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Periodically, I offer up a statement by Scottish economist Alexander Tytler, who, in 1787, was reported to have commented on the then-new American Republic as follows:

A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship.

The average age of the world’s greatest civilizations has been about 200 years. These nations always progressed through this sequence:

From Bondage to Moral Certitude;

from Moral Certitude to Great Courage;

from Great Courage to Liberty;

from Liberty to Abundance;

from Abundance to Selfishness;

from Selfishness to Complacency;

from Complacency to Apathy;

from Apathy to Dependency;

from Dependency to Bondage.

Tytler had it right. There is a Freedom Cycle. It’s not an accident. It’s based upon human nature, which is perennial. And it’s not something that can be manipulated to suddenly reverse itself, just because the citizens of a country are unhappy when they find themselves living in the declining stages. It has to play itself out.

Tytler was quite a scholar and had come to his conclusion, based upon the rise and fall of many nations, over the ages, with particular emphasis on the Athenian Republic.

Since Tytler’s time, we’ve been able to witness many formerly free countries slide inexorably into their final stages of decline. For example, the countries in the EU are further gone than the countries in North America, and Venezuela is further gone, still.

…click on the above link to read the rest of the article…

Investing in Collapse

May 22, 2018

Investing in Collapse

For years, I’ve been writing about Venezuela, describing it as the “movie” by which we can view the future of other jurisdictions that are presently in decline.

The reason is that declining nations follow the same pattern, time and time again, over the centuries. This is not coincidence. The pattern exists because human nature never changes, regardless of the era or the locale. Political leaders make the same mistakes as their forebears, and the people of a nation react in kind.

For this reason, countries have a sort of “shelf life.” They rise in prominence, due to work ethic and productivity. They then go through a period of abundance, which eventually deteriorates, due to complacency and apathy. Finally, they collapse into a period of bondage.

If we recognize that this pattern has played out countless times over the millennia, we can track any given country and assess where it is at present, in the pattern. For example, Europe and North America are presently in the last stages prior to collapse, Venezuela is in the process of collapse and Cuba is in the post-collapse recovery.

But, although this may be historically interesting, of what value is it to us in terms of our own lives and the choices we make for our future?

Well, we can observe Venezuela and see the effects of the present policies evident in our own country, if we happen to live in one that’s on the verge of collapse.

For example, we can see that ever-increasing largesse by a government—on the backs of productive taxpayers—is a major destructive trend. “Protective” tariffs and capital controls also lead to collapse. And excessive debt is a pathway to economic collapse.

We can see from the recent history in Venezuela how these political mistakes caused their collapse, and we can now observe how that collapse plays out.

…click on the above link to read the rest of the article…

Nothing Exceeds Like Excess

March 27, 2018

Nothing Exceeds Like Excess

The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.

—Ernest Hemingway

Military spending is the second largest item in the US federal budget after Social Security. It has a habit of increasing significantly each year, and the proposed 2019 defense budget is $886 billion (roughly double what it was in 2003).

US military spending exceeds the total of the next ten largest countries combined. Although the US government acknowledges 682 military bases in 63 countries, that number may be over 1,000 (if all military installations are included), in 156 countries. Total military personnel is estimated at over 1.4 million.

The reader could be forgiven if he felt that a US military base was rather unnecessary in, say, Djibouti or the Bahamas, yet the US Congress will not allow the closure of any military bases. (The Bi-partisan Budget Act of 2013 blocked future military base closings under the argument that they’re all essential for “national security.”) And Congress has a vested interest in keeping all bases open and consuming as much in tax dollars as possible (more on that later).

Of course, those bases need to be kept well-stocked with small arms, tanks, missiles and aircraft. Yet, in spite of the admittedly incredible number of US military bases across the globe, the additional stockpile of weaponry is so great that the government has difficulty finding places to put it all.

One storage location is pictured in the photo above—Davis-Monthan Air Force Base in Tucson, Arizona. In spite of the size of the photo, it shows only a portion of the aircraft located there. (And bear in mind, such aircraft often cost over $100 million each.)

If asked, the military states that, although these aircraft are in dead storage and many have never seen any use whatever, they might possibly be called up for service, “if needed.” Of course, if they’re needed, they’re unlikely to be of use if located in Arizona. And, in addition, they may not be useful for warfare, as war technology has moved on since the days when such aircraft designs were suitable.

It’s been said that generals are forever fighting the last war, and this is certainly true. Even a layman can observe that such conventional aircraft will never see use, as they serve no purpose in modern warfare.

