Chicago Gold and Silver Investing Fan Blog

The Sugar Daddy Addiction

I read this great article by Paul Rosenberg from the Nestman Blog. Here's the gist of it.

"All governments – communist, capitalist, fascist, monarchy, theocracy, whatever – survive on the skim. They take money from productive people, by force or threat of force. However prettied-up or justified this fact may be, it remains the central fact of rulership.

It’s a simple but disturbing truth: A late-stage state’s modus operandi must always be “government against the people” "

Whatever form of government, including the government set up by the founders of the United States, it is always inherently against the people. Their sole purpose is to serve their people by taking their people's money. Think about that statement again. The government takes their own people's money then they give it back to them.

Thus, the government's purpose or reason for being is to give back or better said spend back the money it collects to it's citizens. Ideally, the government does this well and the citizens are satisfied. That is the premise. The citizens have an expectation that government as Rosenberg says Western government portray themselves as the "saviors of the weak, the healers of the sick, and the fixers of every problem."

Government make claims that they will do. Often times these claims are unrealistic or absolutely do not make long term sense. They make claims like if you expand government we will beat the war on poverty, end racism, make up for past injustices, give everyone the right to free healthcare, pay for everyone's retirement, or other often impossible to deliver claims. But they sound good and citizens as history have shown will often times vote and demand that type of government. It is often good strategy for a politician to run under those claims. 

This is when the problems start to develop.

The people expect their government to be a Sugar Daddy. That is someone who lavishly spends on them. It's all great when the Sugar Daddy has money to spend. But what happens when the Sugar Daddy runs out of money? Or does not have enough money anymore to fulfill the lifestyle of their mistress. At that point, the mistress would begin to lose interest or even think of leaving.

The Sugar Daddy knows this, so in order to stay relavent in the life of their mistress, he has to keep pleasing her. Or else she may jump ship or lose interest.

That is why it is impossible for a government to cut spending. Because they know that once they do, they are done. So they keep spending and they keep growing to try to meet the insatiable appetites of their citizens.

So faced with this situation, government always tries to take more and more from its citizens. However, this can only go on for so long. The smart ones realize that they work and work yet they cannot keep the rewards of their work because it gets taken by the statist government. So what do they do. They either flee to another state or country which is less taxing. Or they adapt their ways to avoid excessive government confiscation of their money.

Like it or not, the governments of the United States, much of the Europe, Japan, and many other countries are at the stage where they are one big overextended Sugar Daddy. They have overextended themselves and have gotten in way too much debt to be able to meet the promises they made to their citizens.

The Sugar Daddy will now get desparate and try more confiscation. At some point its citizens will clearly see what is happening. Many of them will be angry at the results. If they take too much, the ones whose money are being stolen will either flee or take evasive actions. If they fail to deliver on promises, they will anger another group of citizens. In either case, there will be turmoil.  The time to prepare for that turmoil is now.

 

Break Even Date

Anyone that has ever run a business understands that financials are a key part of the business. The financials have to make sense to anyone analyzing the financial numbers of the business. As soon as they do not, the whole competency of the business is taken seriously into question by anyone analyzing the business. Even worse, current management of the business may lose faith in your knowledge of the business.

One financial number of prime importance for any business is what is called the break even date. The break even date is the date is the date in which revenues equals costs.

Every business (and governments) have costs and revenues. Ideally, revenues are less than costs. If not, there has to be a plan to address that or else the solvency of the operation will be seriously in jeopardy.

In the case of governments at any level, most of their revenue generally comes from taxes. The costs of running the government and services and entitlements they provide are the costs. When costs are greater than supply, there are a couple of things governments can do. They can lower costs, increase revenues, borrow funds to pay for the costs, print money, steal money, or more. How a business and governments manage that will ultimately determine the solvency and fate of the organization.

If they manage it properly, the organization thrives. If not chaos or even complete breakdown can occur. Right now those running most governments around the world are not managing it properly. They have chosen to borrow more than they can handle, tax more than they can tax, print more than they could print, and steal more than they can steal.

If you do not manage it properly- and many governments are- the laws of nature will take over. Chaos, resistance, breakdown,defaults, wars, protests, and other malignant symptoms will appear. Like a cancer it will not take over the whole world at one time, you will see it surface in one part of the world at first, then if not quickly overcome it will spread to other areas fairly quickly.

But this is not a message of gloom. This is a message of optimisim. Governments neglecting their fiduciary duty is nothing new. Government have been doing this kind of neglect ever since there have been governments. Every time, humans have responded. The government may not have survived in the previous form, but has generally evolved to something stronger. It is a message of hope, because the governments that do not manage it well will eventually collapse or whither away. The ones that do make it, will be hopefully end out learning important lessons and come out stronger than before.

Nations Always Progress Through Following Sequence

I got this email:

Hi All.......The colleague that sent this to me remembers me referring to the famous historian Toynbee (deceased)...He said civilizations are three hundred years up and three hundred years down....I often think about this....For me, this piece is extremely interesting!  I am pretty sure all of you will appreciate it.....Prayers, best wishes,  cris

 

In 1887 Alexander Tyler, a Scottish history professor at the University of Edinburgh, had this to say about the fall of the Athenian Republic some 2,000 years prior: "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 that 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 over loose fiscal policy, (which is) always followed by a dictatorship."

