Politics and economics–Sorry, they cannot be separated

Politics and economics–Sorry, they cannot be separated by Dr Jerome

The other night, I could not sleep, and as usual I went downstairs, stoked up the fire, and began to let my mind wander, digging out my subconscious concerns so I could face them. And as usual, my 22 year old daughter, who is a night owl, wandered downstairs and said, “Hi Dad. Can’t sleep? What’s on your mind?” She plopped down on the couch next to me and we started talking.

Of course, one of the things on my mind is the future, and how we will prosper survive as this economy slides deeper into the Keynesian-socialist bog of debt-serfdom. At one point, my socialist daughter asked me a question that I couldn’t answer: “Why can’t we invent things to save labor, replace workers and make it so people don’t have to work?” Of course, she wants free college, and she wants to see her friends prosper, and she wants her dream job and country home. She can see it happening in the current system through the power of technology.

My gut knew that what the US is doing economically cannot work long-term, but at 2am, I was unable to articulate an answer to her question. Why can’t technology save us? Why won’t socialism work?

I suppose the short answer is: human nature. But at what point do things break down. And what do they break down into? Well, my old career at troubleshooting electrical systems established some neural pathways that like to start at the beginning. 1+1=2, 2+1=3, etc. And later that day, in the shower, I started at the beginning, pondering how economies function properly and the role of precious metals. There is no need for me to mention that she is not the only one wondering about it. So let’s take a look and what little I know.

Why can’t we have a society where people do not have to work as much?

******

A long, long time ago, in a river valley far, far away, (perhaps where I living now, picking up 1000 year old pottery shards when I walk the dog), a man and woman, Al and Lynn, wandered in one day and began living their lives…

Life was very hard. But they learned that each had a talent. Al was good at building shelters and Lynn figured out how to make warm clothing from animal skins.

Soon, another couple, Bob and Shanna, moved to the valley and set up camp nearby. Bob had a talent for cultivating plants, especially ones that are good to eat. And Shanna had a talent for herbs, spicing food and curing illness.

Being bored, the two couples became friends. Al was appalled at the crappy little lean-to their new friends lived in, but he were in awe of how much food they had stored for the winter. So they made a deal, and the first economy was born.

Al built a new house for Bob & Shanna, in return for a winter’s worth of food that they could easily spare from their bounty. That winter a 3rd couple wandered into the valley. Jim was a good hunter and Audrey knew how to find clay near streambanks and make pottery for storing food and wine. The other two families immediately saw advantages to their new friends and welcomed them into their community and economy.

Another set of newcomers had a talent for animal husbandry. A fifth family arrived who were very clever at inventing tools that made the work of everyone easier.

As the years passed, more people wandered in, each with a useful talent, each finding a helpful place in the community. They also found shiny little rocks in the streambeds by the mountain. Everyone liked them so they began to trade back and forth for the goods or services they needed. Before long, nobody had to work quite as hard, relying on the talent of each other to easily do whatever task was needed.

To pass their evenings they told stories of the old days intended to teach their children the right way to live, and invented playing cards and a game called “Poker.” The shiny rocks were especially handy for this game. The community found an equilibrium within a standard of living that all were enjoying.

Finally, a family arrived bring problems with them. Bernie and Jane started helping in the fields, a little bit, but didn’t offer any special talent of their own, except for being really good at storytelling and Poker. As the months passed, they worked less and ate more. Their kids ducked away from working, just like their parents. And this family had more children than any of the other families.  As a long winter settled in, it became apparent that feeding this new family meant others had to eat less. And some people stopped playing poker.

The economic equilibrium began tilting. Keeping this new family in the community meant a lower standard of living for all. (The community decided that Darwinism was sub-human and agreed to feed & house the family and continue to encourage them to contribute.)

As the years passed, the original members grew old. They just could not work as hard as they once did. Their knowledge had already been passed on to their kids. Sure, they could do easier tasks a few hours per day, but the community felt a decline in productivity as all the aging parents entered their “golden years.”

