PARIS – It’s back to Europe. Back to school. Back to work.
Let’s begin by bringing new readers into the discussion… and by reminding old readers (and ourselves) where we stand.
As a Diary reader, you join a small and lonely group.
But we know something others don’t.
We – and apparently only we – understand the real cause of our economic malaise.
What malaise, you ask?
Well… how could the richest, most technologically advanced, and most scientifically sophisticated economy stop dead in its tracks?
The rate of economic growth has gone steadily downhill for the last 30 years. By some measures, after accounting for the effects of inflation, we’re back to levels not seen since before the Industrial Revolution.
And how could such a modern, 21st-century economy make the average person poorer?
As we saw yesterday, when you measure actual inflation, rather than the government’s crooked numbers, the median U.S. household income is 20% lower today than when the century began.
And why would our modern economy concentrate wealth in the hands of so few, so that only the richest 1% make any real progress?
You may also ask a question with an obvious answer: Why are the richest and most powerful people in the country overwhelmingly supporting Ms. Clinton in the presidential race?
You find the answer to all these questions the same way: Follow the money.
Ms. Clinton is raising record amounts of money – $80 million in a single month.
Big corporations, banks, military contractors, rich people – all are pitching in to make sure Hillary is our next president.
Because she promises to protect the status quo.
That, of course, is what government always does. A free economy is a precarious place for wealth. It is despised by nearly everyone – especially the rich.
In a truly free market, the process of “creative destruction” can’t be controlled. New wealth is born. Old wealth dies.
Naturally, people with wealth and power try to use government to get more wealth and power… and to stop the creative-destructive process. They want to protect what they’ve got already. That’s why the real role of government is to look into the future and keep it from happening.
Hillary stands like King Canute, promising to stop the tides of economic history.
What’s this got to do with money?
Let’s ask another question instead: What is the source of Ms. Clinton’s campaign pile? Whence cometh all this lucre?
“It comes from rich people,” you will say.
But where did the rich get so much money?
Ah… that’s where it gets interesting.
We remind you of the context: So far this century, only the rich have gotten wealthier. Naturally, they are keen to see the system that gave them – and them alone – such great wealth continue.
The key to understanding it all is the money system itself.
The money you spend today is the money that President Nixon inaugurated on August 15, 1971.
That’s when he reneged on America’s promise to convert foreign creditors’ dollars to gold at a fixed price of $35 an ounce… and broke the last link between the dollar and gold.
Nixon’s new money looked, for all the world, like the old money. It seemed to work just like the dollar always did. And the most distinguished economist of the era – Milton Friedman – advised Nixon to put it in place.
Subtle… slippery – the difference between the old dollar and the new one went unnoticed for 40 years.
Old dollar? New dollar? Who cared?
Even now, most of the world has no idea what happened. But we, dear reader, are beginning to connect the dots.
Here’s the basic difference: The old gold-backed dollar represented wealth that had already been created. You got more dollars as you created more wealth.
Money was real wealth.
But this old money was hard for the authorities to control. They said it was uncooperative. Intransient. And stubborn. They wanted a new kind of money… and a dollar they could manipulate (to make a better economy, of course).
So, the new dollar was created. And this new dollar was not based on wealth, but on debt.
It was not backed by gold. And it was not connected to the real wealth of the economy.
Instead, it was brought into being by the banking system – as a credit. It increased as people borrowed and went further into debt, not as they grew wealthier.
The more they borrowed, the more they could buy. This gave the economy the appearance of growth and prosperity. It allowed millions of Americans to increase their standard of living, even as their salaries stalled.
But every purchase put people further into debt…
Between 1964 and 2007, credit expanded 50 times.
And in 2008, the credit bubble burst.
More to come…
By Tom Dyson, Co-founder, Palm Beach Research Group
Fact: The Social Security trust fund has no money in it.
In 2014, the Social Security Administration (SSA) took in $786 billion through the Federal Insurance Contributions Act tax… $73 billion short of the $859 billion needed to pay claims.
In plain English, Social Security was in deficit mode.
By 2026, the SSA will run up a cumulative deficit of $1.6 trillion.
Wait… what about all the money you, I, and every other American have paid in since 1935?
How is that possible?
We’ve been told for decades the Social Security trust fund holds trillions in assets (cumulative Social Security surplus revenues since 1935) that are collecting interest.
Particularly, at the end of 2014, we were told the trust fund owned over $2.8 trillion in assets.
This is a lie. There isn’t one dollar in the Social Security trust fund. Nada. Zip. Zilch.
Remember, that $2.8 trillion sum is book assets, not actual dollars. The dollars were spent the minute the government collected taxes.
That’s because the government isn’t required to use money collected from Social Security toward Social Security purposes (according to the Supreme Court’s ruling in Helvering v. Davis). So, it’s used that money to fund everything from defense spending to payroll expenses.
The Treasury Department took in dollars from taxes, but paid the SSA in paper IOUs… redeemable on a future date.
Translation: The left hand of the government took money from the right hand of the government and promised to pay it back on “some future date.”
Consequently, there are no real assets in the Social Security trust fund.
Now, add a couple more problems to the mix. Social Security has had two problems from the start.
