HOW DOES A NATION BEGIN TO ERODE?
It starts with an absence of character. Plain and simple. Moral decadence, financial irresponsibility, jealousy and greed, lack of respect for others’ property, discrimination based on ethnicity, race, gender, and class all have that one common denominator.
THE EROSION OF LIBERTY
THE COMMON ELEMENT
The growth of the Roman Republic and the growth of America both share a common element. In both cases there was a massive expansion of individual liberty.
HOW DID INDIVIDUAL LIBERTY FLOURISH?
- Separation of powers
- System of checks and balances
- Protection of certain rights of most if not all people.
Individual liberty is NEEDED for economic prosperity to occur.
No people who have ever lost their character have kept their liberties. That is a scary thought considering where America is today. Since individual liberty is so important for the growth of democracy we must ask a very pointed question.
WHAT IS NEEDED FOR INDIVIDUAL LIBERTY TO FLOURISH?
- Self Control
If those characteristics go away or even diminish, what follows is CHAOS and TYRANNY
ORIGINS OF THE WELFARE STATE
(born c. 93 bc—died January, 52 bc, Bovillae, Latium [Italy]), a disruptive politician, head of a band of political thugs, and bitter enemy of Cicero in late republican Rome.Clodius did something that changed the political world forever. What could he have done that was so amazing that politicians today are still mimicking him almost 2000 years later? Sadly, what he devised was a tool used for gaining political power, and not something that is good for the populace.What did he do? He was the first politician bribe people for votes. HE PROMISED FREE GRAIN IN EXCHANGE FOR VOTES! Today, the equivalent would be: Food stamps, other welfare programs, health care, phones, etc.Therefore, the tactics utilized by Clodius were the origins of the welfare state.
Voting for a living is more lucrative than working for one.
33% OF EVERYONE IN ROME RECEIVED PUBLIC RELIEF WHEN THE REPUBLIC FELL INTO A DICTATORSHIP! How does modern day America compare? Sadly we are significantly worse.
THE ROMAN REPUBLIC ERODED FROM WITHIN
WARNING SIGNS OF THE EROSION
- Overextended military
- Debased their currency to pay off debts
- Bureaucracy that essentially was living as a parasite on the entirety of the Roman people
- Loss of control over their borders
Ideological differences caused the church to implode thus weakening the entire nation.
“The absence of character produces chaos and tyranny. When Romans allowed the temptations of the welfare state to erode their character; when they abandoned responsibility and self discipline, self-reliance, respect for the property of others and began to use government to rob Peter to pay Paul they turned down a fateful and destructive path.”
What comes next is a scary part of the progression. A NATION LOSES ITS SOUL.
THE CYCLE OF DEMOCRACY
A democracy cannot exist as a permanent form of government. It can only exist until the voters discover they can vote themselves largess from the public treasury. From that moment on, the majority always votes for the candidates promising them the most benefits from the public treasury, with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.
So let’s look at this cycle, this is important. The average age of the world’s greatest civilizations from the beginning of history is about 200 years. When did our great nation start? 1776. What year is it today? It is 2017. We’re pushing the envelope. We’re 244 years into this and the average is 200 years for a democratic civilization.
When you look at this list, where do you think we are on these 8 steps? I would say Dependence; we’re right about there. From Bondage, we fled Europe and came here because we didn’t want religious persecution. Then we fought the Revolutionary War, which was spiritual faith to great courage. That produced liberty. That liberty created so much abundance in this country that we just grew and grew, from the Industrial Revolution all the way up to the 1980s, where I would say that abundance turned into selfishness and greed. And you can name all the vices that come with that. Then what happens? When your wallet becomes thick and fat and happy, you become apathetic. Everybody does. Things are comfortable. I don’t really need to fight anymore. Once you become apathetic, what happens? You start spending way too much money. See, these cycles repeat themselves over and over again. When you spend too much money you eventually stop caring. You stop looking to the future and start living for the today. This is what happened to the U.S. in the 1980s and 1990s, and even into the early 2000s. We just spent way too much money. Now we can’t even afford the debt service on our credit as a nation anymore. So now it leads back to dependence.
These cycles repeat themselves, and when we look at what’s going on it’s very spooky. Because we’re actually in the dependence stage, we’re actually saying, “Give us Social Security, Give us Medicare, Give us Medicaid, Give us a Health Plan, Give us this, Give us that.” We’ve become a nation of takers, rather than a nation of givers. And this is a sad political commentary and social commentary on where we are because we are between levels 7 and 8 on the cycle of democracy.
