economy Archives - Zenconomics

Economics in One Lesson

submitted by jwithrow.

Journal of a Wayward Philosopher
Economics in One Lesson

June 29, 2015
Hot Springs, VA

The S&P closed out Friday at $2,101. Gold closed at $1,175 per ounce. Oil checked out at $60 per barrel. The 10-year Treasury rate closed at 2.48%, and bitcoin is trading around $246 per BTC.

Dear Journal,

We are back in the mountains of Virginia after our annual family gathering in Emerald Isle, NC. Last week, in addition to enjoying the beautiful Crystal Coast, I thought about the modern credit system that has been in place since 1971.

Speaking of last week’s journal entry, I felt a little clarification was in order after re-reading it myself. Lest the reader think otherwise, I am no Luddite and I have nothing against commercial development. I simply believe very strongly in the old capitalist principle that said commercial development should be fueled by actual capital that was formed from production and savings. Instead of capital, the modern credit system fuels commercial development with credit created ex nihilo. No one forewent present consumption to build said credit, and this dynamic creates distortions and malinvestment that accumulate over time.

The capitalist sees a private beach and wonders if commercial development would be a worthwhile endeavor. Does the market want three story luxury homes by the beach and cheap surf shops on the island? Will these projects be profitable? Will they attract additional capital to the area? To the capitalist, the focus is on individual human action. Private capital is then heavily deployed if commercial development is pursued. Continue reading “Economics in One Lesson”

There Will Never Be Enough Good Jobs Again

by Paul Rosenberg – FREEMANSPERSPECTIVE

It’s over. Except for a short moment or a wild and self-exhausting governmental mandate (both of which are doubtful), there will never again be enough “good jobs” to go around. That model is gone and we need to root it out of our imaginations.

Sure, there will be some good jobs, but nowhere near enough.

About half of the Western world is already on the dole in one form or another. 93 million Americans lack a decent job and have no real hope of getting one. And so long as the current hierarchies remain, things won’t get substantially better.

I’m sorry to dump that on you, but it’s better to face it directly.

But please bear in mind that I’m a confirmed optimist. Just because there are no “good jobs” doesn’t mean that we’ll all languish in a meaningless existence. Far from it. Once we get over our addictions to status, hierarchy, and dominance, a glorious future awaits us.

Why It Won’t Get Better

The standard response to what I’ve noted above is to call it “the Luddite fallacy.” That line of argument says that in the past, innovation has not wiped out jobs, that new types of jobs were created and filled the gaps fairly well.

And that statement is true. Individual jobs were wiped out, but new jobs came along and (more or less) picked up the slack.

However, that is not happening this time, and for a very simple reason: Adaptation is now against the law. Previous rises in technology occurred while adaptation was still semi-legal.

Please take a look at this graph and remember a simple truth: Regulation forbids adaptation.

The US government is currently spending $60 billion, every year, to restrain business activity. (And the EU is worse.) On top of that, reasonable estimates show that US government regulations cost businesses nearly $2 trillion per year.

And let’s be honest about this: The primary purpose of regulation is to give the friends of congressmen a business advantage. Why else would they pay millions of dollars to lobbyists?

So, the new jobs that should be spawned, will not be. Mega-corps own Congress and they get the laws they pay for. And mega-corps do not like competition.

Furthermore, the political-corporate-bureaucratic complex will bite and claw to retain every scrap of power they have, and small businesses will be their first victims. (They already are.)

Trapped Between Hammer and Anvil

So, the people who are hoping and waiting for a “good job” to pop up are trapped between hammer and anvil. Robots are starting to roll into the workplace while the job creators (small entrepreneurs) are in regulatory and economic chains. They can’t come to the rescue.

In the 19^th century, all sorts of possibilities were open to entrepreneurs. This remained at least partly true, even into the 1970s, when I watched the business heroes of my youth having a gas while making piles of money.

It used to be that a clever person could get ahead, independently, and have a ball doing so.

Those days, alas, are over.

These days, to get rich, one needs to take government as a partner. If one does not, regulation and legislation are likely to destroy your business. At this point, many of us (myself included) have had businesses – good businesses that benefited everyone involved – crushed by legislation.

To avoid being crushed these days, you have to be smarter and fleeter of foot than everyone else. Not many of us can survive in that situation, and as regulations continue to rise, even that number grows smaller and smaller.

For the generation before of mine, independent success required ambition, but it was reachable. For my generation, only those of us blessed with unusual talent had a chance at controlling our economic destinies. For the young generation of today, it’s nearly impossible. These days, if you want to jump ahead, you need to be part of something big… and you need to start as a sycophant.

So…

So, if you’re looking for the proverbial good job, stop waiting for “The Hierarchy That Is” to sort things out and get everything back to normal. Good jobs get fewer and fewer every year, and those that are lost won’t be coming back.

But… if and when you’re ready to change your thinking – to seriously change your thinking – this is good news too: You can reclaim the parts of yourself that you were ready to sacrifice to the “good job.”

