There are ways out, though we don't see the intestinal fortitude inside politicians to go the route they need to go.
First, as Professor John Cochrane (The Grumpy Economist) notes, why are we taxing income and not consumption? We can easily track consumption. Getting rid of all federal taxes and instituting one simple consumption tax would be hyper efficient and generate more tax revenue than we do currently. (FairTax.org; get behind it and tweet about it)
Second, we need to make a deal with US citizens. Means testing Social Security is one option. Why does Bill Gates need it? Second, we need to end the program. That means picking an age and telling anyone under that age they won't be getting it-but they don't have to pay into the program either. Next, maybe offering a net present value payout to existing SS recipients. Corporations did this with defined benefit pensions in the 80s and 90s.
Medicare is a different animal. Underlying that problem is that the entire health system market in the US is screwed up because of regulation and mandates. Even the American Medical Association regulates how many doctors can go into certain specialties, and where hospitals can be built. The insurance market for healthcare is dominated by two to three companies. The answer is to deregulate and provide a playing field that has intense competition. Once you do that you can start to see what Medicare might look like, and the answer to that problem.
Fortunately, there is a school choice movement and we need to embrace it. There are better ways to educate our children than the US public school system. It has become the industrialized education complex and it serves its bureaucracy and not the kids. With technological advances, it is antique, brittle and doesn't work anymore.
Getting rid of a lot of the transfer payments and welfare programs is also a good idea. The world does need ditch diggers and too many people in the US survive off of working the government system. It's not that they aren't smart, they are smart. Navigating government bureaucracy is hard. Tied in with that is getting rid of a lot of employment regulation and mandates.
As Robert Bryce shows, economies with the most access to cheap energy do better. That means nuclear power and fossil fuels. Solar/Wind all this green energy bullcrap need to go by the wayside. They might be okay in decentralized single use situations but they cannot power an on demand information economy.
We have spent trillions on getting rid of poverty to no avail. Our cities are a mess. You can say, "the US is $200 trillion in debt" but now add in state, county, and city debt. It's a gigantic wall of debt that seems insurmountable.
Only economic growth, and massive cuts in government spending change that picture. The only way to do that is through capitalistic free market free enterprise competition. These are not problems that are insurmountable. They are problems that take guts to take on given the current political environment.
The US is not like the US I grew up in. It looks very much like the thing we didn't want which was a socialized European bureaucracy.
There is a book out call the Great Taking. Pretty interesting stuff. While "legally" they would empty your bank account as you are an unsecured creditor to your bank when you make a deposit and are last in line to get your money back from the bank. In normal times you just get your money back from the takeover bank or FDIC, but not from the bank. In brokerage accounts it is the same. All your assets are held in street name, meaning your broker holds all your stock positions on its books legally. When you get your statement, the broker has allocated your portion of its APPL holdings to your account. You are the beneficial owner but not the legal owner.
The issue I have with the whole taking concept, is to what end? What would be left? So they take all your Apple stock. What would it be worth if the entire world economy is destroyed and the US was no longer a consumer country? Maybe not zero, but damn close! The entire economy would cease to function. So they take everything from you to pay the debts but the whole thing collapses into a pile of rubble anyway.
Remember, though in 1933, Roosevelt confiscated all gold from the American people and devalued the $ by 75%. The dollar was about $20/oz up until that time, then after the "revaluation" the dollar was pegged at about $35 per oz where it stayed until 1971 when Nixon closed the gold window and stopped France from redeeming there overseas dollars for gold.
So what does this all mean? Yes the financial system is in trouble, but my guess is they have a very big tweek that somehow avoids a collapse. My pet theory is that when a market crash comes, they will offer to make your retirement funds whole, but only if you turn them over to the gov for use to make social security appear solid.
This is all wild conjecture. My entire adult life, "they" have been screaming about the debt and deficit. All the way back to Reagan when the national debt was $1T. So far, the masters of the universe have staved off Armageddon. Let's hope they can do the same for another 40 years as nobody alive today is prepared for what the failure world would look like. The how do you position for this type question is meaningless as the entire financial system of the world would never be the same.
Brilliant summary. Only edit I would make is the $1.86T federal receipts number. That's about half a year. Actual revenues are typically around $4T or so, and that's irrespective of tax rates or anything else.
'See, Keynesianism is like Communism in that it sees no real difference between household and government assets. They recognize no moral limit on how much they can take from the population via inflation and seizure, only practical limits.' That is beautiful comparison. This article is a more easily digestible 'The Great Taking.' Also flows nicely with Luke Gromen's work at FFTT. Thanks for the value, Balaji.
This is so scary but it is evidently true... Is there a way the US could toggle to Bitcoin and extend it's monopoly for the next 1000's of years. Thought experiment
1. US is buying Bitcoin with printed fiat
2. It keeps printing till it can - e.g - 5 years
3 2030 - US President declaration comes at midnight saying US has shifted to Bitcoin as it's currency and all dollar assets / liabilities are zero.
