BALTIMORE – The tweet was never sent and never received…
“Lying Otto von Bismarck set us up for bankruptcy! What was he thinking? Sad!!”
Instead, Mr. Trump said last weekend that, far from trying to curb the promises and cut the costs of the welfare state, he was nearly ready to unveil a plan to replace Obamacare with something better: a plan that would provide “insurance for everybody.”
The liberal and illiberal elites are still trying to figure it out: Isn’t that what Hillary was planning?
The Obama team – like the Bushes and Clintons before it – had already run up impossible bills at taxpayers’ expense and offered all manner of unaffordable benefits.
Now, explained former Fed Chairman Alan Greenspan in his private conversation with us here in Baltimore yesterday, entitlements are out of control. The system set up by German Chancellor Otto von Bismarck in the 19th century is going broke in the 21st.
After the French Revolution, the elites of Europe realized they had to make peace with “the people.” This they did, with Bismarck taking the lead, by promising people more in “social welfare” benefits than they paid in taxes.
The difference between what they paid and what they got would come from two sources.
First, it would come from the rich, who would pay higher rates. Second, it would come from the next generation.
As to the first, the elites ran into a problem.
They were the “rich.” They didn’t want to raise taxes on themselves! And along came economist Arthur Laffer with a handy theory explaining why they shouldn’t.
Laffer claimed there was a “Goldilocks” rate – not too high, not too low – at which the feds would collect the maximum amount of revenue.
A 100% marginal tax rate discouraged the rich from earning more money. A 0% marginal rate left the government with no revenue. The ideal rate must lie somewhere in between.
Besides, there really aren’t that many rich people after all. And they tend to be hard to pin down. “The art of taxation,” former French Finance Minister Jean-Baptiste Colbert had explained in the 17th century, “consists of plucking the goose to get the most feathers with the least amount of squawking.”
The rich tended to squawk. And since they were also the elite who controlled the system, their squawks were backed by campaign cash… their pain was felt… and tax rates at the top were brought down.
The presumed optimal tax rate, here in Baltimore at least, is right in the middle, between all and nothing – at 50%.
The second source of revenue was the more important one. From 1850 until today, each successive generation was reliably richer and bigger than the one before it.
For example, according to The Wall Street Journal, in 1970, 92% of 30-year-old Americans earned more than their parents at the same age.
But that source of funding is drying up. The Journal was reporting on a new study undertaken by Harvard, Stanford, and the University of California.
The same study found that only about half of 30-year-olds today earn more than their parents.
In other words, this generation has made no financial progress compared to the previous one. And taking just men, the situation is worse: Out of 10 30-year-old men, only four earned more than their fathers in 2014.
These results are based on government statistics, which we don’t trust for a minute. So, we will do our own calculation, reduced to the simplest terms.
A working man needs a pickup truck. How many hours of work does he need to buy one?
In 1970, the basic pickup cost 948 hours of work at the prevailing wage at the time. By 2016, it took 1,190 hours of shoulder-to-the-wheel labor to buy it – 25% more.
Few people realize that Bismarck’s model of government is already headed for bankruptcy. The U.S. federal debt will top $20 trillion this month. Over the next decade – if there are no tax cuts and no spending increases – it will rise to $30 trillion.
So far, the money still flows to the baby boomers. And the evidence of impending doom is hidden by record-low lending rates.
But the feds are no longer counting on the next generation to make the welfare state work; they’re sending the bills to a future generation that has not even been born yet. What they will do when they get the bill, no one knows.
“I don’t know how this is going to end,” Dr. Greenspan told us gloomily.
None of this was probably obvious to the average Trump voter. And maybe not even to Citizen Trump. But it will be soon.
By Nick Giambruno, Editor, Crisis Investing
The establishment is setting up Donald Trump.
The mainstream media hates him. Hollywood hates him. The “Intellectual Yet Idiot” academia class hates him.
The CIA hates him. So does the rest of the Deep State, or the permanently entrenched “national security” bureaucracy.
They did everything possible to stop Trump from taking office. None of it worked. They fired all of their bullets, but he still wouldn’t go down.
Of course, the Deep State could still try to assassinate Trump. It’s obvious the possibility has crossed his mind. He’s taken the unusual step of supplementing his Secret Service protection with loyal private security.
The Deep State’s next move is to pin the coming stock market collapse on Trump. When people think “Greater Depression,” they’ll think “Donald Trump.”
