Risk & the Economy

So there is this panic going on right now in the market...

 Even "safe haven" assets like gold and silver and U.S. Treasury funds are down.  Even what might seem like the most contrarian asset in existence--bitcoin--is down...

 PGIM Stable Value Bond Fund: (https://www.morningstar.com/funds/xnas/pdbax/quote)

Almost every chart you look at will have the same shape today over a 1 month time frame, stocks, bonds, gold, silver, real estate, bitcoin.  Every asset class is going down.

Why is this?

It is because of the liquidity illusion, like Warren Buffett once said, "Only when the tide goes out do you determine who's been swimming naked."

Stocks, bond, gold, silver, real estate, and bitcoin are all integrated into the global market, which is then mutualized and liquified like a giant smoothie with all of the effort and ugliness of managing individual assets that may or may not be immediately salable masked behind ETFs, bond funds, etc. managed by professionals who are bound by integrity to make available as much money as possible to people who want to exit their funds when asked to do so.  However, when the house is on fire, everyone wants to exit at the same time.  So the exits are jammed, the websites crash, the phone lines are overloaded and people get trampled.

In economic terms, people lose money.

A lot of it.


What is the underlying problem?  What fundamental truth can we learn from this?

Jonathan Tepper has an excellent blog article which succinctly sums it up:

The Irish Potato Famine is one such cautionary tale of the danger of monocultures, or only growing one crop. The potato first arrived in Ireland in 1588, and by the 1800s, the Irish had used it to solve the problem of feeding a growing population. They planted the “lumper” potato variety. All of these potatoes were genetically identical to one another, and it was vulnerable to the pathogen Phytophthora infestans. Because Ireland was so dependent on the potato, one in eight Irish people died of starvation in three years during the Irish potato famine of the 1840s.

Ultimately, his key point is regarding risk:

Risk is like energy and cannot be destroyed. It can only be transformed.

The potato of the modern economy is the "fund" or the "exchanged traded fund" in the case of stocks, or as some people refer to it as "indexing."

Why does indexing fail in times of crisis?

Because we have mutualized risk across wider swaths of the economic system.  It is socialized capitalism.  Mutualized risk is the reason every complex system fails under extreme load.  It is the sandpile theory of complex systems at work.

The global economy is a giant sand pile.  Each time a transaction is made a grain is added to the pile.  Corporations succumb to greed by borrowing money as low rates and buying back stock.  Pension funds are forced to go into riskier assets by dangerously low interest rates. Over time the pile grows until it reaches the size where it becomes intrinsically unstable until a tiny pebble, like COVID-19, is dropped into the pile and the whole thing comes crashing down around us.

Risk mitigation strategies exist to help us avoid these things.  It is why microservices are being used today to replace mutualized monolithic applications in the web services world.  It is why redundancy exists in the physical engineering world.  It is why diversification exists in the world of investing.

Why does diversification fail in times of crisis?

Because in times of crisis, funds are obligated to return money to those demanding it; and as a result are obligated to sell of any asset the is liquid enough to be sold, regardless of its intrinsic value.  And so the correlation between previously uncorrelated assets approaches 1 and people lose a lot of money.

And so the good, the bad, and the ugly all get liquidated together into the underlying currency, which is the U.S. dollar in most cases and brings us to our final chart:

So, why is this chart going up when all others are going down?

Because it is backed by the U.S. government, which has the  ability to provide infinite liquidity in the form of new money created out of thin air and released into the wild.  In the past, this has taken the form of "quantitative easing" where the Federal Reserve created money and gave it to banks as reserves hoping that they would lend it out to the broader economy, which in 2008 could not afford the debt anyway.  So the economy sank and people suffered.

I have a quote that I have been refining:

Investing is not about timing the market.  It is about having the discipline to exit before the top and re-enter after the bottom and the knowledge of where to hide in between.

The sticking point is "where to hide in between" since that changes each crisis.  Right now, the hiding place is in U.S. dollars or cash.

The problem here is that we are repeating the same mistake again.  The U.S. government has crossed Mario Draghi's line and now seems willing to do "whatever it takes" to resolve this crisis.

For better or worse, we are on the threshold of a paradigm shift.  We are about to step into the completely untested world of Modern Monetary Theory and print ungodly amounts of money and throw it out of the helicopter.  Where this helicopter money goes will determine the depth and breadth of the evolving depression, but this money printing mutualizes risk as the highest level, that of the underlying currency.

I suspect that MMT will dampen this depression to only a severe recession, but in doing so we will be setting ourselves up for an even bigger fall in 5-15 years from which the U.S. government will not recover.  History doesn't repeat, but it does rhyme, and I suspect that U.S. as we know it will not exist in 20 years.  We will find our inner-Roman Empire soon.

This is Socialism

Venezuela food shortages cause some to hunt dogs, cats, pigeons

Peter Wilson

Special for USA TODAY

Published 5:09 p.m. ET May 18, 2016 | Updated 8:29 p.m. ET May 18, 2016

LA VICTORIA, Venezuela — Unemployed construction worker Roberto Sanchez could hear a time bomb ticking as he waited in line with 300 people outside a grocery store this week, hoping that corn meal or rice might be delivered later in the afternoon.

He fears that Venezuela could explode at any minute into political and economic chaos.

“We have no food. They are cutting power four hours a day. Crime is soaring. And (President Nicolás) Maduro blames everyone but himself for the mess we find ourselves in,” said Sanchez, 36. “We can’t go on like this forever. Something has to give.”

The question is what will give first. As the economy spirals into deeper disarray, protests aimed at driving the unpopular president out of office are growing. Maduro responded over the weekend by declaring a 60-day state of emergency to combat what he said are U.S.-sponsored efforts to overthrow his socialist government.

Venezuela's Maduro: Take Fridays off, curb blow dryer use to ease power woes

The confrontation has spilled into the streets. On Wednesday, riot police in Caracas fired tear gas as they clashed with thousands of protesters seeking a recall referendum against Maduro. The anti-government protest was the third in a week.

The unrest mounts as the country faces continuing shortages of essential food, medicine and toiletries. All the bakeries here in La Victoria, 55 miles southwest of Caracas, stopped producing bread last week because there is no flour.

"People are hunting dogs and cats in the streets, and pigeons in the plazas to eat," Ramon Muchacho, mayor of the Caracas district of Chacao, said this month in a tweet that was reported in many newspapers.

Beer shortage for Venezuelans proves tough to swallow

Although Venezuela has the world's largest petroleum reserves, the country has suffered from a combination of lower oil prices and tight limits on dollar purchases that have cut off vital food and most other imports. The result has been a plunging economy and the world's highest inflation rate — above 700%.

