We are on the road to serfdom

Road

Image by Dan

We are now five years into the Great Fiat Money Endgame and our freedom is increasingly under attack from the state, liberty’s eternal enemy. It is true that by any realistic measure most states today are heading for bankruptcy. But it would be wrong to assume that ‘austerity’ policies must now lead to a diminishing of government influence and a shrinking of state power. The opposite is true: The state asserts itself more forcefully in the economy, and the political class feels licensed by the crisis to abandon whatever restraint it may have adhered to in the past. Ever more prices in financial markets are manipulated by the central banks, either directly or indirectly; and through legislation, regulation, and taxation the state takes more control of the employment of scarce means. An anti-wealth rhetoric is seeping back into political discourse everywhere and is setting the stage for more confiscation of wealth and income in the future.

War is the health of the state, and so is financial crisis, ironically even a crisis in government finances. As the democratic masses sense that their living standards are threatened, they authorize their governments to do “whatever it takes” to arrest the collapse, prop up asset prices, and to enforce some form of stability. The state is a gigantic hammer, and at times of uncertainty the public wants nothing more than seeing everything nailed to the floor. Saving the status quo and spreading the pain are the dominant political postulates today, and they will shape policy for years to come.

Unlimited fiat money is a political tool

A free society requires hard and apolitical money. But the reality today is that money is merely a political tool. Central banks around the world are getting ever bolder in using it to rig markets and manipulate asset prices. The results are evident: Equities are trading not far from historic highs, the bonds of reckless and clueless governments are trading at record low interest rates, and corporate debt is priced for perfection. While in the real economy the risks remain palpable and the financial sector on life support from the central banks, my friends in money management tell me that the biggest risk they have faced of late was the risk of not being bullish enough and missing the rallies. Welcome to Planet QE.

I wish my friends luck but I am concerned about the consequences. With free and unlimited fiat money at the core of the financial industry, mis-allocations of capital will not diminish but increase. The damage done to the economy will be spectacular in the final assessment. There is no natural end to QE. Once it has propped up markets it has to be continued ad infinitum to keep ‘prices’ where the authorities want them. None of this is a one-off or temporary. It is a new form of finance socialism. It will not end through the political process but via complete currency collapse.

Not the buying and selling by the public on free and uninhibited markets, but monetary authorities – central bank bureaucrats – now determine where asset prices should be, which banks survive, how fast they grow and who they lend to, and what the shape of the yield curve should be. We are witnessing the destruction of financial markets and indeed of capitalism itself.

 While in the monetary sphere the role of the state is increasing rapidly it is certainly not diminishing in the sphere of fiscal policy. Under the misleading banner of ‘austerity’ states are not rolling back government but simply changing the sources of state funding. Seeing what has happened in Ireland and Portugal, and what is now happening in Spain and in particular Greece, many governments want to reduce their dependence on the bond market. They realize that once the bond market loses confidence in the solvency of any state the game is up and insolvency quickly becomes a reality. But the states that attempt to reduce deficits do usually not reduce spending but raise revenues through higher taxes.

Sources of state funding

When states fund high degrees of spending by borrowing they are tapping into the pool of society’s savings, crowd out private competitors, and thus deprive the private sector of resources. In the private sector, savings would have to be employed as productive capital to be able repay the savers who provided these resources in the first place at some point in the future. By contrast, governments mainly consume the resources they obtain through borrowing in the present period. They do not invest them in productive activities that generate new income streams for society. Via deficit-spending governments channel savings mainly back into consumption. Government bonds are not backed by productive capital but simply by the state’s future expropriation of wealth-holders and income-earners. Government deficits and government debt are always highly destructive for a society. They are truly anti-social. Those who invest in government debt are not funding future-oriented investment but present-day state consumption. They expect to get repaid from future taxes on productive enterprise without ever having invested in productive enterprise themselves. They do not support capitalist production but simply acquire shares in the state’s privilege of taxation.

