Joe Withrow's Blog, page 30

Becoming Antifragile

submitted by jwithrow.

Journal of a Wayward Philosopher

Becoming Antifragile

September 16, 2015

Hot Springs, VA

The S&P closed out Tuesday at $1,970. Gold closed at $1,102 per ounce. Oil closed at $44.59 per barrel, and the 10-year Treasury rate closed at 2.18%. Bitcoin is trading around $227 per BTC today.

Dear Journal,

Wife Rachel cornered me the other day: “I saw what you did in your newest post!”, she said in an accusatory tone.

“Whatever do you mean, honey?”, I asked innocently.

“You talked about Madison buying me a walker when I am old!”

I couldn’t contain my laughter. It’s the little things that I find most amusing.

Last week I delved into global finance and speculated that a currency crisis in the U.S. was on the horizon. It is just unreasonable to create trillions of dollars from thin air on a regular basis and expect the world to accept those dollars ad infinitum. I observed that government has no intention of ceasing its monetary escapades, thus currency ruin is inevitable.

Past currency crises have played out in a similar way on varying scales. The first stage is very gradual in nature: government begins to monetize its debt via currency inflation, but the negative effects are minuscule at first. Prices on everyday goods start to creep upwards gradually such that most people think little of it. The process of debt monetization is exponential in nature, however, so eventually prices rise more and more quickly. When prices begin to rapidly rise, people quickly learn to spend their currency as soon as it is received before its purchasing power is lost. This further exasperates the crisis as it causes prices to rise even faster. Pretty soon basic groceries have one price tag in the morning and a higher price tag in the evening. Then people line up in droves outside the grocery stores and the shelves empty. Fear and panic sets in for a period of time until the old currency is revalued or abandoned enabling the supply chain to stabilize.

We have seen this happen with fiat currencies all throughout modern history. What is happening in Venezuela right now is a relatively minor case – inflation is only running around 70%. Compare this to Argentina in 1990 which experienced a 197% peak inflation rate. Or the Soviet Union in 1992 at 245%. Or Zaire in 1994 at 250%. Ukraine topped out at 285% in 1994 as well. Armenia nearly doubled both of them in 1994, registering a peak inflation rate of 438%. But these cases were just peanuts compared to Zimbabwe, once the wealthiest country in Africa. In 2008 Zimbabwe managed an 8 billion % peak inflation rate. You can surf the internet and find pictures of currency issued by the Reserve Bank of Zimbabwe denominated in One Hundred Trillion Dollar increments. Those 100,000,000,000,000 Zimbabwe dollars barely bought a loaf of bread.

Regardless of the scale, the currency is worthless when the dust settles and those who were unprepared find their savings decimated. If I am correct in my analysis indicating a U.S. currency crisis is in the works, then the time to become antifragile is now.

In Antifragile: Things That Gain from Disorder, Nassim Nicholas Taleb defines antifragility as: the ability to benefit from shocks; the ability to thrive and grow when exposed to volatility, randomness, disorder, and stressors.

What sets the antifragile financial strategy apart from pure speculation is a variation of the barbell strategy. The antifragile barbell strategy places heavy emphasis on both extremely conservative financial positions that are defensive in nature and extremely aggressive positions that are speculative in nature. This strategy places very little emphasis on middle-of-the-road positions such as mutual funds.

Here’s my take on what such an antifragile portfolio looks like:

First and foremost at least 10% of assets should be in physical gold and silver bullion with half stored at home in a safe and the other half stored in an allocated, independently audited vault outside of your political jurisdiction. There are numerous companies offering this service in an affordable manner. Gold and silver have both been monetary metals for centuries thus their market value has been relatively stable over long periods of time. Though their price has fluctuated tremendously in terms of fiat currency, their price relative to real goods and services has not been volatile.

This is why at the very least 10% of assets should be in physical gold and silver bullion: we know they will maintain their market value over time no matter what happens to the fiat currency. Every central bank in the world still stockpiles gold. Many eastern cultures still place a heavy emphasis on owning gold in various forms. Silver bullion is still hoarded by investors globally, and the metal is a vital component in many electronic devices. Precious metals cannot be created from nothing by central banks nor can their value be wiped out by wild market swings, thus they are the conservative anchor for an antifragile portfolio.

