BALTIMORE – A dear reader reminded us of the comment, supposedly made by Groucho Marx: “A free lunch? You can’t afford a free lunch.”
He was responding to yesterday’s Diary about the national referendum in Switzerland on Saturday. Voters will decide whether to give all Swiss residents a free lunch – a guaranteed annual income of about $30,000 a year.
Destroying Lives
The problem with a guaranteed income (you get it no matter whether you have a job or not) is something we’ve been writing about for the last 15 years.
It is the problem with all frauds… all cockamamie, jackass redistribution programs… and all something-for-nothing schemes.
And it is the same whether you are “stimulating” an economy with artificial, phony-baloney “money”… giving aid to foreign dictators… or handing out free lunches to voters at home.
The Deep State, in addition to being malignant and entertaining, is incompetent.
It fights wars just to lose them. It solves problems and makes them worse. Led by the Yellen Fed, it “improves” the economy and leaves 9 out of 10 people poorer than they were before.
Today, we turn to a special war – the War on Poverty.
Jesus dismissed it. “The poor you will always have with you,” he said. But that didn’t stop the feds from launching an attack.
Fortunately, they are so clumsy, lame, and incompetent, they spare us a worse disaster. Had they been smarter and better organized, they would have done even more damage.
Mission Accomplished!
President Lyndon Johnson launched his War on Poverty more than a half-century ago.
Since then, the feds have spent more than $16 trillion on anti-poverty campaigns. There are today as many poor people in the U.S. as there were then – about 39 million.
Already, we applaud the feds: They didn’t make it worse!
And they could have. They’ve spent $16 trillion. That’s about $1.7 million for each poor family of four… enough to wipe out poverty for the whole clan.
But now, the “good government” conservatives have their calculators out. They say the war could be fought much more efficiently by simply handing each poor family a million bucks. Problem solved! The “poor” would be overnight millionaires. Mission accomplished!
And think of the economic stimulus it would bring!
Especially to certain segments of the economy. All of a sudden, a tidal wave of buying power would hit the markets like a U.S Navy cruiser plowing into a dockside brothel.
Cocaine prices would soar! As for black Escalades with tinted windows… GM wouldn’t be able to turn them out fast enough.
For a few months, the poverty problem would be solved… and replaced by plenty of other problems.
Then, the poor would go back to being poor, and the poverty fighters could pick up their weapons again.
The Devil and Idle Hands
Free money is a blind menace: It ruins the rich and the poor alike.
And the more money you apply to the task… the more people you can ruin.
That’s why children of rich parents are often more corroded than those of the poor; the rich have more money to spend on them.
In Aspen, Colorado, for example – an enclave of wealth – levels of depression and drug use among adolescents are higher than in poor communities.
Taking money for nothing is an easy habit to get into… and a hard habit to break.
Poor people – in U.S. inner cities and African countries – have few defenses; even a little handout gives a strong rush. Soon, they are hooked.
Local industries disappear; they can’t compete with free goods and services. Bad habits proliferate; crime and violence rise, as the devil and idle hands find each other.
As we hinted in our review of the graduation ceremony at the University of Vermont, it’s not caring that causes people to make economic progress. It’s need.
And it’s not the abundance of capital that causes people to want to add more of it; it’s the scarcity of it. Take away the need… and you undermine the whole thing. People even stop caring.
Honest Money
One of the key innovations that built modern civilization was money.
It made possible to move wealth through space and time.
Money rolled. You could do business with someone you didn’t know – from a different tribe… a different language… and a different culture.
You didn’t care what he thought or what gods he worshipped. His money was as good as anyone else’s.
This is what allowed people to specialize at doing what they did best. They didn’t have to do everything themselves. They could focus on their most productive enterprise and then trade part of the output with others.
If they lived in a warm place, they could grow bananas or oranges and trade with people farther north for wheat and other grains.
Goods and services began to move around (often with invading armies) carrying with them new ideas and innovations that helped everyone move ahead.
It is no surprise that tribes that have been cut off on remote islands or in isolated valleys are usually more primitive than the rest of us. They haven’t had the advantage of contact, trade, and exchange.
Money permitted wealth to transcend time, too. You build something. You sell it. You hold the money in your purse. Ten years later, you can still spend the wealth you created a decade earlier.
Or, borrowing money, you could use someone else’s money – based on wealth created long ago – to create future wealth… with which you could pay him back and still have something left over for yourself.
