That infernal clanging you might have heard outside your bedroom window this morning was the sound of the proverbial can being kicked down the road, yet again.

With no agreement on spending anywhere on the horizon for the current fiscal year, the US Congress passed yesterday a ‘Continuing Resolution’ to keep the government temporarily funded for another six weeks.

This is nothing new; in fact, Congress has passed more than 50 Continuing Resolutions just since 2010, primarily because they almost NEVER manage to figure out the budget prior to the start of the fiscal year on October 1st.

But now there is far greater need to get it right than ever before.

I’ve been writing about this a lot lately, because, frankly, it is a critical issue. Failing to fix the spending problem spells disaster for the United States… and for the US dollar.

I wrote recently how the Congressional Budget Office projects the US government will add $20 trillion to the national debt through 2033.

$20 trillion is an absurd amount of new debt. And there are very few groups and institutions capable of loaning such a vast sum of money.

Social Security, for example, was one of the biggest buyers of US government bonds for several decades. And at this point they own roughly $3 trillion of the national debt.

But Social Security is now bleeding so much money that the program is no longer able to loan the Treasury Department any more money.

Foreigners also used to be highly reliable buyers of US Treasury bonds; even as recently as a few years ago, foreign ownership of US federal debt was more than 33%.

But foreigners are rapidly losing their appetite for US government bonds, and their ownership has plummeted to 22% very quickly.

Now, in many ways it’s good that the US no longer owes so much of its debt to foreigners.

Except that this only leaves one reliable institution remaining to buy up all that new debt: the Federal Reserve.

Remember, the Fed’s unelected Federal Open Market Committee (FOMC) holds periodic closed-door meetings to make decisions about the US money supply.

When they expand the money supply, they give it a very technical sounding name (like “Quantitative Easing”). But ultimately this means is that they conjure trillions of dollars out of thin air with the click of a button.

It’s actually quite bizarre when you think about it; they make a few entries into an electronic ledger, and, poof, new money exists.

(It’s essentially the electronic version of having a printing press, which is why we often just say that the Fed ‘prints money’.)

The Fed then lends that money to the federal government, and the mechanism for this is buying US Treasury bonds.

Because the Fed has this special ability to print money– something which no one else is legally allowed to do– there is realistically no limit to how many bonds they can buy. If the government needs to borrow $20 trillion, the Fed has the capacity to print and lend $20 trillion.

And this is the key issue: when individuals, corporations, or even foreign governments buy US Treasury Bonds, they are buying those bonds with existing money that’s already in the system.

But when the Fed buys US Treasury Bonds, they do it by conjuring new money out of thin air.

And this new money creates more inflation.

This isn’t some wild theory; we all experienced the effects firsthand during the pandemic; the US government spent so much money in 2020 and 2021 that the national debt increased by more than $6 trillion.

The Fed created about $4 trillion of new money to buy the biggest chunk of that debt. And the end result of so much sudden, new money was 9% inflation.

So, if $4 trillion in new money caused 9% inflation, how much inflation will $20 trillion create? No one can predict the effect precisely, but it probably won’t be zero.

Remember, this $20 trillion figure for new debt is the government’s own forecast over the next ten years (and it might be on the low side).

But most of this amount, i.e. $15+ trillion, will accumulate over the next 5-7 years. So this is really the time frame for increased inflation risk… and serious threats to the US dollar.

Because with an explosion in US government debt– and renewed inflation– there is a very strong chance that foreigners will finally demand a change.

The United States and the US dollar have been in command of the global financial system ever since the Bretton Woods Agreement was signed at the end of World War II.

This agreement made the US dollar the world’s dominant reserve currency, forcing every nation, every major bank, every large corporation to hold US dollars for international trade and financial transactions.

The dollar’s reserve status is a very special privilege for the United States. But if the world finally demand a new, de-dollarized system, then foreigners would no longer need to hold US dollar assets– including US government bonds.

Even though foreign ownership of US debt is already dwindling, losing reserve status would cause that percentage to drop very quickly. And the Fed would need to print even more money to make up for the loss of foreign investors… causing even more inflation.

Now, I’ve written before that, at least for the moment, there are still a handful of ways that the US could navigate out of this mess. But options are narrowing and the window to act is closing.

Watching Congress kick the can down the road yesterday, yet again, rather than make tough decisions or even DISCUSS necessary actions like entitlement reform, etc. does not give me much confidence that they will figure this out.