In my mind, the next step in weighting the conservative side of the antifragile barbell is to build a base level of home resiliency. If the worst should happen then I would prefer not to be amongst those waiting in line at the grocery store and the gas station. Therefore I need to have water, food, and backup energy sources in my home that could last for a reasonable period of time in an emergency scenario. For me the benchmark is ultra-conservative: six months. It is unlikely that a currency crisis would drag on for that long, but I figure it is better safe than sorry where my family is concerned. Please review my previous journal entry on building home resiliency for an outline of specific action items.

The final piece to the conservative side of our antifragile portfolio is to keep a portion of assets in cash. Though we expect cash to devalue significantly over time, it is prudent to keep at least six months worth of living expenses in reserve for a rainy day. Additionally, assets (stocks, bonds, real estate, businesses) always go on sale during times of economic distress when credit is not readily available. Those who keep cash on hand are able to capitalize upon those opportunities when they arise.

At this point we have 10% of our assets anchored in precious metals, and we have established a base level of home resiliency such that we are capable of living comfortably for six months even if major financial dislocations were to occur. We also have a six-month cash reserve in place, and additional cash on hand to purchase distressed assets should an opportunity to do so arise. If we were doomsday preppers then we could now focus on building bunkers and stockpiling weapons. If we instead think the global economy is simply undergoing a period of socio-economic change which will render the current centralized fiat monetary system obsolete then we can now focus on the aggressive side of our barbell.

Unlike the conservative side of our barbell, our aggressive speculations will vary over time according to market conditions. Currently, I think natural resource stocks – especially gold stocks – are poised for a massive upswing. Most of these stocks are down 80-90% from their highs, thus they are hated by most equity analysts.

Unlike physical bullion, gold stocks move through violent cycles of booms and busts. Using the TSX Venture Index as a benchmark, we observed a similar set-up for gold stocks back in 2009. At that time the index had fallen nearly 80% from its previous high and nobody wanted anything to do with the sector. The TSX proceeded to rally 256% over the next two years, with numerous stocks exploding more than 1,000% higher. The index peaked at that point in 2011 and has been falling ever since, but we are now seeing signs of a bottom.

These cyclical moves are normal for gold stocks – low prices lead to booms which lead to high prices which lead to busts and low prices again. Those disciplined enough to buy the bust and sell the boom can do very well in the sector. It looks to me like now is a great time to get aggressive by adding gold stocks to the speculative side of an antifragile portfolio. We are already close to the beginning of a new boom cycle in gold stocks that will unfold over the next few years, and a currency crisis would only further power the boom in gold prices.

A stock portfolio loaded to the hilt with speculative gold stocks goes against everything conventional personal finance stands for. Your stockbroker would be shocked by such a portfolio. “You need to diversify amongst stocks and mutual funds in various sectors!”, he would say. But conventional personal finance does not advocate allocation to physical gold and silver bullion or home resiliency so it must be much more cautious with its stock portfolio and forego becoming antifragile. Because we went ultra-conservative on one side of the barbell, we can skip the middle-of-the-road stuff and go ultra-aggressive on the other end.

Shorting stocks and various option strategies are other ways in which one can speculate on the aggressive side of the barbell, but these strategies require timing the market which is impossible to do on a consistent basis. Long dated options help mitigate some of the timing requirements, but even then markets can remain irrational far longer than individuals can remain solvent so these strategies require much due diligence and professional analysis.

As you can see, becoming antifragile is a comprehensive strategy that requires a certain level of commitment and flexibility. I am convinced that such an antifragile barbell strategy is the key to thriving in the volatile times to come, however.

Approximately $1.5 trillion changes hands via economic transactions in the U.S. every month. People go to the store, go to the gym, take their wife out to dinner, pay their mortgage, and otherwise live their life to the tune of $1.5 trillion each month. But there is only $1.2 trillion dollars of physical U.S. currency in circulation, and at least half of it resides overseas. So where does most of the $1.5 trillion in monthly transactional money come from? Easy – it comes from credit. In the aggregate, U.S. consumers pay roughly half of all basic living expenses with credit. More than two-thirds of all commercial transactions are settled with credit.

In a nutshell: the grocery store stocks its shelves using credit then consumers come along and buy food from the shelf using credit. This works fine when the economy is functioning properly, but credit is the first thing to freeze up when monetary dislocations occur.

In 1978 the U.S. national debt was $789 billion and Social Security was comfortably in the green. Today, the debt is north of $18 trillion and the government’s unfunded liabilities are somewhere around $200 trillion. The U.S. government will service this debt by creating vast sums of dollars out of thin air which will eventually cause major monetary dislocations in the economy. When the money goes bad, everything goes bad as we have observed throughout modern history. What happens to all of those credit-based transactions when the credit freezes?