Reducing deficits is thus to be encouraged at all times, and the Keynesian nonsense that deficit-spending enhances society’s productiveness is to be rejected entirely. However, most states are not aiming to reduce deficits by cutting back on spending, and those that do, do so only marginally. They mainly replace borrowing with taxes. This means the state no longer takes the detour via the bond market but confiscates directly and instantly what it needs to sustain its outsized spending. In any case, the states’ heavy control over a large chunk of society’s scarce means is not reduced. It is evident, that this strategy, too, obstructs the efficient and productive use of resources. It is a disincentive for investment and the build-up of a productive capital stock. It is a killer of growth and prosperity.

47 percent, then 52 percent, then 90 percent…

Why do states not cut spending? – I would suggest three answers: First, it is not in the interest of politicians of bureaucrats to reduce spending as spending is the prime source of their power and prestige. Second, there is still a pathetic belief in the Keynesian myth that government spending ‘reboots’ the economy. But the third is maybe the most important one: In all advanced welfare democracies large sections of the public have come to rely on the state, and in our mass democracies it now means political suicide to try and roll back the state.

Mitt Romney’s comment that 47% of Americans would not appreciate his message of cutting taxes and vote for him because they do not pay taxes and instead rely on government handouts, may not have been politically astute and tactically clever but there was a lot of truth in it.

In Britain, more than 50 percent of households are now net receivers of state transfers, up 10 percent from a decade ago. In Scotland it is allegedly a staggering 90 percent of households. Large sections of British society have become wards of the state.

Against this backdrop state spending is more likely to grow than shrink. This will mean higher taxes, more central bank intervention (debt monetization, ‘quantitative easing’), more regulatory intervention to force institutional investors into the government bond market, and ultimately capital controls.

Eat the Rich!

In order to legitimize the further confiscation of private income and private wealth to fund ongoing state expenditure, the need for a new political narrative arose. This narrative claims that the problem with government finances is not out-of-control spending but the lack of solidarity by the rich, wealthy and most productive, who do not contribute ‘their fair share’.

An Eat-the-Rich rhetoric is discernible everywhere, and it is getting louder. In Britain, Deputy Prime Minister Nick Clegg wants to introduce a special ‘mansion tax’ on high-end private property. This is being rejected by the Tories but, according to opinion polls, supported by a majority of Brits. (I wager a guess that it is popular in Scotland.) In Germany, Angela Merkel’s challenger for the chancellorship, Peer Steinbrueck, wants to raise capital gains taxes if elected. In Switzerland of all places, a conservative (!) politician recently proposed that extra taxes should be levied on wealthy pensioners so that they make their ‘fair’ contribution to the public weal.

France on an economic suicide mission

The above trends are all nicely epitomized by developments in France. In 2012, President Hollande has not reduced state spending at all but raised taxes. For 2013 he proposed an ‘austerity’ budget that would cut the deficit by €30 billion, of which €10 billion would come from spending cuts and €20 billion would be generated in extra income through higher taxes on corporations and on high income earners. The top tax rate will rise from 41% to 45%, and those that earn more than €1 million a year will be subject to a new 75% marginal tax rate. With all these market-crippling measures France will still run a budget deficit and will have to borrow more from the bond market to fund its outsized state spending programs, which still account for 56% of registered GDP.

If you ask me, the market is not bearish enough on France. This version of socialism will not work, just as no other version of socialism has ever worked. But when it fails, it will be blamed on ‘austerity’ and the euro, not on socialism.

As usual, the international commentariat does not ‘get it’. Political analysts are profoundly uninterested in the difference between reducing spending and increasing taxes, it is all just ‘austerity’ to them, and, to make it worse, allegedly enforced by the Germans. The Daily Telegraph’s Ambrose Evans-Pritchard labels ‘austerity’ ‘1930s policies imposed by Germany’, which is of dubious historical and economic accuracy but suitable, I guess, to make a political point.