You see, the “good job” was nearly as much a curse as it was a blessing. Yes, I know, steady wages and benefits are a very comfortable thing, but they also play right into a ridiculous, predatory script.

You know the one: where you struggle to display your status to all the other worker-bees. You feel like you have to do what the ads tell you: Get the new car, the bigger truck, the video player in the back seat, the gigantic TV, the most “amazing” holiday parties, the expensive shoes, the designer bags, the organic veggies, etc., etc., etc.

I would like you, please, to consider this quote from the boss of Lehman Brothers, just as the World War I production surge was failing:

We must shift America from a needs, to a desires culture. People must be trained to desire, to want new things, even before the old had been entirely consumed. We must shape a new mentality in America. Man’s desires must overshadow his needs.

Would you agree that their plan worked?

As long as you follow their script, you’ll remain in a permanent deficit mentality. No matter how much you have, you’ll always feel like you need more. It’s life on a shiny gerbil wheel. The “good job” kept us from knowing ourselves; it allowed us to sleep-walk through life. We got a “good job” and never developed ourselves any further. Work, retire, die, ho hum.

Then What?

So, if we forget about having a “good job,” what happens?

Well, it might very well mean that you do what you’re already doing, but you stop feeling bad about it. It means that you get over the endless grasping after status… of letting ridiculous ads define what “success” looks like… of letting other people define your self-opinion.

Letting go of the “good job” delusion means that you stop pining for the days when you could blow a third of your money on status crap. It means that you start taking pleasure in growing your own food, developing new ventures, and improving yourself.

It means that rather than begging politicians to ride in on a white horse and fix your world, you ignore them and start paying attention to your actual life.

Fundamentally, this means that we start using our own initiative, without seeking permission, and start building better things.

Rather than going on, I’ll leave you with two quotes, both from Erich Fromm. I think they are worth close consideration:

Our society is run by a managerial bureaucracy, by professional politicians; people are motivated by mass suggestion, their aim is producing more and consuming more, as purposes in themselves. All activities are subordinated to economic goals, means have become ends; man is an automaton – well fed, well clad, but without any ultimate concern for that which is his peculiarly human quality and function.

The quest for certainty blocks the search for meaning. Uncertainty is the very condition to impel man to unfold his powers.

Paul Rosenberg

[Editor’s Note: Paul Rosenberg is the outside-the-Matrix author of FreemansPerspective.com, a site dedicated to economic freedom, personal independence and privacy. He is also the author of The Great Calendar, a report that breaks down our complex world into an easy-to-understand model. Click here to get your free copy.]

The US Has Become a Nursing Home Economy

by Bill Bonner – Bonner and Partners.com:

The key feature of age is that it happens no matter what you think.

What does this mean?

It means the “old countries” – their assets and their institutions, at least the ones that depend on population, income and credit growth – are “fastened to a dying animal” and are not likely to survive in their present form.

Today, these countries, including the US, are victims of demography. Older people get more money from the government. And they pay less in taxes. Old people also slow the rate of GDP, for obvious reasons: They are not adding to output; they are living on it.

As people age, the whole society – its institutions, its laws, its customs, its economy and its markets – ages, too. They all become as familiar, comfortable and shabby as a well-worn shoe.

An economy is not independent of the people in it. The economy ages with them. And when they reach retirement age, the economy gets arthritis.

A Nursing Home Economy

Even the Congressional Budget Office has noticed how government debt slows growth:

Increased borrowing by the federal government generally draws money away from (that is, crowds out) private investment in productive capital in the long term because the portion of people’s savings used to buy government securities is not available to finance private investment.

The result is a smaller stock of capital and lower output in the long term than would otherwise be the case all else held equal (CBO, July 2014, p. 72).

Why does the federal government need to borrow so much? Before the invention of the welfare state, almost all large borrowing was done for war. Since the end of World War II, however, most developed countries – with the exception of the US – have borrowed heavily only to pay for social programs.

But neither debt nor spending contributes to a dynamic, innovative and growth-oriented economy. Instead, they produce an economy that looks like the people in it – old, creaky and in need of around-the-clock care.

As people age, they begin fewer new businesses. “The Other Aging of America: The Increasing Dominance of Older Firms” is the title of a major study from the Brookings Institution. Done by Robert Litan and Ian Hathaway, it showed that American business was becoming “old and fat.”

Taken together, the data presented here clearly show a private sector where economic activity is sharply concentrating in older firms – a trend that is occurring in a nearly universal fashion across sectors, firm sizes and geographies…

An economy that is saturated with older firms is one that is likely to be less flexible, and potentially less productive and less innovative, than an economy with a higher percentage of new and young firms.

Young people try to create new wealth. Old people try to hold on to the wealth they believe they have in the bag. They are less entrepreneurial. They are also, perhaps, more eager to protect their businesses and professions from competition.

