The Feds are Running Out of Options

In the last few years, the only real buyer of government bonds has been the federal reserve. Historically, the federal reserve was not even allowed to purchase government bonds. In addition, it certainly wouldn’t have been able to become the primary purchaser without quantitative easing. However, the federal reserve is planning on backing off of quantitative easing, and that spells trouble for the government, and they know it.

Two policy changes this year indicate that the federal government knows that it is in trouble. The first is the myRA account announced at the State of the Union speech. This is a special retirement account being sold to lower-income Americans that can only contain *one* investment type. You guessed it – government bonds. The goal of this program is not to help poor people get retirement accounts. The goal is to sucker the poorest Americans into financing the government’s debts. Why? Because we can’t find anyone else to do it.

The second policy change is the increase in the Social Security Administration to pursue old debts, and take the money from relatives of the debtor. In some cases, they are withholding tax returns from people because the social security administration overpaid a relative of theirs 30 years ago. So, not your debts, but a relative’s debts. And not a recent debt, but one 30 years ago. This means that as quantitative easing starts to fade, the federal government is going to start doing increasingly panicked measures to increase their cash, because they have run out of people to finance their borrowing.

No, just to point out, I think that removing quantitative easing is a good thing. The problem is that it will reveal just how poorly managed our country and our economy have been, and it will hurt bad. It’s a necessary step for healing, but the transition is going to be a ride that no one will ever forget.

Where is Your Wealth? Part 2 – What Kind of Wealth Lasts the Longest?

In part 1 of this series, we discussed how the wealth that our bank accounts and investment updates show us is not really real. We also covered some practical ways that we can build wealth which don’t rely on the larger economy to maintain their usefulness.

If you haven’t read part one, please go do so now.

In this article, I want to go a bit deeper. You may have gotten the feeling that, although you could put a certain amount of money into savings by buying food, capital assets, land, and valuables, that, ultimately, it will wind up being very hard to manage. That, actually, is true. An abundance of wealth is always hard to manage. That is part of our current problem – people want to offload the difficulties of having a lot of money. Do you know what happens when people offload the difficulties of having money? It gets stolen right out from under you.

A moderate amount of money is relatively easy to keep track of. If I have $10,000, it might get stolen, but I’m not really big enough of a target for someone to pull off an Ocean’s 11 type of heist. Likewise, if instead of cash, I have $10,000 spread across stored food, jewelry, cash, ammo, and some capital equipment for my house, that will last a long time and be of benefit to me the whole time, without being overly burdensome.

However, if I have $10,000,000, it changes things quite a bit.

Now, if I have the money in an easy-to-access form (i.e. gold coins), it is also an incredibly easy target to steal. If I store it in dried food, how do you even manage to store that? This is the conundrum that the rich man had in Luke 12:16-21:

And he told them this parable: “The ground of a certain rich man yielded an abundant harvest. He thought to himself, ‘What shall I do? I have no place to store my crops.’ Then he said, ‘This is what I’ll do. I will tear down my barns and build bigger ones, and there I will store my surplus grain. And I’ll say to myself, “You have plenty of grain laid up for many years. Take life easy; eat, drink and be merry.”’ But God said to him, ‘You fool! This very night your life will be demanded from you. Then who will get what you have prepared for yourself?’ This is how it will be with whoever stores up things for themselves but is not rich toward God.

There are several interesting aspects about this parable. First of all, in this parable, Jesus did not say that saving up money was hurting others. Who did it hurt? It hurt the rich man. In fact, it helped the poor, because he couldn’t use all of his grain, and when he died, it went to everyone else. In fact, in Proverbs 13:22 it says that “a sinner’s wealth is stored up for the righteous”. How does this work? Let’s say that you have $100,000,000 in the bank. What does that represent? It represents $100,000,000 that you earned but have not spent. In other words, you have contributed $100,000,000 to the economy without taking from it. If you are greedy and are chasing this number higher, you will never be satisfied, but you will indeed wind up helping out the poor. But you will not help yourself.

So what does Jesus suggest? Being rich towards God. Jesus also mentions this in Matthew 6, and deals with the very same conundrums about wealth that we are facing here:

Do not store up for yourselves treasures on earth, where moths and vermin destroy, and where thieves break in and steal. But store up for yourselves treasures in heaven, where moths and vermin do not destroy, and where thieves do not break in and steal.

In other words, all of the hassles of storing up wealth are merely the result of storing up the wrong kind of wealth. If I need a sandwich, I need dollar bills. If I need to save a little money, I should invest in silver coins. If I need to save larger amounts of money, I should invest in gold coins or land. However, if I want permanent wealth, I need to shift my investment focus.

In the next part, we will look on how to do this practically.

Where Is Your Wealth? Part 1

One day the U.S. will have a financial reckoning. I have a feeling that when this happens, a lot of people will be surprised. Most people who save for their retirement rely on nice printed figures from their banks or investment advisor, telling them how wealthy they are. However, these sorts of numbers are more ephemeral than most people realize.

Let me tell you a mythical story about Bill. Let’s say Bill’s neighbor George is running a Ponzi scheme. Not knowing that it is a Ponzi scheme, Bill puts money into it. George gives Bill a statement each month, telling how much Bill’s wealth is growing. Bill knows some other people invested in this “fund”, who have successfully pulled their money out for a profit. Therefore, Bill invests his money into it. Let’s say Bill put in $1,000 a year ago. The statement George gave Bill last month says his money has increased to $1,500!

Here’s the question – does Bill actually have $1,500, or do he have a sheet of paper which tells him that you have $1,500?