Because Venezuela imports 70% of the goods it consumes, including most medicine, growing shortages of medicines for such ailments as cancer, diabetes, hypertension and HIV has created dire situations for many.

“My 4-year-old daughter is dying of cancer, and there’s no medicine here to treat her,” said Luis Avila, 42, a farm worker outside this industrial city. “What am I supposed to do? What can I do? Maduro has destroyed this country.”

An epic drought has also gripped this nation that relies mostly on hydroelectric dams, sparking rolling blackouts and water shortages. Hospitals have had to postpone operations and procedures because of power outages. And government employees now work only two days a week to conserve electricity.
Venezuelan President Nicolas Maduro speaks during a news conference on May 17, 2016.

“Shortages are just going to get worse in the coming weeks and months, and the government's bet that they can keep the protests and looting ... small-scale seems risky,” said David Smilde, a senior fellow at the Washington Office on Latin America. “Venezuelans are not used to hunger and do not have a lot of respect for Maduro as their leader.”

Voters in Venezuela gave the opposition a landslide victory in December's congressional elections, and polls now show a majority of the country wants Maduro out as president. His term expires in 2019.

“Venezuela is a bomb that could explode at any moment,” opposition leader Henrique Capriles warned during a Saturday rally.

Maduro, the handpicked successor of the late Hugo Chávez, discounted the chances of a recall referendum being held this year.

“They don’t want a referendum, they want a coup,” Maduro said this week during meeting with foreign journalists. “We have no obligations to hold any type of referendum in this country.”

U.S. State Department spokesman John Kirby said Wednesday that "reports of excessive use of force and violence against protesters obviously is troubling to us ... We don’t believe that that response to peaceful protest about real difficulties facing the Venezuelan people is the appropriate response."

He called Wednesday for "all Venezuelans to try to work together peacefully" to solve the country's problems.

https://www.usatoday.com/story/news/world/2016/05/18/venezuela-food-shortages-cause-some-hunt-dogs-cats-pigeons/84547888/

U.S. Saudi Arms Deals

I was dismayed to find this New York Times article[1] about U.S. arms deals with Saudi Arabia allowing them to manufacture advanced guidance components for our missile systems. 

This is not okay.

U.S. engineers worked tirelessly for years to perfect those systems, and giving the designs away is not worth any geopolitical gain.  There is zero chance that these designs will not be stolen by the Russians and the Chinese.  Zero.

We are giving away all of our hard work, and then we wonder why the rest of the world catches up so quickly.

I do not see how Trump can be so strongly against technology transfers to China and then hand over our advanced weapon systems to Saudi Arabia. 

This is unacceptable.

[1] https://www.nytimes.com/2019/06/07/us/saudi-arabia-arms-sales-raytheon.html

Mauldin on the Trade War

John Mauldin wrote an excellent piece here on the ongoing, insane trade war with China.

The key points are:

1. Intellectual property theft is a FAR bigger problem than deficits or trade imbalances.
2. "If other nations don’t want your currency, you can’t run trade deficits without severe economic problems. Valéry Giscard d'Estaing was right: The US has an exorbitant privilege as owner of the world’s reserve currency.  In fact, if you have the reserve currency, it is your obligation to run deficits so that the world has enough currency to conduct trade. (bold face mine)

We need to resolve the intellectual property theft crisis.  The trade imbalance is a side effect of owning the world's reserve currency.

https://www.mauldineconomics.com/frontlinethoughts/digging-a-hole-to-china

Venezuela: A Post-mortem Analysis

I found an excellent article by Dr. Anne Bradley regarding Venezuela and their fall into abject poverty.

There is one line in particular that strikes with as both true and with great fear:

Bad economics, poor policy decisions, and terrible institutions will trump the engines of human creativity and entrepreneurship every time.

No truer statement has ever been said, and this statement is as true today in America as it was in Ancient Rome.  Civilizations grow and thrive on the productivity of the people within them.

Be productive!  God calls us to good stewardship.

https://tifwe.org/how-venezuela-took-the-fastest-route-to-poverty/

Mauldin on Trade Deficits

Mauldin has yet another excellent article regarding trade and trade deficits, as he says: "I have to confess something: I run a huge trade deficit. It’s not with China or Mexico, but with Amazon. I buy all sorts of goods from them and Jeff Bezos has yet to spend a penny with me. It’s just not fair."

The U.S trade deficit is just as useful.  It does two very good things, 1) it gives us lots of cheap stuff, and 2) sends lot of U.S. dollars around the world to help maintain our currency as the world's reserve currency.

A great many people do not realize what advantages you get by issuing the world's reserve currency (like being able to run 130% debt-to-GDP without completely destroying your economy... yet).

If we pursue aggressive protectionism, it will deeply incentivize other countries to not hold as many U.S. dollars in their reserve pools and thus erode the dominance of the U.S. dollar as the world reserve currency.

This trade war nonsense is the only reason I refused to vote for Trump, because I understand the nature of trade and the advantages of our country issuing the world reserve currency.

Hopefully, Trump does not destroy this advantage with his tomfoolery.

Mauldin's article is posted below, but without images, since my email does not load images.
If you want the chart and image version, go to Mauldin's site, here:
http://www.mauldineconomics.com/frontlinethoughts/the-trade-deficit-isnt-the-boogeyman

Not Petya: Russia's Cyberattack on Ukraine

A fascinating article about how cyber attacks can cause collateral damage:
https://www.wired.com/story/notpetya-cyberattack-ukraine-russia-code-crashed-the-world/

U.S. Public Pension Crisis

I apologize to any regular reader.  I have not written as much lately.  I have been busy, which is both good and bad.

Anyway, Mauldin has an article, titled "The Pension Train Has No Seatbelts" regarding the public pension crisis in the U.S. that is packed with a lot of useful and scary data.

Most of the states in the U.S. are underwater financially, and some of them are going to go belly up very soon (like Illinois, for example).  Even the state with the highest average income (Connecticut) is short by around 50% of their stated pension obligations.

This is not going to end well.

It is why I am completely convinced that biotechnology and life and health extension must happen.  If it doesn't, our civilization collapses.

So, people of my generation need to begin to get used to the idea of living and working for the next 300 years to try to fix this insane situation.  Fortunately, biotechnology will allow us to do that.  Companies like BioTime, Asterias, and AgeX are at the forefront of this, and have been for years now.

The biotechnology age of humanity is dawning, and I --for one-- look forward to being an elf.