Part of the reason for fewer business start-ups is that it has gotten a lot harder to launch a new company in America.

That was the conclusion of a study by John W. Dawson and John J. Seater (“Federal Regulation and Aggregate Economic Growth”). What they found was that there has been a huge increase in economic regulation and restrictions in the US since World War II. They point out that these regulations have an economic cost. Like debt and demography, regulations reduce output.

In fact, they estimate that had the level of regulation remained unchanged since the year I was born – 1948 – today’s GDP would provide every man, woman and child in America with about $125,000 more in income per year.

A Glorified Ponzi Scheme

It was Alexis de Tocqueville who observed that democracy was doomed. He said it would soon degrade into tyranny. As soon as politicians realized that they could win elections by promising the voters more of other people’s money, it was just a matter of time until they overdid it.

Had he imagined how old people would get, he wouldn’t have been so optimistic.

As things developed, politicians noticed two important things: that young people (especially those who hadn’t been born yet) didn’t vote… and old people’s votes could be bought fairly cheaply, at least so it appeared at first.

When the US Social Security program was first put in place, for example, the typical American male could expect nothing from it. He was expected to live to 61. He’d be dead before benefits kicked in. But as the 20th century led to the 21st, his life expectancy increased, and so did the burden of old people.

Early Social Security participants paid in trivial amounts and got a very good return on their money. My mother, for example, only worked a few years at a low-paying job, from which she retired in 1986. She has been collecting Social Security ever since.

“Don’t you feel guilty about getting so much more than you put in?” I teased her.

“Not at all. That’s just the way the system works.”

The way the system works would be illegal for a private annuity plan. It would be labeled a Ponzi scheme. Its promoters would be fined or put in prison. The money that goes into the system is not locked away in wealth-producing investments so that the cash will be available to finance the retiree’s pension. Instead, the contributions of new participants are used to pay benefits to old ones.

This has the obvious and fatal flaw of all Ponzi schemes – eventually, there is not enough new money coming into the system to meet its obligations. This point was reached in the US system in 2010. Since then, the system has been running an annual deficit.

You’ll see why in the chart showing the retirement-age population.

Everybody knows Social Security, the Affordable Care Act, veterans’ pensions and other support programs are dangerously underfunded. What is not appreciated is the effect that this has on GDP growth and stock market prices.

The crankshaft of age leads to the universal joint of social spending, which then goes to the axles of debt. Finally, where the rubber meets the road, the wheels turn more slowly.

This is not just a problem for government finance. Companies make money by putting out products and selling them. But when people grow old or population growth declines, so do both supply and demand.

Then, companies earn less money. Their shares are worth less. Personal incomes go down. Capital gains retreat. And tax revenues fall, too.

When this happens in an economy that is already deeply in debt, it triggers a crisis.

Article originally posted at Bonnerandpartners.com.

Investors Are Coming to Grips with Reality

by Justin Spittler – Hard Assets Alliance:

Today’s financial markets have acquired a knack for ingesting bad news without so much as a hiccup. Lately, that same resiliency—or more appropriately, complacency—has come under pressure.

After lying dormant for months, volatility has come storming back with a vengeance. Investors are finally coming to their senses—much to the delight of the precious metals community.

Patience Wearing Thin

The problems facing the global economy didn’t come out of nowhere. It just took a jolt of volatility to put them in the spotlight—and you can thank the soaring US dollar and the collapse of energy prices for putting investors on high alert.

Of course, there are perks to a strong dollar and cheap energy. A strong dollar makes imported goods more affordable for American consumers, while it’s estimated that weak oil prices will put roughly $500 into the wallet of the average American driver. While neither is positive for precious metals, the euphoria won’t last long.

An appreciating US dollar makes American exports less competitive. Depressed oil prices could cripple the domestic energy revolution, which has been the backbone of the US recovery. The breakout of the dollar also threatens to derail commodity-centric emerging markets, particularly nations that have relied on cheap credit for growth.

Monetary Tools Becoming Dull

The precarious state of the global economy doesn’t just have investors on edge. Policymakers in countries across the globe face a dilemma: risk an economic crash by stepping away from their maligned economies, or provide their debt-addicted with another dose of stimulus. It’s a lose-lose situation.

Yet it’s a no-brainer for central bankers, whose greatest fear is deflation.

The situation is no different in the United States even though the Federal Reserve ended its quantitative easing program in October. Remember, the Fed has said it will be “patient” in raising rates; and you can bet Yellen will fire up the printing press the second that the US economy shows symptoms of flatlining.

Unfortunately, the next round of stimulus won’t be as effective as previous installments, and investors seem to be waking up to that harsh reality.

Perceptions Change; the Case for Gold Stays the Same

As an analyst, I spend most of my days sifting through data, crunching numbers, and gathering different perspectives in an attempt to gain clues about the future. And yet, I’ll be the first to admit that economic forecasting is a silly process. Nonetheless, my feeling is that gold has hit a bottom.

