 coming soon … hope to have it done by January 2nd. The “incoming” right now is surreal. No way the outcome can be pretty, at least not as I see it. More soon, and Happy New Year.

  6. What a compelling spot on summation of the current reality. The challenge as always it to get it consumed by enough folks to make a difference. Thank you sir! Perhaps the best most concise spot on the reality I have read. I will do my best to increase circulation.

    1. Thanks, Theravaida. Who knows what the future will bring. Stay tuned, more to come. I really appreciate your ongoing interest. Best regards and Happy New Year. Stewart

    1. Thanks, SaminOregon. I really appreciate your message. Stay tuned. Will be working this weekend. All the best and Happy New Year, Stewart

  7. Dave if you keep posting conspiracy theory stuff like this…well…you might end up on some list of fake news, propaganda, or foreign-government-sympathizers list.

    lol I hope 2017 is a GREAT year for you. Best wishes

  8. All of this info had been talked about laughed about and downright ignored for years. Noting new to see here but it’s about time someone is taking it seriously for once. We hope but once again.

  9. Nice story. Gov will stand no matter what, to maintain control. Gov bail in means they will take or tax everything including gold.

    If the goal is a global gov then that body will bail out the nations in exchange for sovereignty, control, etc.

    Alternatively the only way to eliminate so much intricate systemic debt is physical destruction on an adequate scale. WAR. And a lot of lives will go along with that.

    But maybe the debt gulag will just get deeper and slowly burn everyone except the few.

    No one really knows what comes next.

  10. I think a lot of people get it that the entire system is a fraud.

    You could declare all this fraud debt odious and start over with Congress creating money but that won’t solve the massive dependency problem.

    There are really to many useless eaters as the elite refer to them as, plus all the people retired and retiring who paid into this fraud their whole lives and will be left with nothing.

    Bottom line is, a lot of people are going to die when the herd gets necessarily thinned.

  11. People still believe in the fed stats? Bzzzt! Wrong. Most dont even pay attention to that crap, and for the last X number of years they’ve defied common sense and empirical observation so anyone paying attention knows theyre a joke. And most of this conversation, while hitting key facts, is likely not what was said. Dont know enough about this GS clown, but what he said was a function of how embedded into the criminal labyrinth he was.

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