What happens? Will it need a dictator in 2030 to do this? Will China or India do it before US?
Another great article Balajis, and thanks for the Link to the Ray Dalio video.
I found it Completely engrossing and so well made, if only history was this intersting back in school!
On to the topic of your article, Its my beleif any gov confiscation of centralised assets would further drive the adoption of decentralised digital assets such as BTC. Though these will need to be self custiodied, and not held on an vulnerable exchange, or in the form of a derivative such as an ETF.
Its does seem the US is in its 'decline' phase and the world is betting on China to snatch at the batton of world power.
But what if the collapse is more systemic, say the worldwide kenysian fiat system? The dollar is known for being the 'cleanest, dirtiest shirt' of this system, would it's failure be the death knell for all of the worlds central banks aswell?
My guess would be a 'no', the majority of the population will continue to accept a fiat currency for payment as long they can roll their digital wheel barrows of CBDC's to the grocers to be exchanged for their shrinkflated loaves of bread.
No surprise there - Inflation being the most insidious and stealthiest tax known to humankind.
I have to keep reminding myself that when I see prices go up, its actually the fiat currency buying less.
However, There is a small yet growing band of people with the advantage of no formal economic training who can clearly see the advantages of the new crypto economic paradigm.
As Balaji mentioned in The Network State, The next great 'super power' may not be based on soil,
but a mass of hot servers, copper, fibre and screens: The Internet.
...And why not? the net now has governance systems like DAO's, online learning institutions, and a maturing crypto economic financial system.
..Which may prove to be the safe haven we need when the legacy gov comes a' knocking.....
Terrified and alert to this. The question I have is how long until it goes from pressure to broken? I find it fascinating that they don’t include the 25% PV decrease in CPI - speak to anyone in the US and they will tell you how much things cost!
Sidestepping the “big gov coming for your assets” distraction, let’s leave that on the floor. In accounting, the value of these assets offsets liabilities. The net value of the liabilities decreases when you pay them back (etc) but it’s important to recall that assets lose value under a range of circumstances - most notably when correlated to non-correlated approaches 1. Going broke happens slowly, then all at once.
There are ways out, though we don't see the intestinal fortitude inside politicians to go the route they need to go.
First, as Professor John Cochrane (The Grumpy Economist) notes, why are we taxing income and not consumption? We can easily track consumption. Getting rid of all federal taxes and instituting one simple consumption tax would be hyper efficient and generate more tax revenue than we do currently. (FairTax.org; get behind it and tweet about it)
Second, we need to make a deal with US citizens. Means testing Social Security is one option. Why does Bill Gates need it? Second, we need to end the program. That means picking an age and telling anyone under that age they won't be getting it-but they don't have to pay into the program either. Next, maybe offering a net present value payout to existing SS recipients. Corporations did this with defined benefit pensions in the 80s and 90s.
Medicare is a different animal. Underlying that problem is that the entire health system market in the US is screwed up because of regulation and mandates. Even the American Medical Association regulates how many doctors can go into certain specialties, and where hospitals can be built. The insurance market for healthcare is dominated by two to three companies. The answer is to deregulate and provide a playing field that has intense competition. Once you do that you can start to see what Medicare might look like, and the answer to that problem.
Fortunately, there is a school choice movement and we need to embrace it. There are better ways to educate our children than the US public school system. It has become the industrialized education complex and it serves its bureaucracy and not the kids. With technological advances, it is antique, brittle and doesn't work anymore.
Getting rid of a lot of the transfer payments and welfare programs is also a good idea. The world does need ditch diggers and too many people in the US survive off of working the government system. It's not that they aren't smart, they are smart. Navigating government bureaucracy is hard. Tied in with that is getting rid of a lot of employment regulation and mandates.
As Robert Bryce shows, economies with the most access to cheap energy do better. That means nuclear power and fossil fuels. Solar/Wind all this green energy bullcrap need to go by the wayside. They might be okay in decentralized single use situations but they cannot power an on demand information economy.
We have spent trillions on getting rid of poverty to no avail. Our cities are a mess. You can say, "the US is $200 trillion in debt" but now add in state, county, and city debt. It's a gigantic wall of debt that seems insurmountable.
Only economic growth, and massive cuts in government spending change that picture. The only way to do that is through capitalistic free market free enterprise competition. These are not problems that are insurmountable. They are problems that take guts to take on given the current political environment.
The US is not like the US I grew up in. It looks very much like the thing we didn't want which was a socialized European bureaucracy.
There is a book out call the Great Taking. Pretty interesting stuff. While "legally" they would empty your bank account as you are an unsecured creditor to your bank when you make a deposit and are last in line to get your money back from the bank. In normal times you just get your money back from the takeover bank or FDIC, but not from the bank. In brokerage accounts it is the same. All your assets are held in street name, meaning your broker holds all your stock positions on its books legally. When you get your statement, the broker has allocated your portion of its APPL holdings to your account. You are the beneficial owner but not the legal owner.
