free market economics Archives - Page 7 of 9

Debt as Far as the Eye Can See

submitted by jwithrow.

Journal of a Wayward Philosopher
Debt as Far as the Eye Can See

December 9, 2014
Hot Springs, VA

The S&P opened at $2,056 today. Gold is up around $1,218. Oil is still floating around $64 per barrel. Bitcoin is down to $347 per BTC, and the 10-year Treasury rate is 2.21% today.

In other news, U.S. national debt has now eclipsed $18 trillion. That’s: $18,000,000,000,000.00. Debt to GDP is now around 99%. To put this in perspective, U.S. national debt stood at $398 billion back in 1971 – 34% of GDP – when Tricky Dick put the “Out to Lunch” sign up in front of the international gold window.

Even more startling, total credit market debt now checks in at 330% of GDP. Mr. Market has been trying to wind down the credit market bubble for some time now, but the Federal Reserve has been fighting tooth and nail against him. The Fed’s weapon of choice: funny money! The Fed has purchased more than $4.3 trillion worth of bonds since 2008 in an effort to prop up asset prices and strangle interest rates.

Where did the Fed get this $4.3 trillion? As we pointed out in last week’s journal entry, the Fed got this $4.3 trillion from the same place it always gets money… it conjured every dime of it from thin air!

Still, the economists pretend like this is all normal. Some of them say that the Fed should have bought fewer bonds; $4.3 trillion worth was too much. Other economists say the Fed didn’t buy enough! So they write their articles and conduct their interviews and everyone sleeps sound at night. I can’t help but wonder – do they think this can go on forever? Do they think the Fed can reverse course whenever they darn well please? Do they think at all?

I don’t know if mainstream U.S. finance really is arrogant enough to think there are no consequences to all of this financial chicanery or if they are just playing a big sleight-of-hand game, but the world seems to slowly be waking up to the fiat monetary system that has allowed debt to pile up faster than 5:00 Beltway traffic.

Though the Swiss Gold Referendum didn’t pass last month, it does suggest a change in the financial wind. The initiative would have prevented the Swiss National Bank from selling any of Switzerland’s gold reserves and it would have required a 20% gold backing to the Swiss Franc. The fact that this initiative made it to a vote indicates a growing apprehensiveness towards the international monetary system.

This apprehensiveness is not limited to Switzerland. Germany, France, Belgium, and the Netherlands have each expressed interest in repatriating their gold reserves held in foreign central banks. Additionally, both China and Russia have been buying gold hand over fist. The Russian Central Bank bought nearly 20 tons of gold in October alone. We don’t know exactly how much gold China has been buying – they haven’t reported their full reserve numbers in several years. China and Russia aren’t alone; global gold demand now eats up more supply than miners can produce at current prices.

2013 was a record setting year for precious metals purchases from the U.S. Mint and 2014 sales are on pace to surpass that record. The U.S. Mint sold 3,426,000 ounces of silver in November alone. Perth Mint sold 851,836 ounces of silver in November. India imported 169 million ounces of silver through the first ten months of 2014. The precious metals are clearly being viewed as a life-boat in a sea of rising debt.

In addition to the precious metal rush, several major U.S. financial firms have been using depressed interest rates to gobble up real assets recently as well. The Blackstone Group has been buying domestic real estate like it was last call and Berkshire Hathaway acquired Burlington Northern Santa Fe Corp (BNSF) – a railroad company. Shrewd analysts suggest Berkshire’s purchase of BNSF was a hard asset play to mitigate expected inflation; railroads are nothing but hard assets hauling other hard assets around the country.

Are all of the precious metal purchases and hard asset acquisitions just a coincidence?

Maybe deficits really aren’t that big of a deal. Maybe the Fed really can navigate through the uncharted waters of debt and derivatives. Maybe the fiat monetary system really has supplanted Mr. Market’s choice for good. Maybe financial asset prices really can go to the moon and never come back down.

But I wouldn’t bet on it.

More to come,

Joe Withrow
Wayward Philosopher

For more of Joe’s thoughts on the “Great Reset” 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.

Image Source: WilliamBanzai7 – Zero Hedge

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.

Macroeconomic Trends

submitted by jwithrow.

Journal of a Wayward Philosopher
Macroeconomic Trends

November 18, 2014
Hot Springs, VA

The S&P opened the day at $2,040. Gold is up to $1,193. Oil dipped just below $75. Bitcoin fell slightly to $379, and the 10-year Treasury rate is 2.32% today. All seems to be calm in the financial world for the moment…

In other news: little Madison is one month old this week!

I have spent many of the past twenty-nine evenings contemplating the intricacies of the infant experience. Maddie’s infant mind is as mysterious to me as this crazy world must be to her.