The Future of Spending and Investing Sardines

With Bitcoin(BTC) and its associated cadre of cryptocurrencies on the rise, I have no doubt that a panoply cryptocurrencies will become the dominant currency in the U.S. in time.  Long term, I see Bitcoin effectively becoming digital gold, and the other cryptocurrencies forming the panoply of trading currencies.  With this post, I will explain my logic on why I think Bitcoin will become a highly valued saving currency, and why I think Litecoin(LTC) and others will become spending currencies.

One of the more thoughtful points made by an economist/investor, Howard Marks, that I read was the idea of trading and investing sardines:

Two friends meet in the street, and Jim tells Sue he has some great sardines for sale.  The fish are pedigreed and pure-bred, with full papers and high IQs.  They were individually de-boned by hand and packed in the purest virgin olive oil.  And the label was painted by a world-renowned artist.

Sue says, “That sounds great.  I could use a tin.  How much are they?” and Jim tells her they’re $10,000.  Sue responds, “That’s crazy, who would eat $10,000 sardines?”  “Oh,” says Jim, “these aren’t eating sardines; these are trading sardines.”

I had been thinking about digital currencies like Bitcoin as investing sardines, and that may have been a mistake.  Their fans tell me they’re spending sardines, and while that may be the case, I think at the moment they’re being treated largely as trading sardines.  The question remains open as to whether Bitcoin is (a) a currency, (b) a payment mechanism, (c) an asset class, or (d) a medium for speculation.

I agree with Howard Mark's initial assessment.  Bitcoin is not an eating sardine.  It is an investing sardine.  Bitcoin, as an investing sardine, will be treated as a store of value, and will only be traded when the need arises to purchase physical assets.  At that time, Bitcoin will be traded for a more liquid cryptocurrency, which will then be spent purchasing the physical asset.

I base this on the fact that Bitcoin has a limited number of total Bitcoin that will ever be produced, 21 million; and on the fact that SegWit2x was abandoned.   The economics of supply and demand thus directly apply to it, and the US dollar price of Bitcoin will climb indefinitely, albeit at a much slower rate once mass adoption is complete, assuming stable dollar value.

Litecoin, however, is an eating sardine, for now, because of its relative availability.  In the future, LTC will likely run into an identity crisis, due to the earlier adoption of Bitcoin and the limited supply of Litecoin.   I will conjecture that because Litecoin is one of the more secure cryptocurrencies and because it is being adopted later than Bitcoin, the miners will vote to change the fundamental algorithm to increase the total supply at some point in the future.

This is exactly the opposite of what the consensus was on the recent Bitcoin SegWit2x, which was abandoned, implying that the consensus on Bitcoin seems to be settling around Bitcoin being a saving currency, not a spending currency.  Bitcoin is well on its way to being an investing sardine, while abandoning any ambitions of being an eating sardine.

You clearly see the beginning of this divergence of perception of the in the BTC price of a LTC.

Litecoin Charts - https://coinmarketcap.com/currencies/litecoin/

The BTC price of LTC is declining as the perception of Litecoin being an eating sardine and Bitcoin being an investing sardine begins to take hold.  As an investing sardine, I would expect the trade volume of BTC to gradually drop off as the currency matures fully until people just hold Bitcoin, only trading it in large quantities into more liquid currencies -- like LTC and others.

As Litecoin matures though -- only ~64% of LTC are mined compared to close to ~78% of BTC -- the Litecoin will likely begin to look more like a Bitcoin junior or undergo a hard fork to become more liquid.  The chief difference between them will remain the initial perception gap, which will assign BTC a much higher value, simply by virtue of being adopted first and attaining the perception of an investing sardine before LTC.

So, if you are investing in cryptocurrencies to save, you should be investing in Bitcoin, because BTC will not have a maximum price in US dollars that it will stop at.  If the current workings of Bitcoin remain, it will become the digital gold of the future, only far more valuable than gold.

In the future, I can see entire companies being bought and sold for handfuls of Bitcoin.

Socialism in the Age of Robots

Most people who read this blog know that I am a firm libertarian.  However, I also have a firm understanding of why socialism doesn't work.

Socialism doesn't work because people are involved.  People operate on incentive systems.  Economics works because it incentivizes productive behavior in people.

However, what if you were to remove people from the production side of the socialism equation?

Robots don't care if you give some of the fruits of their labor to people.   They don't require time off.  They don't take vacations.  They don't sleep.  Everything that makes socialism not work on a fundamental level would simply evaporate when you have robots doing all of the work.  We can tax the robots productivity (effectively taxing the owners of the robot slaves), and give to everyone.

A universal basic income like this will eventually be required, as humans become increasingly obsolete in the functioning of our society.

At this point, can it really be called socialism?  Really, we are barreling back into a system of slavery.  Robot slavery.  The robots work, and humans benefit.

I am okay with this.

EDIT:
Mauldin forwarded a relevant article by Scott Santens who is a strong advocate of a UBI.  The chief issue then is deciding when the robots are sufficiently productive that we can actually implement a UBI without sinking our economy.

Perhaps, if we start small --say, a few hundred dollars per month.  We can grow it from there, as the robots take over more and more of the productive end of the equation, while maintaining societal productivity.

The other option that we have is to free up the Federal Reserve to print money to help fund this until the robots are productive enough to support all of our economy.  Either way requires wisdom in the timing.

Patrick Cox on Aging and Richard Fisher on Orange Swans

I had two delightful Mauldin things come in this morning.  One by Patrick Cox on aging and biotechnology, which is hardly surprising given his constant harping on the issue.  He has a couple of savage lines that ring truly to me.  First he starts off by pointing out a recent article in the Washington Post:

Last year, we began to see articles in the press conceding that overpopulation wasn’t going to end civilization. This year, we’re seeing reports on the real population problems—depopulation and aging. 

For example, The Washington Post published an article titled, “The U.S. fertility rate just hit a historic low. Why some demographers are freaking out.”

And then he goes on to contrast this article with an article from the same newspaper from 1985 when people were freaking out about "overpopulation."

This is quite a change from pieces published in the same newspaper in the 1980s. Here is the lead from an older article titled, “Global Overpopulation.”

In the face of overwhelming evidence that there is no way of fighting poverty in the Third World without more extensive family planning, the Reagan administration is cutting back its support of the most tested and experienced organizations in this field, condemning wide areas of the globe to ever bigger, ever more hungry populations. 

The point of the piece above was that more US taxes should flow to national and international overpopulation experts. Politicians who disagreed were accused of ignoring or even causing mass starvation. 

Today, almost everything about that article has been proven wrong.