And if no action is taken, the scenario I outlined above is likely to play out over the next 5-7 years.

Fortunately, this gives every intelligent, independent-thinking individual a healthy window to prepare for what’s coming.

What I wrote above is not the end of the world. I am not predicting doom and gloom. I am, however, making a strong case for an inflationary future.

But there is plenty we can do now to prepare so that future inflation won’t have a significant impact on our lives.

Energy prices, for example, could likely soar. And yet many energy producing companies are remarkably cheap right now. This is a pretty good hedge.

Gold is also worth discussing; even though it’s near an all-time high, there’s a good chance that the future financial system I mentioned earlier becomes based on gold, rather than any single currency.

And if that happens, we could easily see $10,000 gold or more, likely by the end of the decade.

More on that soon.

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Tony Fauci should be in a prison cell in Wuhan right now given how much responsibility he bears for destroying US government finances.

This guy was one of the chief architects of the hysteria that took over the US (and much of the world) back in 2020.

Yet he now admits, according to recent Congressional testimony, that his infamous six-foot social distancing edict “sort of just appeared” and was “not based on any data”.

But it was precisely those sorts of claims that prompted politicians to close schools and business across the country, and to pay people to stay home and NOT work.

The financial results of this insanity are clear; the US national debt increased by an unbelievable $6.5 trillion during 2020 and 2021. And while there is a lot of blame to go around– politicians had ample time to find their intellectual courage– Fauci is extremely culpable.

Now, the US fiscal situation was already in bad shape prior to 2020. I remember back in 2019, when the economy was booming and federal tax revenue was at a record high, the US national debt STILL increased by more than $1 trillion that year.

And I wrote to our readers wondering– if the United States government still manages to add $1 trillion to the national debt when everything is awesome, what’s going to happen when there’s a real emergency?

Well, Tony Fauci gave us the answer the following year.

But even now that Covid is over, government overspending is still extreme. And it’s not getting any better.

I’ve been writing about this a lot lately, but today I need to explain where this is headed, and why it’s so inflationary.

Consider that, according to the Congressional Budget Office’s own forecasts, the United States will add another TWENTY TRILLION DOLLARS to the national debt through 2033.

Now, 2033 is a REALLY important date, because it also happens to be the year that Social Security’s primary trust fund completely runs out of money.

Social Security is funded in large part by workers who contribute a portion of their paychecks into the program through the FICA/payroll tax.

Social Security uses that tax revenue to pay monthly benefits to retirees across the country. And any surplus left over is rolled into a special trust fund.

Over time, the accumulated surplus in the trust fund amounted to roughly $3 trillion dollars; and all that money was invested in interest-bearing government bonds.

Between the payroll tax contributions and the trust fund’s interest income, Social Security always ran a healthy surplus.

Until recently.

Starting in 2020, there were so many retirees receiving Social Security benefits that the program barely broke even for the year.

The following year, 2021, was even worse. Social Security ran a deficit for the first time ever and had to dip into its trust fund to make ends meet.

This trend kept up in 2022 and 2023 as well. In fact, the program loses so much money now that its trust fund is shrinking rapidly, and Social Security projects it will fully be depleted by 2033.

One of the many, many reasons this is so important is because Social Security will no longer be a BUYER of US government bonds. It will be a SELLER. And that’s a big deal.

For the past 90+ years, Social Security always invested its annual surplus into government bonds… which essentially gave politicians an extra pile of cash each year to spend.

But now this cash flow will reverse. Instead of Social Security sending its surplus to the Treasury, the Treasury Department now must repay the debt that it owes to Social Security.

This nearly $3 trillion repayment will happen gradually over the next ten years. And then, of course, in 2033, Social Security will be out of money and require a multi-trillion-dollar bailout.

Unfortunately, the Treasury Department doesn’t have the money to repay this $3 trillion debt, let alone another $5 to $10 trillion to bail out Social Security.

This means that, in addition to the $20 TRILLION in new debt that the CBO is projecting over the next ten years, the Treasury Department will have to borrow an ADDITIONAL $3 trillion to repay Social Security. And then even more to bail out the program

(So, this means that the government will need to find someone to buy $23++ trillion of government bonds over the next ten years… which is just an absurd amount of money.

And it will have to do this at a time when it has lost some of its biggest investors; again, Social Security can no longer afford to buy bonds. And many of America’s biggest foreign bondholders, including China and Japan, are also not buying any more bonds.