What does she see as she gazes out from those blue-grey eyes? Why does her attention seem to be drawn to the top corner of the room? How does she interpret all of the data received by her sensory organs? What can she possibly be dreaming of while in the throes of R.E.M. sleep? How can she tolerate her mother’s off-tune singing all day long?

Some evenings, when especially sleep-deprived, I can imagine an older Madison filling her father in on all the details. “I tried to tell mom to stop singing those ridiculous songs to me but I just couldn’t find the words”, future Madison would say. But then I come-to and accept that I will never have the definitive answers to my reckonings.

Not one to be discouraged, I then focus my reckonings on slightly more concrete topics.

What will the world look like eighteen years from now when Maddie is ready to go her own way?

Fortunately I don’t need to rely on future Madison to answer this question; I can make an educated guess by projecting current macroeconomic trends out to their logical conclusion. I have been tailing macroeconomic trends for several years now and no matter how close I follow behind, they always seem to lead me to one inevitable conclusion: the debt-fueled, fiat-driven, consumption-oriented, entitlement-laden, militarily-enforced Pax Americana is coming to an end.

Not a very popular thing to say in today’s hyper-sensitive politically correct world, I know. But I say this as a cold observation with no emotion attached. Just look at the prominent trends:

The U.S. government took more than 200 years to run up $1 trillion in debt. The national debt has since exploded to nearly $18 trillion in less than 30 years with $9 trillion of that coming from 2005-present.
The U.S. monetary base was relatively stable from 1781-1971. It has since exploded to the point where the U.S. dollar has lost 98% of its purchasing power.
Consumer debt has skyrocketed right along side public debt since 1971.
When calculated according to GAAP, the U.S. debt is actually north of $200 trillion and growing. This figure is predominantly made up of Social Security and Medicare unfunded liabilities.
Demographics show that roughly 10,000 people with celebrate their 65th birthday every single day for the next ten years. One can safely assume they will all be interested in signing up for Medicare and Social Security benefits.
The 10-year Treasury rate has been steadily declining since the late 1980’s with the help of the Federal Reserve. Despite record-low interest rates, the U.S. government paid out more than $420 billion in interest payments in 2013. Even a slight uptick in interest rates will dramatically impede the Treasury’s ability to service the national debt.
America was founded upon the principle of non-intervention. “Peace, commerce and honest friendship with all nations; entangling alliances with none”, said Jefferson. The United States has systematically morphed into a military empire with more than 300 military bases in over 170 countries. Militarism puts a measurable strain on the budget and a less measurable strain on the morality of society.

It doesn’t take much analytical skill to see that current macroeconomic trends are not slowing: they are growing exponentially. One only needs to utilize a sliver of common sense to understand that exponentially expanding trends are not sustainable. The trends don’t tell me what the world looks like in eighteen years but they do clue me in on what it doesn’t look like. And what it doesn’t look like is the world of the past seventy years.

Hmm. So, how best to to help Maddie prepare for adult life in a world that does not yet exist?

That’s the problem with philosophical contemplations: rather than answers they tend to lead only to more questions. Fortunately, questioning is the philosopher’s strong suit.

Until the morrow,

Joe Withrow
Wayward Philosopher

Book Excerpt: Set Money Free

submitted by jwithrow.

The following is an excerpt from Chris Rossini’s new book titled “Set Money Free: What Every American Needs to Know About the Federal Reserve”. Chris does a magnificent job of breaking down the Federal Reserve System, monetary policy, and free market economics in a way that is comprehensive yet easy to understand. Chris also had the foresight to lay the book out as a quick-reference guide which makes it a tremendous tool to have on hand. Continue reading “Book Excerpt: Set Money Free”

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

IBC – What’s it all about?

by R. Nelson Nash
Author of Becoming Your Own Banker
Article originally published in the October issue of BankNotes

It should be evident to most people that the last 100 years have been very violent in the financial world. Why? What happened to cause all this turbulence?

During this period we have witnessed the bloodiest century of all time. Two World Wars. Endless smaller wars all over the earth. An influenza epidemic after WWI. Nations formed and then self-destructed. New diseases coming into existence. Endless turmoil in the Mid-East. Empires coming apart. Financial euphoria followed by inevitable busts. Unbelievably powerful weapons and weapon systems. Propaganda perpetrated on an unsuspecting public such as man-made global warming. The list could take several pages to itemize them.

So, what’s going on? All of these actions are preceded by thoughts of the people involved at any time and place. Or, maybe it could be best described as lack of thought! It appears to me that people have forgotten how to live. It could be that they never learned how to live in the first place. Maybe it could be because of the way people feel. We seem to have a generation of “touchy-feely” folks that are in places of leadership and they influence the actions of every-day people.

