-- Posted Wednesday, 30 May 2012 | | Disqus
Gary North is an icon in the Austro-libertarian world, and writes more in a day than most will write in their lifetimes. The majority of what he says is excellent and it is well worth your time listening to whatever he has to say.
In his recent article, entitled, "Why We Are Not On The Road to Serfdom", he takes a slightly different perspective than TDV on the state of liberty in the USSA. In it, he makes many good points and tries to lay out the case that because the US Government is on the verge of financial collapse, we should be optimistic about the future. He opens his argument with the following statement: "the federal government is no deeper into our pockets than it was in 1947," and presents us with the following chart:
The rest of the article goes on to make the case that on net, the average citizen is better off due to the radical advances in productivity in the last 50 years and "that we are not moving into a comprehensive tyranny". He is also optimistic about the "Great default" and the negative effect that it will have on the Federal Governments ability to interfere with our lives.
But, we don't see the government's involvement vis-a-vis GDP, or the improvement of technology that we have managed to achieve despite the attempts of the Feds attempt to shut down innovation as being proof that the US Government is not attempting to move us down the road to serfdom. Here's the way we see it.
THE US HAS ALREADY GONE BANKRUPT TWICE IN THE LAST CENTURY
It is our view that the modern USSA needs to be looked at in terms of its regression (not progress) since the Federal Reserve was put into place in 1913 and income tax was introduced. Less than two decades later and the US Government was already bankrupt. The only way it could salvage itself in 1933 was to confiscate much of the real wealth(gold coins and bullion) of its citizenry and devalue the dollar. This was bankruptcy #1.
After World War II, two facts led to it’s predominance in the global economy. The USSA was the only modern, industrial economy to survive intact and the establishment of the Bretton woods system that positioned the USD as the world reserve currency. This position was abused by the cynical political class and their wealth was squandered throughout the 1960s with the unnecessary war in Vietnam and the institution of the “Great Society” welfare state programs. By 1971, the US Government was again bankrupt.
This time, on August 15, 1971, Richard Nixon reneged on the promise to exchange the US dollar for gold. The world went into shock. For a period of time the US dollar barely traded on international markets. In Germany, where they have experience with hyperinflation, US dollars were not accepted by any currency exchange shop for a number of weeks as people around the world threw up their arms in anger. But... what could they do? Nothing. And what were the viable alternatives at the time? There were none... so, after a few weeks, people just continued to use the now pure fiat dollars.
As the years passed and as the US Government and Federal Reserve, unrestrained by an admittedly weak gold exchange standard of the Bretton Woods system, began to inflate the dollar dramatically, the world was sent into an inflationary crisis by 1979. People from Toronto to New York to Paris were calling in sick for work and standing in lines that wound down the block to buy gold in exchange for their fiat currencies.
It was less than ten years on a pure fiat currency system and the US economy was on the verge of collapse. But, and this is a big but, the total amount of debt that had been racked up western governments had not reached the point where they could not be paid for even with interest rates skyrocketing well over 10% to squelch the inflation. And that is what happened. Paul Volcker allowed interest rates to seek their natural level and it hit as high as 18% before the inflation was muted. But the US Government only had $900 billion in debt versus a GDP of $2.7 trillion. So, debt to GDP was only 33%.
Today, the US GDP is approximately $15.4 trillion (2011). The admitted to federal government debt is also currently at $15.4 trillion, meaning a debt to GDP ratio of 100%. Forgetting for the moment the unfunded liabilities which have already been spent, which would leave the figure at closer to 500%, an interest rate of 18% on the current debt would require $2.7 trillion per year in payments. The total tax theft “revenue” of the US Government in 2011 was $2.3 trillion, meaning every dollar of tax theft revenue would go solely to interest payments on the debt.
In other words: raising rates, which is the only thing that can squelch the impending inflation that is currently building, is not an option this time around. This time around the choice will be allowing interest rates to rise dramatically and bankrupting the government or keeping rates low until the dollar hyperinflates into worthlessness. Ben Bernanke has kept interest rates at 0% since 2008 and has publicly stated that he will keep them at zero until 2014. Ben Bernanke has drunk of the Keynesian koolaid so deeply and for so long that he will keep rates at zero until the economy recovers. The thing is, the economy can never recover until rates rise. It’s a Catch 22... and it all ends in tears.
WE AREN'T IN KANSAS ANYMORE, DOROTHY
Where to begin in our comparison of 1947 versus 2012? Just off the top of our head, here are ten ways the US is worse than it was in 1947:
- Government Unrestrained. The US dollar used to be backed by gold, it is no longer... meaning the Government is completely unrestrained in its spending.
- Socialist Insecurity Insolvency. The intergenerational ponzi scheme known as the Socialist Insecurity system (social security), was in its infancy and was not bankrupt as it is today (see "Forget Retirement... and Retirement Savings"), with over 40 workers per retiree. Today it stands at closer to 3 workers per retiree.
- Surveillance State. While the US Government may have tapped one or two phones in 1947 they certainly weren't building a $2 billion domestic spying data center in Utah to monitor all telephone calls, emails and web traffic.
