Ten Ways the US Is Worse Than It Was In 1947

By: Jeff Berwick | Wed, May 30, 2012
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Gary North is an icon in the Austro-libertarian world, and writes more in a day than most will write in their lifetimes. The majority of what he says is excellent and it is well worth your time listening to whatever he has to say.

In his recent article, entitled, "Why We Are Not On The Road to Serfdom", he takes a slightly different perspective than TDV on the state of liberty in the USSA. In it, he makes many good points and tries to lay out the case that because the US Government is on the verge of financial collapse, we should be optimistic about the future. He opens his argument with the following statement: "the federal government is no deeper into our pockets than it was in 1947," and presents us with the following chart:

The rest of the article goes on to make the case that on net, the average citizen is better off due to the radical advances in productivity in the last 50 years and "that we are not moving into a comprehensive tyranny". He is also optimistic about the "Great default" and the negative effect that it will have on the Federal Governments ability to interfere with our lives.

But, we don't see the government's involvement vis-a-vis GDP, or the improvement of technology that we have managed to achieve despite the attempts of the Feds attempt to shut down innovation as being proof that the US Government is not attempting to move us down the road to serfdom. Here's the way we see it.


The US Has Already Gone Bankrupt Twice in the Last Century

It is our view that the modern USSA needs to be looked at in terms of its regression (not progress) since the Federal Reserve was put into place in 1913 and income tax was introduced. Less than two decades later and the US Government was already bankrupt. The only way it could salvage itself in 1933 was to confiscate much of the real wealth(gold coins and bullion) of its citizenry and devalue the dollar. This was bankruptcy #1.

After World War II, two facts led to it's predominance in the global economy. The USSA was the only modern, industrial economy to survive intact and the establishment of the Bretton woods system that positioned the USD as the world reserve currency. This position was abused by the cynical political class and their wealth was squandered throughout the 1960s with the unnecessary war in Vietnam and the institution of the "Great Society" welfare state programs. By 1971, the US Government was again bankrupt.

This time, on August 15, 1971, Richard Nixon reneged on the promise to exchange the US dollar for gold. The world went into shock. For a period of time the US dollar barely traded on international markets. In Germany, where they have experience with hyperinflation, US dollars were not accepted by any currency exchange shop for a number of weeks as people around the world threw up their arms in anger. But... what could they do? Nothing. And what were the viable alternatives at the time? There were none... so, after a few weeks, people just continued to use the now pure fiat dollars.

As the years passed and as the US Government and Federal Reserve, unrestrained by an admittedly weak gold exchange standard of the Bretton Woods system, began to inflate the dollar dramatically, the world was sent into an inflationary crisis by 1979. People from Toronto to New York to Paris were calling in sick for work and standing in lines that wound down the block to buy gold in exchange for their fiat currencies.

It was less than ten years on a pure fiat currency system and the US economy was on the verge of collapse. But, and this is a big but, the total amount of debt that had been racked up western governments had not reached the point where they could not be paid for even with interest rates skyrocketing well over 10% to squelch the inflation. And that is what happened. Paul Volcker allowed interest rates to seek their natural level and it hit as high as 18% before the inflation was muted. But the US Government only had $900 billion in debt versus a GDP of $2.7 trillion. So, debt to GDP was only 33%.

Today, the US GDP is approximately $15.4 trillion (2011). The admitted to federal government debt is also currently at $15.4 trillion, meaning a debt to GDP ratio of 100%. Forgetting for the moment the unfunded liabilities which have already been spent, which would leave the figure at closer to 500%, an interest rate of 18% on the current debt would require $2.7 trillion per year in payments. The total tax theft "revenue" of the US Government in 2011 was $2.3 trillion, meaning every dollar of tax theft revenue would go solely to interest payments on the debt.

In other words: raising rates, which is the only thing that can squelch the impending inflation that is currently building, is not an option this time around. This time around the choice will be allowing interest rates to rise dramatically and bankrupting the government or keeping rates low until the dollar hyperinflates into worthlessness. Ben Bernanke has kept interest rates at 0% since 2008 and has publicly stated that he will keep them at zero until 2014. Ben Bernanke has drunk of the Keynesian koolaid so deeply and for so long that he will keep rates at zero until the economy recovers. The thing is, the economy can never recover until rates rise. It's a Catch 22... and it all ends in tears.


We Aren't In Kansas Anymore, Dorothy

Where to begin in our comparison of 1947 versus 2012? Just off the top of our head, here are ten ways the US is worse than it was in 1947:

Still think the US Government has about the same involvement in the lives of US citizens today as it did in 1947? The reality is clear. The US is closer to the Soviet Union now than it was to any idealized free country sixty years ago.