Most commentators are all too happy to cite the alleged negative effect of ‘austerity’ on GDP, ignoring that in a heavily state-run economy like France’s, official GDP says as little about the public’s material wellbeing as does a rallying equity market in an economy fuelled by unlimited QE. If the government spent money on hiring people to sweep the streets with toothbrushes this, too, would boost GDP and could thus be labelled economic progress.

At this point it may be worth adding that despite all the talk of ‘austerity’ many governments are still spending and borrowing like never before, first and foremost, the Unites States, which is running the largest civil government mankind has ever seen. For 5 consecutive years annual deficits have been way in excess of $1,000 billion, which means the US government borrows an additional $4 billion on every day the markets are open. The US is running budget deficits to the tune of 8-10% per annum to allegedly boost growth by a meagre 2% at best.

Regulation and more regulation

Fiscal and monetary actions by states will increasingly be flanked by aggressive regulatory and legislative intervention in markets. Governments are controlling the big pools of savings via their regulatory powers over banks, insurance companies and pension funds. Existing regulations already force all these entities into heavy allocations of government bonds. This will continue going forward and intensify. The states must ensure that they continue to have access to cheap funding.

Not only do I expect regulation that ties institutional investors to the government bond market to continue, I think it will be made ever more difficult for the individual to ‘opt out’ of these schemes, i.e. to arrange his financial affairs outside the heavily state-regulated banking, insurance, and pension fund industry. The astutely spread myth that the financial crisis resulted from ‘unregulated markets’ rather than constant expansion of state fiat money and artificially cheap credit from state central banks, has opened the door for more aggressive regulatory interference in markets.

The War on Offshore

Part and parcel of this trend is the War on Offshore, epitomized by new and tough double-taxation treaties between the UK and Switzerland and Germany and Switzerland. You are naïve if you think that attacks on Swiss banking and on other ‘offshore’ banking destinations are only aimed at tax-dodgers.  An important side effect of these campaigns is this: it gets ever more cumbersome for citizens from these countries to conduct their private banking business in Switzerland and other countries, and ever more expensive and risky for Swiss and other banks to service these clients. For those of us who are tax-honest but prefer to have our assets diversified politically, and who are attracted to certain banking and legal traditions and a deeper commitment to private property rights in places such as Switzerland, banking away from our home country gets more difficult. This is intentional I believe.

The United States of America have taken this strategy to its logical extreme. The concept of global taxation for all Americans, regardless where they live, coupled with aggressive litigation and threat of reprisal against foreign financial institutions that may – deliberately or inadvertently – assist Americans in lowering their tax burden, have made it very expensive and even risky for many banks to deal with American citizens, or even with holders of US green cards or holders of US social security numbers. Americans will find it difficult to open bank accounts in certain countries. This is certainly the case for Switzerland but a friend of mine even struggled obtaining full banking services in Singapore. I know of private banks in the UK that have terminated banking relationships with US citizens, even when they were longstanding clients. All of this is going to get worse next year when FATCA becomes effective – the Foreign Account Tax Compliance Act, by which the entire global financial system will become the extended arm of the US Internal Revenue System. US citizens are subject to de facto capital controls. I believe this is only a precursor to real capital controls being implemented in the not too distant future.

When Johann Wolfgang von Goethe wrote that “none are more hopelessly enslaved than those who falsely believe they are free” he anticipated the modern USA.

And to round it all off, there is the War on Cash. In many European countries there are now legal limits for cash transactions, and Italy is considering restrictions for daily cash withdrawals. Again, the official explanation is to fight tax evasion but surely these restrictions will come in handy when the state-sponsored and highly geared banking sector in Europe wobbles again, and depositors try to pull out their money.

“I’ve seen the future, and it will be…”

So here is the future as I see it: Central banks are now committed to printing unlimited amounts of fiat money to artificially prop up various asset prices forever and maintain illusions of stability. Governments will use their legislative and regulatory power to make sure that your bank, your insurance company and your pension fund keep funding the state, and will make it difficult for you to disengage from these institutions. Taxes will rise on trend, and it will be more and more difficult to keep your savings in cash or move them abroad.