At a group meeting, the community made a decision. After rejecting Andy’s  idea to mercifully strangle anyone that could not pull their weight, they chose to continue supporting their parents and accept a reduced standard of living for the entire community. After all, the new generation recognized that they owed it to their moms and dads. Another problem emerged after time. Occasionally, a community member would be seriously hurt, but never fully recover physically, and their contribution to the community welfare was greatly reduced. Again they met and decided to accept the burden of supporting their injured friends, finding tasks they could perform, yet accepting another reduction in their standard of living.

They felt good about helping to support their parents and hurt friends.

The community’s hard work and steady technological advances, found an economic balance that continued to provide an acceptable living for all.

But a more things more went wrong…

First, people from the valley over the ridge began sneaking into the Shire at night, stealing vegetables from the farms and community gardens. Al’s son, Andy, volunteered to keep their farms safe from thieves, but of course he needed a release from his work duties, an official title of “Reeve,” and he needed a sidekick deputy, his buddy Barney, Bernie’s son, to help with the long nights and stressful work. He also settled disputes between the citizens (as he now called them). The standard of living of all declined a bit more, but the benefits of safety and justice were worth the cost. Equilibrium was re-balanced, but with a lower standard of living.

As time passed and the community grew, a group of Bernie’s friends got it in their heads that they also deserved food and shelter, just like Bernie and Jane. Their reasoning was varied, but they always resorted to claiming that “You cannot let me starve.” They refused to leave the community, and clung to relatives, continuing their demands. Unfortunately, the community conceded. They supported these people, while creating schools to provide them job training. But it never quite worked out because the folks spent most of their time telling stories and playing poker.

Soon, others envious of the housing and food being received for free decided to join their group, which they cleverly called “socialists.” The drain on public welfare became untenable. The working folks began to call them “sluggards.”

Something had to change. And to the community’s great relief, a clever man, Maynard, (whom nobody trusted around their kids) stepped forward and offered a plan to manage the welfare of the entire community through wealth creation that required no work at all. Maynard proposed that they ditch their shiny rocks and use paper money as a medium of exchange, printing as much as needed to house & feed everyone, requiring all to accept it for their services.

Just like the invention of the plow, hybrid crops, medicinal herbs, hydrology, the wheel, the lever, and hot pockets, the people of the community accepted his plan as another technological improvement.

But everyone did NOT live happily ever after …

Even with their technological advances, there just were not enough people producing as much as what everybody wanted to have. Many of the workers came to resent the sluggards and refused to have anything to do with them … and they kept their shiny rocks.

*****

Well, this author hates stories with tragic endings. Unfortunately, our own economy is heading toward a tragic ending.

Somebody paid for the donut I snatched yesterday in the office break room! And if I don’t put a buck into the coffee can on the counter, I’m on the receiving end of micro-socialism.

For each person taken out of the productive work force, the rest of society foots the bill. “Free college” will be paid by someone—the government, via taxes on the workers. That free healthcare will be paid by those same workers’ tax burden.  Food assistance? Rent assistance? Section 8 housing? Unemployment? Free busses?

Any hard-working economy has a fixed number of people it supports—the elderly, the young, the disabled and we are OK with that. But when too many people are on the receiving end, without contributing, the burden becomes too great …

…unless the economy can borrow money to make up the difference. And Maynard has a plan for us to do that.

Borrowing is spending your future labor today. But the day comes when you need that labor value in your future, and it will not all be there. Your personal finances will break down and you will face the whip of the slavemaster.

3-1=2. Not 3. And borrowing the 3rd dollar only temporarily balances the equilibrium. It is a debt to another. The borrower becomes the servant of the lender, owing a portion of future labor.

The US government will extort collect $3.3 trillion in taxes but spend $3.9 trillion in 2017. State and local governments are borrowing fiat money to balance their budgets also.

My daughter argues that cutting the US Military (a great idea) can balance our budget. It almost does, if we eliminate it entirely. But she fails to realize how many US citizens are employed by that military and pay taxes, who would then move to the other side of the equation, becoming in need of housing & food, rather than contributing. And we shouldn’t disperse the entire military. That is no solution.