…click on the above link to read the rest of the article…

China Is Days Away From Killing the Petrodollar

March 22, 2018

China Is Days Away From Killing the Petrodollar

Not long ago, there was a popular joke in China that went something like, “Who is Xi Jinping?”

The answer was, “The husband of Peng Liyuan,” the famous singer Xi is married to.

Today, Xi is China’s president. He leads 1.4 billion people. And he’ll likely be the most powerful person in the world soon.

As I mentioned last Wednesday, Trump’s new steel and aluminum tariffs are part of a larger, escalating battle between the US and China.

China is rapidly displacing the US as the dominant global power. This shift is inevitable. China’s economy will be twice as large as the US economy by 2030.

This leaves the US with limited options…

It could kick back and let China displace it as the most powerful country in the world.
It could start a military war with China.
And it could push the current trade battle into an all-out economic war against China.

I think a full-blown economic war is the most likely. Under President Trump, it’s all but certain.

That said, the Trump administration seems to underestimate China’s position—in both the short and long term.

For decades, the US has been able to exclude virtually any country it wants from international trade. Right now, if one country wants to trade with another, it basically needs US permission first.

That’s because (for a short while longer) the US dollar is the world’s most important currency. The US Navy also dominates the world’s oceans, controlling most major shipping lanes.

But China is building a new international system. Eventually, it will let China and its trading partners totally bypass the US.

And, as I’ll explain shortly, a key piece is set to fall into place on March 26…

…click on the above link to read the rest of the article…

Trump’s Tariffs Could Start a Real War

March 14, 2018

Trump’s Tariffs Could Start a Real War

Trump’s steel and aluminum tariffs may set his epitaph in stone… “Herbert Hoover II.”

History remembers Hoover as one of the worst American presidents.

Like Trump, he was a rich international businessman. He was also a political outsider. Hoover hadn’t held public office before his 1929 inauguration. And, like Trump, Hoover faced intense pressure from struggling American workers.

In 1930, he signed the Smoot-Hawley Tariff Act into law, raising tariffs on thousands of imported goods to record levels. This kicked off a tariff war, reducing American exports by half. It was a crushing blow to the American economy.

Nearly a century later, Trump seems determined to make the same mistakes…

Trump Started This Trade War Last Summer

Trump placed tariffs on steel and aluminum last week. China, of course, is the world’s largest producer of both.

The mainstream press called the tariffs “unexpected.” But they didn’t come out of nowhere.

Last month, I told readers of my advisory, Crisis Investing, that steel and aluminum tariffs were likely. (Paid-up readers can access the issue here.)

In fact, I’ve been pounding the table about a trade war—specifically a trade war with China—since September.

Frankly, I think Trump fired the first shot in this trade war last summer, when his administration launched an investigation against China using Section 301 of the Trade Act of 1974.

This rarely used provision allows Trump to “take all appropriate action… to obtain removal of any [trade] practice that is unjustified, unreasonable, or discriminatory, and that burdens or restricts U.S. commerce.”

Traditionally, World Trade Organization (WTO) members, including China and the US, have settled trade disputes through it. But Trump, using Section 301, has taken a unilateral approach.

…click on the above link to read the rest of the article…

How China Could Freeze the US Military

February 23, 2018

How China Could Freeze the US Military

Last April, President Trump launched 59 Tomahawk cruise missiles into Syria.

He was responding to an alleged chemical weapons attack by Bashar al-Assad’s Syrian government.

It was Trump’s most dramatic military move since he became president. It was also the United States’ first deliberate attack on the Syrian government.

At the exact moment he ordered the strike, Trump was also hosting China’s president, Xi Jinping, for dinner at Mar-a-Lago, Trump’s Florida resort. Xi’s wife was also there.

Trump said:

I was sitting at the table. We had finished dinner. We are now having dessert. And we had the most beautiful piece of chocolate cake that you have ever seen. And President Xi was enjoying it. And I was given the message from the generals that the ships are locked and loaded. What do you do? And we made a determination to do it. So the missiles were on the way. And I said: ‘Mr. President, let me explain something to you… we’ve just launched 59 missiles… heading toward Syria and I want you to know that.’

When asked how President Xi responded, Trump claimed: “He paused for 10 seconds and then he asked the interpreter to please say it again.”

The timing of the attack was meant to intimidate Xi and send China a message.
You see, China and Syria are allies. The Chinese give Assad’s government diplomatic, military, and economic support. China has also used its veto power at the UN several times to support Syria.

Essentially, Trump invited President Xi and his wife to his home for dinner. Then, over cake, he bombed one of Xi’s friends.