Now you may not consider yourself to be rich. You may not own or live in a house that Nick Clegg would consider a ‘mansion’. You may not want to ever bank in Switzerland or hold assets abroad. You may only have a small pension fund and not care much how many government bonds it holds. You may even be one those people who regularly stand in front of me in the line at Starbucks and pay for their semi-skinned, decaf latte with their credit or debit card, so you may not care about restrictions on using cash. But if you care about living in a free society you should be concerned. And I sure believe you should care about living in a functioning market economy.

This will end badly.

 

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Comments

  1. James says

    Great article, the ‘forcing you into a dodgy pension’ policy has already started. It’s All Gonna End In Tears.

  2. Huge Fan says

    Excellent article Detlev. You deserve the highest honors. Again I have to recommend submitting a version of this to the WSJ or other major news paper.

  3. says

    Wonderful article, Detlev. I have to concur with your melencholy outlook. There does not appear to be a scintilla of hope that any of this is going to change any time soon.

  4. Ross says

    Great article right to the crux of the problem. We are witnessing democracies end game the point where the parasite consumes all. This will end badly!

  5. Pete says

    Your articles get better each time. The more i read and observe the markets around the world the more worried i get . I dont know how this will end & when it will end. The common man has no idea how to save himself , I guess we have put ourselves in this situation my asking govts to run our lives rather than be responsible for our own futures. The end game is going to be very very ugly for all. Thanks Detlev for the clarity you bring to this financial mess we have bought upon our selves.

  6. algorithmicDisorder says

    Interesting article mr Schlichter.

    One thing that is unclear to me though is why is it necessarily bad to “eat the rich” . I understand how by not decreasing government spending and by keeping all these inefficient and bad managed institutions running we are essentially losing money. Still, I do not see why is it a bad idea to combine a crack-down on dinosaur type bureaucracies with a push to extract money from the rich -at least in these difficult time- . Again, I get that the rich should not be vilified and crucified and that some governments are beginning to treat them as culprits (so that they can hide their own faults and move on the blame game). The rich however have many assets that are not being utilized to promote the economic good of the countries. At the very least they should have a moral responsibility. After all you become rich -at least in theory- to be able to give back and boost the economy. This is the game. You feed your ego and satisfy your aspirations (Which is all good) by succeeding. However by keeping billions in secure accounts just earning interest is not really productive for the rest. I hope you get where I am going.
    The core of my question remains. Why is it bad to tax the rich – alongside other deep structural reforms-

    Thank you

    • Huge Fan says

      The money held by the rich that simply “sits in an account and gathers interest” gather’s interest precisely because it is productive. The money is taken by the bank and reinvested into the economy via loans of all kinds.

    • Craig says

      Mr algorithmicDisorder

      You clearly have access to a computer and the internet and probably have a roof over your head. Now I can assure you that you are very, very rich by comparison to most people in Africa, where I live. Without a doubt there are people where you live who are also desperately poor. Now present yourself to me so that I may take your assets and distribute them to the poor because you’re so f*&ing obscenely rich. If you are able to make judgements on the assets of other people, to what extent they deserve them and to what extent they deserve to be dispossessed of them, then you must allow me to do the same to you. If you don’t, then you’re a spineless hypocrite. I would also like to end off by saying – beware that when you try to eat me, I don’t eat you first. You’re going to be met with one hell of a fight. Let the games begin.

  7. John Archer says

    Thank you. Great article.

    Just one quibble: “But when it fails, it will be blamed on ‘austerity’ and the euro, not on socialism.” — DS

    That makes it sound like the euro is at worst merely neutral in all this and nothing to do with socialism or more generally furthering the power of politicians and bureaucrats to control people’s lives.

    On the contrary, the euro is another aspect of the problem. It is and was a political construct from start to finish. It was introduced specifically as a Trojan Horse to force political integration and further the superstate ambitions of the EU and those who support it through the inevitable crisis, or series of crises, which it entailed and which would require massive fiscal transfers, as we now see.