The United States is already more socialist than we realize, if we define socialism as various products and services provided to the poor from taxes upon those who work.

The share of national debt for each tax-paying citizen is 166K . Funny, I don’t recall borrowing that money, or getting any benefit from it. At least I got a house to live in with my mortgage debt of 100K.

When does the slavemaster’s whip arrive? Well, Venezuela and its 30 million citizens found out and are now considered a “failed state.” Their paper money (promises to pay) lost their trust in the world economy. And Goldman Sachs managed to gain possession of  their shiny rocks prior to their collapse.

The most successful socialism is found in Denmark, and it maintains a balance, as long as their paper money holds its value against other paper monies, and as long as they keep borrowing. To their credit, they are trying to pay down their national debt to balance the system. The Danes are a hard-working innovative people, but their  nation may break if the surplus fiat from European QE is taken away. And don’t think their citizens are happy about having the highest taxes in the world to run their socialist utopia. Their experiment has left its 5.7 million citizens about $111 billion in debt. Their system is not balanced, requiring loans to stay solvent.

Our youth today—millennials, that is—unfortunately have been bombarded with visions of a socialist utopia, failing to mention that it requires continued borrowing to maintain. Free college, shorter work weeks, free health care, cheap mortgage rates. In the next election, socialism will rise again with another Berniesque candidate and even more young voters seduced into its sophistic promises.

Far too many Americans are not working. Far too many are “underemployed.” Far too many are working two jobs to make ends meet—and paying taxes in a dozen directions to provide a living for those who will not work. People are going deeper in debt personally, and collectively. And if the wealthiest Americans pay relatively little tax, due to write-offs and business losses, it leaves an eroding  number of workers paying for the welfare of nearly half the nation. If these trends continue, the US will reach a breaking point, just like Venezuela. I wonder if Fort Knox and the Fed vaults still have our 8K tons of shiny safely inside? If not … there will be no remedy, and that will be tragic.

The playwright, Arthur Miller wrote an essay in 1949—as Communism was overtaking half the world—an essay that defines the nature of tragedy:

But there are among us today, as there always have been, those who act against the scheme of things that degrades them, and in the process of action everything we have accepted … is shaken before us and examined, and from this total onslaught by an individual against the seemingly stable cosmos surrounding usfrom this total examination of the “unchangeable” environmentcomes the terror and the fear that is classically associated with tragedy … the underlying fear of being displaced, the disaster inherent in being torn away from our chosen image of what and who we are in this world. Among us today this fear is strong, and perhaps stronger, than it ever was. In fact, it is the common man who knows this fear best.

Millennials like my daughter fear for the future. They see deteriorating conditions as hope sets beyond the horizon.  Any sophist promising hope is appeals to them. To avoid a real tragedy that displaces what and who we are as free people, we must keep our focus on the oppressor: the banking system that has invented paper money, has stolen our shiny rocks, and to whom we owe our future labor. The banking system enslaves us, degrades us, and tears away our self-image.

The only means we have to free ourselves from this oncoming slavery is to seek self-sufficiency and store our current labor surplus in the form of shiny rocks that exist outside of the control of our enemy.

Keep working hard. Keep trading to earn some fiat if you have the skill. Even try some bitcoin. But most of all, keep stacking

That token of shiny metal means future freedom.

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TFMetals Report

Craig Hemke, aka "Turd Ferguson," was a licensed securities "professional" for nearly twenty years. Disgruntled by the fraud known as "financial services", he retired to a career as a serial entrepreneur in 2008. Though otherworldly in his ability to forecast price movements, The Turd is NOT a soothsayer, a psychic or a witch. After all these years, he simply has a decent understanding of the forces at play in the precious metal "markets". You can reach The Turd by visiting the Contact page and selecting "Speak to The Turd" or you can simply send him an email at turd@tfmetalsreport.com. If you are polite and not belligerently arrogant, he will probably answer you in short order. If he does not answer you, do not be offended. He's a busy guy and there are only so many hours in a day.