EXAMINING THE FEDERAL BUDGET
UNFUNDED FUTURE OBLIGATIONS
So how much debt do we actually have? And why are we right here? We have over $20 trillion worth of debt right now. This is just everything we’ve amassed in our country from 1776 until now. That’s what that number represents. What that number doesn’t represent is very scary, and that is all of the bills that have already been passed by Congress. The Medicare and Medicaid and health plans and all of the other entitlement programs. They’ve already passed them. And they’re going to pay for years and they’re going to pay into perpetuity. They’re going to pay for years and years and years. That’s what that means. When you add up all those future unfunded obligations that we’re responsible for, what is that number? The true national debt (considering passed bills) is actually about $200 trillion! Remember, it’s mathematically impossible to pay back the $20 trillion. So what does $200 trillion represent? Well, it just means that it’s really, really impossible to pay that one off. This is the problem.
ENTITLEMENTS AND MANDATORY PAYMENTS EQUAL 80.2% of ALL federal revenue.
When interest on the national debt is added to entitlements and mandatory payments, 82% off all federal revenue goes to fund entitlements, mandatory payments, and the interest on our debt.
THIS IS WITH SOME OF THE LOWEST INTEREST RATES IN THE HISTORY OUR AMERICA!
This means that it is IMPOSSIBLE to balance the federal budget unless entitlement are slashed, but politicians will not do this because cutting entitlements means losing votes!
BREAKING DOWN THESE NUMBERS
- U.S. FEDERAL REVENUE: $3.7 TRILLION
- U.S. FEDERAL BUDGET: $4.79 TRILLION
- NEW DEBT: $376 BILLION
- NATIONAL DEBT: $23.8 TRILLION
BRINGING IT HOME
These numbers are huge, and when numbers get too large it starts to make them meaningless because it is so hard to comprehend. Therefore, let’s do an exercise to make all of this more meaningful at hit home. Let’s remove seven zeroes.
When this is done from all of the numbers across the board it will make these numbers more understandable to us as families.When this is done and we relate it to a hypothetical families income and spending we get the following:
- Annual family income: $370,000
- Money the family spent: $479,000
- New debt on credit cards: $37,600
- Outstanding balance on credit cards: $2,380,000
This family realizes they have a serious spending problem, so they decide to cut back their spending.
- Budget cuts so far: $3,850
Ridiculous isn’t it. Sadly yes, but when we add seven zeroes we get exactly what America has done at the federal level.
THE ENTITLEMENT TIME BOMB
FERTILITY RATE CONSIDERATIONS
One of the scariest trends in the history of the world is to look at the fertility rate!Bear with me for a moment as I explain this. Once you see what I see, you will realize that the global economy cannot recover for at least a generation.
For a society to GROW, a fertility rate needs to be GREATER than 2.0
At 2.0, a society stays constant (i.e. when two parents die, they have replaced themselves with two kids)
At less than 2.0, a society will shrink.
Why are fertility rates below 2.0 so devastating?A fertility rate below 2.0 means the population is aging. There will be MORE people entering retirement years and receiving benefits without paying into the system, along with fewer working age people because the society is shrinking.
This is like a Ponzi scheme! At some point the entire system will collapse from the weight of entitlement benefits as not enough people will be working to pay into the system to keep it afloat.
A DISMAL FORECAST
Even if policies were enacted to entice people to have as many kids as possible, things cannot be fixed for at least a generation!
Consider the following hypothetical example: What if a country came up with a new policy that said if you had five kids you don’t need to pay taxes anymore. WOW! Let’s say that the majority of the world took fertility medication and all of them had quintuplets. Unreasonable and unlikely. But let’s say it happened. . . It would still be 18 years before those kids entered the full time workforce and became productive members of society.
UNEMPLOYMENT IN PERSEPCTIVE
NUMBERS HAVE MEANING
If I were to say unemployment is 4.1%, the reality of that number is somewhat lost because we have to look at it with a proper perspective.
What if I were to say, “Everyone in West Virginia is unemployed! Every man, woman, and child! Nobody has a job.” Your response would be something like, “Oh my goodness! That’s awful! Something needs to be done. How can we help them?”
The reality is significantly worse. In reality,EVERYONE IN 20 STATES IN UNEMPLOYED!
THE UGLY MATH
At the time this lesson was put together, the number of people NOT WORKING are as follows:8.9 MILLION people on disability19.7 MILLION people on unemployment
8.9 MILLION + 19.7 MILLION = almost 29 MILLION UNEMPLOYED
That’s the equivalent of every man, woman, and child in:Wyoming, Vermont, District of Columbia, North Dakota, South Dakota, Alaska, Delaware, Montana, Rhode Island, New Hampshire, Maine, Hawaii, Idaho, West Virginia, Nebraska, New Mexico, Nevada, Utah, Kansas, and Arkansas.WITHOUT A JOB!
BUT NUMBER OF PEOPLE NOT IN LABOR FORCE IS NOW 91,000,000!!!!!