    I think it’s important to highlight this. I’m surprised you let it pass.

  8. Dr James Thompson says

    Excellent. Now we have to organize. Lamentation is not enough. I understand your position on physical gold, though I hold none. Buying some is a panic move, but also an insurance policy. However, that would simply result in isolated individual “strivers” (the current ministerial description of productive people) working hard, paying very high taxes, and holding some gold coins at home just in case. Could we strivers also form banks or friendly societies or investment companies based on “inelastic” money principles? There must be some way to avoid the worst excesses of fiat money, and to band together with like minded investors.

    On a related matter, how do I send you an attachment about “Cognitive Capitalism”. I will paste the abstract below, to see if it interests you.
    Abstract
    Traditional economic theories stress the relevance of political, institutional, geographic, and historical factors for economic
    growth. In contrast, human-capital theories suggest that peoples’ competences, mediated by technological progress, are the
    deciding factor in a nation’s wealth. Using three large-scale assessments, we calculated cognitive-competence sums for the mean
    and for upper- and lower-level groups for 90 countries and compared the influence of each group’s intellectual ability on gross
    domestic product. In our cross-national analyses, we applied different statistical methods (path analyses, bootstrapping) and
    measures developed by different research groups to various country samples and historical periods. Our results underscore
    the decisive relevance of cognitive ability—particularly of an intellectual class with high cognitive ability and accomplishments in
    science, technology, engineering, and math—for national wealth. Furthermore, this group’s cognitive ability predicts the quality
    of economic and political institutions, which further determines the economic affluence of the nation. Cognitive resources
    enable the evolution of capitalism and the rise of wealth.

    • Craig says

      Peter Schiff started a bank earlier this year which offers “inelastic” money. Your account is backed by gold. When you deposit cash you buy gold and when you draw cash, you sell gold. Unfortunately it’s not available to American citizens or residents.
      http://www.europacbank.com

      • says

        Dr. James Thompson and Craig,

        You can also hold gold or silver through units in a gold or silver physical trust (the one I am somewhat familiar with is the Sprott Physical Gold Trust (PHYS) and Sprott Physical Silver Trust (PSLV), both traded on the New York and Toronto stock exchanges. You can purchase and sell the units and you can have them delivered to you should you so choose. They are not prohibited to American citizens or residents.

        • says

          By have them delivered, I am referring to the underlying metals, not a piece of paper stating that you own them. I apologize for not stating that more clearly in the initial comment.

          • Dr James Thompson says

            Dear Martial Artist,
            Thank you for the information about the Sprott Funds. I had seen these, or something similar, and it looks a convenient way to hold gold in normal circumstances. However, I am not attracted to gold in normal circumstances, and in the abnormal circumstances of a severe crisis it would only need a government declaration to halt Sprott handing over the physical metal, and forcing them to issue notes or bonds in return. I think that gold is a panic purchase, but that physical gold will always be acceptable in such moments of panic and monetary collapse. So, I still don’t hold gold, but I can see that one day many of us will feel like a stranded pilot who bails out of a failing plane, and on landing finds that the natives will happily accept gold, but contemptuously turn down paper.

  9. Raymond Wray says

    Detlev,

    I would be interested in seeing you do an blog on the situation in Argentina. It seems that they are well ahead of the rest of the world as far as going down the road of which you speak.

    Raymond

    • Brent says

      I would agree with Raymond. I have done some research on Argentina and I would tend to think that we are on the same path, although we may not have the good fortune of the velocity of their problems.

  10. Letmethink says

    @JA

    Morning John. Far be it from me to put words in other people’s mouths or be conciliatory about their meaning.

    If I had said what DS had said about the Euro I would have meant more or less the point you make, I.e. that the Euro (and the so-called austerity measures) are instruments of a political ideology, that ideology in DSs (and my) view is socialism (although I would call it Marxism).

    So, I think the point he’s making is that to blame our impending doom on the consequences of ‘socialist’ ideology will let socialism itself off the hook to continue wreaking havoc.