Now let’s say Bill take his statement to the bank, and asks for a loan, and pledges the $1,500 in the George’s Ponzi scheme as collateral. The bank agrees (since they also don’t know it is a Ponzi scheme), and loans Bill $1,500. Now, let’s say that Bill’s neighbor tells him that something great is happening, so he better invest more now before the value shoots through the roof. So Bill takes the $1,500 from the bank, and reinvests it with George. The next month, George gives Bill a statement that shows that his new $1,500 investment has grown to $2,000 in a single month!

So, at this point, how much money does Bill think he has?

  • He put in $1,000 at the start
  • He made $500
  • He used the investment as collateral for a loan of $1500
  • He invested the $1,500
  • He made another $500 on the new investment

So, Bill think that he has $4,500 in assets, offset by $1,500 in loans – so, a total of $3,000 from an original investment of $1,000. So, when Bill’s wife asks you how much he has in savings, Bill respond that he has $3,000.

Now, let’s say that tomorrow George is arrested, and his Ponzi scheme is discovered. It turns out that he was only keeping enough money to pay people who asked to withdraw, and spending the rest. He only had $5,000 in assets, but 100 investors. That means, each of them receive $50.

Now what does Bill’s account look like?

Well, now, instead of having $4,500 in assets, he only has $50. However, Bill still has the $1,500 loan. So, instead of having a nest egg of $3,000, he owes the bank $1,500, and only has $50 to pay it off. This is what a financial day of reckoning looks like.

So here is my question – at what point did Bill lose his money? My answer – when he put it in someone else’s hands.

Paper investment works when a society is moral and dutiful. When people put honoring their word above their own comfort, paper investment can work wonders, as it removes much of the burden of keeping and preserving wealth, and offloads it to people who are better at it. Unfortunately, that isn’t our society today. We live in a fully-pornified culture – anything at all to satiate what I want now. This is true of everything from TV to healthcare. I want it now, immediately. Oh, my obligations to you? No, I want what’s mine, and I’ll give you what I owe you only if I must. And this behavior is enabled and supported by the government going into debt every year, and the federal reserve continually printing money to support it all.

So what’s the solution?

It’s okay to have investment in paper assets, but realize that they are just part of a Ponzi scheme. In fact, even the money you have in your wallet is part of the same. Let’s say that you kept all of your money hidden in your mattress. Let’s say you saved $100,000 over 10 years. Well, with a 3% inflation rate, your money would only be worth $75,000. If inflation is at 10%, it would only be worth $30,000. If we have a real financial reckoning, you might as well have spent the money.

Here’s the deal – we have money so that later when we need things we can buy them. However, since the people behind the money system aren’t doing their job, we need to buy the things now, and buy them in such a way that they are usable later. Stored food, home capital assets, seeds, land (that you actually own, keep, and use), and valuables (jewelry, gold, silver). You need things that won’t go poof when the financial system does. A lot of people will one day find that the fortune that they thought they saved doesn’t really exist. They will think that it all disappeared the day they found out about it in the news. However, just like George’s Ponzi scheme, the truth is that the money was lost long before they found out about it. They were just fooled by the nice-looking monthly statements.

Stay tuned to read part 2 of this series, where we will go deeper into building long-term wealth today.

Hood Conservatives: Because Conservative Ideas Help Everyone

Strong communities help everyone, and are an essential part of MicroSecession. Building our own communities stronger is one of the key aspects to becoming independent.

A new organization is launching, called Hood Conservatives, with the goal of reaching the inner city with conservative values and ideas. The fact is, if done right, this will probably do more to help the inner city than all of the government programs combined. They have a five-part plan, and I think it is great:

  1. Gun Education and Training
  2. Entrepreneurship
  3. Education
  4. Financial Independence
  5. Rebuilding the Family

The only thing I would add is that they must first rebuild the spiritual and moral foundations if this is to work properly.

Theological Reflection in Politics

I plan to write more about theological reflection in politics later, but for now, I want to present this illustration from the introduction to GK Chesterton’s Heretics:

Suppose that a great commotion arises in the street about something, let us say a lamp-post, which many influential persons desire to pull down. A grey-clad monk, who is the spirit of the Middle Ages, is approached upon the matter, and begins to say, in the arid manner of the Schoolmen, “Let us first of all consider, my brethren, the value of Light. If Light be in itself good—” At this point he is somewhat excusably knocked down. All the people make a rush for the lamp-post, the lamp-post is down in ten minutes, and they go about congratulating each other on their unmediaeval practicality. But as things go on they do not work out so easily. Some people have pulled the lamp-post down because they wanted the electric light; some because they wanted old iron; some because they wanted darkness, because their deeds were evil. Some thought it not enough of a lamp-post, some too much; some acted because they wanted to smash municipal machinery; some because they wanted to smash something. And there is war in the night, no man knowing whom he strikes. So, gradually and inevitably, to-day, to-morrow, or the next day, there comes back the conviction that the monk was right after all, and that all depends on what is the philosophy of Light. Only what we might have discussed under the gas-lamp, we now must discuss in the dark

Is Globalization the Best Thing Since Sliced Bread?

This article makes a stunning claim that globalization is the best thing society has going for us. I agree that free trade reduces poverty in general. I don’t mind some forms of globalism, but I’m not sure that it is unequivocally good. Free trade and globalization are both negative when done by immoral people, and I have trouble thinking that the present set of globalists are influencing societies for improved morality. Nonetheless, it is interesting information worth noting.