Money didn’t come from nothing; it came from something. It had to be honest money, not fraudulent money created by central banks or central governments.
And it couldn’t be stolen.
Instead, it had to be earned – from work, investment, trade, commerce, and industry. It was the product… the fruit… of effort. Not of idleness. And it brought with it a whole new spirit, a new ethic, and a new philosophy about how the world worked.
“Do unto others as you would have them do unto you” was how Jesus put it in the Sermon on the Mount. And woe to the chiselers: “Every branch in me that beareth not fruit… he taketh away.”
If you are going to get, in other words, you’ll have to give. Remove the need to give as well as to take, and you muck up the whole thing.
No need to plant if you don’t have to reap. No need to say “please” and “thank you”… or to get up and warm your oven at 4 a.m… if you get a check even without baking a single loaf.
And no need to save your money and invest it wisely if you have access to pseudo-savings in unlimited quantity.
Free money creates the illusion of wealth – in a family or an economy – and leaves everyone poorer.
Regards,
 |
Bill
Market Insight
BY CHRIS LOWE, EDITOR AT LARGE
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Yesterday, oil cartel OPEC failed to agree on a cap on production.
It’s an outcome many feared could put an end to oil’s bull run.
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Mailbag
Yesterday’s Diary issue on the Swiss guaranteed income vote triggered a lot of great reader feedback. And not all readers think it’s a bad idea…
Although I realize you have moral and practical objections, I must admit to always having been fascinated by the idea of a guaranteed annual income, perhaps combined with a flat tax.
Thirty-thousand dollars seems high (of course, I’ve heard the Swiss cost of living is obscene!). But if the level was set just above the poverty line, the government could eliminate all other social programs for persons over 18 – including educational assistance, disability, unemployment (at least in countries where university is affordable).
What is hard to determine is how these plans would impact a country’s finances, especially as demographics shift over the coming decades?
— Gary M.
The Swiss minimum wage is equivalent to about $25 per hour; with a 2080-hour work year, this comes out at $52. You mention taxes. But the tax rate would be no more than 20%, leaving take-home pay of about $42K – considerably above the $30K.
Then again, the Swiss will never vote in favor for it, and you know that.
— Paul D.
No need to worry too much about that crazy Swiss initiative. It will go down big time. (A Swiss in Manila)
— Peter R.
Actually, giving EVERYONE (i.e. working and unemployed and retired) a flat state income, then abolishing all direct taxes (except sales tax and excise tax), is good.
Why? All democratic countries need to buy political acceptance from voters. This removes any need for lying politicians, bureaucrats, and the welfare state.
— John I.
Your comments continue to be an oasis in a desert of insanity. Thank you for the clarity and the breath of fresh air! I’m going back under now.
— Aldera B.
I’m interested in watching how this pans out. I only hope it’s coupled with a decrease in any other public assistance provided in Switzerland.
— Ed M.
You may be on to something [about machines taking jobs from humans]. In 1993, my wife and I were invited to spend a week in Switzerland as guests of a roofing material manufacturer. At the time, I was CFO of a large roofing contractor. One condition of the invitation was that we would spend one day at their plant.
I was amazed, as I saw only four employees in the plant. Everything was automated from the delivery of raw materials to the packaging of the finished product. Two employees moved a large roll of finished roofing material from the production line to the packaging line and the other two oversaw the loading of packaged material onto trucks for delivery.
The factory was immaculate to the point where you could have probably eaten from the floor with no ill effects.
— William M.
My two-minute history of the world: Populations banded together to raise their standard of living by attacking their neighbors, robbing, and enslaving them… until they became fat, dumb and happy and were taken over by their neighbors.
This happened from the beginning of time through the Egyptians, Greeks, and Romans… and up to the colonial period. Then a former colony became the most powerful country in the world and tried to put an end to raising the standard of living by conquest.
We now try to raise our standard of living through credit by stealing and enslaving our children, our grandchildren, and their children. It won’t work either.
— Tom F.
We already have that in Britain thanks to [former prime minister] Gordon Brown. Except it’s called “tax credits”!
Yes, HMRC (the equivalent of your IRS) pays OUT money to workers not deemed to be paid enough – absolutely barmy! The welfare state is doomed in Britain as well. It’s bankrupting the country!
— David S.
Here is hoping it passes in Swiss and then come’s here. Make all the rich people like you Bill, pay for it…
— Robert S.
