Tag: Simon Black

Submitted by Simon Black via Sovereign Man blog,

On October 22, 1981, the government of the United States of America accumulated an astounding $1 TRILLION in debt.

At that point, it had taken the country 74,984 days (more than 205 years) to accumulate its first trillion in debt.

It would take less than five years to accumulate its second trillion.

And as the US government just hit $18 trillion in debt on Friday afternoon, it has taken a measly 403 days to accumulate its most recent trillion.

There’s so much misinformation and propaganda about this; let’s examine some of the biggest lies out there about the US debt:

1) “They can get it under control.”

What a massive lie. Politicians have been saying for decades that they’re going to cut spending and get the debt under control.

FACT: The last time the US debt actually decreased from one fiscal year to the next was back in 1957 during the EISENHOWER administration.

FACT: For the last several years, the US government has been spending roughly 90% of its ENTIRE tax revenue just to pay for mandatory entitlement programs and interest on the debt.

This leaves almost nothing for practically everything else we think of as government.

2) “The debt doesn’t matter because we owe it to ourselves.”

This is probably the biggest lie of all. Two of the Social Security trust funds alone (OASI and DI) own $2.72 trillion of US debt.

The federal government owes this money to current and future beneficiaries of those trust funds, i.e. EVERY SINGLE US CITIZEN ALIVE.

I fail to see the silver lining here. How is it somehow ‘better’ if the government defaults on its citizens as opposed to, say, banks?

3) “They can always ‘selectively default’ on the debt”

Another lie. People think that the US government can pick and choose who it pays.

They could make a bing stink about China, for example, and then choose to default on the $2 trillion in debt that’s owed to the Chinese.

Nice try. But this would rock global financial markets and destroy whatever tiny shred of credibility the US still has.

Others have suggested that the government could selectively default on the Federal Reserve (which owns $2.46 trillion of US debt).

Again, possible. But given that the Fed (the issuer of the US dollar) would become immediately insolvent, the resulting currency crisis would be completely disastrous.

4) “It’s the NET debt that’s important”

Analysts often pay attention to a country’s “net debt” instead of its gross debt. If you have a million bucks in debt, and a million bucks in cash, then your ‘net debt’ is zero. It washes out.

Problem is, the US government doesn’t have any cash. The Treasury Department opened its business day on Friday morning with just $71.9 billion in cash, or just 0.39% of its total debt level.

Apple has more money than that.

5) “They can fix it by raising taxes”

No they can’t. Just look at the numbers. Since the end of World War II, US government tax revenue has consistently been roughly 17% of GDP.

They can raise tax rates, but it doesn’t move the needle in terms of revenue as a percentage of GDP.

In other words, the government’s ‘slice of the pie’ is pretty consistent.

You’d think with this obvious data that, rather than try to increase tax rates (ineffective), they’d do everything they can to help make a bigger pie.

Or better yet, just leave everyone the hell alone so we’re free to bake as much as we can.

But no. They have to regulate every aspect of people’s existence: How you are allowed to educate your children. What you can/cannot put in your body. How much interest you are entitled to receive on your savings.

All of this costs time, money, and efficiency. So do never-ending wars. The bombs. The drones. The airstrikes.

This isn’t about any single person or President. The problem is with the system itself.

History shows that every leading superpower from the past almost invariably fell to the same fate.

Great powers often feel that their wealth and success entitles them to spend recklessly and wage endless, arrogant wars. The Romans. The Ottoman Empire. The British.

History may not repeat but it certainly rhymes. And the lesson here is very clear: debt weakens a nation. It weakens a society.

Generations that will not even be born for decades will inherit these debts by complete accident of birth.

And the people in charge of the system have backed themselves into a corner where there is no way out other than to default– either on their creditors (creating a global financial crisis), the central bank (creating a currency crisis), or on the citizens themselves (creating an epic social crisis).

Bottom line: this is not a consequence-free environment. And while you can’t fix the debt problem, you can certainly reduce your own exposure to what happens next.

Submitted by Simon Black via Sovereign Man blog,

John Anderson, an American tourist from San Clemente, California, was driving down a poorly-maintained highway when he saw flashing lights in his rearview mirror.

After a brief exchange with the local police officer, Anderson was shocked when the cop started searching his vehicle.

Anderson had $25,180 in US dollar cash in the car, which by the way was not a crime according to the local laws.

When the cop saw it, he told Anderson that we would take it and threatened him with arrest if he protested.

Anderson couldn’t believe it. This is the sort of stuff you always hear about in these third world countries—corrupt cops and state robbery.

Ultimately Anderson gave in; the cop let him go and did not charge him with a crime, but took every last penny in the vehicle.

And for the last two years, Anderson has been trying to unsuccessfully fight it in the country’s Kangaroo court system.

Clearly we should all avoid going to such dangerously corrupt third world countries.

Except in this case, Anderson was in the United States of America. And he is far from being the only victim of this highway robbery known as Civil Asset Forfeiture.

Since 9/11, police forces in the Land of the Free made over 62,000 seizures without charging anyone with any crime, stealing $2.5 billion in cash alone.

The cost of taking legal action against the government is so high, that only about 17% of the victims actually challenged the seizures.

And even then, only 41% of those that challenged have been able to get their money back.

This means that the government has a better than 93% success rate in outright theft.

This is worse than mafia—it’s blatant theft with impunity from the people that are sworn to protect and serve. It’s the kind of thing that is thought to only occur in heinously corrupt countries.

Here’s the good news: many people are waking up to the reality that they’re not living in a free country.