…click on the above link to read the rest of the article…

The All-Important Doorman

February 17, 2018

The All-Important Doorman

Picture this: A tribal leader from a distant country visits the US. He’s brought to a large apartment building in New York City. When he gets out of the car, he looks up at the great building and is quite impressed. A uniformed doorman exits the foyer and comes out on the sidewalk. The tribesman sees the gold braiding and brass buttons of his coat and immediately decides that this is a very important person. Again he looks up at the building and says to the doorman, “This is a very great home you have. You must be very important indeed.”

Of course, if we were present, we might chuckle at the tribesman’s naiveté. The owners of such a great building would never greet people at the entrance. They leave such trivial tasks to hired servants, whilst they run the real business without ever needing any direct contact with visitors as they enter the building. And, in addition, doormen come and go – they are, after all, disposable. The owners – those who control what happens in the building – retain their positions over the long term… and may remain anonymous, if they so choose.

We find this simple concept easy enough to understand, and yet we chronically have difficulty in understanding that, in most countries, the president, or prime minister, is not by any means the man who makes the big decisions in the running of the country.

We assume that, because we were allowed to vote for our leader, he must actually be our leader. But, as Mark Twain has at times been credited as saying, “If voting made any difference, they wouldn’t let us do it.”

…click on the above link to read the rest of the article…

The Antidote to Optimism

January 27, 2018

The Antidote to Optimism

It is always brightest before they turn the lights out.

You can quote us on that, Dear Reader.

Just when you thought things couldn’t get better… guess what?

They don’t. They go dark as a dungeon.

Antidote to Optimism

Our task today is to show that however wonderful things may appear in today’s markets and economy, they may not be all that great.

We put our backs into this grim work neither for love nor for money, but simply out of a sense of stern duty.

If not us, who? If not now, when?

Someone must put forward an antidote to the optimism now raging through markets around the world.

Someone must make the case for cynicism, suspicion, and mockery.

Someone must take the other side of the trade.

And so… the work, like shucking oysters on a cold day, falls to us. We open them up… hoping to find a pearl.

Donald Trump, Davos ManInstead, we find claptrap.

“The elite gathering at Davos [including Donald Trump],” begins a Financial Timesarticle, “takes place against a backdrop of improving economic activity across the world.”

The IMF says it is the “broadest synchronized global growth upswing since 2010.”

The FT goes on to tell us that the world economy is supposed to grow a healthy 3.9% “this year and next” thanks, at least in part, to the sweeping tax reform measure just implemented in the U.S.

Well, well, well. Gosh, it looks as though we were wrong about everything. You can predict the future after all.

As for the tax cut, we didn’t believe that the tax measure would have any positive consequences other than giving us more money.

What economic benefit could be reaped by taking money from one pocket and putting it in another?

…click on the above link to read the rest of the article…

A Bedtime Story

December 31, 2017

A Bedtime Story

We are explaining our money system to our grandson, James, now 14 months old…

His mother tries to get him to go to bed at 9 p.m. But the little boy’s internal clock is still on Baltimore time; it tells him it is much too early to go to sleep.

Bill’s living room transformed into a makeshift nursery

Grandpa takes over, drawing out the monetary system like a general spreading a map on a field table. “Here is the enemy,” he says gravely. “They have us completely surrounded. We’re doomed.”

James grumbles. He squirms. He has a sunny, optimistic temperament. But we think our explanations are sinking in.

He seems to understand…

…that money is not wealth; it just measures and represents wealth, like the claim ticket on a car in a parking garage.

…that our post-1971 money system is based on fake money that represents no wealth and measures badly.

…that this new money enters the economy as credit… and that the credit industry (Wall Street) has privileged access to it. The working man still has to earn his money, selling his work, by the hour. But Wall Street—and elite borrowers connected to the Establishment—get it without breaking a sweat or watching the clock.

…that a disproportionate share of this new money is concentrated in and around the credit industry—pushing up asset prices, raising salaries and bonuses in the financial sector, and making the rich (those who own financial assets) much richer.

…that this flood of credit helped the middle class raise its living standards, even as earnings stagnated. But it also raised debt levels throughout the economy.

…and that it allowed the average American family to spend American money that Americans never earned and buy products Americans never made…

Instead, Walmart’s shelves were stocked with goods “Made in China.” The middle class lost income as factories, jobs, and earnings moved overseas. Debt stayed at home.

…click on the above link to read the rest of the article…

Are Governments Running Out of Candy?