 And he is not wrong.  The environmentalists and overpopulation crazies have been at this for years.  They were wrong then.  They are wrong now.  They peddle fear with an agenda.  Nothing more.   Patrick Cox goes on to rightly assert that the movements like overpopulation and environmentalism are little more than secular religions, complete with swaying somnambulant masses, adoring pundits, and exalted technocratic priesthoods.

Today, the journalists, academics, and politicians who spread overpopulation hysteria have moved on to new doomsday scenarios. Oddly, they’re still demanding immediate and massive tax monies for “experts.” It seems they’re hoping that we’ll just forget how wrong they were about population. 

Personally, I’m not forgetting. Their irrational obsession has done serious damage. They have distracted us from that fact that the shrinking population of workers can’t support the growing population of older and sicker retired people. 

This is the flipping of the demographic pyramid. Warren S. Thompson first predicted it in 1929 in a paper for the American Journal of Sociology. 

Thompson’s textbook on demographics was standard in American colleges until the 1960s. Then, it was displaced by what I view as an apocalyptic environmentalist religion.

Anyway... enough about insane liberal media.  Let's move on to something more enthusiastically optimistic.  Richard Fisher has been a Federal Reserve President and has lived in the belly of the beast for sometime and shouted, rang cymbals, produced smoke signals, and probably every other imaginable form of objection noisemaking he could prior to various insane moves by the Fed in the past, which were promptly and completely ignored by those who made the decisions...  to all of our disadvantage.  Now are are neck deep in the dung with no shovel in sight.  But Richard Fisher is apparently an eternal optimist...  I hope--in my heart of hearts--that he is right.  I must admit that I feel the fire to resist and build independently of the mad government, but I am not confident that this fire burns in enough souls in the U.S. to save us as a country.

I am going to repost his speech in full, because it is a very worthwhile read.  The link to the Mauldin site is here too.

Doug Casey on Cultural Marxism and Bioethicists

Doug Casey is a firebrand libertarian who loves to preach 'doom porn' as Kyle Rearden calls it.  I read Doug's words because he presents a vastly different -- in some ways -- view of the world than I have; and while I disagree with some of what he says, I believe his core ideas are both sound and true.

In this article, I wanted to highlight his view on how cultural marxism, which I agree with him, is a cancer upon our society.  It erodes individualistic thought and personal responsibility and foments class warfare and race-and-classcism by emphasizing groups rather than individuals.  Not only does it produce all of these toxic properties, but it also gives people a false philosophical basis upon which to attack other people, using the label-happy liberal terms such as homophobe, bigot, and racist.  These are toxic words and ideas that enable a secular form of self-righteousness that would put the Pharisees to shame.

When you are an individualist, those terms are meaningless and less than worthless.  When you culturally castrate the individual, you discourage free thought and scientific enterprise, and you erode the fundamental and key element of free society: personal responsibility.  When you, see yourself as a black, or a woman, or a white male Protestant, you enable yourself to lay blame for unpleasantness at the feet of the opposing groups who are 'oppressing' you.  This idea is as absurd as your feet crying out that they are oppressed by the rest of your body and your legs calling your nose a walkophobe for not doing its part in walking.  A society, much like a body, is made up of different and distinctly individual parts that each play a role.  When you try to make everyone into hands, your body ceases to function, because all roles are necessary for the healthy functioning of society.  Similarly, when you try to pigeonhole individuals into broad categories, you both grossly mischaracterize each individual, and you strip away the incentive for being personally responsible for your actions, both morally and economically.

In a cultural marxist world, a person who makes poor economic decisions and whittles their life away doing non-productive activities is considered 'oppressed' by those who actually work to make the world a quantitatively better place, which gives the violent State the right to steal from the productive in order to give to the lazy who choose not to produce.  In an individualist world, those who make poor economic decisions get to starve or suffer the indignity of begging from friends, family or society as a whole, and it also opens the door for people to be truly charitable to those in need as opposed to charity at gunpoint, as is current government welfare.

Similarly, in the moral realm, cultural marxism seeks to fill the void with an arbitrary and arbitrarily changing system of political correct morals that allow people to feel morally superior without requiring them to live according to any absolute moral standard.  It turns people into assholes for inclusivity and diversity and enables them to treat anyone who disagrees with them as poorly as white slavemasters in America in the 1800s treated their slaves.  While in an individualistic society, there is an implied absolute moral standard, by which all are held accountable -- governments included -- and all can then see cultural marxism for what it really is, a convenient excuse to be a self-righteous assholes to their neighbors who disagree with them.

However, with all of this said, I am not against all forms of welfare.  Voluntary welfare, or charity as it is more commonly called, is a right, good and necessary element of society.  When you espouse and live by the absolute moral standard that is laid out in the Bible, you will naturally gravitate toward charity on a personal level, and when everyone does this the entire society is transformed to actually care for the poor who are made poor by bad luck (or even those who are poor by choice, as charity is a free thing).

To conclude though, cultural marxism is cancer in society.  It has so many negative effects which are quite literally draining the life from our culture and society and will unquestionably result in the downfall of our civilization through economic collapse if we let it metastasize.

Do not be a cultural marxist!
Think for yourself.
Our society depends on it.

I have attached the entire article below, but you can read the original here:
http://www.internationalman.com/articles/doug-casey-on-the-plague-of-cultural-marxists
*WARNING: Auto-play video is on his site*

Mauldin on Taxes

Mauldin brings another savage article on taxes and tax reform here with his Tax Reform: The Good, the Bad, and the Really Ugly -- Part Five.

There are some really important points in here that I want to highlight:

( 1 )
We are in far worse shape economically than most people realize.  Including only federal unfunded liabilities, federal, state, and local debt, EACH and EVERY one of us (U.S. citizens) owes around 1.2 million dollars in government debt.

1.2 million dollars EACH.

Didn't know you were 1.2 million dollars in debt?  Well, now you do.

As Mauldin says:

Break down that national and state and local debt by the number of US citizens, and we find that we each – every man, woman, and child – owe over $70,000. Worse yet, the total debt per taxpayer is over $190,000 and rising fast. If you include unfunded liabilities, the total debt per taxpayer rises to around $1.2 million, give or take. (There are some analysts who would make it somewhat less than a million and others who would make it more than $2 million. Whatever, it’s a huge number.) By the way, that number does not include the unfunded liabilities at the state and local level, including the pensions that are theoretically guaranteed by the states. Add another few hundred thousand or so per taxpayer, depending on the state you live in. Trigger warning: If you live in Illinois or California, do not attempt to estimate this number without alcohol or heart medication nearby.

( 2 )
We are completely contradictory and dysfunctional in what we expect from our government.