Such economic analysis troubled me greatly three years ago. After working to become antifragile, I now view this analysis logically with an even-keel. Such peace of mind is the true power of the antifragile portfolio. Finances play an important role, but true Liberty is ultimately the goal of the barbell strategy. The beauty of this strategy is that it works well even if economic problems never materialize. The ultra-conservative side of the strategy keeps most of your capital sheltered even if your speculations do not bear fruit. Thus you can live to fight another day while focusing on those things in life that truly matter.

More to come,

 

 

 

 

 

Joe Withrow

Wayward Philosopher

For more of Joe’s thoughts on the “Great Reset” and individual solutions, please read The Individual is Rising: 2nd Edition. The Individual is Rising is available through Amazon and at http://www.theindividualisrising.com/. Please sign up for the mailing list to be notified of other projects as they come to fruition.

The post Becoming Antifragile appeared first on Zenconomics - an Alternative Financial Blog.

Why the U.S. Faces a Currency Crisis

submitted by jwithrow.

Journal of a Wayward Philosopher

Why the U.S. Faces a Currency Crisis

September 11, 2015

Hot Springs, VA

The S&P closed out Thursday at $1,952. Gold closed at $1,109 per ounce. Oil closed at $45.92 per barrel, and the 10-year Treasury rate closed at 2.22%. Bitcoin is trading around $239 per BTC today.

Dear Journal,

Little Maddie is now on the verge of becoming a toddler. She has mastered the art of the crawl and the leveraged stand-up. Walking is the next frontier, and she knows it. To aid Madison in her quest, wife Rachel bought her a plastic toy that doubles as an obnoxious farm animal noise making machine and a child’s walker. Somewhat to my surprise, Madison instantly knew what to do – she pulled herself up on the handles and walked six steps using the contraption to achieve balance.

It was an exciting moment for a first-time dad, but the philosopher’s mind has a tendency to wander and I couldn’t help but envision the future. What happens when, in fifty years perhaps, little Madison buys her mother a walker? Will Rachel instantly understand the intricacies of its function as her daughter once did fifty years prior? Time shall tell.

Moving on to the wonderful world of finance and economics… all of the focus is currently on the Federal Reserve. Having beaten interest rates down to zero and left them for dead for six years in an effort to prevent the market economy from liquidating the cronies, the Fed has recently been talking tough about raising rates. Some say the Fed will follow-through and raise rates next week. Others say by the end of the year. Still others say they can’t raise rates without torpedoing the debt markets. My suspicion is that the economy has become so dependent upon low interest rates that any interest rate hike would be minuscule and nothing but an effort to save face.

Ultimately, the Fed’s decision is irrelevant in the big picture – a currency crisis is in the works regardless.

The U.S. dollar has dominated the global monetary system since the establishment of the Bretton Woods System in 1944. Bretton Woods fell apart in 1971, but the dollar has continued to dominate global finance thanks to a strategic alliance with the Saudi Royal Family which led to the pricing of OPEC oil exclusively in U.S. dollars.

This means that the entire world has been settling transactions – buying oil, importing goods, servicing debt – in U.S. dollars for seventy years now. U.S. dollars have been used in the vast majority of international transactions, even when a U.S. organization has not been involved in the trade.

This global demand for U.S. dollars has supported the value of the dollar and it has enabled the U.S. government to simply print money to pay external debts. As a result, there is nothing the federal government thinks it can’t do… and in the short term they are correct. After all, they are the only organization with the ability to create the international reserve currency at will. From thin air. Ex nihilo, nihil fit.

There are subtle consequences to this, however. The U.S. dollar has lost 21% of its value since 2002, and 98% of its value since 1913. As the national debt continues to pile up, the need to print more and more dollars increases as well. Which means the dollar will continue to lose value in an exponential fashion. This system is locked in a death-spiral, and the federal government has made it clear that no effort to shore up its balance sheet will be made. Spending cuts have never even been on the table; the recent debt ceiling arguments were over making cuts to spending increases. Meaning one side of the aisle didn’t want spending to increase quite so much the next year, but the other side did. Actual spending decreases were never considered.

