No follow through in stocks… no bounce in gold. The S&P 500 is at an all-time high. Gold is approaching its low for this cycle.
What useful information is there in this news? Probably none. So, we wrap our commencement address to the Class of ’14 (You can find parts I, II and III here, here and here.)
Note that we do this a cappella – alone that is. We will find no allies. Neither on the left nor the right. Expensive education and cheap credit have done their jobs. No one wants to endanger his credit score or his security clearance.
Egyptians must be especially fond of democracy. On Tuesday, they went back to the polls for the second time in 11 months. They’ll keep voting until they elect a candidate that the elite will accept.
That’s why the US system is superior. Candidates – Democrat and Republican – who are unacceptable to the Pentagon, or Wall Street, or the health-care industry or the tort lawyers – are screened out long before they reach the presidential run-off election.
Getting in Line
A rogue candidate won’t get to first base. He won’t get any campaign contributions. And he won’t get media attention. The hacks will label him as “unelectable” and make him invisible. If that doesn’t work, they’ll label him too “kooky” and “fringy” to be worthy of serious attention.
Industry, the media, and the educated classes all line up in favor of acceptable candidates – those who promise not to rock the boat. To get votes, of course, the candidate will promise “change.” But change is the last thing he will deliver.
The elite don’t want it. The lobbyists, fixers, meddlers, chiselers and zombies don’t want it. And you don’t want it… not now… not after you have invested four years and $100,000 to take your place in the rigged system.
Yes, college graduates, you’ve paid your dues. You’ve done your time. You’ve got your ticket. You sure don’t want someone coming along telling you that the system is crooked… that you’ve wasted your time and money… and that you are a fool for believing it.
No, you want to get in line and put your hand out.
Over the last 50 years, the amount of credit in the US has increased 50 times. This represented roughly $33 trillion in new money – buying power that hadn’t existed previously.
In 1755, Irish-born economist Richard Cantillon noticed that when new money is added to a system it doesn’t go to everyone equally. Its original recipients enjoy higher standards of living at the expense of later recipients.
It goes to the people who control the system, in other words. Later, it trickles down to the chumps. By then it has lost most of its value.
You’re hoping that more new money is added. And that you – as aspiring members of the elite – get some of it. But you’re a little late to the party.
You see, you don’t control the system. Old people control the system: The oligarchs. The fixers. The manipulators. The ones with the money. And the power. They’re going to take the new money… and the old money. The system is going to blow up before you get to the head of the line.
A Special Kind of Mess
“Intertemporal discoordination” is the kind of expression you’d expect from a German. In this case it was Ludwig von Mises. (He was Austrian. Same difference.)
The expression means that when the authorities meddle with the supply of money and credit, they inevitably make a mess of things. But it is a very special kind of mess.
First, as Cantillon noticed, the insiders get first crack at the money. Second, the new money creates distortions and disruptions that doom the whole system to collapse.
The famous economist John Maynard Keynes explained the importance of credit as “a link between the present and the future.” That’s what the “intertemporal” part is all about. In a nutshell, your parents and the insiders get the new credit. You get the old debt.
I speak as something of an expert… or at least a veteran… on this matter. Twenty-eight years ago, I didn’t think it was fair that my generation should run up so much government debt and expect you to pay for it.
So, I put together a class action suit against the US government. My eldest son, Will – who was seven years old at the time – was the primary plaintiff.
A federal court ruled against us. It said we didn’t have standing to sue.
That was when Will and other youngsters in the suit faced $1.7 trillion of federal debt. Now, there’s 10 times more federal debt. Author and former World Bank economist Richard Duncan believes it will go over $30 trillion before the whole thing blows up.
Whips in Their Hands
Why so much debt?
Because it is the way the insiders transfer real wealth from you to them. The financial industry loans you money for houses, cars… you name it. In the case of mortgages, the loan will be backed by Fannie Mae.
Mortgage loans rarely get paid off. Instead, they just go on forever, from one “owner” to the next. That is how the financial industry came to be landlord to 44 million Americans.
Where do the banks get the money they lend you? Out of nowhere.
But you’re already acquainted with the credit system, aren’t you? The average graduating student in the US has about $25,000 in debt. Here in Baltimore the marginal tax rate is close to 50%. So, you’ll have to clear $50,000 in income to pay it back.
When the Spanish conquered South America, their encomienda system of slavery typically required only 40 days of work from their victims. The French conquered Madagascar; they forced male Hovas between the age of 16 and 60 to work 50 days a year.
The US example is closer to that of Russia – where Emperor Paul I, in 1797, declared that three days a week was enough for serfs to give their lords and masters. That works out to nearly 150 days a year.
A 50% tax rate – federal, state and local – is the equivalent of about 125 days of forced labor a year. Pretty steep. But that’s just the beginning. In our system of crony democracy, all the major industries have whips in their hands.
Now that you’re out of college, you can join the corvée.
Regards,
Bill
Further Reading: If you’re interested in learning more about why Bill sued Washington… and why he lost… read on here. Bill and Will may have lost their case, but it led them to a very important discovery. You can find full details in Will’s special report.