December 20, 2017

Are Governments Running Out of Candy?

By now, many readers will have seen the popular American YouTube video by Mark Dice in which he stands on a city sidewalk and offers passers-by a free gift. They may choose between a 10-ounce silver bar or a large Hershey’s candy bar.

Each taker chooses the candy – most of them with no deliberation. The only taker who seems to hesitate at all soon decides on the candy, as “I don’t have any way to do anything with the silver.” (Behind them is a coin shop. Mister Dice offers to take the silver bar inside if she wishes, but she’s uninterested and takes the candy.)

A 10-ounce silver bar is presently valued at about $140, the Hershey’s bar at about $2.

(Editor’s Note: If you have not seen the video, please see below.)

Mister Dice doesn’t comment in the video as to what lesson might be learned from this, but an obvious one would be that Americans (or at least those who reside in his home town of San Diego, California) are prone to prefer instant gratification over something of substantially greater, but delayed value.

If this is his intent, he’s succeeded well in his light-hearted, but instructive video.

Since the 1950’s, much of the world has perceived Americans as being on “Easy Street,” and in recent decades, the U.S. government has fuelled American complacency through a consciousness of easy money and entitlement.

And so, Americans are often perceived by those outside the U.S. as being somewhat insulated, spoiled, naïve, and short-sighted. But, if this is true, Americans certainly aren’t alone. Much the same exists in Europe, Canada, and quite a few other countries that have, over recent decades, followed the American socio-economic model.

…click on the above link to read the rest of the article…

Doug Casey on What Happens After the Next 9/11

December 16, 2017

Doug Casey on What Happens After the Next 9/11

Is a police state in the US possible? Absolutely.

That’s because people are essentially the same the world over, regardless of their culture, religion, race, or what-have-you. A certain percentage of them are sociopaths.

There is a standard distribution of sociopaths across time and space. It’s a function of Pareto’s Law, better known as the 80-20 rule. 20% of the people do 80% of the work. Another 20% are responsible for 80% of the crime. 20% of the population always winds up with 80% of the wealth. And so forth, through all areas of human endeavor. This observation can be represented by a bell-shaped curve—a “standard distribution”—with a small minority at each extreme, but the large majority in the middle. The people who will take us to a police state are sociopaths—criminal personalities who don’t respect the liberty or property of others. And sociopaths gravitate towards government, and eventually come to control it.

My view is that 80% of human beings are basically decent, get along, go along types. 20% are what you might call potential trouble sources, that can go either way. But then you take 20% of that 20% and you’re dealing with the sociopaths.

When social conditions reach a certain stage these really bad guys come out from under their rocks and take advantage of the situation. We’re seeing that right now in the US, across the political spectrum. Just as we’ve seen in the past in hundreds of places throughout history.

A major tipping point occurred sixteen years ago, on September 11, 2001, with the attacks in New York and Washington. They were disastrous. But not nearly as disastrous as the government’s reaction to them.

…click on the above link to read the rest of the article…

Where Does It End?

November 21, 2017

Where Does It End?

It’s nothing new.

Whenever a major country is in decline and approaching collapse, a contingent arises that does everything it can to speed up the process toward collapse. This is always done in the same way:

Vilify the established rulers as being the culprits for the nation’s woes.
Establish simplistic arguments to support that view. (The arguments need not be entirely logical or supportable, but they must have emotional public appeal.)
Create simplistic rhetoric that supports the destruction of the establishment and its icons.
Make the arguments and rhetoric as ubiquitous as possible (particularly through the media).

Then, like any recipe, turn up the heat and bake until done.

Generally, the destruction of the first icon (most often a statue) requires some sort of explanation, regardless of how flimsy the argument may be. After that has succeeded, praise is to be showered on those who took part, egging them, and others, on to do more. As each new icon falls, less justification is necessary and, in the end, only blind anger is required to keep the destruction going.

In the present era, we’re witnessing this age-old process taking place in quite a few countries, but notably in the US.

But, why the US—the one country in the world that began as possibly the most advanced, freest nation the world had ever seen? How did this come to pass in “the land of the free”?

Well, truth be told, no matter how inspired or sincere the founding fathers of any nation may be, those who would usurp them are always many in number and, in most cases, are prepared to do whatever it takes to slowly take power and return to tyrannical rule.

…click on the above link to read the rest of the article…

What Will Push Them Over the Edge?

November 14, 2017

What Will Push Them Over the Edge?

Recently, the people of two of Italy’s most prosperous regions voted in a referendum, on whether they wished to have greater autonomy from Rome. The referendum is non-binding, but that’s not what’s most significant in the results.