"The average age of the world's greatest civilizations from the beginning of history, has been about 200 years. During those 200 years, these nations always progressed through the following sequence:

From bondage to spiritual faith;

From spiritual faith to great courage;
From courage to liberty;
From liberty to abundance;
From abundance to complacency;
From complacency to apathy;

From apathy to dependence;
From dependence back into bondage."
The Obituary follows:

Born 1776, Died 2012
It doesn't hurt to read this several times.
Professor Joseph Olson of Hamline University School of Law in St. Paul, Minnesota, points out some interesting facts concerning the last Presidential election:

Number of States won by: Obama: 19 Romney: 29 Square miles of land won by: Obama: 580,000 Romney: 2,427,000

Population of counties won by: Obama: 127 million Romney: 143 million Murder rate per 100,000 residents in counties won by: Obama: 13.2
Romney: 2.1

Professor Olson adds: "In aggregate, the map of the territory Romney won was mostly the land owned by the taxpaying citizens of the country.

Obama territory mostly encompassed those citizens living in low income tenements and living off various forms of government welfare..."

Olson believes the United States is now somewhere between the

"complacency and apathy" phase of Professor Tyler's definition of democracy, with some forty percent of the nation's population already having reached the "governmental dependency" phase.


If Congress grants amnesty and citizenship to twenty million criminal invaders called illegals - and they vote - then we can say goodbye to the USA in fewer than five years.

If you are in favor of this, then by all means, delete this message.

If you are not, then pass this along to help everyone realize just how much is at stake, knowing that apathy is the greatest danger to our freedom..

Enjoy the party...it won't last

Federal government workers and those who benefit from the government are enjoying immense prosperity. However, the party will end soon.

Think about who is doing well today: $80,000/year Physical Education teachers, Wall Street types, tenured college professors, non-profits helping verterans find jobs, even some military personnell etc.

Granted there are also entrepreneurs, small businesses, and the kid busting his way through life who are also thriving in today's economy. However, a big portion of America - mainly government workers or those supported by the government will soon face a reality call. See, their main source of income comes from the government. The government has over extended itself and soon will not be able to pay all of these guys. Or if they do pay, it will surely be in much much devalued currency.

That is when the party ends.

Sovereign Debt Auctions

Central Banks use what is called a Sovereign Debt Auction to raise money. For example, US Treasuries.

According to TreasuryDirect.gov:

"Marketable securities can be bought, sold, or transferred after they are originally issued. The U.S. Treasury uses an auction process to sell these securities and determine their rate or yield."

It is not important to know all the details of a security auction like the bidding and issuance process. What is important to understand is that Sovereign Debt Auctions are just one belief or tool that central banks use to feel they have adequate control of the market.

For more see Robert Fitzwilson's": We are headed to a historic collapse of the financial system.

However, this tool does not go exactly to plan all the time. According to a Der Spiegel article: A complete disastor, 

Germany held a bond auction but 2/3 of their sold. The rest went unsold and will go to the secondary bond market.

 

 

Security or Freedom

The question of security versus freedom is just as relevant today as it is in any time.

Some want security others want freedom. Some want the security of a place to goto every day, of a steady pay check, of benefits. They will fight very hard to keep this system of security in place. They want to produce an educational system that produces workers who fit nicely into that secure system. They want control and the ability to tell people what to do, when to do it. In other words they want a system of follower who jump when they say to jump.

On the other hand, there are the freedom lovers. They hate being in a situation where others tell them what to do, when to do it, and how much money they are going to make.

Big governement union loving types love security. Limited government, free market, entrepreneurial type love freedom.

You Know Illinois is in Serious Financial Trouble When Their Democratic Governor Has To Talk Pension Reform

Governor Quinn of Illinois is starting to talk like a Republican. He is actually proposing some sweeping pension reform for public sector unions in Illinois. In a stunning Chicago Tribune article states that Quinn proposes:

To help shore up the vastly underfunded system, Quinn called for a 3 percent increase in employee contributions and reducing the rate of cost-of-living increases. The governor also wants to raise the retirement age to 67.

This just shows you home much financial trouble the state of Illinois is in. If something is not done soon, the state will be unable to pay its bills. The democrat party has basically been the most union friendly party you can get. Now when Democrats begin admitting there is a pension problem and then start doing something about it, that is a major admission of public sector unions have really bled the system dry.

At the same time, I approach this news with caution. Quinn is still a democrat, and democrats always look to tax and spend. Quinn will find a way to screw this up. He could call for more borrowing, more taxing, and more spending. Like any Democrat, it is in their blood to tax money from someone else, borrow more than you can handle, and spend like there is no tomorrow.

 

Video-Government Debt Simplified

Short Film- This is what the government is doing to us

Peter Schiff on government regulations hurting business

Peter Schiff is an expert on how the governement and government regualtions stifle the economy and economic growth.