Now most developed governments operate in the exact same fashion: they print fiat money from thin air to monetize government debt via the central banking system. The U.S. government is certainly not alone in this madness, but the spotlight is brighter because the U.S. dollar has dominated global finance for seventy years, and most people still consider it to be as good as gold.

We are starting to see a de-dollarization trend growing in the international community, however. There have been numerous bi-lateral trade agreements bypassing the dollar announced over the past few years, including a massive energy deal between the Chinese government and the Russian government. We have also seen a large emphasis placed on gold internationally over the past few years. China has been converting dollar reserves into gold on a massive scale. Several countries have expressed interest in repatriating gold held in foreign vaults. There is a reason every central bank in the world still stockpiles gold. We have also seen efforts to create cross-border payment and lending systems as an alternative to the U.S. dominated SWIFT system. The China International Payment System (CIPS) is the largest alternative scheduled to be up by early 2016.

As these de-dollarization trends gain steam, the aforementioned support for the U.S. dollar will decline. The ill-effects of monetary inflation in the U.S. will be felt more significantly as the global demand for dollars wanes. This means that the dollar will be devalued more quickly which will lead to rapidly rising prices on goods and services across the board.

The logical conclusion is hyperinflation if proper action and reform is not taken. By my estimation, the likelihood of proper action and reform being taken is approximately zero. Throughout history governments have responded to currency crises by blaming some other group and implementing crushing capital controls which further exasperates the situation. Look at what’s happening in Venezuela right now to get an idea of what this looks like.

As mentioned above, the U.S. government has demonstrated no interest in monetary reform, thus a currency crisis appears to be baked into the cake. We will probably see a few other countries go the way of Greece and Venezuela first because the U.S. dollar is still largely considered a safe-haven. But eventually the market will have its revenge.

The entire central banking system is an attack on free markets. Fiat money, deficit financing, and interest rate manipulations are all attacks on the free market. What’s been forgotten over the past one hundred years is that central banks are not instruments of capitalism; they are instruments of communism. In fact, the establishment of a central bank is the fifth plank of the Communist Manifesto. You know what else are planks of the Communist Manifesto? The graduated income tax, estate taxes, and the public school system. These are all attacks on the market economy, and major contributing factors to the precarious economic position most developed nations are in today.

Try as you might, the free market cannot be conquered. Fortunately, technology is enabling individuals to develop market-based solutions to the major economic problems we face. Even if government refuses to make the necessary reforms to avoid a currency crisis, you can choose to do so individually.

More to come,

 

 

 

 

 

Joe Withrow

Wayward Philosopher

For more of Joe’s thoughts on the “Great Reset” and individual solutions, please read The Individual is Rising: 2nd Edition. The Individual is Rising is available through Amazon and at http://www.theindividualisrising.com/. Please sign up for the mailing list to be notified of other projects as they come to fruition.

The post Why the U.S. Faces a Currency Crisis appeared first on Zenconomics - an Alternative Financial Blog.

The Individual is Rising: 2nd Edition

submitted by jwithrow.

Journal of a Wayward Philosopher

The Individual is Rising: 2nd Edition

September 4, 2015

Hot Springs, VA

The S&P closed out Thursday at $1,946. Gold closed at $1,124 per ounce. Oil closed up at $46.75 per barrel, and the 10-year Treasury rate closed at 2.19%. Bitcoin is trading around $230 per BTC today.

Dear Journal,

Wife Rachel took it upon herself to berate me for my past few journal entries. She said they were too gloomy. She also berated me for failing to provide any light-hearted family updates. As any good husband would, I flipped the selective hearing switch on and pretended not to hear her.

After a couple years of marriage I have learned that there are times to trust her judgment and times to ignore it. Choosing what to order from a restaurant is a good time to discount her judgment, for example. Despite my unwelcomed reminders, she has a tendency to order a meal completely unrelated to the theme of the restaurant. I am quite sure the chef is shaking his head when her order comes in. “Hamburger and french fries, are you kidding me? This is an authentic Italian joint!”, he exclaims in the kitchen. I just chuckle to myself: At least she ordered a glass of Chianti.

Relating to and connecting with other people is her forte, however, so despite outward appearances I listen carefully when she advises me on such matters. Her emotional intelligence never ceases to amaze me. Maybe it’s just a woman thing, but I suspect years of studying finance and economics hasn’t help improve my own EI much, either. So if Rachel says I should incorporate more light-hearted matters into my writing then I feel compelled to talk about her poor menu choices. Thanks honey!