The issue I have with the whole taking concept, is to what end? What would be left? So they take all your Apple stock. What would it be worth if the entire world economy is destroyed and the US was no longer a consumer country? Maybe not zero, but damn close! The entire economy would cease to function. So they take everything from you to pay the debts but the whole thing collapses into a pile of rubble anyway.
Remember, though in 1933, Roosevelt confiscated all gold from the American people and devalued the $ by 75%. The dollar was about $20/oz up until that time, then after the "revaluation" the dollar was pegged at about $35 per oz where it stayed until 1971 when Nixon closed the gold window and stopped France from redeeming there overseas dollars for gold.
So what does this all mean? Yes the financial system is in trouble, but my guess is they have a very big tweek that somehow avoids a collapse. My pet theory is that when a market crash comes, they will offer to make your retirement funds whole, but only if you turn them over to the gov for use to make social security appear solid.
This is all wild conjecture. My entire adult life, "they" have been screaming about the debt and deficit. All the way back to Reagan when the national debt was $1T. So far, the masters of the universe have staved off Armageddon. Let's hope they can do the same for another 40 years as nobody alive today is prepared for what the failure world would look like. The how do you position for this type question is meaningless as the entire financial system of the world would never be the same.
Brilliant summary. Only edit I would make is the $1.86T federal receipts number. That's about half a year. Actual revenues are typically around $4T or so, and that's irrespective of tax rates or anything else.
So how does one position themselves?
A surreal read.
Keynesians are communists xD true in a way I didn't expect.
All your assets are belong to us.
Another a great piece, demystifying and synthesising to help us truly understand what most governments around the world are hiding!
What could this mean globally?
Thank you Balaji for fighting the good fight in the best way only you can 👏
'See, Keynesianism is like Communism in that it sees no real difference between household and government assets. They recognize no moral limit on how much they can take from the population via inflation and seizure, only practical limits.' That is beautiful comparison. This article is a more easily digestible 'The Great Taking.' Also flows nicely with Luke Gromen's work at FFTT. Thanks for the value, Balaji.
This is so scary but it is evidently true... Is there a way the US could toggle to Bitcoin and extend it's monopoly for the next 1000's of years. Thought experiment
1. US is buying Bitcoin with printed fiat
2. It keeps printing till it can - e.g - 5 years
3 2030 - US President declaration comes at midnight saying US has shifted to Bitcoin as it's currency and all dollar assets / liabilities are zero.
What happens? Will it need a dictator in 2030 to do this? Will China or India do it before US?
All that’s gilded isn’t gold.
Covid was not a pandemic, it was a test run psyop for what they can get away with when the real crisis comes.
Another great article Balajis, and thanks for the Link to the Ray Dalio video.
I found it Completely engrossing and so well made, if only history was this intersting back in school!
On to the topic of your article, Its my beleif any gov confiscation of centralised assets would further drive the adoption of decentralised digital assets such as BTC. Though these will need to be self custiodied, and not held on an vulnerable exchange, or in the form of a derivative such as an ETF.
Its does seem the US is in its 'decline' phase and the world is betting on China to snatch at the batton of world power.
But what if the collapse is more systemic, say the worldwide kenysian fiat system? The dollar is known for being the 'cleanest, dirtiest shirt' of this system, would it's failure be the death knell for all of the worlds central banks aswell?
My guess would be a 'no', the majority of the population will continue to accept a fiat currency for payment as long they can roll their digital wheel barrows of CBDC's to the grocers to be exchanged for their shrinkflated loaves of bread.
No surprise there - Inflation being the most insidious and stealthiest tax known to humankind.
I have to keep reminding myself that when I see prices go up, its actually the fiat currency buying less.
However, There is a small yet growing band of people with the advantage of no formal economic training who can clearly see the advantages of the new crypto economic paradigm.
As Balaji mentioned in The Network State, The next great 'super power' may not be based on soil,
but a mass of hot servers, copper, fibre and screens: The Internet.
...And why not? the net now has governance systems like DAO's, online learning institutions, and a maturing crypto economic financial system.
..Which may prove to be the safe haven we need when the legacy gov comes a' knocking.....
I
Terrified and alert to this. The question I have is how long until it goes from pressure to broken? I find it fascinating that they don’t include the 25% PV decrease in CPI - speak to anyone in the US and they will tell you how much things cost!
Sidestepping the “big gov coming for your assets” distraction, let’s leave that on the floor. In accounting, the value of these assets offsets liabilities. The net value of the liabilities decreases when you pay them back (etc) but it’s important to recall that assets lose value under a range of circumstances - most notably when correlated to non-correlated approaches 1. Going broke happens slowly, then all at once.
Thank you for insight
Thanks, I hate it.
I think for that graph to be meaningful they’d have to include private debt as well, very misleading otherwise.