What is significant is that over 95% of those who voted in Lombardy did so in favour of greater autonomy. In Veneto, the number in favour of greater autonomy was even higher, at 98%.

Roberto Maroni, president of Lombardy, said, “I now have a commitment… to go to Rome and give concrete actualization to the mandate that millions of Lombards have given me.”

It may appear on the surface that Mister Maroni intends to make an appeal for independence, but this is not what will occur. He’s a politician and won’t invite Rome to jail him for sedition. His goal will instead be to demand that a greater amount of the national income that’s generated by Lombardy and Veneto (about 20% of the total) remains within those regions.

This will not mean that he wants his people to be taxed less; his goal will be to retain a larger portion to be absorbed by the regional governments—to be in his own hands.

So much for the politicians’ agenda. But what does the referendum say about the people of the regions? Well, the extraordinarily high numbers in favour of greater self-determination demonstrate that virtually all the people in the regions have figured out that Rome is bilking them of their earnings and they’re getting pretty cheesed off.

In prosperous times, a population tends not to complain too much about being robbed through taxation. They grumble a bit, but tolerate it. However, in more stringent times, when people are finding it more difficult to make ends meet, they become more resentful of governments that are chronically both overreaching and wasteful.

…click on the above link to read the rest of the article…

The Destruction of the Dollar

November 11, 2017

The Destruction of the Dollar

“Inflation” occurs when the creation of currency outruns the creation of real wealth it can bid for… It isn’t caused by price increases; rather, it causes price increases.

Inflation is not caused by the butcher, the baker, or the auto maker, although they usually get blamed. On the contrary, by producing real wealth, they fight the effects of inflation. Inflation is the work of government alone, since government alone controls the creation of currency.

In a true free-market society, the only way a person or organization can legitimately obtain wealth is through production. “Making money” is no different from “creating wealth,” and money is nothing but a certificate of production. In our world, however, the government can create currency at trivial cost, and spend it at full value in the marketplace. If taxation is the expropriation of wealth by force, then inflation is its expropriation by fraud.

To inflate, a government needs complete control of a country’s legal money. This has the widest possible implications, since money is much more than just a medium of exchange. Money is the means by which all other material goods are valued. It represents, in an objective way, the hours of one’s life spent in acquiring it. And if enough money allows one to live life as one wishes, it represents freedom as well. It represents all the good things one hopes to have, do, and provide for others. Money is life concentrated.

As the state becomes more powerful and is expected to provide more resources to selected groups, its demand for funds escalates. Government naturally prefers to avoid imposing more taxes as people become less able (or willing) to pay them. It runs greater budget deficits, choosing to borrow what it needs.

…click on the above link to read the rest of the article…

The Secret Reason Trump Is So Cozy With Saudi Arabia

November 8, 2017

The Secret Reason Trump Is So Cozy With Saudi Arabia

As a candidate, Donald Trump used uncommonly harsh language to criticize Saudi Arabia—the world’s largest oil exporter.

He called the Saudi regime the world’s biggest funder of terrorism.

He also said the Saudi government uses “our petro dollars—our very own money—to fund the terrorists that seek to destroy our people, while the Saudis rely on us to protect them!”

At another point, Trump said, “Who blew up the World Trade Center? It wasn’t the Iraqis, it was Saudi [Arabia].”

Trump also criticized Hillary Clinton for taking Saudi money for the Clinton Foundation. (They were its biggest “donors.”) He even challenged her to return the money.

He also famously got into a Twitter spat with a prominent member of the Saudi royal family, Alwaleed bin Talal.

As a candidate, Trump blasted the Saudis countless other times.

But, after he took office, Trump did a complete 180. He stopped criticizing the Saudis. In fact, he’s now singing their praises.

It’s bizarre… as if someone put a severed horse head in his bed.

Mere months after criticizing the Saudis, he was on Air Force One headed to Saudi Arabia to do the sword dance with his new friends.

It was his first foreign trip as president.

President Trump with King Salman

Trump’s about face was astounding. But his newly adopted deference to the Saudis is no different than Obama’s, Baby Bush’s, or any previous president’s.

President Obama with King Abdullah

President G.W. Bush with King Abdullah

Today, I’ll tell you why Trump made such an abrupt turnaround. I’ll also explain why the Saudis get special treatment from the US Deep State.

“As Good As Gold”—From Bretton Woods to the Petrodollar

It’s been rightly said that he who holds the gold makes the rules.

…click on the above link to read the rest of the article…

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