Moving on to another fun topic; I launched the second edition of The Individual is Rising this week. The Kindle format will be free on Amazon all day today, and then will be discounted at $2.99 all next week.

So far the reception has been good, and the Kindle is ranked #1 in two economics categories on Amazon. If you find the book worthwhile, please consider leaving a review for it on Amazon as they are an integral part of the ranking algorithm. The beauty of independent publishing is there are no gatekeepers or P.C. censors. The downside is there’s no marketing support so ranking on Amazon is especially important. To help get the word out about The Individual is Rising we are sponsoring The Sovereign BTC podcast this month which is a great show for anyone interested in learning more about Bitcoin and the ideas of Liberty.

The Individual is Rising: Second Edition is the culmination of more than three years worth of study, research, contemplation, and focused writing.

I began writing the book back in 2012 as my eyes were opened to how the monetary system has been systematically corrupted over the past one hundred years. This is a topic that is completely ignored throughout the entire educational system thus very few even realize there is a ‘monetary system’, much less understand it. Money is glorified in modern pop culture yet very few people can actually define what it is. I was awarded a finance degree from a public university and not once did my curriculum critically examine the monetary system or the nature of money itself. Instead, the finance curriculum presented these topics as permanent, unchanging fixtures, and then it moved on to feeding us incoherent Keynesian theories.

Originally I was driven by a desire to communicate what I had learned about the monetary system, and I published a short eBook on Amazon titled “The Great Reset”. My knowledge grew as I continued to study finance, economics, and philosophy, and I gradually fleshed out an entire book around this “Great Reset” thesis using it as the first chapter. The Individual is Rising was born and it seeks to not only communicate the major economic problems we face, but also to offer practical solutions anyone can implement in their own life. The book also unapologetically advocates the primacy of the individual over the State and similar power institutions. Thus the book is both practical and philosophical. The core theme is practical individual solutions to macroeconomic problems, but the ideas of Liberty, decentralization, and voluntaryism are held up as the requisite tenets for a peaceful, prosperous, and just civilization.

The book also takes a critical look at several well-established systems that many people accept unconditionally. Three of these systems – government, the banking system, and the education system – serve as employers to a huge swath of the population. I understand that and I publish this book knowing that there will likely be friends and family offended by my critical examinations. But I firmly believe that these institutions have become so large, centralized, and corrupt that they actively suppress human freedom and serve as a major drain upon individual creativity and ingenuity. So I feel compelled to publish The Individual is Rising regardless of any hardships or negative attention that may come my way.

I will conclude this journal entry by emphasizing the fragility present within the current economic climate. The fiat monetary system has enabled massive debt, unfunded liabilities, and false promises to accumulate over the past forty years. The governments of most western nations are now buried in debt – well in excess of 100% GDP is some cases. Most of these governments have accumulated huge liabilities for which they have no asset backing or revenue support. The political promises were made during times when the demographics allowed these governments to plunder most of the population to give to the few. Life expectancy has since increased just as birth rates have fallen which means the political Ponzi schemes will soon hit the fan.

In addition to all of the government debt, the fiat monetary system has enabled bubbles to form in the stock market, real estate market, student loan “market”, auto loan market, and the derivative market. In most cases (real estate outside of major metropolitan areas being the exception) these bubbles are now bigger than they were in 2008. There has been no real recovery. There have been no structural reforms. There has only been the creation of trillions of dollars from thin air. Most of this funny-money was used to prop up the cronies at the expense of the populace which has incentivized even more centralization and more cronyism.

All of the 2016 presidential candidates will trot around on stage and portray themselves as the solution, but they aren’t. You are the solution. You can take action now to insulate yourself from the major risks you face – I present specific strategies for doing this in the book. I also suggest, and firmly believe, that we can leave all of this political injustice, financial chicanery, and monetary manipulations behind in one generation if we choose to do so at the individual level. There are specific strategies in the book for doing this as well. Paradigm shifts are never facilitated by government; they are always driven by the dedicated minority.

So I implore you to check out The Individual is Rising with an open mind. It doesn’t contain all of the answers, but it does have some. You have the rest.

Watch closely. The Individual is Rising.

More to come,

 

 

 

 

 

Joe Withrow

Wayward Philosopher

The Individual is Rising: 2nd Edition is available through Amazon and at http://www.theindividualisrising.com/. Please sign up for the mailing list to be notified of other projects as they come to fruition.

The post The Individual is Rising: 2nd Edition appeared first on Zenconomics - an Alternative Financial Blog.