- Selling off/Indebting the young. The total US Government debt in 1947 was $258 billion. And while that was a massive amount at the time after having gone "balls in" to World War II, for no apparent reason, given the population of 144 million, it was about $1,791 per person in federal government debt. Today, with a population of 305 million and debt of $16 trillion, it works out to about $52,000 per person... but that leaves out all the unfunded liabilities (which didn't exist in 1947) which add up to more than $75 trillion now, meaning a total debt and liabilities of $250,000 per person in the US.
- The War on Plants. There was no "war on plants" (drug war) in 1947. Today the US has the largest amount of people in cages per population by a factor of four (see "Kidnapping and Ransom Rampant in the US"). The US has nearly 800 people in cages per 100,000. The US has 5% of the population of the Earth and 25% of the total incarcerated. Of total arrests in 2008, 90.7% were for non-crimes (ie. victimless crimes). Now, possession of a dried flower that millions, including Prime Murderer In Chief, Barack Obomber, enjoy regularly is reason to haul someone off in the night.
- Police State. Anyone remember no knock raids in 1947? Fonzi making too much noise up in the garage bungalow? Break it down with a SWAT team! No knock, warrantless raids are such a norm in the US today that songs are written about it. It is so out of control that even members of the "elite" (politicians) have been caught up in the carnage as this Mayor of a town found out when his dog was killed in a mistaken "no knock raid".
- Terminator-esque Existence. While U.S. President Harry S. Truman signed the National Security Act of 1947 into law, creating the Central Intelligence Agency, the Department of Defense, the Joint Chiefs of Staff, and the National Security Council, no one could have imagined that by 2012 the US Government would be signing into law an act that will put 30,000 drones over the US, watching US citizens.
- Revocation of the Bill of Rights. While the upper levels of the executive branch of the US Government, and those who control them, have always had impunity to kill at will, never has it been made more blatant than in the National Defence Authorization Act, passed on New Year's Eve of last year, which allows the President the ability to indefinitely detain or kill any American he wishes. While a federal court has temporarily blocked this act, is there any doubt it will eventually be rammed through?
- Dependency Nation. In 1947 hardly anyone was dependent on the government for their well-being. In 2012, nearly 50 million (1 in 6) are on Food Stamps and nearly half of all US households are recipients of government handouts.
- Controlling population through Vaccinations. In the 1940s vaccines were not the norm. At most, two were given, for some very serious diseases. In 2012, 49 doses of 14 vaccines are introduced into the yet to be developed immune system of infants by the time they are six years old.
Still think the US Government has about the same involvement in the lives of US citizens today as it did in 1947? The reality is clear. The US is closer to the Soviet Union now than it was to any idealized free country sixty years ago.
THE VAMPIRE STATE BARES ITS FANGS
We really aren't in Kansas anymore, Dorothy.
The US Government and the US dollar are in its death throes. There is really only one thing left that can be done to stave off the funeral for a few more years... and that is to begin to leach off of the citizenry until everyone is sucked dry. What's that mean? Taxes, taxes, and more taxes. 2012 and 2013 will be remembered in the US as the years of the tax hike. States across the US have been raising taxes on almost anything. See "Record Tax Hike Isn't Fixing Illinois' Problem" and "Brown pushes tax hike as California's money woes deepen" as just two of countless examples.
But, that's just the states. Brace yourself... next year US citizens will be extorted with a tax hike the likes of which US tax slaves have never seen. The Washington Post called the unprecedented $494 billion tax hike “Taxmageddon,” and Federal Reserve Chairman Ben Bernanke described it as a “massive fiscal cliff.”
The squeeze is on... and it won't get any better any time soon. Expect worse and worse until the end of the US Government or the US dollar.
NEXT STEP: RETIREMENT SAVINGS
Charles Schumer and the other feeders in the US Congress showed their fangs, dripping with blood when they announced the Expatriation Prevention Act (see "Charles Schumer Tells Americans They Can't Leave So Easily") upon hearing Facebook co-founder Eduardo Saverin doesn't want to involuntarily pay into the criminal US system. They hate it when anyone with money escapes their grasp.
But the last grasp for them, in our opinion, will be the retirement savings of US citizens. And, it isn't like they are even trying to hide their intentions as this story from the New York Post recently headlined, "Feds eye retirement-fund tax to cut $16 trillion-plus deficit".
This ain't 1947 anymore... and we highly recommend anyone with "retirement savings" withdraw their funds and get them into hard assets. If you don't want to withdraw the funds, at least work to get them outside of the control of the government who purports to own you. In the US, this can be done through a "Self-Directed IRA". You can even take a large enough IRA, turn it into a self-directed IRA, and use a portion of the funds to purchase real estate in the theft free(tax free) island of St. Kitts, which comes with a passport, and free yourself almost completely from the US Government all in one fell swoop... all without even cashing in your IRA (call the guys at TDVPassports.com for more).
Or, Subscribe to The Dollar Vigilante today. In this week's dispatch we outline exactly how to go about the above process and detailed info on the St. Kitts and Nevis Investment Passport program... and this week Ed Bugos tells us why he is getting even more bullish on gold stocks... plus much more on how to survive the collapse of the US Government and The End Of The Monetary System As We Know It (TEOTMSAWKI).
-- Posted Wednesday, 30 May 2012 | Digg This Article | Source: GoldSeek.com