CONSEQUENCES OF THE WELFARE STATE
It is scary to think of how a sturdy and industrious people, when they let their guard down, even for a little while lose their character and can be bought and paid for by the welfare state.
When a self-governing people confer upon their government the power to take from some and give to others, the process will not stop until the last bone of the last taxpayer is picked bare.
WHAT HAPPENED IN THE ROMAN REPUBLIC WHEN THEY PLUNGED INTO A WELFARE STATE?
- Civil wars (faction fought against faction to get control of the huge state apparatus and all its public loot).
- Mass corruption
- Huge bureaucracy
- High taxes
- Burdensome regulations
- Businesses were called upon to support the growing body of public parasites.
HISTORY REPEATS ITSELF
“People will not look forward to prosperity who never look backward to their ancestors.” -Edmond Burke
MODERN DAY TRANSLATION
Those who don’t know history are doomed to repeat it.
THIS LEADS TO THE END RESULT OF ALL WELFARE STATES which is the debasement of currency. In the next lesson we will begin the discussion of what an erosion of a currency looks like.
EROSION OF CURRENCY
“The massive demands on the government to spend for this and that created pressures for the creation of new money. The Roman coin, the denarius, was cheapened and debased by one emperor after another to pay for the expensive programs.”
Once 94% silver, the denarius, by 268 A.D., was little more than a piece of junk containing only .02% silver. THAT’S A DECREASE OF 99.978% OF THE VALUE OF THE CURRENCY.
HOW MUCH HAS THE U.S. DOLLAR DEVALUED?
How does the U.S. Dollar compare to the denarius, which lost 99.98% of its value due to irresponsible debasement? Since the Federal Reserve was created in 1913, the dollar has lost 98% of its purchasing power via inflation. In 1913 dollars, $1 is now worth a paltry 2 cents. However, since this deterioration has taken 100 years, the American populace is unaware of the effects of a devalued currency.
CONSEQUENCES OF INFLATION
INFLATION ULTIMATELY HAS A DIRECT RELATIONSHIP TO THE DECLINE OF DEMOCRACY
Imagine what it would be like to realize a decline of 98% of retirement assets or life savings in a month, a week, or even a day.The following chart of the U.S. monetary base shows us that money creation has now gone parabolic!
INFLATION IS COMING
HOW WILL INFLATION IMPACT YOUR LIFESTYLE?
Asset prices will go through the roof and wages will not keep up with them. Thus, it will wipe out anyone who is not hedged with tangible assets like gold and silver.
LOSS OF FREEDOMS
This kind of economic catastrophe will lead to a political revolution. The freedoms that are generally lost with this are:
- PERSONAL FREEDOMS
- RELIGIOUS FREEDOMS
- ECONOMIC FREEDOMS
- POLITICAL FREEDOMS
Do you see any of these eroding already? Things are already happening! The time to prepare is now!
CURRENCY WILL BE WIPED OUT
The currency will be wiped out, which will lead to major trade imbalances. If the country is a debtor nation (like the United States), creditors will become extremely upset as we begin to default on our obligations.
REVERSE REPURCHASE AGREEMENTS
A repurchase agreement (repo) is a form of short-term borrowing for dealers in government securities. The dealer sells the government securities to investors, usually on an overnight basis, and buys them back the following day.
For the party selling the security and agreeing to repurchase it in the future, it is a repo; for the party on the other end of the transaction, buying the security and agreeing to sell in the future, it is a reverse repurchase agreement.
Repos are typically used to raise short-term capital.
When a bank needs money they sell their treasuries back to the Federal Reserve in exchange for cash (The Federal Reserve is repurchasing the treasuries owned by the banks). But, a Reverse Repurchase Agreement is pulling money out of the baking system as the Federal Reserve is giving the banks treasuries in exchange for cash.
This is bizarre. Look at the chart below. For years, the reverse repurchase market (i.e. Federal Reserve taking cash out of the banking system) was flat. Then, the worst financial crisis since the great depression in 2008-2009 and you will see on the chart a spike in reverse repurchase agreements. Why? We can speculate, but my guess is to either shore up banks assets by giving them something of value (US Treasuries) when their balance sheets may take a huge hit during a financial crisis. Another option, is the Federal Reserve, knowing the severity of the financial crisis is taking cash out of the banks before a potential “run on the banks.”
With this scenario in mind, and remembering the most severe financial crisis since the great depression in 2008-2009 look at what is happening since 2014. It’s like a an earthquake is happening at a magnitude 2.5-6 times greater than what happened during the worst modern day financial disaster America has experienced.
SOMETHING NASTY IS JUST AROUND THE CORNER
We may not know exactly what is happening, but this chart of reverse repurchase agreements tells a potentially disastrous story is happening right under our noses and we will soon see the physical manifestation of that. Are they expecting a run on the banks? Are they expecting a credit default? Who knows. . .