The Great Opportunity for Free Markets

submitted by jwithrow.

Journal of a Wayward Philosopher

The Great Opportunity

August 26, 2015

Hot Springs, VA

The S&P closed out Tuesday at $1,873. Gold closed at $1,138 per ounce. Oil closed out at $39.31 per barrel, and the 10-year Treasury rate closed at 2.00%. Bitcoin is trading around $229 per BTC today.

Dear Journal,

My last entry suggested that the centralized nation-state model looks to have peaked in the 20th century. I speculated that troubling macroeconomic trends related to government interventions will lead to a “Great Reset” sooner or later – probably sooner – as these massive nation-states are forced to ramp up the printing presses in attempts to service all of their debt and unfunded liabilities.

Today I would like to point out that we are approaching a crossroads and there is a tremendous opportunity for the growth of free markets and prosperity if we can shed the 20th century paradigm of centralization. A great golden age for civilization is staring us right in the face, but few have noticed. Why? Because we have placed too much emphasis on politicians, presidents, elections, and democracy and too little emphasis on individual self-empowerment.

For starters, consider the following advancements: indoor plumbing and electricity, refrigeration, cooking appliances, heating & air systems, local and long-distance transportation, local and long-distance communication, and access to information. Each of these items were non-existent, scarce, or unreliable just one hundred short years ago. Additionally, roughly 40% of the U.S. population was involved in agriculture in the year 1900 in order to produce enough food to meet demand. Today that number is around 2% and food is more available than ever. Fresh fruits and vegetables are available at the grocery store year-round. Also, thanks to technological development, oil and gas are now more abundant and cheaper than ever. This has reduced the costs of production and distribution significantly, and it has created competition for the oil cartels and monopolies that have had a strangle-hold on the industry for decades.

As a result of this drastic reduction in scarcity, the average person today is far wealthier than the wealthiest people alive one hundred years ago. Having said that, the average person is not nearly as wealthy as they should be under these circumstances for two reasons: the massive growth of governments and the debt-based monetary system.

Simultaneous to scarcity diminishing and prosperity rising, governments all over the world grew much larger, thus extracting greater amounts of wealth from the population. Factoring in all taxes levied by all levels of government today, the average person in the U.S. likely pays 50% of their income out in taxes. That is astounding! Too add insult to injury and unbeknownst to most, the central banks of the world maintain a government-enforced monopoly over the money supply. The primary role of most central banks today, including the Federal Reserve, is to monetize government debt by printing money to buy sovereign bonds. This effectively steals purchasing power from individuals as the money they have worked to earn loses value over time. I go into this in much more detail in my book: The Individual is Rising.

The U.S. federal government confiscated $3 trillion in taxes in 2014. State governments extracted another $1.7 trillion and local governments took $1.1 trillion. That is $5,800,000,000,000 extracted from the general economy in 2014. That $5.8 trillion was filtered through layer upon layer of bureaucracy and very little of it was used to provide useful services. The vast majority of it was wasted on welfare, militarism, unsustainable public works projects, government expansion, the enforcement of arbitrary mandates and regulations, and crony payoffs.

This has been going on for the better part of one hundred years now on a constantly expanding scale. In addition to removing a huge amount of private capital from the economy, this practice has created a dynamic in which economic incentives are terribly skewed. This system incentives private corporations to grow large enough to fund powerful lobbies so that they can use the power of government to shield themselves from competition by influencing and often writing their own industry regulations. These regulations require the companies to employ a legion of attorneys full-time to ensure compliance which drives the cost of business up significantly. This effectively establishes pseudo-monopolies in major industries as smaller competitors without lobbies simply do not have the resources or capacity to comply with all of the crony regulations.

Once these state-corporate monopolies are established the incentive is to stay put. Research, development, and innovation are much less necessary when a company is largely shielded from competition in its industry. The population is largely apathetic to this rampant cronyism because government does funnel some of the loot down to individuals via massive social welfare programs.

Now imagine what your world would look like if that $5.8 trillion was left in the economy and if your money did not devalue over time.