    Just my reading of it

  11. JR says

    At least you didn’t espouse the quantity theory of money here Mr Schlichter. Though “printing unlimited amounts of fiat money to artificially prop up various asset prices forever and maintain illusions of stability” comes dangerously close.

    Remember, it is the QUALITY of the assets that the central bank ‘repos’ or buys outright that determines the QUALITY, thus value of central bank credit. If the quality of central bank credit declines then of course prices, in central bank credit, will rise. If the central bank sticks to quality assets, then central bank credit remains a quality monetary substitute, no matter how much ‘fiat money’ it prints.

    So how to regulate the quality of financial assets. Why, they must be redeemable in something whose QUALITY is eternal, unchanging, inert.

    • says

      What is all this gibberish about ‘quality of assets’ and ‘regulating the quality of financial assets’? Who is supposed to ‘regulate the quality of financial assets’, and to what end? The central bank? – Frankly, I have no idea what you are talking about. I hope you have not fallen victim to the voodoo economics of MMT?
      Of course, the quantity of money matters. Money is a medium of exchange. Flooding markets with new money has numerous effects – a marginal, short-term boost to growth and a marginal drop in money’s purchasing power are the most commonly understood ones. But, as I keep stressing, there are many others, such as the distortion in interest rates and in other relative prices. All these effects are harmful to the proper functioning of the economy.
      According to what you seem to be saying – if I understand you correctly – the central bank can print as much money a it likes as long as this money is redeemable in something “whose QUALITY is eternal, unchanging, inert.” Well, first point, your paper money is not redeemable in ANYTHING. Sorry to break that news to you. If you take your paper notes to the central bank you get — change! Second, what precisely is eternal, unchanging and inert, and from this world, I may add? Well, gold comes pretty close but the key point is: it is not unlimited! Its supply is INELASTIC, which makes it fantastic money but hardly the basis for unlimited paper money printing. I hope you don’t suggest that government debt is of a quality that is eternal, unchanging and inert? That would be truly a ridiculous assertion. At present it may seems as if a certain group of governments can indeed issue debt without limit. But this is only because the central banks print the money to pay for the bonds. The “quality” of the bonds – or their momentary acceptance in markets as high-quality assets – is predicated on the acceptance of all the paper money that is printed to pay for the bonds. The bonds don’t lend any support to the paper money because without the ability to print fiat money these governments would already be bust. — You may think that this can go on forever. I don’t. We will see. But it is illogical to claim that the “quality” of the government debt is so eternal that it will support unlimited money printing.

      • JR says

        “Who is supposed to ‘regulate the quality of financial assets’, and to what end?”

        I figured being an ‘Austrian’ you would realise what I was alluding to Mr Schlichter but evidently not, even though you say, “gold comes pretty close”. No, not just pretty close, it IS. Gold regulates the quality of financial assets Mr Schlichter, because only gold has unchanging, eternal quality. That is, it is an inert metal. Continuing redeemability in gold means the quality of credit is regulated. ‘Suspending’ redeemability means the credit has lost its quality. And “to what end?” do you think?

        As if I am suggesting “that government debt is of a quality that is eternal, unchanging and inert”. Why would I be suggesting that? That’s exactly how central banks operate now. You just made that accusation that on the fly.

        You are wrong Mr Schlichter, the quantity of money does not matter, because it is not quantity that determines value, rather it is QUALITY. A central bank can indeed “print as much money as it likes AS LONG as this money is redeemable in something “whose QUALITY is eternal, unchanging, inert.”