The Vampire State Bares Its Fangs

We really aren't in Kansas anymore, Dorothy.

The US Government and the US dollar are in its death throes. There is really only one thing left that can be done to stave off the funeral for a few more years... and that is to begin to leach off of the citizenry until everyone is sucked dry. What's that mean? Taxes, taxes, and more taxes. 2012 and 2013 will be remembered in the US as the years of the tax hike. States across the US have been raising taxes on almost anything. See "Record Tax Hike Isn't Fixing Illinois' Problem" and "Brown pushes tax hike as California's money woes deepen" as just two of countless examples.

But, that's just the states. Brace yourself... next year US citizens will be extorted with a tax hike the likes of which US tax slaves have never seen. The Washington Post called the unprecedented $494 billion tax hike "Taxmageddon," and Federal Reserve Chairman Ben Bernanke described it as a "massive fiscal cliff."

The squeeze is on... and it won't get any better any time soon. Expect worse and worse until the end of the US Government or the US dollar.


Next Step: Retirement Savings

Charles Schumer and the other feeders in the US Congress showed their fangs, dripping with blood when they announced the Expatriation Prevention Act (see "Charles Schumer Tells Americans They Can't Leave So Easily") upon hearing Facebook co-founder Eduardo Saverin doesn't want to involuntarily pay into the criminal US system. They hate it when anyone with money escapes their grasp.

But the last grasp for them, in our opinion, will be the retirement savings of US citizens. And, it isn't like they are even trying to hide their intentions as this story from the New York Post recently headlined, "Feds eye retirement-fund tax to cut $16 trillion-plus deficit".

This ain't 1947 anymore... and we highly recommend anyone with "retirement savings" withdraw their funds and get them into hard assets. If you don't want to withdraw the funds, at least work to get them outside of the control of the government who purports to own you. In the US, this can be done through a "Self-Directed IRA". You can even take a large enough IRA, turn it into a self-directed IRA, and use a portion of the funds to purchase real estate in the theft free(tax free) island of St. Kitts, which comes with a passport, and free yourself almost completely from the US Government all in one fell swoop... all without even cashing in your IRA (call the guys at TDVPassports.com for more).

 


Or, Subscribe to The Dollar Vigilante today. In this week's dispatch we outline exactly how to go about the above process and detailed info on the St. Kitts and Nevis Investment Passport program... and this week Ed Bugos tells us why he is getting even more bullish on gold stocks... plus much more on how to survive the collapse of the US Government and The End Of The Monetary System As We Know It (TEOTMSAWKI).

 


 

Jeff Berwick

Author: Jeff Berwick

Jeff Berwick
Chief Editor
The Dollar Vigilante

Jeff Berwick

Anarcho-Capitalist. Libertarian. Freedom fighter against mankind's two biggest enemies, the State and the Central Banks. Jeff Berwick is the founder of The Dollar Vigilante, CEO of TDV Media & Services and host of the popular video podcast, Anarchast. Jeff is a prominent speaker at many of the world's freedom, investment and gold conferences as well as regularly in the media including CNBC, CNN and Fox Business.

Jeff's background in the financial markets dates back to his founding of Canada's largest financial website, Stockhouse.com, in 1994. In the late '90s the company expanded worldwide into 8 different countries and had 250 employees and a market capitalization of $240 million USD at the peak of the "tech bubble". To this day more than a million investors use Stockhouse.com for investment information every month.

Jeff was the CEO from 1994 until 2002 when he sold the company and still continued on as a director afterwards until 2007. Afterwards, Berwick went forth to live on and travel the world by sailboat but after one year of sailing his boat sank in a storm off the coast of El Salvador. After being saved clinging to his surfboard with nothing but a pair of surfing shorts left of all his material possessions he decided to "live nowhere" and travel the world as spontaneously as possible with one overarching goal: See and understand the world with his own eyes, not through the lens of the media.

He went on to visit nearly 100 countries over four years and did and saw things that no education could ever teach. He met and spoke with a plethora of amazing people, from self-made billionaires to some of the brightest minds in finance - as well as entrepreneurs from a broad range of backgrounds and locations from tech companies in southern China to resource developers in Mongolia, Thailand, Russia and Chile. He also read everything he could find on how the world really works... politically and financially. A pursuit he continues to this day.

He expatriated, long ago from his country of birth, Canada, and considers himself a citizen of the world. He has lived in numerous locales since including Los Angeles, Hong Kong, Bangkok and currently lives in Acapulco, Mexico and is building a home in Cafayate, Argentina. In essence, everything he writes about here for TDV he has done or is doing.

As well, during his travels, both real and virtual (through the internet), he met some amazing people who have a similar shared vision of what is currently going on in the world and enticed them to come aboard TDV and provide their own brand of analysis.

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