So, who is going to buy all this new debt?

The only realistic option is the Federal Reserve. And this is nothing new for the Fed.

During the pandemic, for example, the Fed magically created about $4 trillion in new money, then used that money to buy US government bonds.

Of course, their $4 trillion in new money also helped create the highest inflation in four decades.

So, if buying $4 trillion of government bonds led to 9% inflation, what’s going to happen when the Fed has to create $20+ trillion to buy government bonds?

And by the way, the CBO’s $20 trillion estimate on new government debt is probably a bit too optimistic. It assumes there will be no new war, no pandemic, no national emergency, and no idiotic legislation that causes even crazier spending.

If any of those were to happen over the next decade, the increase to the national debt would be even higher… meaning the Fed would have to create even MORE money.

$20+ trillion is a ton of debt. And with no other realistic option other than the Federal Reserve to buy that debt, it’s easy to make a very strong argument for substantial inflation a few years down the road.

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Do you hear alarm bells ringing? Neither do I. And that’s a huge problem.

Granted, global power fanatics at the World Economic Forum just kicked off their 5-day cocaine and sex party festival in Davos, so they’re too tied up at the moment to notice this looming disaster.

And the White House is obviously too preoccupied with wrecking the economy and keeping Hunter Biden out of jail.

It’s clear that just about everyone is ignoring what should be the biggest news of the day… an ominous milestone that may just signify the point of no return. I’ll explain–

Recent data published by the Congressional Budget Office show that, last year, “Discretionary Spending” in the Land of the Free totaled $1.7 trillion dollars.

Remember, “Discretionary Spending” is one of the three broad categories of federal spending; the other two are interest on the debt and mandatory spending.

Interest on the debt and mandatory spending (which includes programs like Social Security and Medicare) are like your monthly mortgage payment– they get sucked out of the Treasury’s Department’s bank account every month. Congress doesn’t even debate or discuss those categories.

All of the haggling and bickering and politicking in Congress is purely over discretionary spending. And it includes almost everything else we think of as ‘government’, i.e. military, national parks, homeland security, embassies around the world, etc.

So here’s what’s remarkable:

Again, discretionary spending totaled $1.7 trillion last year– which includes US military expenditures.

However, the other spending categories– mandatory spending (Social Security, Medicare, etc.) and interest on the debt– were so vast that the federal government still had an enormous deficit for the year.

How enormous? $1.7 trillion enormous.

Look at those numbers again: Discretionary spending for the year was $1.7 trillion. The fiscal deficit for the year was also $1.7 trillion.

Conclusion? The government needed to eliminate ALL discretionary spending last year– including the military– in order to balance the budget.

Think about that. US spending is now so high that nearly everything we think of as government– from the United States Marine Corps to Yosemite National Park– needs to be completely eliminated in order to make ends meet.

Alarm bells should be ringing everywhere. But they’re not. Hardly anyone in power has even noticed.

Now, the US government has obviously been running huge deficits for decades. But it was rarely this bad.

In Fiscal Year 2018, for example, discretionary spending was $1.3 trillion. But the budget deficit was much less– about $700 billion. Sure, that was bad. But not like 2023.

Going back even further, to 2007, discretionary spending was about $1 trillion. But the budget deficit was $162 billion that year– i.e. bad, but manageable.

This problem has clearly become MUCH worse over time. And the government’s own projections show the trend will continue.

White House and Congressional Budget Office estimates forecast that this current fiscal year (FY24) may be slightly better; they’re projecting $1.6 trillion in discretionary spending… but ‘only’ a $1.425 trillion deficit.

But within about six years, the federal budget deficit will exceed ALL discretionary spending… every year.

In other words, by 2031, the US could permanently cut all discretionary spending, including the military, and STILL have a budget deficit.

As I’ve discussed many times before, there are very few options in this scenario.

One option is to default on the debt. But this is extremely unlikely given that it would cause a catastrophic financial crisis around the world.

A second option is to dramatically slash (and eventually eliminate) key programs like Social Security, Medicare, etc. But few politicians have the willingness to do so.

A third option would be an enormous asset sale, i.e. selling off Yellowstone National Park to China and other foreign investors. I will give you a lot more detail about this soon and show you exactly what the US owns… and why even such a radical approach still wouldn’t solve the problem.

Most likely the US will resort to the same tactic that bankrupt governments have relied on for centuries: inflation.