        • says

          So are you saying that central banks should print money that is backed by gold? – I would not argue with that at all. This would be a much better system than we have now, although why would we even need a central bank in that system? – I am not sure why we are having this argument. That gold would make great money is one of the points I am making all the time. I am not sure, however, why you are stating that in such a convoluted way, which is probably what led me to misinterpret your point earlier. I quote: “A central bank can indeed ‘print as much money as it likes AS LONG as this money is redeemable in something ‘whose QUALITY is eternal, unchanging, inert.’” – And what is that something? – Gold, you say. So to put it differently, “a central bank can indeed ‘print as much money as it likes AS LONG as this money is redeemable in gold”, which certainly means that the central bank CANNOT print as much money as it likes but only as much as it has gold reserves. The phrase “to print as much money as the central bank likes” does simply not make sense in a proper gold standard. Gold standards work precisely because there is nobody under a gold standard who can print as much money as he likes. The supply of money is essentially inelastic. Let’s assume somebody found a way to create gold out of water and thus flood the market with gold. This gold would have the same physical properties but would now be available in abundance. You are telling me it would still make great money? No way.
          Your concept of value is completely mistaken, I believe. Value is always in the eye of the beholder. It is always subjective. In economics there is nothing that has eternal value and certainly not eternal value because of its physical properties. Gold has certain physical properties that make it suitable as money (its relative scarcity is very important for its role as money), and if people have demand for money and decide to use gold, then they will consider it to be valuable. But, of course, this could change. Nobody can claim that any of this is eternal. If you argue (and I will be careful now because I may misunderstand you again) that value comes from quality and quality comes from physical properties, I am afraid, as an Austrian and subjectivist, I cannot follow you.

  12. KevinR says

    Detlev, thanks for a superbly written and informative essay.

    In my veiw, you very accurately describe what is going on and where it’s leading to. I know people have different terms to describe this, but what I see is a planned totalitarian coup d’état by our political elites and their cronies in the (unelected) Establishment and elsewhere – eg banking.

    As you rightly say, “this will end badly”.
    But I wonder if & when people will wake up to this before the cost of bringing the political criminals to heel becomes bloody. Given that growing proportions of people receive some or all of their income from the Almighty State (certainly yet another *planned* socialist policy in my view), I won’t hold my breath waiting…..

  13. says

    Excellent analysis.

    There is an economic plan which follows the Hayek vision – allowing the people to allocate resources, rather than ‘big government.’

    This comprehensive plan provides for direct credit extension from the Federal Reserve TO American Families. And this will accomplish massive debt reduction at the family level. Revitalized economic growth.
    Reduced scope of government. Economic liberty.

    The Leviticus 25 Plan will pay for itself over the course of 10 years – though positively incentivized ‘recapture provisions.’

    • says

      Thanks for the compliment but I cannot agree with your proposal. Credit extension directly from the Fed is the problem, never the solution. Pumping new fiat money into American households is a recipe for disaster.

  14. Miloo says

    Brilliant article.
    There is, however a mistake concerning France.
    To the tax rates you are mentioning, you must add a “social” surcharge of 13% called CSG/RDS.
    This means that the rate will be 45% + 13% = 58%
    The top rate above 1 million € will be 75% + 13 % = 88%
    Concerning you views on France, I share them, however, this is a rich country, and the decay will take longer than what people think.
    That being said, the outcome is written on the wall.

  15. Federico says

    Detlev,
    (Most of) Western Europe + US = Soviet Union in the early eighties: on the verge of implosion thanks to mobocracy run amok

  16. Enlightment says

    Totally agree with everything you have just stated.
    Just sent the letter below to the Irish Sunday Independent,
    with regards
    to a potential European banking and fiscal union.
    Which obviously do not want or need and why Irish citizens must be
    allowed to have a referendum on the future of our Sovereignity.