But, in the midst of an economic slowdown it makes ZERO sense to pull cash out of the banks when people need it the most.
This process of an increased welfare state causing governments to run out of money will result in a restriction of freedoms leading to civil unrest and ultimately the collapse of a civilization.
COMPARING THE AMERICAN AND ROMAN WELFARE STATES
Sadly, in many ways, the American welfare state parallels the Roman welfare state.
- legions of beneficiaries,
- our confiscatory taxation,
- our burdensome regulation,
- and of course, our inflation.
What makes this battle so difficult to win is that it stems from a loss of virtue. This is a loss of character and a culture battle. Those kind of battles are hard to win until rock bottom is hit. Therefore, things will get worse before they get better.
NEVER GIVE UP THE FIGHT
- But we must never give up the fight. There is hope in this message if we persist.
- Did the Roman Republic die? YES
- Does Italy, Rome, and people still exist in that area? YES
- We will continue to exist too. Our freedoms may erode, but we can THRIVE. We were created to THRIVE.
HOW TO PROFIT IN TIMES OF INFLATION
WHAT DO TRUMP’S POLICIES MEAN FOR US AS INVESTORS
RISING INTEREST RATES
HOW DO POLICY MAKERS SLOW DOWN INFLATION?
- By raising interest rates to slow down borrowing.
- When rates are higher and people are handcuffed by debt, they slow down their spending as their debt service increases.
- When they slow down their spending, businesses get hurt, stock valuations come down, people get laid off.
WHAT COMES WITH A WEAK DOLLAR?
The exact policy that will bring jobs back to America, create economic growth, and make America great again will create a symptomatic effect of cooling down the economy that it just heated up. Unless. . .people get out of debt.
HOW DO DIFFERENT ASSET CLASSES RESPOND TO A WEAK DOLLAR POLICY?
- STOCKS: Short term UP! Medium and long term will come down
- BONDS: Get crushed! Get out now.
- REAL ESTATE: Short term UP! Medium and long term will come down.
- GOLD AND SILVER: Will go up as tangible assets will go up with the inflationary pressures. Additionally, gold and silver act as a safe haven investment when other assets are crumbling.
HOW DO YOU KILL ELEVEN MILLION PEOPLE?
Andy Andrews wrote a book titled, How Do You Kill 11 Million People. Quite possibly it was one of the most important books I’ve read in my entire life. It was the story about a church on the railroad tracks in Germany during the Holocaust and during the reign of Hitler. And this church heard stories of the Jews and how they were being exterminated, but chose not to believe them because it was just too hurtful. So, one Sunday morning as they were in church worshipping, they heard the train coming. This train would come by week after week. But this time they heard people screaming. They heard the Jews screaming on the way to their death. What did the church do? This is very telling for their time and this could have changed everything. They did nothing, except…they started worshiping God louder and louder and louder. They started to sing their hymns louder so they could drown out the cries and the screams of the people being taken to their death. So I had to ask myself, “Is it wrong to be in church? No, of course not. Is it wrong to worship God and worship Him loudly? Of course it isn’t. Is it wrong to be in church and to worship God so loudly just to drown out the screams of people being brought to their death? Yes!!” This is where there is a problem. What could they have done differently? I don’t know, but anything would have been better than nothing. Anything would have been better. See, they started focusing on themselves and on their own pain of not wanting to have to deal with it, rather than focusing on the pain of others around them that were being exterminated. This is wrong. That is the cost of silence.
WHAT CAN WE DO?
- Be aware of the trends. Allocate accordingly.
- Love your neighbor! We are in the midst of a culture battle. Focus on what we have in common, not our differences.
Reed, Lawrence. “The Fall of Rome and Modern Parallels” https://www.youtube.com/watch?v=FPFlH6eGqsg
https://www.britannica.com/biography/Publius-Clodius-Pulcherhttp://object.cato.org/sites/cato.org/files/pubs/pdf/the_work_versus_welfare_trade-off_2013_wp.pdf (Table 2)
Tytler, A. (1747-1813)
http://www.fee.org/the_freeman/detail/the-fall-of-rome-and-modern-parallels#axzz2sHPPoqouReflections on the Revolution in France, 1790.
Board of Governors of the Federal Reserve Systemhttps://search.stlouisfed.org/search?&client=Research-new&proxystylesheet=Research&site=Research&output=xml_no_dtd&num=30&getfields=*&q=reverse%20repurchase%20agreementshttps://www.investopedia.com/terms/r/repurchaseagreement.asp
Andrews, A. (2012). How do you kill 11 million people?: Why the truth matters more than you think. Nashville, TN: Thomas Nelson.