The economy has been on life support since the 2008 financial crisis. The Fed has pumped it up with unprecedented amounts of “stimulus.” This has created enormous distortions and misallocations of capital that need to be flushed.
Think of the trillions of dollars in money-printing programs – euphemistically called quantitative easing (QE) 1, 2, and 3.
Meanwhile, with zero and even negative interest rates in many countries, rates are the lowest they’ve been in 5,000 years of recorded human history.
If the Deep State wants to trigger a stock market collapse on par with 1929, it just has to pull the plug on the extraordinary life support measures it’s used since the last crisis.
The most important variable to watch is the Federal Reserve – the quintessential establishment institution.
Manipulating interest rates to near 5,000-year lows is a crucial part of the life-support system. Now the Fed is set to pull the plug and leave Trump holding the bag.
In December 2015, the Fed raised interest rates for the first time in almost a decade, from 0% to a mere 0.25%.
The Fed kept rates there until last month, when it raised them to 0.50%. It also announced it would accelerate rate hikes throughout 2017 – three in total.
The establishment will get its revenge on Trump. The Federal Reserve is its weapon of choice.
Trump seems aware of the situation. He recently said, “They’re keeping the rates down so that everything else doesn’t go down.”
He’s also said that “we have a very false economy” and the stock market is a “big, fat, ugly bubble.”
During the campaign, Trump called Fed Chairwoman Janet Yellen “highly political.” He said the Fed should raise interest rates but won’t because of “political reasons.” (Raising rates before the election would have hurt Hillary Clinton.)
All this is why what happens after Trump’s inauguration could change everything… in sudden, unexpected ways.
This is exactly why Doug Casey and I put together a time-sensitive video explaining how it could all go down.
You absolutely must see this urgent video before Trump’s inauguration in two days. Click here to watch it now.
– Nick Giambruno
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Great work on the Perón piece. One piece that I thought was left unmentioned was Evita Perón’s impact on her country and the legacy that she left, a legacy still felt today. “Don’t cry for me, Argentina!” Keep up the great work!
– Kerry A.
Drawing Donald Trump in an analogous way to Juan Perón in your most recent post is not only a travesty, but I’m greatly looking forward to you having to eat your words. Would you care for some freshly ground pepper with those words?
– Marilyn G.
We’ve already had eight years of extreme dishonesty, corruption, confusion, lawlessness, and megalomania streaming down from the top. I think everyone should read The Snapping of the American Mind by David Kupelian for insight. It’s good education for those who are still in denial.
How dare you spoil our dream! Here we finally get the hero we’ve been waiting on for so many years and you dash our hopes. How can you be so cruel? We all know that the crap is going to hit the fan pretty soon, but can’t you just let us dream for a little while before reality jumps up and bites us in the rear? Even a condemned man gets the meal of his choice before being executed. The next four years may be like going to a movie that everyone says is wonderful but they fail to tell you that it has a terribly sad ending. However, like a moth drawn to a flame, we would like to see a little of the movie before you tell us that the swamp critters kill our hero. That’s just cruel, Bill.
– Ken D.
Bill, I love you, but I think you are being too critical of Trump. He hasn’t even taken office yet and you already have his ship sinking. Give him a break!
– Jeanette S.
I like your approach to things, makes things interesting. As a small-business man, 75 years old still working every day because I want to – and being gone from the house for seven-hour work days makes my wife of 53 years happy – I sum things up simple: The day after the election, my business increased quite a bit. Why? Because I manufacture motorcycle trike kits and my customers are older people enjoying their retirement or partially disabled people that feel comfortable about spending money with their vision of the Trumpster making America great again. Me, I am just glad to make a few extra bucks before everything goes to hell. No one other than Almighty God can save this nation that our ignorant Deep State has destroyed. My family will be fine because I believe in Jesus and don’t owe anybody anything… and I bought your book and am prepared.
– Steve H.
Trump gets his energy from exposure in the media, good or bad, doesn’t matter. The one thing that he couldn’t cope with would be silence. If his picture wasn’t all over the news, he would wither and die.
– George E.
On his first day in office, Donald Trump will issue an executive order that will wake a sleeping giant… and send this tiny stock through the roof.
The Casey Report Editor E.B. Tucker just put together a video with all the details of this opportunity. Click here to watch it before the inauguration this Friday.