    Now that Europe is heading towards potentially a centrally planned “European banking and fiscal union.”
    Is it perhaps time that Irish citizens should reflect on Europe and what she has done for us, for better or for worse?
    For worse, on that fateful evening of 28th September 2008, her former banking master, Jean Claude Trichet told us,
    we had to borrow €47 Billion to recapitilise Anglo Irish bank, a “bust bank” and could not let her fail, or else there would be no liquidity in the Irish private or corporate banking sector on the morning of 29th September 2008.
    We mercifully saved “Europe’s financial bacon” that evening, and prevented a “banking contagion”.
    This was the begining of Socialism for the rich and Capitalism for the poor.
    Hence 4 years on, Irish citizens are left crippled with a completely “dysfunctional banking sector”, and paying a very serious price for that disastrous decision.
    In 2006 another fateful event occured, this time where the European Court of Auditors ran a report with a negative conclusion on the sugar beet industry, which led to Greencore closing the only remaining factory in Ireland.
    Today we are facing a “Global Food Crisis”, as a direct consequence of the appalling drought both in the US and Ukraine this summer, pushing grain prices through the roof. Many Irish farmers have used all their supplies of cattle feed and will now be forced to pay huge prices to feed their stock this winter, all the time loosing profitable margin on the sale of their cattle.
    Sugar beet was a profitable part of an Irish farmer’s rotation.
    So why did Europe do this to us?
    The European Union has acutally turned into a a very modern form of Communism, subtley, slowly and insidiously making all the rules – just so we don’t notice.
    She has moved away from what she orginally was meant to be – Friendship, Alliances and the Common Market.
    However with all good intentions, Brussells has formed an “extractive institution”, which is now failing.
    Brussells is responsible for taking away “Agricultural creativity”. A few years ago, a Dutch delegation came to Ireland – they called it a “Green Desert”.
    We should be like France with a hugely vibrant, food, cheese, woodland, a large homegrown drinks industry (cider and beer).
    Ireland’s verdant land should be “bursting at at the seams”, with Artisanal Farmers selling all over the globe.
    Do we need Europe us much as we think we do?
    History shows us that centrally planned unions fail at some stage.
    It is time to move on.
    Ireland has all the ingredients for great success. We have proved to ourselves now, with all the recent exciting announcements of highly skilled jobs, namely with the Kerry Group and Paddy Power, that we are a “mixed economy” and with our own hugely successful homegrown mulinationals.
    Add that to our high tech industry, agricultural, the knowledge Economy, we could potentially turn our “economic malaise” around quite quickly and become a Global Player in all those fields.
    We have proved that we can create our own Googles, Facebooks etc.. and we must have confidence to go forward and do exactly this.
    For that very reason Brussels must allow Ireland to vote on a referendum on wether our country would like to give up our Soverignity for good or
    to go it alone.

  17. raul says

    14 october 2012 saturday
    “with all due respect sir, i would also like to
    write down, where is the economy heading.
    the how, the why and the when,”
    everybody’s invited to my facebook account:
    thegreatdepression.part2@yahoo.com
    thanks’
    please take care and God bless . . . . . . . raul

  18. Vance says

    Perhaps the end game will be direct sequestration of bank accounts and the holding to ransom of wealthy individuals and their immovable property. All under ‘necessity’ of course.

  19. John pd says

    Neatly & clearly put Detlev.
    I’ve just finished a YouTube video: The Money Masters ( Rothchilds exposed).
    It’s 3 1/2 hrs, & dated, (1996), but an eye opener.
    I’d appreciate any comments, especially on the proposals to get away from debts generated by fractional reserve banking & fiat money.
    Regards,
    JD.

  20. Steven in Dallas says

    >> The astutely spread myth that the financial crisis resulted from `unregulated markets’ rather than constant expansion of state fiat money and artificially cheap credit from state central banks, has opened the door for more aggressive regulatory interference in markets.

    Your brain is perfectly in sync with the brains of all the other members of the herd in your desire for simple single point explanations. However the existence of fiat money does not preclude toxic consequences of unregulated markets (or more specifically, unregulated financial markets).

  21. Daniloux libertarian says

    Dear Detlev,

    Austrians stand for low government outlays to grow the economy and higher interest rates for the stability of the financial sector. In some european countries, despite the first clause is absolutely far from being met, the second one is clearly ensuing. Spain, Italy, Greece are in a deflationary territory and face higher interest rates at least for the private citizens. What is your guess about the possibililty of healing from their financial troubles?

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