   * We expect our social benefits to increase (or at least not decrease).
   * We expect our taxes to decrease.
   * We expect our economy to grow and provide good, high paying jobs.

You cannot have all of those desires at once.  Debt loads over a certain size -- Reinhart, Reinhart, & Roghoff suggest 90% -- will slow down the growth of that country, making all of our lives and goals that much more difficult to achieve.

In a peer-reviewed study, Reinhart, Reinhart, and Rogoff demonstrated that when government debt rises above 90% it begins to have an effect on the growth of GDP. That conclusion is somewhat controversial in economic circles, as some say the critical level is higher or lower. Whatever – we’ve gone well past 90%.

Understand, RR&R are not examining some theoretical proposition; they are looking at actual debt levels and actual growth levels in scores of countries and situations over a long period of history and seeing that excess debt inhibits growth. We can argue about why that is true, but the fact is that debt at the level that has already been reached here in the US makes it far more difficult to even talk about 3% or 4% growth. So when politicians talk about growing the economy by 3% a year, they are facing very strong headwinds. That sort of growth is not impossible in our circumstances, but it would be abnormal given what we know of the history of debt and growth. To grow the economy at 3% today will require tax reform beyond anything that’s being suggested. It will require real tax reform, not just tinkering around the edges.

( 3 )
We must have real, serious tax reform if we want to have any hope of fixing our problems.  Enough so, that we have to be willing to consider the unthinkable.  For Republicans this means considering a VAT and carbon tax in exchange for significantly lowering the income and corporate taxes.

My liberal friends are going to fall off of their chairs here; but, after reading Mauldin's logic, I am now in support of both the VAT and the carbon taxes.

They are both a form of consumption taxes which are far superior in incentivization to income taxes, and thus would produce positive benefits.

If you want more income and jobs, tax them less. So if you can substitute a consumption tax for an income tax, even if the two generate the same revenue, the incentive structure you create is superior under the consumption tax regime. I am going to be walking into territory that is considered heretical for Republicans, but I’m going to argue that we need to radically reform taxes by going to much higher consumption taxes and much lower income taxes. If we want to avoid a recession and really boost the economy and jobs, then we need to get “medieval” on income taxes. Don’t take a scalpel to them. Bring out the axes and chainsaws.

Mauldin recommends we start by eviscerating the income taxes and introducing a 17% VAT and a significant and increasing yearly carbon tax on all energy inputs.  I think there is a good chance this would actually work and have very positive effects for our economy and potentially help save us from certain doom that is coming if we do nothing.

Mauldin ends by reviewing his five main points:

Let’s sum up the constraints and desires mentioned above as we set out on our quest for tax reform. Admittedly, these are my constraints and desires, but sharing them will help you understand what my ultimate goal is.

1. Since too much debt at the level we currently have creates a drag on growth, we have to control the growth of debt. That’s pretty much like the admonition that when you find yourself in a hole, stop digging. At some point, maybe we could repeat the Clinton/Gingrich experience of actually paying down the debt. (Let me have my dreams!)
2. My fellow Americans want two inconsistent things: They want their entitlements and benefits to continue, and they would like their taxes to be lower. Cutting benefits will quickly result in a return to a Democratic Party-led government, and no politician on either side of the aisle has any stomach for doing more than tinkering with Social Security or really cutting healthcare.

I think Republicans will seek to find efficiencies in the way health care is delivered and thereby maybe reduce total healthcare expenses somewhat, but benefits are going to stay roughly the same. Yet somehow we need to get a handle on how to reduce the constant cost increases. So we have to figure out how to fund those benefits. And while you could probably cut $50 billion from the discretionary parts of the budget – if you include defense spending as discretionary (which would elicit anguished screams and derogatory name-calling from everyone) – we must sadly acknowledge that cutting $50 billion gets you only about 10% of the way to balancing the budget.

3. What is the appropriate size of government in the US economy? Here I am conflicted. I am truly a small-government advocate. But I also want to balance the budget and actually reduce the debt, which means (and I can’t believe I’m using these words) that we’re going to have to find additional revenues unless we are willing to take a hatchet to entitlements, which we are not.

4. We really do have to create jobs, or the future is going to get pretty bleak pretty quick. Job creation means allowing small businesses and entrepreneurs to keep more of what they make and to increase their savings. It also means radical regulatory reform. It comes down to the most basic of identity equations in economics. GDP is the sum of Consumption (C), Investment (I), Government Spending (G), and Net Exports (X – M): GDP = C + I + G + (X – M), which reduces down to Savings = Investments.

It’s more complicated than that of course, but if you want investments that will create new jobs, the best thing you can do is to stop taxing savings and income and start taxing consumption. This country doesn’t need more consumption; it needs more income. That in turn will lead to increased consumption and more jobs. This is a basic Hayek versus Keynes argument, and I come down on the side of Hayek. Which means that the vast majority of academic economists believe I am wrong.

5. We have to change the corporate tax structure to put our businesses on an equal footing with their competitors around the globe. And while we’re at it, why not make them hypercompetitive? Why not take the corporate tax rate down to 15% of everything over $100,000, with no deductions other than to comply with normal GAAP accounting principles? Really want to jumpstart things? Then allow 100% write-offs of all business investments such as research and development, equipment, and buildings (but normal depreciation on the actual land).

6. There are several types of consumption-based taxes.
a. A sales tax (which would be too high – that’s why I dismissed the concept above)
b. A border adjustment tax, which would be challenged by Europe at the WTO, and we would lose because the vote is a political vote. Further, the BAT (I’m tempted to add “Out of Hell”) would set off immediate reactions by all of our trading partners, precipitating a round of tit-for-tat changes that would quickly deteriorate into something that looks like Smoot-Hawley. A BAT would cause a global recession. Further, it would pick winners and losers here in the US. Why is an export business better than an import business? They are equally valuable to the country. And they both create jobs.
c. A value-added tax (VAT) would easily withstand a challenge at the WTO, since nearly every other country in the world has a VAT.
d. We could introduce a carbon tax on petroleum products that would gradually increase, generating significant revenues over time. As noted above, a carbon tax is just another form of consumption tax, and it has the value of making progressive Democrats giddy about doing something for the environment and climate change, which makes them more likely to go along with the real Republican goals of job creation, income tax reform, and deficit reduction.

This is a solid plan and I think it has real potential to work to help us reverse this hole we have dug for ourselves.

Trade, Debt, Deficits and the Border Adjustment Tax

I am slowly arriving at a more full understanding of the relationship between international trade, sovereign debt, and government deficits.