Septimus Severus was Roman Emperor in the 190s AD and found himself in a similar position; Rome’s fiscal deficit was massive, and he didn’t have enough money to pay his troops. So over a four-year period, he debased the Roman denarius coin from 81.5% silver, down to 54% silver.

Debasing the coinage meant that he could produce more coins with less silver… and hence pay his soldiers with increasingly worthless money.

The United States will likely do the same thing but updated for modern times; the Federal Reserve will step in with a new ‘quantitative easing’ program that creates trillions upon trillions of dollars out of thin air.

This money will be used to finance US government deficits at artificially low (perhaps even negative) interest rates.

But just like the debasement of Roman currency, this approach will eventually create serious inflation in the US.

Remember– I’m talking about a few years from now, not today. Inflation has fortunately been falling over the past several months, and I certainly hope that trend continues.

But if you look at the government’s own forecasts, it’s clear that there are very few options other than inflation after about 4-5 years from now, if not sooner.

This isn’t some wild, pessimistic conspiracy theory. I’m talking about the actual results from the last fiscal year, and the government’s own forecasts which project a terminal fiscal crisis by 2031.

That means it’s absolutely critical to look at these problems rationally… because politicians certainly aren’t doing that.

But there are solutions. If the data show that inflation could be a major problem down the road, then you still have a few years to plan for it and reduce its impact on your life.

And one of the best ways to do that is to own high quality real assets, i.e. scarce, critical, valuable resources that cannot be conjured out of thin air by central bankers or politicians.

We’ll have a lot more on this soon.

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Relax, it’s satire… Although it is getting harder to tell.

Pentagon Informs White House it Nuked Russia Three Weeks Ago

In a casually delivered press release, the Pentagon confirmed today that it had, in fact, launched a nuclear strike against Russia three weeks ago, but had simply forgotten to loop in the White House on this minor development.

“It’s been a busy month,” shrugged Defense Secretary Lloyd Austin, as he sipped his morning coffee, surrounded by a room of shell-shocked reporters. “You know how it is. Emails pile up, nuclear codes get entered, and before you know it, you’ve initiated World War III without telling the boss.”

The revelation came to light only after an aide to President Biden, while browsing Twitter, stumbled upon a meme about the nuclear apocalypse and questioned its accuracy.

The White House says they are “reviewing the situation” and has added a new rule to their daily briefings: “Check if we’ve nuked anyone.”

But when asked by reporters, President Biden seemed to downplay the seriousness of the situation.

“I’ve nuked countries before. This isn’t America’s first nuclear war, after all. In fact my son, Beau, died in a nuclear strike after he founded the Space Force,” the President said, before wandering aimlessly off stage.

Pentagon officials are not being forthcoming with details on whether the strike was intentional or not.

But we do know that the Defense Department’s highly-trained nuclear launch team— which is responsible for securing the nuclear codes and executing launch instructions— was suddenly replaced last month after right-wing extremists were discovered in their ranks.

One long-time member of the nuclear launch team, for example, was found to have shared a social media post last Independence Day saying, “Happy Birthday, America.”

And another veteran member of the launch team was caught displaying an American flag on his front porch.

These are both “well-known extremist dog whistles” according to White House press secretary Karine Jean-Pierre, which resulted in the President suspending the entire nuclear launch team roughly one month ago.

He ordered that the old team be replaced by a new team comprised entirely of pansexual persons who identify as Muslim women of Palestinian descent.

It turns out that the military ranks were very thin on pansexual persons who identify as Muslim women of Palestinian descent. So the Pentagon had to hastily recruit and train a new, completely inexperienced team in order to comply with the President’s demand.

The nuclear strike on Russia took place roughly a week after the new launch team was in place. However the White House insists that the team’s inexperience has nothing to do with the strike.

“It’s racist, homophobic, and misogynistic to suggest diversity in our ranks had anything to do with a nuclear strike which may or may not have been an accident,” Press Secretary Karine Jean-Pierre said.

When pressed for more details on if it was intentional, Defense Secretary Austin commented, “Never let the enemy know your next move. Let our enemies unequivocally understand that the same thing, or something different, may or may not happen to you, either intentionally, or unintentionally. That is how to project strength.”

New York City Hires Illegal Immigrants to Teach: “Already in the Schools Anyway”

An ingenious solution to kill two birds with one stone, or a recipe for disaster?