Wars make absolutely no sense, but it is evident that this behavior is a common denominator throughout this time frame. Nothing good came from them. Yet, wars are glorified in the minds of many people. Things like Tom Brokaw’s book, The Greatest Generation. In reality it was a disaster — because of what it did to the minds of the people. They heard lies and came to believe them. Our country had already adopted Socialist ideas a number of years earlier, but this head-long plunge gained tremendous momentum during this period. I was there to witness it as a teenager and have seen it unfold to become the monster that we have today.

The historian, Dr. Clarence B. Carson wrote a masterful book entitled, The World In The Grip Of An Idea back in the 1970’s. He did a great job of explaining how we got into this abominable situation. The book needs to be re-published and Dr. Paul Cleveland and Dr. L. Dwayne Barney are in the process of re-writing it at this time. The world needs this book very much and so I encourage you to get a copy when it becomes available.

From my own perspective, money is the real common denominator in human action. The great Austrian Economist, Ludwig von Mises points out that the business cycle is caused by central banks. They inflate the money supply dramatically and people can’t tell the difference between “real money” and the “counterfeit money” (fiat money has no real basis). They feel that it is real wealth and so they do things that are totally irrational. This creates booms in the economy. In due course of time, reality rears its ugly head, and the bust follows.

This pattern has a long history, but it seems that every generation during the boom years feels that “Yes, those things happened in the past – but, this time it’s different!” This is nothing but hubris in its purest form. It is the “Arrival Syndrome” that I describe in my book, BECOMING YOUR OWN BANKER. It is the worst thing that can happen to the human mind!

Government debt all over the world is huge. But, consumer debt in these nations is approximately equal in volume. Bankers have created a mind-set in people that “you don’t have to save money– just spend, spend, spend! We are going to take care of your financial needs.” A local Credit Union advertises “Get a Legacy Lifestyle Loan from us.” Translated: “If you don’t like your present lifestyle, then get a loan from us so you can live the way you want to today! Don’t worry about having to repay the loan.”
We are bombarded with such stuff every day. If you listen to financial advertising very long then it becomes “hourly!”

Your local, commercial banks are the primary source of inflation. They lend money that doesn’t exist. If anyone else did that they would be put in jail! But, this chicanery has been going on so long that most everyone considers it normal.

In the video, Banking With Life, Dr. Paul Cleveland points out that people confuse money with wealth. Wealth is your productivity, and things that you own. Money is just the medium of exchange that we use to acquire wealth. Creating a pool of money from which to buy wealth is a necessary function in an economy. This pool of money is known as banking! We could not live the way we do today without the concept of banking! It is sovereign! Some party in your life is going to be the banker whether you recognize it or not!

That party should be you! John Donne (1572-1631) gave us the thought, “No man is an island.” Therefore, this Infinite Banking Concept must involve other people in the form of a contractual relationship. The perfect financial instrument to accomplish this has been in existence for over 200 years. It is known as Dividend-paying Whole Life Insurance (Preferably with a Mutual Company – one that is owned by the policy owners). Your medium of exchange must be warehoused somewhere! There are no exceptions!

This is a place that cannot inflate the money supply. This Infinite Banking Concept has been taught through my book, Becoming Your Own Banker and the follow-up book, Building Your Warehouse of Wealth. Further explanation is provided by How Privatized Banking Really Works by Carlos Lara and Robert P. Murphy, PhD.

Through these books and seminars that are taught all over the USA and Canada, there are now thousands of people who will never have to make loans from an institution that inflates the money supply and creates “booms and busts.” You, too, can become your own banker!

Please see the October issue of BankNotes for the original article and others like it.

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.

Saving

submitted by jwithrow.

We have been hearing all about how most Americans are living paycheck to paycheck and not saving any money as justification for the brilliant (*cough*) myRA government savings plans so we felt that it would be prudent to take a deeper look at what ‘saving’ is.

You see, we don’t think that saving is about money. Money is involved, but it is not the focus. Saving is really about storing our productive efforts.

It goes back to the days of barter…

Back then the fisherman would catch extra fish in the morning and take them to the market in the afternoon to trade his extra fish with the farmer for vegetables. His wife liked to have vegetables with her fish for supper so he had to trade for vegetables instead of the painted rock that he really liked.

The fisherman had learned that fish would start to smell bad the day after being caught so he had no choice but to trade all of his extra fish every afternoon and go fishing for more again every morning.

Until the fisherman discovered gold. Then the fisherman could trade his extra fish for gold and take the next day off. The fisherman didn’t really care about amassing gold; he just figured out that gold would let him store his production so he didn’t have to go fishing every single day to feed his family. And it turned out that three day old gold smelled much better than three day old fish – this was a bonus.

So saving was born!

Somewhere along the line we forgot this and started to think that saving was about amassing money. And on top of that we started to think that money was paper and not gold. We are so forgetful!