While dear friends of mine have been encouraging me to look at gerrymandering, which is a serious political issue and needs to be fixed, the effects of the implementation of Trump's Border Adjustment Tax (BAT) have much more grievous consequences.

First, let me address the gerrymandering issue though, since it has been on my mind lately.  Having a Goofy Kicking Donald Duck district in Pennsylvania and a Latin Earmuffs district (below) in Illinois is absurd.

This kind of gerrymandering is ridiculous and should be outlawed.  We need to take a nice square grid system and overlay it on each state and have that set the districts.  Nothing is fairer than a square grid.  The only places people can quarrel on is the grid size and the grid origin.

But a BAT disrupting global trade, currency exchange rates, and foreign sovereign debt is a far more immediate threat that risks setting off a global contagion that would eventually engulf the U.S.

The root problem in this BAT idea is that the world is not a static system.  It is a dynamic equilibrium.  If we make changes to our tax system in such a way as to affect other countries trade balances, they will respond to counteract those changes.  This BAT issue is the sole reason why I refused to vote for Donald Trump as president.

The currently certain effect of implementing a BAT is that the U.S. dollar would rise sharply in value, being predicted by both economists on the right and left.  This rise would occur due to the flow of U.S. dollars across our borders being slowed, causing lower supply of U.S. dollars circulating in the world compared to a stable demand.

John Mauldin, who I generally consider to be a right-leaning economist predicted that the dollar would rise by as much as 20% in value with respect to other nation's currencies.

As the trade deficit shrinks, fewer dollars will flow from the US to the rest of the world. That trend will make the dollar rise against other currencies, thereby nullifying the higher prices we will pay for imported goods.

Paul Krugman, who is definitely a left-leaning economist, likewise predicts a rise in the value of the U.S. dollar exchange rates.

But of course wages and/or the exchange rate would, in fact, change. If the US went to a DBCFT, we should expect the dollar to rise by enough to wipe out any competitive advantage. After the currency adjustment, the trade effect should once again be nil. But there might be a lot of short-to-medium term financial consequences from a stronger dollar.

I am all for a strong dollar, but I need to nuance this view.  I am strongly in favor of an organically strong dollar, not a forced stronger dollar.  I am beginning to think that forcing the dollar stronger may have equally deleterious effects as forcing the dollar lower.  The effects are simply different and the genesis is not in the U.S.

If we force the dollar value higher, we will immediately cause a direct increase in the servicing costs of the $10 trillion in emerging market dollar-denominated sovereign debt.  This increase has the potential to sink those emerging market economies, much of whose debt is held by Western investors.  The contagion will wrap back around the world and setup a sub-prime debt crisis in sovereign emerging market debt which will inevitably result in a global recession at best or a global depression at worst.

We need to stop considering tariffs and border taxes as a means of solving our globalization woes.  These measures are not helpful in a dynamically volatile system in which other players will respond in kind of changes in the competitive advantage equilibrium currently in place.  We need to enact changes to the tax system that do not disrupt global trade or threaten the stability of emerging markets to the point of collapse.

Robots, Automation and Their Effect on Economics

This is a short repost of a hugely significant comment that John Mauldin made in his latest letter.

Like it or not, we have entered an era in which machines are learning how to do much of the work that now provides our incomes and, in many cases, our self-worth. This is a topic we will explore in depth in future letters. But a brief summary needs to be interjected here.

The US is manufacturing more materials and goods than ever. Manufacturing is increasing at a fairly serious rate, well over 2% a year. The problem is, manufacturing jobs are not. A Ball State University study calculated that it would take more than 8 million additional jobs to produce what we currently produce today if we were merely at the productivity levels of 15 years ago.

Investment in automation and software has doubled the output per U.S. manufacturing worker over the past two decades. Robots are replacing workers, regardless of trade, at an accelerating pace. “The real robotics revolution is ready to begin” writes BCG and predicts that “the share of tasks that are performed by robots will rise from a global average of around 10% across all manufacturing industries today to around 25% by 2025.” (Source: fortune.com/2016/11/08/china-automation-jobs/)
This is a simplification, but robots and their associated machinery have been somewhere in the neighborhood of four times more important in the loss of manufacturing jobs than off-shoring of jobs has been. But it is hard to protest against increased automation and easier to point a finger at China or Mexico.

The real challenge the US and the rest of the developed world face is how to create new jobs in the face of this automation challenge. The problem is not one we can walk away from. The best estimates that I have read suggest that Korea may be 15–20% more productive than we are in terms of costs, because they are pushing further and faster into the automation process. That trend will leave US manufacturers and exporters – or those in Germany or Italy or any other developed country – behind in the global business contest. Think Japan is not seeing the same thing?
If we don’t automate faster, we lose jobs by being uncompetitive. If we do automate, then we see jobs go away. What we have to do is figure out how to make sure that new jobs are created, and that these jobs are simply not make-work but are rather meaningful and fulfilling. Tall order. For whatever it’s worth, we are programmed in our evolutionary DNA to value what we contribute to the community through our work. Simply getting welfare without a way to eventually make it on your own does not help personal self-esteem or your community. (italics mine)

This is the single greatest challenge facing our world today is how we will adjust as a society as robots unemploy huge swaths of our population.  "We are programmed in our evolutionary DNA to value what we contribute to the community through our work. Simply getting welfare without a way to eventually make it on your own does not help personal self-esteem or your community."  This innate state is not going to change as robots produce more and more of the goods and services that we consume. 

This is where I think computer games will help, as it will allow people to 'work' without needing to produce anything.  I have already seen this as people pursue fictive goals and seek to cultivate skills in a virtual realm that fills this work and community requirement for our psyches.  The Matrix is closer than we might think, but we will live in a myriad of worlds all of our own creation with the freedom to jump from virtual reality to virtual reality at our choice.  I definitely foresee a large and growing interest in computer games in the future, and I am staking my life on it, literally.

You can read his entire article here.

The Dangers of Collectivism

I read a very wide variety of articles from across the political and economic spectrum, and I read Doug Casey's stuff with a grain of salt.  However, this article from him is spot on.  It is an incomplete but poignant review of near-history results of collectivist (both socialist and fascist; both authoritarian in nature) outcomes in countries.

There is a very clear pattern that the author identifies that I am going to repost here.

In each of the above countries, the pattern has been roughly the same.

• A formerly prosperous country experiences a period in which the standard of living for the majority of citizens drops significantly.
  
• The voters react by electing a new leader who promises a chicken in every pot (in essence, collectivism, although it is not always called that at the time of the election).
  
• The new leader begins to rob the producers of wealth to provide largesse for those with less. This has a direct positive benefit for those with less, resulting in an increase in voters supporting collectivist promises over a period of years.
  