New York City has decided to bring on hundreds of illegal immigrants to fill vacant teaching positions.

As Chancellor David C. Banks explained, “These undocumented migrants are already in the schools anyway, being housed in the gymnasiums and cafeterias due to lack of space elsewhere. We figured, hey we have a teacher shortage right now. So we’ve hired 230 immigrants across the city.”

These immigrant teachers will also be allowed to sleep in their classrooms.

“The benefit there,” Banks said, “is unprecedented access to teachers. Parents can simply knock on the door at any time, which especially helps the disadvantaged who may not be able to afford Internet and email.”

We asked one of these new teachers how he felt about the program, to which he replied, “Que? No hablo ingles.”

But Chancellor Banks was ready for any skepticism on language barriers.

“It will be the duty of students to understand the native language of their teachers. Anything else would just be extremely xenophobic.”

In addition, the city plans to replace school bells with live Mariachi bands, in order to employ even more disadvantaged migrants. They too will be allowed to live in the schools.

In fact, plans include an entire school/ migrant camp hybrid moving forward.

“These migrants, they have so much to teach our kids,” Banks said. “I can’t think of a much more culturally enriching experience than to walk through and experience a migrant camp on the way to school, while practicing sports, and on the playgrounds. We couldn’t design that kind of immersive curriculum if we tried.”

Indeed, several unregistered taco and empanada food stands have sprung up in the school parking lot over the past week. But teachers and students don’t mind.

“The quality of the food is way better than what they serve in the cafeteria,” one teacher told us. “And it’s a fraction of the price.”

Meanwhile the girls’ volleyball team finds the crowds at their practices quite encouraging.

“I’m actually putting in extra effort, because I know the migrants in the stands are ready to whistle and cheer with each play. They’re super sweet, one even said, ‘¡Mamacita, estás que ardes!’ which I think means, ‘your mother would be proud.’”

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Earlier this week, leaders from both major parties in the Land of the Free announced a grand bargain that, in theory, should avoid a government shutdown later this month.

According to their agreement, Congress will supposedly cap its ‘discretionary’ spending at $1.6 trillion for Fiscal Year 2024. That’s down from about $1.7 trillion in FY23.

So, yes, technically this $100 billion reduction represents about a 6% decrease over last year. And if we want to be even more cheerful about it, we could call it a 9% decrease on an inflation-adjusted basis.

If we’re being intellectually honest, that’s a step in the right direction for the US. A tiny, tiny, tiny step in the right direction.

How tiny, you ask?

Well, pretty much non-existent; the agreement to cut spending is an almost entirely symbolic gesture that won’t do much good.

Before we go further, it’s important to understand that government spending is generally categorized into three distinct buckets.

The first bucket is interest on the debt. And, at least for now, this is non-negotiable. It has to be paid.

And I don’t mean it ‘has to be paid’ in the moral sense that “America always pays its debts.”

I mean, legally, interest on the debt is automatically paid. Just like your monthly mortgage, interest payments on the US national debt get automatically sucked out of the Treasury Department’s bank account.

The second bucket is what’s known as “Mandatory Spending”, which includes programs like Social Security and Medicare. Just like the interest bucket, Mandatory Spending gets sucked out of the Treasury Department’s bank account every month.

Those two buckets– Interest payments and Mandatory Spending– constitute the vast majority of US federal spending.

The third bucket is known as Discretionary Spending… because it’s at Congress’s discretion.

Discretionary spending what results from all their debates and arguments over annual appropriations, for everything from the military to the national parks. It also includes supplemental spending for pandemic bailouts, Ukraine, Hunter Biden artwork, etc.

So, the announcement this week was about $100 billion reduction to Discretionary Spending

But consider that Mandatory Spending (which Congress doesn’t touch) on Social Security alone surged $281 billion last year… and will likely increase by a similar magnitude this year.

So that single increase to Mandatory Spending will more than wipe out the entire $100 billion Discretionary Spending reduction.

Easy come, easy go.

Then there’s interest on the debt, which increased by $177 billion last fiscal year. It will probably increase by at least that much this year… which, again, more than wipes out the entire $100 billion in Discretionary Spending reduction.

If you drill down into the numbers, you’ll see pretty clearly that there are very few credible paths forward for the United States.

One path is to drastically… and I mean almost entirely… slash Discretionary Spending.

Look at it this way– last year’s Discretionary Spending was $1.7 trillion. The government is claiming that their annual budget deficit last year was also $1.7 trillion.