That’s probably something you’re sick of hearing. Some in the precious metals community have been calling an end to the gold market rut for months… others for much longer.

Why do I think that this time is different? It has little to do with fundamentals. The case for owning gold has changed little recently, although we’re receiving more and more reminders. What’s changing is the perception of Western investors.

After witnessing unconventional monetary policies push financial markets to new heights, investors seem to be losing faith in this grand experiment. This uneasy feeling is starting to bring them back to gold—the most crisis-proof asset of all.

Luckily, there’s still an opportunity for investors to pick up gold while incurring little downside risk. There are few sellers at today’s prices, and those holding gold are what I like to call “strong hands.”

Even if gold hits a few speed bumps throughout the year, investors will sleep easier knowing that some of their wealth is held in the most time-tested of all assets.

Article originally posted in the January issue of Smart Metals Investor at HardAssetsAlliance.com.

Employing the Infinite Banking Concept

submitted by jwithrow.

Yesterday we examined the merits of the Infinite Banking Concept. Today let’s look at some IBC strategies to build capital and mitigate inflation.

If you combine the Infinite Banking Concept with a fundamental asset allocation model you have the makings of your own personal central bank. If one were so inclined, just like a central bank, one could establish tangible reserve requirements and use the policy’s ever-growing capital base to purchase tangible assets. Your job as Chairman would be to continuously acquire assets based on your allocation model as your central bank’s capital base grew in size to maintain your specified reserve ratios.

The possibilities with this strategy are endless!

The hardest part of employing the Infinite Banking Concept is being patient enough to capitalize your policy over the first several years until the policy becomes self-sustaining.

Imagine a world in which more people take control over their financial destiny by using the Infinite Banking Concept as an integral part of their financial plan. This strategy has the power to mitigate the boom-bust cycles created by the Federal Reserve and the fractional-reserve banks because people employing the IBC strategy would not have much need for traditional bank financing.

The power of the Infinite Banking Concept can truly be unlocked if families were to implement this strategy generationally. For example: what if parents were to set up IBC policies for their children as soon as they were born?

The IBC policy would have the opportunity to grow for twenty years or more, and the next generation would automatically have a large pool of capital available to them upon their maturation into adult-hood. This pool of capital could be used to finance specialized education or to start a business with no student or bank loan necessary.

The child would also receive a substantial death benefit payment down the road when the parents were to pass on from this world. That death benefit could then be used to set up larger IBC policies for future generations so the family’s pool of capital would continuously grow over subsequent generations. Every single one of your children and grandchildren would have access to a significant pool of capital to help them build self-sufficiency and resiliency.

Talk about an individual revolution!

A generational implementation of IBC in this way could gradually transfer the power of the purse away from governments, central banks, and Wall Street and back into the hands of individuals where it belongs. This would cause the financial sector to shrink tremendously, which would free up capital for more productive purposes across the board.

You see, the financial sector doesn’t really produce much of anything. It is more like the money changers of old in that the financial sector does little more than temporarily warehouse capital and then move it around, siphoning off small fees at every stop along the way. The financial sector certainly plays a very important role in a developed economy, but that role should be much smaller than what it is today.

So how do we know that the IBC strategy will survive the Great Reset? The answer is that we don’t know anything for sure.

But life insurance companies have a built-in inflation hedge as they can charge higher premiums to new customers on an ongoing basis as the currency loses value. Additionally, if the currency were to completely collapse, it is highly likely that life insurance companies would re-value their policies in terms of a new currency or maybe gold (we should be so lucky). Also, if you operate your personal central bank wisely and use your capital to purchase precious metals and other real assets, then you have a currency hedging strategy already in place.

Hopefully this chapter has done the Infinite Banking Concept justice, and you can see why we think it is a powerful tool for individuals disciplined enough to devote the time and resources necessary to capitalize a policy.

Capitalism and Creditism and Corporatism, Oh My!

submitted by jwithrow.

Journal of a Wayward Philosopher
Capitalism and Creditism and Corporatism, Oh My!

December 26, 2014
Hot Springs, VA

The S&P opened at $2,084 today. Gold is flat around $1,198 per ounce. Oil is still checking in at $56 per barrel. Bitcoin is at $326 per BTC, and the 10-year Treasury rate opened at 2.24% today.

All is quiet in the markets this holiday season. We may look back on this time period in a few years and say that we were presented with a tremendous opportunity to buy beaten down energy and commodity stocks during the tax-loss selling season of 2014. We probably will say that we had a great opportunity to accumulate some gold throughout 2014 as well. Just be sure to follow your asset allocation model if you decide to capitalize on these opportunities.

Yesterday we examined our current economic circumstances and realized that we were employing capitalism but we had no capital! Today we must ask the question: How can you have capitalism without any capital?

The obvious answer is you can’t. It’s like making potato soup without potatoes – try as you might it just won’t work.

So if we don’t have capitalism then what do we have? My answer is that we have some weird blend of creditism and corporatism. Governments have colluded with large corporate interests, especially in the commercial banking sector, to rig the economy in their favor.