There would instantly be a huge boom in economic activity and free markets as incomes would effectively double and smaller businesses would be free to compete with the large corporations. Individuals would be able to exit the rat-race and pursue meaningful employment in fields that interest them once again. Self-regulating industry associations would form, and R&D would ramp up tremendously leading to new technologies and better systems. Marginal businesses would become viable once again and maximization would no longer be necessary. This would bring about the return of craftsmanship and main street shoppes throughout small-town U.S.A. Private charities would form for any cause imaginable and these charities would be much more transparent and accountable than they are today. The multi-national corporations currently spending huge amounts of money on lobbyists and attorneys would be forced to redirect that money towards useful purposes to be competitive. Those MNC’s able to compete and provide value to society would thrive and those unable to compete without government cronyism would disappear.

That brief picture is what a free market economy would look like. None of this is utopian; there would still be plenty of problems. But individuals and communities would have far more resources with which to solve these problems for themselves.

We already have the technology and infrastructure necessary for such decentralization to occur. As we examined earlier this month, the gatekeepers in most fields have fallen. The peer-to-peer economy is enabling individuals to work on their own terms and cryptocurrencies like Bitcoin are enabling individuals and businesses to bypass the financial system entirely. Companies like Hard Assets Alliance allow individuals to store their wealth in precious metals secured in allocated vaults outside of their political jurisdiction with a few clicks of a button. Additive manufacturing (3-d printing) is decentralizing manufacturing and placing the keys in the hands of individuals. Social media and video-conferencing technology are enabling individuals to network with one another and communicate instantaneously regardless of physical location. The massive open online course (MOOC) movement and sites like Khan Academy, Code Academy, and Udemy are decentralizing education with increasing quantity and quality while decreasing costs.

As you can see, the tools for free markets and a golden age of civilization are already in place. Government cronyism and the fiat monetary system are the primary roadblocks preventing this golden age from blossoming.

Of course the enemies of civilization will not reform themselves or go away on their own accord, and they are far too powerful for anyone to forcefully change or remove them. But they are already bankrupt and only the ability to create money out of thin air is keeping them afloat. This is significant – governments all over the world must continue to print more and more money to service their debt, make their social welfare payments, and prop up all of the cronies and special interests. Eventually this behavior will destroy the fiat currencies completely. We have seen this happen in isolation – France during the late 1700’s, Weimar Germany in the 1920’s, Hungary in the 1940’s, Yugoslavia in the 1990’s, Zimbabwe in 2008 – but we have never seen this take place on a global scale before. The Great Reset is coming.

That will be our great opportunity. The powers-that-be will present scapegoats and push for more centralization, and indeed the people dependent upon government for sustenance will buy their talk. But more and more people are waking up every day to the fact that these problems are caused by governments and central banks. Once people learn this, they discover strategies to insulate themselves from the major risks inherent in the system, and they become much more self-reliant as a result.

Perhaps the golden age of free markets and individual self-empowerment can arise from the ashes of the Great Reset as awareness grows. We shall see.

More to come,

 

 

 

 

 

Joe Withrow

Wayward Philosopher

For more of Joe’s thoughts on the “Great Reset” and individual solutions to collective problems please read “The Individual is Rising: 2nd edition” which will be available later this year. Please sign up for the notifications mailing list at http://www.theindividualisrising.com/.

The post The Great Opportunity for Free Markets appeared first on Zenconomics - an Alternative Financial Blog.

The Nation Is Not the State

submitted by jwithrow.

Journal of a Wayward Philosopher

The Nation Is Not the State

August 11, 2015

Hot Springs, VA

The S&P closed out Monday at $2,104. Gold closed at $1,104 per ounce. Oil closed out just under $46 per barrel, and the 10-year Treasury rate closed at 2.24%. Bitcoin is trading around $267 per BTC today.

Dear Journal,

Last week I suggested that the growth of the nation-state in the 20th century brought forth the rise of collectivism. I speculated that we may have reached peak collectivism and thus inferred the nation-state model may be ripe for decline, however. Today I will point out the troubling macroeconomic trends once again in support of this speculation.

The democratic nation-state model has grown so massive largely because the political class has bribed people with half-baked social insurance (welfare) programs across the board. This has led to a massive accumulation of debt throughout the entire western world. Simultaneously, the demographics of many western nation-states is such that there are more aged people drawing from pensions and national social insurance programs than there are younger workers to pay for them. This dynamic has resulted in an absolutely gargantuan accrual of unfunded liabilities.

What this means is most governments in the western world are already bankrupt. Many people remain unaware of this fact because governments have kicked the can down the road by manipulating interest rates ever lower (negative in places!) and creating huge amounts of national currency out of thin air via the central bank mechanism. More and more people are slowly waking up to reality, however, and this is leading to a loss of trust in the nation-state model.