So when saving became about money and not about production we opened the door to debt. We started to think that instead of saving we could just borrow whatever money we needed. After all, the credit money still bought stuff just like the saved money except we didn’t have to wait to use it!

But then when we had to start using our entire paycheck to pay back all of the credit money we found out that we had to be even more productive now than before we went into debt. Our plan backfired.

We didn’t learn from our smart fisherman ancestor and now we had to go fishing both in the morning and in the afternoon to have enough fish for our supper and also enough to trade for vegetables so our wife won’t get mad and also enough to give to the banker to pay him back for the credit money that bought us the really neat painted rock.

Darn painted rocks.

Debt Impedes Economic Recovery

submitted by jwithrow.

Debt is nothing more than an obligation to pay for present spending with future earnings.

A little bit of debt used to increase future earnings is a good thing. A little bit of debt used to increase present spending at the expense of future earnings is not a very good thing. A lot of debt used to increase present spending at the expense of future earnings is a good way to make it very difficult for there to be any earnings in the future at all.

At the macroeconomic level, the U.S. has chosen option three. Japan and Europe have done the same.

The great thing about economics is that there is a ‘response’ system built in that maintains a sort of chaotic order in the general market.

When there is significant capital formation within the system, interest rates go down. Decreasing interest rates send a signal that it is a good time to borrow so homes are purchased and businesses expand.

Interest rates then rise as more debt is taken on and thus capital available diminishes. This sends a signal that it is not a good time to borrow so mortgages are paid down and business debt is reduced. This leads to gradual capital formation within the system that will trigger a decrease in interest rates and the cycle perpetuates.

But guess what happens when you have an Ivy League graduate that thinks it is his job to force interest rates lower and keep them suppressed?

That’s right! The market does not receive the proper signal and it looks like it is still a good time to borrow. So even more homes are purchased and businesses keep on expanding.

Then we get the idea that home prices should always go up, stock prices should always go up, businesses should always expand, and GDP should always grow.

And we end up with more debt.

U.S. debt has grown by more than 60% since the financial crisis began in 2008. Global debt has grown by more than 40% in the same time period.

It turns out that a problem of too much debt cannot be solved by taking on more debt.

The events of 2008 sent a signal that it was time to stop borrowing and to liquidate debt but we didn’t listen. The economy will undoubtedly blow up again and the next crisis will be even bigger because the debt is now even bigger.

The only way for the economy to truly recover is for a mass-liquidation of debt to occur. Until then we can expect the Fed to keep fudging the numbers and blaming economic stagnancy on the snow.

We happen to like snow and find it to be much more desirable than the Fed, both economically and ascetically.

The Middle-Class is Fading

submitted by jwithrow.

The middle-class is fading. Fast.

The jobs that have been lost since the financial system teetered on implosion in 2008 have not come back. Those jobs are not coming back. More education won’t bring them back. More laws won’t bring them back.

The government’s job report says that more and more jobs are being created, but guess what? They are mostly low paid part-time or temporary jobs; they are not the middle management jobs in the high rise buildings.

As for why the middle-class is being wiped out, it’s no mystery. This very same scenario has occurred all throughout history. One can look back as far as the time of the Roman Empire and see that there is nothing new under the sun. History rhymes and those ignorant of history are doomed to repeat its mistakes.

You see, every time the currency of the land has been inflated and debased, the middle-class has been destroyed. Inflation transfers value from those who must work to earn currency to those who control the currency supply.

They don’t tell you this in school. They don’t tell you this in college. They don’t even tell you this if you major in finance or economics. They probably don’t know themselves. So most people never understand what is happening. Their paycheck gets bigger and bigger so they can’t figure out why they can never get ahead. They don’t realize that their bigger paycheck is buying less and less. They don’t understand the difference between nominal income and real income.

In Roman times it was the government that controlled the currency supply. The Romans would collect taxes and tributes from citizens and conquered peoples and they would then melt the precious metal coins and add in cheaper metals such as copper to re-mint more coins of lower value. They would then pay the Roman army with these cheaper coins and pretend that they had the same value as before. The general market caught on to this process and began to charge higher prices for food and goods in response. The middle-class was destroyed over time and eventually the economy collapsed. Then the Empire fell.

In modern times it is the Federal Reserve and the other central banks of the world that control the currency supply. They do this by simply creating currency units from nothing and using the new currency as they see fit. They inject some of this new currency into the banking system, they use some of the new currency to buy government debt, and they inject some of the new currency into the IMF and foreign central banks. This directly leads to more and more debt and an increase in consumer prices across the board.

They are printing currency at will so why is the middle-class working so hard for 2% annual raises?

The rules of the game have changed and those unable to recognize this and adjust accordingly will be wiped out with the middle-class – just as has happened throughout history.