Though we could go back further, let’s start our story (from the American perspective) at the end of World War II. Prior to the war governments didn’t think they could do everything they wanted due to financial constraints. That didn’t stop them from doing half of what they wanted to do but it forced them to make a choice. Did they want guns (warfare) or butter (welfare)?

The U.S. came out of WWII looking like gold… literally. The U.S. economy was the least damaged by the war which ravaged Europe and it came out holding the world’s largest stash of gold reserves. This relative economic strength gave U.S. politicians the wrong idea: they started to think they might not need to make any choices. Then President Lyndon Johnson came along and he wasn’t shy about it – guns and butter it will be!

So we got the Vietnam War and the Great Society together! And gold steadily flowed out of the U.S. Treasury until President Nixon pulled the switch-a-roo in 1971 and closed the gold window. All of a sudden the international monetary system became elastic. With no more gold restraint, dollars and yen and pounds started to pile up as central banks and commercial banks discovered they could conjure money into existence largely at will. But this was a different kind of money than the gold-backed variety – it was credit-based.

This credit-based money was extremely popular and the money supply grew 50-fold between World War II and 2008. Everyone got used to a constantly expanding money supply and now both the economy and asset prices are dependent upon it. It is the expansion of credit, not real capital, that supports all of the federal spending programs, all of the wars in the Middle East, the mass imports from China and Vietnam, the new housing developments and shopping malls in Middle America, the massive car lots across the country, most of the skyscrapers dotting the city skies, and current real estate and stock market valuations.

Here’s a fun example: do you know how much debt is still owed on the tax-funded Meadowlands Sports Complex in New Jersey? I’ll tell you: more than $100 million is still owed on the facility. Oh, and I am talking about the old Meadowlands Stadium that was closed and demolished in 2009 to make way for a new $1.6 billion facility now known as MetLife Stadium. New Jersey taxpayers are still on the hook for $100 million on a sports complex that no longer exists! New Jersey built the stadium, used the stadium, and demolished the stadium but never bothered to pay for it.

Such nonsense can only occur in a world of ever-expanding credit-based funny money.

This applies to the massive bank bailouts and banker bonuses that one side of the fictitious aisle rails against just as it applies to the massive welfare programs that the other side of the false political-divide takes issue with. None of it exists without perpetual credit expansion; none of it exists without creditism and corporatism.

Capitalism would have nothing to do with any of it.

It is important to understand that we have only seen one side of the credit cycle within the current monetary system. Credit has been expanding constantly for more than forty years now. But if we look around our world we can clearly see that nothing expands forever. Waves rise then fall. Trees grow then mature. Balloons inflate then pop.

One day credit will have to contract; it is inevitable. What happens when that day comes? Ludwig von Mises, the late Austrian School economist, offered some insight:

“There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved.”

Was he right? Time will tell.

More to come,

Joe Withrow
Wayward Philosopher

For more of Joe’s thoughts on the “Great Reset” and the fiat monetary system please read “The Individual is Rising” which is available at http://www.theindividualisrising.com/. The book is also available on Amazon in both paperback and Kindle editions.

Capitalism Without the Capital

submitted by jwithrow.

Journal of a Wayward Philosopher
Capitalism Without the Capital

December 25, 2014
Hot Springs, VA

Merry Christmas!

The markets are closed today in honor of this wonderful holiday so we have no updates for you in this entry. Check back in with us tomorrow for market updates. We do have an important entry for you today, however. It’s not nearly as important as spending time with your family on Christmas Day but, since you are here nonetheless, we will carry on.

Earlier this month we watched as the U.S. national debt came up behind $18 trillion, whipped into the passing lane without signaling, and sped off into the distance. Where is the national debt going in such a rush? I’m not sure, but I’d wager it’s someplace not worth going to.

As the national debt raced past we noted that total credit market debt has ballooned up to 330% of GDP with considerable help from the Fed’s efforts to pump in $4.3 trillion worth of hot air.

The television analysts accept it all as normal but we must ask the question: How in the world did we get to this point?

Much of the apparent prosperity we have enjoyed over the last several years has been borrowed from the future. The world’s three major central banks – The Federal Reserve, the European Central Bank, and the Bank of Japan – have each been engaged in an outrageous financial experiment; they have been creating massive amounts of currency out of thin air to purchase government debt by the boat-load.

Remember, debt is nothing more than a promise to pay for present spending with future earnings. These central banks, in collusion with their respective government, are really engaged in a scheme to transfer massive amounts of wealth from the public in the future to themselves in the present. There will be serious consequences to this madness.

It is important to realize that none of this chicanery has anything to do with capitalism… there’s no capital even in sight! The money created by the central banks of the world may act much like real capital, but it is just a clever impersonator.

Capital, according to the Ludwig von Mises Institute, is defined as the goods that were produced by previous stages of production but do not directly satisfy consumer’s needs. In short, capital is real savings and real resources.