The first is retirement age. When the government designed the program in 1935, it set the retirement age at 65. At that time, the average life expectancy of a newborn was just 59 years. Most people wouldn’t live long enough to collect benefits.
But the framers of Social Security didn’t address the possibility that life expectancies would increase. Today, life expectancy in the United States is 79.9 years.
The second major problem is demographics. When Social Security began, there were 41.9 workers for every retiree. It isn’t too difficult to fund a program where more than 40 workers support a single retiree.
But now, in 2016, there are just 2.8 workers supporting every person collecting Social Security benefits.
By 2030, the ratio will be 2:1.
There you have it. Zero dollars in the trust fund, higher life expectancies, and a big wave of people claiming more benefits.
Takeaway: More people are going to want money paid out for a lot longer… from an account that has no money in it.
No amount of financial smoke and mirrors will prevent the system from collapsing under its own weight.
Bottom line: If you’re not actively working on a plan B for the coming Social Security cuts, you should be.
Note: To help you protect your wealth, my colleagues and I are putting on a first-ever Retirement Rescue Roundtable next Tuesday. Our entire team of experts will be there – including Bill Bonner’s longtime business partner, Mark Ford.
You can have a “seat at the table” as we reveal how to create a “Cash Calendar” with checks coming in on a daily, weekly, and monthly basis… and yields as high as 24%. To register for FREE, just click here.
Why Hillary Could Start World War III…
In a private interview, Bill Clinton’s former classmate talks U.S. politics, his personal encounters with the Clintons, and why he thinks Hillary is more likely to start World War III than Donald Trump.
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Negative interest rates are spreading across the world… and could be coming to America soon. The only problem is that they’re illegal. That’s because they violate an elementary principle of commercial law…
Why You Need to Pay Attention to America’s “War on Cash”
Remember Washington’s War on Drugs and its War on Terror? Now, it’s waging a new war – on cash. And it threatens your freedom in a more subversive way than ever before.
We continue to get a flood of feedback from Diary readers about how Bill can save his ranch in Argentina… including lots of helpful ideas about how he can get a backhoe up to the high pasture in the mountains.
Your ranch has always lost money, and you know it always will. But you don’t own it to make a profit. You enjoy the lifestyle (occasionally) and you’ve met some interesting people. Nothing wrong with that.
Here’s a thought… transfer ownership to all the nice folks who work for you there, in equal shares. They seem like the sort of people who would welcome you as a guest whenever you wanted to visit. You would still enjoy the benefits you seek. And we, your loyal readers, will still enjoy your stories. But you will have cut your losses. And, if you want to contribute a little extra cash to the new owners on each visit, it’s your money.
– Paul A.
I am absolutely awed by your plans and operational viewpoints on the ranch! My kind of game!
I’m 63 years old and am playing that game plan on a much smaller scale – 5 acres surrounded by woods, wildlife, never-ceasing spring, but only 5 miles from town. Yes, I am at odds with the governmental regulations. But quietly, under the radar, battle on I do. And I absolutely love the challenges.
My hat is off to you, sir.
– Brad H.
Time to think outside the box. Remember the old story of a semi-truck stuck under an overpass? A 12-year-old kid provided the solution to the experts: "Let some air out of the tires."
Incidentally, doing that on dirt roads gives better traction, if not overdone. But to a different solution – capture water lower down the mountain. And if rushing through too fast, install flow restrictors to slow water/prevent dam blowout. From a 12-year-old type.
– Christopher P.
Take the backhoe up by helicopter. Ski resorts do this all the time.
– Charles C.
Buy [Diary reader] Fred M.’s San Antonio ranch, and use the profits from it to carry the Argentine ranch. And for heaven’s sake don’t risk going over the cliff with the backhoe. Take it up by helicopter.
– Pat O.
The darkest hour is just before dawn. Hold on!
– Richard C.
I would like to propose something different than bombing an ancient Incan trail to deliver a backhoe. Next you have to deliver fuel. Why not explore grasses which are more drought tolerant?
LSU in Homer, La., where my family has lived for six generations has an Agriculture Extension cattle farm and developed a drought-tolerant grass called Alicia
Horse people do not like it… even though it is comparable to alfalfa in protein… because it is not pretty green, but yellow. But horses like it fine.
– Jill B.
I have long said that the two most important things for a property are good water and good neighbors. Sounds like you have neither. And why you want more than 100 acres is beyond me. I have 20, and that is plenty to take care of.
– John H.
I read about your problem for bringing heavy equipment up a small narrow-winding road to your establishment. I used to live on a farm and always tried to solve my problems with little money.
My curiosity got the best of me, and I went looking in search of a solution for your dilemma. I found a Sikorsky S-64 (sky crane) capable of carrying five people and having a payload of 20,000 lbs. (9,072kg).
Possibly this is something you might consider when all other ideas have failed. Hope you’ll read and consider this from a friendly, but helpful, reader-subscriber perspective.
– William and Frances P.
I think you should turn the ranch over to your ranch managers and their families, gratis, and do a good thing for them. Worry not what they will do with it. Let them work it out with their people. Blessings all around and an exceptional experience for you to remember.
– Jen M.