• Over time, the free market experiences a permanent loss of wealth, resulting in diminished largesse for those who are now dependent upon it.
  
• The government imposes increasing capital controls and other regulations, which deteriorate the free market more severely, causing inflation, shortages of goods, loss of jobs, and eventually starvation and systemic collapse.
  
• The voters choose a new leader who promises fiscal responsibility.
  
• With a return to a freer market, prosperity slowly reappears.

I have zero doubt that the U.S. will follow this path exactly if we do not recognize the dangers of the false siren call of socialism and reject it soundly.  The timeframe for a full socialist collapse in the U.S., assuming we run full speed ahead into socialism is maybe ten to twenty years.  The U.S. has a lot of wealth for parasites to consume.

 The link to the original article is here: http://www.internationalman.com/articles/a-chicken-in-every-pot
Or you can read it below, for people who don't like auto-play videos...

A more progressive and libertarian society

After watching yet another authoritarian be elected to the presidency of the United States of America, I have been turning my thinking towards how we can build a better society.

First, I should say that I define 'progressive' in a much different fashion than most liberal thinkers and non-thinkers.  Specifically, I am using the 1b definition according of the Merriam-Webster Dictionary, "making use of or interested in new ideas, findings, or opportunities."

I have a very unique view of how I think that U.S. society should be run.  My view is very heavily influenced, but not dominated, by the libertarian ideals laid out by Murray Rothbard in "A New Liberty," which conveniently you can download and read for free if you want to understand my sociopolitical base.

First and foremost, I believe firmly in the non-aggression axiom except in the upholding of individual property rights.  When a person violates another person's right to life or property then violence must be used to restrain the aggressor.  The government must exist to exert the sum total of individual violent force that any man is entitled to defend his life and property.  The problem is that the government crosses this line and often exceeds the instances that individuals can use violence to protect life and property and thus becomes tyrannical by definition.

For example, if you were to go into your neighbors home and hold them up at gunpoint and demand they give you 30% of their income, it would be appropriately considered assault and robbery.  However, when the Internal Revenue Service raids your neighbor's home with a SWAT team and holds your neighbor at gunpoint to demand remittance of 30% of their income in taxes, it is suddenly perfectly acceptable to most people.   How is it that we consider the same action criminal if an individual does it and 'business as usual' when a government does it?  That is a serious problem in our society today.  A government that exceeds the limits of individual force is a tyrannical government.

So, the first step in freeing society from the grip of tyranny is to limit government to its role of exerting the sum of individual forces.

"But how will we collect taxes?" you say, and you are correct to ask the question.  Taxation will be voluntary and earmarked by the taxpayer.  This accomplishes three things, first it frees the taxpayer from the tyranny of government robbery.  Next, it gives the taxpayer a sense of ownership and invests them in their programs.  Lastly, it removes the budgeting debates from Congress and allows the budgeting process to be automatically handled by the taxpayers.  Congress would only be responsible for creating and publishing programs that are available to be donated to.  From there, the taxpayers would earmark their taxes to the programs which they believe in and want to see funded would be funded, and those which taxpayers believe are frivolous and wasteful would simply not be funded.  This system would make all of the government beholden to the taxpayers and also force them to deliver on the services that they are supposed to, because no one will earmark money for programs that don't benefit them in some way.

"How would justice be maintained?" you might ask next.  The judicial branch would be run by private individuals who operate on a fee system, much like the rest of the private sector.  The BAR Association would be reduced to a legal standards organization, but their power to 'certify' lawyers and judges would be permanently revoked.  As such, anyone would be allowed to serve as a judge, assuming anyone will agree to allow them to adjudicate their disputes.  Judges would be chosen by both parties in a dispute, and both parties would pay the judge to adjudicate the dispute.  In criminal cases, trials by jury would continue as they do now, except that juries would be voluntary and funded by a taxpayer judicial pot.

"How would we build roads?"  All public projects could be funded at the state level by having a public works pot of money that is contracted out to private companies to build roads, bridges, etc. much like it is now.  People who are unhappy with the state of the infrastructure would donate to this pot of money in their respective state.

"How would we defend ourselves?"  The military would be separated along state lines and paradigms.  The military would consist of one national research, development, and materiel command whose sole job it is to provide advanced equipment for all of the state fighting branches, a national space/intelligence command who would manage the information and intelligence for all states, and the national transport command who would facilitate global transportation of state fighting forces all of whom would be run by an elected civilian director on four year terms with a two-term limit.  There would be no "Air Force", "Navy", "Army," etc. each state would possess a self-contained fighting force across air, sea, and land.  When a war was declared by the Congress, they would appoint a supreme commander from one of the state commands whose state would respond first to the external threat.  From there, states would rotate in and out of the combat zone once every three months to allow soldiers to recuperate and be ready to roll again.  All of the national branches would be funded by one pot of money and all of the state fighting forces would be funded by each respective state.

The Congress would serve the same number of years as they do now, but would be limited to two terms for Senators and four terms for Congressmen.  This would ensure that fresh ideas are enforced in the Congress and keep stagnant group think out of Washington.  All Congressional health insurance and retirement programs would be dissolved and they would be forced to utilize the private market, as all of their constituents must.

The Federal Reserve, Treasury, and Federal Deposit Insurance Company (FDIC) would all be rolled into one department with a seven-member elected board each serving four year terms with two-term limits.  This new Finance Department would be responsible for ensuring that the money supply is maintained and that all deposits in U.S. banks are insured and would be authorized to print and disperse money to reimburse all clients of U.S. banks.  This way, when a bank fails, the Finance Department would print U.S. dollars up to the deposit balances of all customers of the failed bank and make those funds available to the customer to deposit in a new bank.  That way, when banks fail, the bank will simply go bankrupt and the money will be dispersed by the Finance Department to a bank of the depositors choice.  In this way, the depositors will be protected by the money-printing power of the Finance Department.  The fractional reserve system that modern banks use would be backed up by the full faith and credit of the U.S. and printing money up to the depositors amount would fill out the slack in the fractional system without creating inflation since they are simply backing up money that is already in the system.  The banks would create the money in the form of loans to individuals and businesses and the Finance Department would be the guarantor of all funds in the entire U.S. banking system regardless of which bank it is contained in.  That way, banks in the U.S. become expendable middle men who are incentivized to manage their bank well.

All other government functions would be divided up into departments to which people would be free to earmark their taxes for.  Each department would have an elected director on four years terms with a two-term limit and thus be wholly responsible to the taxpayers for making good on whatever service the department exists to provide.