In Case You Missed It
Currency expert Jim Rickards says that the U.S. is about to get stabbed in the back. And he’s put out a new video to explain exactly who the “backstabbers” are… and how their betrayal will affect your money.
2018 BONNER & PARTNERS, ALL RIGHTS RESERVED
3 comments. Leave new
“How Free Money Leaves Everyone Poorer” – a highly informed and thoughtful read: thank you for sharing.
With free money for everyone, a key observation is that surely eventually, money loses 100% of its value.
That’s why, I think perhaps the $30,000 of free Swiss money, is an initial advancing move; a part of something bigger, something far more insidious and wide ranging.
Switzerland, Sweden, Norway, and the like, are perhaps the economic petri dishes, preparing us all for the planned death of money.
Maybe the Swiss “free money” project, is simply an early experimental step, or exploration, by one of several governments in …
… how to remove money altogether.
After all, today – at least at this point in time, before the fall – most money does not exist in physical form: just numbers on a screen.
Yet, I think for the deep state, even digital money is a real pain in the derrière.
The deep state seems to have to keep justifying what is done, or not done. Always messy. Never-ending. An endless queue of people – like Bonner & Partners – 🙂 nit-picking at deep state veracity, hard-won proposals, implementations.
More importantly of course, all this debt is an expensive business.
Yet how hard is it to “print” digital money today? So simple to change the numbers on the screen.
The answer is more attitude- and belief-based than skills driven.
The same way that money in a digital account can be stolen: zeroed in seconds, by those who have little conscience, debts can be wiped (or increased) likewise.
I’m often amazed how any electronic evidence can stand up in a Court of law, since everything electronic can be duped, broken, forged. All that is required are two things: (1) knowledge, and (2) permissions. Both can be procured. I guess, that winning a legal case is more about persuasion than finding the truth of something.
Deep state debts can be erased tomorrow, but for many, many reasons, of course won’t. The debts are essential to prove the semblance of the status quo, and are probably actually desired right now maybe as fuel for other fires.
So perhaps the thinking goes something like: why not get rid of the source of the debt in a unique, powerful, popular, vote-winning way – while decreasing the personal power of those billions lured into the drama?
Two wins for the price of one.
If we’re to play the game of faux democracy, while money, and its effects, of course, can’t just be removed, it can be modified, changed, reduced in value, and deleted in stages, over time.
A subtle tweak here, a devaluation there. Rinse and repeat a thousand times if necessary, each time a little different – a swathe of movements that bring a society closer toward an ultimate goal, not commonly seen – until too late.
For most people, the thought of getting free money might seem like a wonderful prospect. Yet “Welcome to my parlour” says the spider to the fly.
More importantly, the well thought out points in your article are enlightening. Caution and greater consideration can help us all so much in making better decisions throughout life.
Without money having its value, or being removed entirely, we can ponder the curious question of what might replace money. Though a few minutes forethought can provide some scary scenarios.
For example, even with free money, while at best, most might have all they need, in practice, many then become totally reliant on “the system”. Made pointless and economically gelded by consuming too much of anything that is free.
In such a scenario, total reliance is weakness, powerlessness – like lambs to the slaughter. The next generation, and beyond, could become ever more enfeebled, skill-deprived, trapped, by the “endless good times”.
When – not if – “the system” goes wrong, we essentially could have a form of involuntary slavery; total control of the many, by the power-drunk few paid for by apparent plenty.
A story that to varying degrees seems to be echoed throughout the folly and fortunes of human history. Yet rarely do such scenarios have a good outcome for the majority.
The really scary part: usage of too many tools of modern life, including A.I. “benefits”, can bring remarkable efficiencies that make up for poorer results achieved in previous generations, thereby entrapping us so deep that most of humanity may never find its way out.
Or not.
People can surprise us sometimes. Human ingenuity and creativity seem to be two jokers in the pack that break down so many barriers and make the impossible possible.
Either way, even today, the process of earning money – or preferably some kind of physical (not digital) proxy for money – is surely the safest way for true progress to occur from one generation to the next.
However, I feel that that for most people, the lure of apparently removing poverty by the promise of free money has a gravity so powerful, so enticing, that without some unexpected sufficiently large seismic distraction, the free money momentum – also referred to as “basic income” – may well become unstoppable, perhaps becoming the norm within 20 years.