They are starting to understand what I call ‘the criminalization of existence.’

Every last detail of our lives is regulated—what we can/cannot put in our bodies, whether we can collect rainwater or unplug from the grid, how we are allowed to educate our own children, etc.

Driving this point home, a Tennessee woman was actually thrown in jail earlier this month for ignoring a city citation to trim some overgrown bushes in her yard.

This isn’t freedom.

The irony is that, even though many people are starting to realize this, they’re looking to the very institution that has enslaved them to solve the problem.

It is their own government that has created this system.

It is the government that passed US Code section 983 (Rules for Civil Forfeiture), allowing the police to commit highway robbery.

It is the government that continues to arrogantly, brazenly spy on every citizen despite overwhelming public outcry.

It is the government that continues to bring forth new regulation at an absolutely astounding rate.

Just today (this is 100% true), the US federal government published an eye-popping 490 pages of new rules, proposals, and regulatory notices.

To give you a little taste, today’s regulations include:

• Stringent requirements for properly handling spearmint oil;

• New tolerance specifications for a-alkyl-w-hydroxypoly sulfate

• Additional powers awarded to the Department of Education to decide “whether certain postsecondary educational programs prepare students for gainful employment.”

• A decision to centrally manage the 2014 ‘total allowable catch of Pacific Cod’ in the Bering Sea.

There’s even a new rule upholding fines for unauthorized playing of digital recordings.

You can’t make this stuff up—they are regulating nearly everything.

It’s government that does this. They are the problem, not the solution.

Looking to government to solve the problem that they themselves created is completely irrational. They are incapable of righting themselves.

The solution – the power – is with the individual.

All the tools and all the resources to distance yourself from this system already exist.

On one hand, there’s always the possibility of leaving. The American Dream is still alive and well… it’s just no longer in the United States. Not to mention all the financial, business, investment, and lifestyle opportunities for the taking.

But even if you stay, there are dozens of ways to take back your freedom.

For example, why hold 100% of your savings and assets in that jurisdiction when they could easily confiscate everything?

There are so many great, safe jurisdictions in the world to bank, to invest, to own property, and to store assets. And you can set all of this up without leaving town.

The solutions are out there. It’s time to consider them before becoming a statistic.

P.S. Here’s more proof that the official inflation numbers are completely phony… yet another market that has reached an all time high.

The Morning After: What Happens When A Government Destroys Its Currency

 

Submitted by Simon Black of Sovereign Man blog,

Here’s a guy you want to bet on– Li Ka-Shing.

Li is reportedly the richest person in Asia with a net worth well in excess of $30 billion, much of which he made being a shrewd property investor.

Li Ka-Shing was investing in mainland China back in the early 90s, way back before it became the trendy thing to do. Now, Li wants out of China. All of it.

Since August of last year, he’s dumped billions of dollars worth of his Chinese holdings. The latest is the $928 million sale of the Pacific Place shopping center in Beijing– this deal was inked just days ago.

Once the deal concludes, Li will no longer have any major property investments in mainland China.

This isn’t a person who became wealthy by being flippant and scared. So what does he see that nobody else seems to be paying much attention to?

Simple. China’s credit crunch.

After years of unprecedented monetary expansion that has put the economy in a precarious state, the Chinese government has been desperately trying to reign in credit growth.

The shadow banking system alone is now worth 84% of GDP according to an estimate by JP Morgan. The IMF pegs total private credit at 230% of GDP, jumping by 100% in the last few years.

Historically, growth rates of these proportions have nearly always been followed by severe financial crises. And Chinese leaders are doing their best to engineer a ‘soft landing’.

If they’re successful, the world will only see major drops in global growth, stocks, property, and commodity prices.

If they fail, the spillover could become pandemic.

This isn’t important just for Asian property tycoons like Li Ka-Shing. Even if you don’t know Guangzhou from Hangzhou from Quanzhou, there are implications for the entire world.

Here in Chile is a great example.

Chile is among the top copper producers worldwide, China among its top consumers. With a major slowdown in China, however, copper prices have dropped considerably.

Consequently, the Chilean economy has slowed. The peso is down nearly 10% against the US dollar in recent months, and the central bank is slashing rates trying to prop up growth.

There are similar situations playing out across the globe.

Not to mention, China could put the entire global financial system on its back just by dumping a portion of its Treasuries in order to defend the yuan.

Now, you’d think that a major credit crunch with far-reaching consequences in the world’s second largest economy, its largest manufacturer, and its largest holder of US dollar reserves, would be constant front-page news.

But it’s not.

Most traditional investors are unaware that what’s happening in China will likely have far greater implications to their investment portfolios than the policies of Janet Yellen and Barack Obama combined. At least for now.

And folks who don’t see this coming and keep buying at the all-time high may see their portfolios turned upside down. Quickly.

At the same time, some investors who are conservative and cashed up may realize a real ‘blood in the streets’ moment.

Again, using Chile as an example, I’m starting to see over-leveraged property owners coming to the market in droves ready to make a deal. This is great news because my shareholders and I are able to buy far more property with US dollars than we could even just six months ago.

I expect this trend to hold given that China is just at the beginning of its process.

It’s said that the Chinese word for “crisis” is a combination of “danger” and “opportunity”.

This isn’t entirely accurate. ‘Weiji’ can have several meanings, but is probably best translated as ‘dangerous’ and ‘crucial point’.

We may certainly be at that crucial point, and now might be a good time to take another look at your finances and consider selling before a major crash. The richest man in Asia certainly thinks so.