Capital formation is actually quite simple – just save more than you consume and you will have capital.

We are currently doing the opposite – we are consuming way more than we produce. That’s how you end up with debt piled to the ceiling. This is true on the macro level (governments, multi-national corporations, etc.) and it is true on the micro level (individuals, local communities). The credit-based money and the massive debt have driven capital into hiding… we suspect for fear of being called a greedy capitalist.

And that, in a nutshell, is the answer to our question: we got to this point by embracing central banking and fiat money thus abandoning capitalism and its sound monetary system.

Sound Money once kept debt and the central planners at bay.

What was the secret?

Sound Money was like your grumpy friend that just won’t ever agree to do anything. You ask him to go to the movies and he says nope. You ask him to go to the ball game and he says he’ll watch it on T.V. You ask him to go to the bar and he says he has beer in the fridge at home already. Eventually you learn there’s nothing you can talk him into doing so you stop trying. That’s why governments and central banks hated Sound Money; it would never agree to any of their best laid plans.

You see, Sound Money could not be infinitely printed by governments or central banks. Originally, before governments got into the money business, money could not be printed at all; it had to be dug out of the ground and then minted into a coin. Later, governments took it upon themselves to stockpile gold in a vault and create paper currencies 100% backed by the gold. Always one to offer something it doesn’t have at a price it cannot sustain, Government reduced the gold backing of its currency over time and then, in 1971, it cut ties to gold altogether. That was the requiem for Sound Money and ever since then there has been absolutely no limits on the amount of currency central banks can create. Which means there has also been absolutely no limit on how much debt governments can rack up.

So here we are.

But just because there have been no limits to all of this economic madness in the short run does not mean there will never again be any limits. History shows that market forces cannot be perpetually suppressed and distorted – eventually the market will win out. The Day of Reckoning will come.

Until the morrow,

Joe Withrow
Wayward Philosopher

The First American Socialists

submitted by jwithrow.

Journal of a Wayward Philosopher
The First American Socialists

November 25, 2014
Hot Springs, VA

The S&P is hanging around $2,070 today. Gold is checking in at $1,196. Oil is floating around $76 per barrel in anticipation of OPEC’s big meeting on Thursday. Bitcoin is still at $380 per BTC, and the 10-year Treasury rate is 2.30% today.

All remains quiet in the financial markets as we turn our attention to the wonderful holiday season upcoming. Thanksgiving is a day of family, food, and fellowship in honor of the legendary first American Thanksgiving celebrated back in the 17th century.

Most Americans are familiar with this story of the Pilgrims and the Indians sitting down together for the first Thanksgiving, but did you know the Pilgrims were the first American socialists? The Pilgrims’ original financing contract stated that all colonists would get their food, clothing, and provisions from the colony’s “common stock and goods” and any profits would go into the “common stock” for the first seven years. The agreement required each person to submit his production to the common stock and the governor was to distribute provisions out to each family according to need. There was to be no private property for at least seven years.

The Pilgrims landed in America on December 21, 1620 and the first winter wiped out half of the population. The following harvests of 1621 and 1622 were miniscule. Governor William Bradford documented the problems stating that the hardest working men found it unjust that they received no more food than the weakest workers, the young men resented working without compensation, and the wives resented doing household chores for other men who were not their husband. How dare them!

The Pilgrims wised up in 1623 and abandoned the socialist model. Governor Bradford documented the transition stating that families became very industrious once they were required to grow their own food with women and children taking on significantly more responsibilities for the family unit. Three times the amount of corn was planted once socialism was abandoned and the colonists actually exported a substantial surplus in 1624. The Pilgrims thereafter purchased back all of the colony’s stock and completed the transition to private property and free markets.

How fortunate we are that the Pilgrim’s experiment with socialism was largely forgotten over time!

What if Woodrow Wilson understood the Pilgrim’s story? There would be no Federal Reserve System, no
income tax, and no centrally planned war-time economy!

Imagine if Franklin Delano Roosevelt had been familiar with the story. Why, Americans would have gotten no New Deal! There would be no Public Works Administration, Resettlement Administration, Rural Electrification Administration, National Youth Administration, Forest Service and Civilian Conservation Corps, Tennessee Valley Authority, Agriculture Adjustment Administration, Federal Crop Insurance Corporation, Farm Security Administration, Federal Housing Administration, Homeowners Loan Corporation, Federal Deposit Insurance Corporation, or Works Progress Administration. There would be no food stamps, no Social Security, and probably no labor unions. Americans would have to settle for the old deal where they had to work hard, make their own decisions, provide for their own financial security, and save with gold coins instead of paper bills. Who wants to do that?

Of course there is a big difference in scale between the first American socialists and the newer variety. The Pilgrims’ experiment was limited to a small colony so when the model failed the damage was limited to the tiny colonial economy. The ill-effects of the newer forays into socialism modeled after Wilson and FDR’s examples are not contained within a tiny economy – they run rampant through a massive modern economy consisting of hundreds of millions of people.