Moreover, the more recent dire economic predictions of Bill Bonner, if enacted, could hasten the distribution of free digital money faster than expected, as an attempt by governments to find a way out of the mess total societal breakdown that could result otherwise.
For the G20 countries especially, there is one reality that is different to all other known known times of economic upset.
No previous generation has had access to the idea of electronic money or digital currencies.
At heart, a digital currency is simply numbers on a screen created out of “thin air”.
Whereas gold and sliver have to be mined and – to a point – physically distributed.
So in any economic downturn, providing the technical infrastructure of a society still remains in place, perhaps, in any economic disaster, after the initial shock, digital currencies can be used in place of the traditional gold and silver, as a means of doing business.
However, when electronic infrastructure breaks down, then assets like gold, silver, even types of food, are natural currencies.
Yet who really knows the future? None of us for sure.
We can play a game. One curious idea: perhaps the rash, timely, liberal distribution of free money could, would create a spending frenzy so big, wiping out the “impossible debts” of today – while, in the process, more subtly wrecking the lives of its victims in ways that are not immediately clear.
Yet, the free money merchants may consider mental disabilities as a price worth paying – or preferred.
Downing the debt comes first, fuelled by free money. The mental health of millions, even billions, may be viewed by those who govern us as, secondary, incidental – or intentional.
If yes, the audacity is astonishing – though not surprising! Yet may explain the entire global economic rationale we find ourselves in today.
For four deep state bureaucracies especially, free money could offer the perfect, “ultimate get-out clause” solution – until the debts become more manageable, fixable by traditional means (what does that mean? 🙂
How much and for how long does a world need free money? Five years? Ten years? Twenty-five years? Indefinitely? I have no idea.
Dramatic swing changes never come easy that’s for sure. A hardly noticeable pain going in, a much worse ache coming out, like the gentle hot breath-snort of a hungry lion breathing on the nape of your neck. You wonder what’s going to happen next.
How times might change. How cycles might repeat.
Or not.
A new, different “digital cycle” may emerge.
Whatever happens, we can hope that “traditional” money survives. While hope is enduring, it seems cheap, without teeth.
However perhaps, in the near future, and if by some fluke the world can somehow avoid global economic collapse, my view is that physical money is unlikely to survive in the lifetimes of my children (now in their mid-twenties). Maybe even in my lifetime (I’m 60), physical money may simply die out.
The more I learn about blockchain and Etherium more so, than Bitcoin, digital credit-based money seems inevitable for our commercial trading reality sooner rather than later.
For some weird, bizarre reason, these things often work better in 3s, to cause mainstream changes. So perhaps:
– The first was Bitcoin.
– Now some remarkable people are working on Etherium.
– Perhaps the third “connector” is some kind of digital glue, or enabler, that makes working with Etherium simple, yet secure, for most people.
So we can keep learning, strive to stay informed, question. We can be wary especially of the simple and easy paths; the promise of no risk, and something-for-nothing dreamscapes.
What’s more, we can take remedial actions where and when is necessary to maintain personal sovereignty.
Whatever happens, that is surely a fine idea.
If anybody can pull it off, it would be the Swiss.
Your theory makes a lot of sense, Bill. It made me sad to read it, though, because I am disabled. I would love to work and earn money. I am also the daughter of a very riche nouveau riche, and as you say, that’s especially corroding.
One thing you missed is that in the United States, we have very few ways to connect people with jobs. If you fall off the high school-college-job train, it can be very hard to get back on. We need more connections between businesses and the professionally poor. It’s very hard, both psychologically and practically, for a poor person to hop into the workforce. Helping people–including training them–to get jobs would be a much better use of money than handing the money over to the poor, which, as you say, makes things worse.
As for what Jesus said about the poor, you are taking it out of context. Jesus spent his life curing the sick, bringing the dead back to life, and miraculously providing food. When he said “The poor you have always with you,” he was (if I remember rightly) telling the disciples to leave the poor aside for the moment so they could accompany him through his Passion. He was emphatically NOT telling them to stop helping the poor. Be careful when you quote Scripture. “The devil can cite Scripture to his purpose,” as Shakespeare said. Read the WHOLE Gospel and you will see that Jesus cared passionately about the poor and constantly reminded the rich that it was going to be harder for them to get into heaven than it would be for the poor. Remember Dives and Lazarus. That parable is more to the point of this discussion.