That may not be such a bad thing.

The collectivist world-view pushed by governments, academia, and the media conditions us to think only in terms of the nation-state when considering geopolitical matters. Turn on the news and you will hear statements such as “Russia did this”, “China did that”, “Iran wants this”. This is a subtle promotion of the collectivist world-view as people are led to associate the actions of a particular nation’s government with the entire population of that nation. They are promoting the idea that government authoritatively speaks and acts on behalf of all people within its jurisdiction.

This is of course an absurd notion. Just like many Americans are extremely disillusioned with the U.S. government as evidenced by approval ratings, there are plenty of people in other countries disillusioned with their government as well. The political establishment does not want this little secret to get out because it is extremely easy to unite people behind government if they are convinced of a common enemy.

Hermann Göring, a leading member of the Nazi Party and ranking member of the German military during World War I, explained this dynamic:

“But, after all, it is the leaders of the country who determine the policy and it is always a simple matter to drag the people along, whether it is a democracy or a fascist dictatorship or a Parliament or a Communist dictatorship… the people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same way in any country.”

This is why the politicians and the complicit corporate media always demonize other countries – people would eventually realize they didn’t need political leaders otherwise. Granted, I suspect most of these politicians that parade around on television actually believe their own fear-mongering. The people at the highest level of the political establishment know what they are doing, however.

So why does the political class go to such lengths to promote the nation-state model? Easy: this model minimizes their competition.

Remember reading about the great wars between Athens and Sparta in Greece? How about the wars between the Italian city-states? These wars weren’t fought because two guys got in a fist-fight at the market while arguing over which city-state was better. They were fought because each government wanted to increase its power, wealth, and control. You see, that is the true nature of governments.

The city-state model kept power relatively decentralized most of the time because there were competing governments in each nation. The rise of the nation-state swept away this competition and allowed national governments to grow tremendously in size, power, and wealth. Competition between nation-states is much more destructive as a result as evidenced by the two world wars. The political class is very fond of such a powerful arrangement thus they will defend centralization by any means necessary.

The truth is, nations really have nothing to do with their dominant government. A nation is simply an association of people who share similar language, culture, traditions, customs, habits, and often ethnicity. This concept is difficult to elucidate, but easy to witness. If you are sitting in a Parisian café you can tell you are in France and not Atlanta. If you are browsing in the Grand Bazaar in Istanbul then it is obvious that you are in Turkey and not in London. If you are touring a winery in Tuscany then you will clearly know that you are in Italy and not in Japan. Times Square during the Christmas season is easily differentiated from the same experience in Columbia.

The point is, nations are the result of voluntary human interaction between people. It is this voluntary interaction that develops culture and tradition.

Absent the State, nations are naturally arising constructs that add value and diversity to human civilization. While there are always bad apples, conflict is typically mild within nations sans political intervention because of the shared culture and values.

The average person is not very interested in conflict with people in other nations. The average person has thoughts, feelings, desires, fears, ambitions, hopes, dreams, convictions, and passions that have absolutely nothing to do with the national government. The average person is working to service his mortgage, invest for retirement, and maybe even pay for a vacation to the beach. The average person is interested in becoming a better athlete, musician, or salesman. The average person is focused on advancing his career, caring for his family, and cutting the grass so his wife doesn’t yell at him. The average person enjoys going out to dinner, watching sports on the television, or maybe volunteering in the community.

Though the culture and traditions may be different, this dynamic is true of the average person in every nation.

The average person could not care less about what hare-brained schemes the politicians, bureaucrats, and special interests have cooked up. This is why the politicians, in conjunction with the media, must constantly work to keep people immersed in fear, worry, and doubt. There must always be a boogieman under the bed and a foreign nation ready to attack. There must always be calls for national unity and shared sacrifice. Collectivism must be constantly promoted. Double-speak must be propagated: War is Peace. Freedom is Slavery. Ignorance is Strength..

Otherwise the average person might get back to what he was doing and ignore the politicians altogether!

Maybe he is starting to do just that. Maybe Peak Collectivism is approaching. We shall see.

More to come,

 

 

 

 

 

Joe Withrow

Wayward Philosopher

For more of Joe’s thoughts on the “Great Reset” and individual solutions to collective problems please read “The Individual is Rising: 2nd edition” which will be available later this year. Please sign up for the notifications mailing list at http://www.theindividualisrising.com/.

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