We never seem to learn the lesson today, either. The Pilgrims abandoned the socialist model when the results clearly indicated failure. Today we implement a new public policy when the results indicate failure. We are always just one public policy fix away.

As we discussed last week in our journal entry examining macroeconomic trends, the sustainability of Pax Americana based on socialist programs is likely coming to an end. Will a transition back to free markets and private property be the solution?

More to come,

Joe Withrow
Wayward Philosopher

For more of Joe’s thoughts on the “Great Reset” and regaining individual sovereignty please read “The Individual is Rising” which is available at http://www.theindividualisrising.com/. The book is also available on Amazon in both paperback and Kindle editions.

The Majesty of Childbirth

submitted by jwithrow.

Journal of a Wayward Philosopher
The Majesty of Childbirth

October 27, 2014
Hot Springs, VA

The S&P is checking in at $1,964, gold is at $1,228, oil has dipped down to $79, bitcoin is trading hands around $355, and the 10-year Treasury rate is at 2.25% today.

October has been the most volatile month of 2014 for U.S. stocks. The Fed is supposed to end QE3 (quantitative easing) this month which has investors nervous. Does the market tank when QE3 ends as it did with the end of QE1 and QE2? Or is the economy all better and ready to resume some semblance of normalcy?

My guess: get ready for QE4.

Mr. Market tried to clean out the gutters back in 2008 by liquidating unsustainable debt but the Fed intervened. With their quantitative easing chicanery, the Feds not only prevented Mr. Market from liquidating bad debt, they also piled even more rotting debt on-top. Without QE, Mr. Market would be free to begin the healing process which requires clearing out bad debt and insolvent entities. But most of the bad debt lives on the balance sheets of the federal government and now the Federal Reserve (transferred from Wall Street) and liquidating this debt would reveal the fundamental insolvency of these entities.

How best to hide insolvency? Print money to pay the debts! Hence: QE4 coming soon – probably early 2016.

Shifting gears: Madison made her entrance last week!

She was born on October 20 at 9:59 pm right here in Hot Springs, VA.

In our dining room.

Oh don’t worry, we put the dining room table out in the garage and replaced it with an Aqua Doula pool and a queen-size mattress.

The result: a healthy 7 lbs 11 oz baby girl born completely naturally with no invasive interventions or pharmaceutical drugs necessary. Just like childbirth has been done for thousands of years!

Wife Rachel said the homebirth experience has far exceeded her expectations in every aspect.

Instead of laboring on her back underneath fluorescent lights hooked up to an I.V., monitors, pain-killers, and labor-enhancing drugs, Rachel paced back and forth from our Great Room to our kitchen while verbally telling Madison she couldn’t wait to meet her. No one was around to bother her save her husband who valiantly tried to be a breathing exercise leader while also laboring himself to fill up the 170 gallon Aqua Doula pool. Needless to say, Madison did not wait around to test her sea legs and she was born very peacefully on dry land… into her father’s waiting hands.

Upon her birth, there was no one waiting to rush her off to be weighed, measured, poked, prodded, or checked so Madison had to settle for laying in her loving mother’s arms instead. While mother and baby bonded in those first few minutes of life, our midwife and doula worked gently to make sure both parties were in good health as the birthing process neared completion. Once confident in the health of mother and baby, our health care team worked diligently to clean and sanitize the area, provide food and water, do laundry, provide advice, tips, and reassurance, and countless other things that a star-struck father couldn’t possibly pick up on in the most defining moment of his life.

Our midwife and doula monitored the situation and provided sound counsel for roughly four hours post-birth as well. “This is what real health care looks like”, I thought. Our midwife came back out to our house for a 36 hour appointment and then again for a five-day appointment. She also answered several phone calls and text messages at weird hours during the stretch in-between appointments as well.

The result of such wonderful health care service is that both mother and baby are in terrific health despite not having left the comfort of their own home. It will be more than two weeks from birth before mother and baby will need to leave their home for another appointment.

The entire experience has confirmed what we knew all along – that natural childbirth at home is a much healthier and happier alternative to hospital birth for both mother and baby.

Of course few others understood this. Some just shrugged at the eccentricity of such an endeavor. Some turned their nose up in disgust. Some thought us to be ignorant, selfish, and cheap.

What they didn’t see were the countless hours dedicated to learning, study, and research over the course of nine months. They didn’t see the pages turning in the books that were read. They didn’t see the computer screen scrolling as medical studies and articles were mentally consumed. They didn’t drive an hour and a half to natural childbirth classes every Thursday evening for six weeks after a full work-day to increase their knowledge and understanding before driving an hour and a half back home to get ready for the following work-day. They didn’t watch the videos and the documentaries or practice the comfort techniques or study the possible complications and their signs. They didn’t sit up at night discussing emergency plans and precautions. They didn’t give up coffee, tea, and soda (caffeine) or dramatically reduce their intake of processed foods for nine full months. They didn’t eliminate glucose from their diet for a full week in the final week of their pregnancy.