This would be a far superior way to run our government and society, and thus will probably never happen because too many people's feathered beds would be turned upside down.  But the point of this post is to get people thinking about how a libertarian society could run.

Doug Casey on Facism in America

Doug Casey has a new article which is surprisingly balanced for him from an optimism standpoint.  All of the reasons that he lists for both optimism and pessimism are well-founded according to everything that I have read and he lists his basic recommendations which I am in the process of executing, despite my somewhat limited resources.

It is well worth a read:
http://www.internationalman.com/articles/how-fascism-comes-to-america

I have it copied below for brevity and long term storage.

Trump

This is going to be a two-part post because I have been neglecting my blog lately, despite my head brimming with topics to write about.  The two topics are completely disparate and have little to do with one another, aside from AI affecting the technology fabric underlying a Trump presidency.  So, sorry, keep your mental compartmentalization ready.

First, Trump.  I don't like Trump.  He is a big government guy and I am a libertarian.  He wants to do all kinds of expensive things with other people's money, which makes him only marginally better than Bernie Sanders and only morally superior to Hillary Clinton.  Currently, we have over 19 trillion USD in sovereign debt, not even considering unfunded liabilities like government pensions, social security, and Obamacare... I have read estimates in excess of 100 trillion USD in unfunded liabilities going forward.

100 trillion.  100,000,000,000,000,000!

Let that sink in for a bit...

Except that this number is so astronomical that most people cannot even conceive of it, let alone begin to fathom the consequences of this number.  But the debt will be paid.  It has to be, because the consequences of not paying it are world-ending (at least in the short term).  And it will be paid, even if other countries take it out of us in blood, which I imagine that they will be more than happy to do if we default on tens of trillions of USD in sovereign debt.

But we can't default, you say!

Technically, yes... you are correct, but a hyper-inflationary money printing extravaganza qualifies as a 'default,' just ask Zimbabwe, Argentina, and now Venezuela.

These countries are examples of unbounded spending on anything... defense, social entitlements, whatever...  eventually you run out of other people's money.   And if you don't think that this will happen here in the U.S., think again.  It doesn't matter how powerful you think you are, the piper must always be paid.  And Trump has all kinds of expensive plans including building walls, tax cuts, tariffs, and boosting defense spending, which I am in favor of, so long as we stop this military adventurism nonsense.  But you cannot do all of that at once without funding it, and there are only two sources of funding, debt and currency.  You can issue debt until you can't when the rest of the world figures out that the emperor has no clothes, then you must print... or cut spending.

Debt is one reason I do not like Trump.

A second reason that I neither trust nor like Donald Trump is that all of his solutions revolve around tariffs.  A tariff is a sanction or penalty on incoming goods from other countries.

That $2000 TV you envy in the electronics store?  $4000 after Trump sanctions the country that manufactures it.

Those $20 clothes at Walmart?  $30-40 after Trump sanctions countries that manufacture them.

Those $50 car parts that you buy from Mexico to keep your jalopy running?  $100+ after Trump sanctions Mexico to force them to pay for the wall.  To say that Mexico is going to pay for the wall is technically true, but in reality you are going to pay for it.

And this is just the beginning. 

Tariffs start trade wars.  That is simply how it works.  So, China will put tariffs on our iPhones and start chasing US companies out of China and ramp up their cyber- and economic espionage campaign to steal IP from us in order to continue making our shit for less than we can.  So, we lose anyway.

 This post is already running way longer than intended, so I guess I will close with the Hillary/Bernie alternative which is equally dim.  You'll have to wait for comments on AI-theism.

A Hillary/Bernie presidency would consist of free shit for everyone.  Great, you say!  I love free shit!

Except that nothing is free.

If we have close to 100 trillion in already unfunded liabilities, why not throw on another 20 trillion.  No big deal, right?  So, sure, we can enjoy our social entitlements until our civilization collapses under the crushing debt load.

So, the Bernie/Hillary presidency, which also has this penchant for big government and spending other people's money, will run out of money long before a Trump presidency will...  and I think there is at least some small modicum of hope that Trump will see the error of his ways before he actually screws us all over.  Hillary and Bernie will be screwing us as a matter of principle, so I don't see any hope down that path.

So, long story short, I am not voting.  I am preparing to run for the hills, so that when the inevitable shit hits the fan I will be protected.  And you would be wise to do the same.

The Exploits of the Demopublican Party

Doug Casey is a pessimist, but a pessimist on solid grounds.  The problems that the U.S. faces are real, serious, debilitating, and potentially catastrophic.

The U.S. debt is not going to simply disappear, unless we print our way out of it --which with all of the discussion about helicopter money going around would not surprise me-- and there are severe consequences if this debt is not dealt with.

But the true rot of our country is not purely economic.  The economics are merely following the social and cultural rot that is decaying our country from the inside out.  This rot has its source at the philosophy of humanism, and we are seeing the results of humanism applied and lived out on a mass scale.  And it will only get worse as the idiocracy takes hold.  Our learning institutions are pushing out droves of mindless slaves, who probably couldn't reason their way out of the brown paper bag, while the entitlement culture is eroding what little prosperity was left in the system.  Eventually, the only buyer left in the U.S. Treasury market will be the U.S. Federal Reserve who relies on printing money to fund their purchases.  Japan is already there; the U.S. is only a few steps behind.  The coming economic collapse is very sure, the only uncertainty is the timing.

So, what is the solution?

I am not sure that there is a solution that will actually prevent this, barring major cultural shifts, which I do not see happening.  So, I reluctantly admit that Doug Casey may very well be correct when he says, "the only thing that you can do is protect yourself."

So, to protect yourself against currency collapse (the result of excessive money printing), buy gold, silver, real estate, guns, even Bitcoins might work.   Anything that is not reliant on the U.S. government for it's underlying value.

I really think that Christians should begin banding together and preparing a set of local church arbitration courts to replace the judicial system that will collapse when the government collapses.  At least then some sense of justice will be maintained on a local level, and we can simply arbitrate amongst other Christians for now, and pagans can use it when it becomes necessary.

For European Christians, they need to prepare to care for and protect Muslims when the next holocaust comes; because everything is in place now for the holocaust of Muslims in Europe, all that is required is the spark that lights the keg.

As with all predictions though, the exact timing is very difficult to determine, but this is why we are to remain watchful and keenly aware of the world around us.

You can read Doug Casey's thoughts on the political election in the U.S. here.  Be warned though, there is an auto-play video that will load on the page.  You can read it below if you want to avoid the auto-play video.  And if you feel so inclined, he offers his solutions for purchase, which are very pragmatic solutions.