But someone did do all of these things.

Someone put the time, effort, and work in to make sure they were making the best decisions possible and to make sure they were fully prepared for what was to come. Someone decided that she would be responsible for educating herself first rather than being wholly dependent upon the status-quo.

Someone decided she would be Super-Mom.

To her I pledge my eternal love, respect, and service.

More to come,

Joe Withrow
Wayward Philosopher

On the National Debt

submitted by jwithrow.

Journal of a Wayward Philosopher
On the National Debt

October 7, 2014
Hot Springs, VA

The S&P is down to $1,953, gold is up to $1,212, oil is up to $89, bitcoin is up to $330, and the 10-year is down to 2.38%.

Looks like the 10-year Treasury rate is still well-corralled for the moment. And gold is still on sale.

Yesterday we examined a few of the traps cleverly hidden for infants coming into the world at this time – prompted by wife Rachel and my expectations of a little girl named Madison set to begin her journey here on Earth within the next few days or weeks. Today let’s look at the overt trap that boldly claims the right to little Madison’s future earnings: the national debt.

It is popular today for politicians to speak out against the national debt and boldly claim that ‘we’ (they love this ‘we’ business) need to balance the government’s budget and begin to pay the debt down. This sounds great and people will vote for you for making such a statement, but there are two problems this leaves unaddressed – one based in economics and one based in morality.

First, the economic problem: the national debt is not $17.75 trillion as advertised. The national debt is actually closer to $200 trillion if you calculate it according to generally accepted accounting principles (GAAP) which require you to record all future liabilities on your balance sheet. Most of these future liabilities that are not included in the official debt figure are Social Security and Medicare commitments. These future commitments are completely unfunded which means there exists no underlying revenue support and no asset backing. The only way these future commitments can be met is if enough money comes into the Social Security and Medicare programs versus going out. Demographics tell us that 10,000 Baby Boomers will retire EVERY SINGLE DAY for the next ten years, however, which suggests that a huge number of people are going to move from being contributors to these programs to recipients.

Oh, and both Social Security and Medicare already run annual deficits.

These politicians must be expecting quite a bit from my little Madison if they plan to balance the budget and pay down the debt with her future earnings.

But they don’t actually plan to balance the budget and pay down the debt. The simple fact is it can’t honestly be done without defaulting on the existing commitments in some capacity. There’s just too much debt and not enough production. Which leads us to the moral problem: this system is incredibly, unbelievably immoral.

Why should anyone be taxed and forced to pay for anything against their will? What kind of system assigns debt to infants from the moment they draw their first breath in this world? What kind of system incentivizes debt, dishonesty, consumption, and exploitation while punishing honesty and production?

My answer: a really bad one.

So did the economic problem lead to the moral problem or vice versa? I am not sure but history does suggest that dishonest fiat money seems to always undermine the morality and stability of society.

I will have more thoughts on that in a later entry. In the meantime be sure to order a copy of The Individual is Rising for a more in depth look at these economic problems, some financial strategies to prepare for the Great Reset, and more.

Focusing our attention back on the debt-trap: how best to prepare Maddie for life in a society that plans to confiscate her future earnings to pay for the immorality of earlier generations?

It is a shame that I have to spend any time at all on this question here in what is supposed to be the “Land of the Free”. The more I think about it, the more I become convinced that education is the key to preparing our children for the world that awaits them.

Not education of the public kind, however. It looks to me like the public schools are setting children up to be victims of the immoral System. The public school system fosters a herd mentality and requires students to subordinate themselves to “authority” at all times. Such an environment is not going to stimulate the creativity and self-confidence necessary to thrive in a society that expects the next generation to pay the debts of the previous. Instead, this method of education is going to condition students to happily embrace their servitude to the System as it pillages the fruits of their labor in the name of the “common good”.

Far better to create an individualized educational experience tailored to Madison’s unique skills and interests. Instead of forcing subjects upon her, why not let her guide her own education? Rachel and I will probably need to do most of the guiding in the early years, but I suspect Madison will be plenty capable of determining her own path as she grows and matures. Enabling self-education in this manner will certainly do a better job of preparing her for adult-hood than the government school system that conditions students to always seek guidance and permission from “experts” instead of trusting their own abilities.

Of course this self-education will need to be blended with social activities as well. Fortunately, one can find all manner of groups, clubs, and activities using a simple internet search these days so I don’t see this being much of a problem. What will Madison like to do? Dance? Aikido? Art? Music? Softball? All of the above?

The world will be her oyster…

More to come,

Joe Withrow
Wayward Philosopher

For more of Joe’s thoughts on the Great Reset and regaining individual sovereignty please read “The Individual is Rising” which is available at http://www.theindividualisrising.com. The book is also available on Amazon in both paperback and Kindle editions.