This means that, in order to balance the budget, they would have to almost completely eliminate ALL discretionary spending. No more military. No more Homeland Security. No more government.

In other words, one of the only ways to balance the budget would be a Zombie Apocalypse in Washington DC.

The second path forward is to make major cuts to Mandatory Spending… which would involve politically unpopular overhauls to Social Security and Medicare.

Few politicians have the courage to do so. And given that they can’t even agree on basic priorities for Discretionary Spending, it seems unlikely that they’ll come together for more difficult cuts to Mandatory Spending.

This leaves the third path forward: to prioritize economic growth and productivity… by slashing regulations and actually make it easy once again for people to do business.

And this approach would really work. If real (i.e. inflation-adjusted) economic growth were 3% or even 3.5%, instead of 2%, then America’s fiscal woes would be over within a decade.  And this is totally achievable.

With just 3% real growth, tax revenues would soar, the budget would be balanced, and the national debt would be trivial in comparison to the size of the US economy.

Seems like the obvious approach, right? Except that they’re doing the opposite… foisting even more regulatory burdens onto small business.

It’s no surprise that tax revenue last fiscal year was down 9% from the year before; that’s a testament to not only a weakened economy, but the Byzantine regulatory state that they’ve created over the past few years.

The most recent example is the Corporate Transparency Act (CTA), the completely idiotic and destructive piece of legislation that I discussed last week.

The CTA exists because the government thinks that its tax revenue should be higher. And they’re right– federal tax revenue SHOULD be higher.

But the government never points the finger at themselves. They never conclude that dwindling tax revenues are the result of their criminal mismanagement of the economy, including all the excessive regulations which debilitate business.

No, to them, the only possible reason why tax revenues are down is because of criminal tax evasion. So, their solution is to create even more regulation which forces business owners to file information reports to the government.

The even more pathetic part is that US businesses already must provide this information to the IRS.

But Congress doesn’t care. Instead, they demand that taxpayers provide the exact same information– but in a different format– to a separate agency within the Treasury Department.

Saddling small businesses with more paperwork is hardly the sort of thing that is going to make the US economy more productive.

So, they’re not going to eliminate Discretionary Spending. They’re most likely not going to find the courage or wisdom to cut Mandatory Spending.

And it sure as hell doesn’t look like they’re going to prioritize growth and productivity.

That leads to the fourth and final option: inflation… which, from a historical perspective, is what almost ALWAYS happens in these scenarios.

We’ll talk a lot more about this soon.

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When Edward Winslow and his fellow passengers aboard the Mayflower set sail from England on September 16, 1620, they probably weren’t thinking about taxes or Social Security.

Most likely they were just hoping to stay alive long enough to enjoy their new-found religious freedom. Tragically, most of them did not.

Many of the Mayflower passengers were adherents of a religious group known as the Separatists, who believed that that everyone should be free to pursue their own spiritual journey without interference from the church or state.

But that belief was literally illegal in England back then.

The Act of Uniformity from 1558– which remained on the books for more than three centuries– required everyone in the country to attend state religious services every week… or else face hefty fines and possibly jail time.

Passengers on the Mayflower were sick of having the government interfere in something as personal as religious beliefs. And they desired freedom so much that they were willing to take the huge risk of sailing across the Atlantic to an unknown land.

This is why the concept of religious freedom became such an integral part of America’s DNA, enshrined in the First Amendment of the Constitution. And over time, the freedom of religion has served as a useful counterweight against overzealous government bureaucrats.

Religious freedom, for example, was one of the most important Constitutional arguments against many Medieval public health policies during the Covid-1984 hysteria.

The Supreme Court struck down several lockdown orders on the grounds that they violated Constitutionally guaranteed freedom of religion, including Tandon vs. Newsom (California) and Roman Catholic Dioecese of Brooklyn v. Cuomo (New York).

But one of the most interesting religious exemptions in the United States has to do with taxes… and it goes back to the year 1965.

Congress passed the Social Security Amendments Act that summer– which created the Medicare program– and it was signed into law by President Lyndon Johnson on July 30^th.

But buried deep in the legislation is an obscure section carving out a special tax exemption for religious groups who are opposed to insurance.

This exemption still exists today under section 1402(h)-1 of the Internal Revenue Code; there’s even a tax form– IRS Form 4029– to apply for an exemption of Social Security and Medicare taxes.

Once an application is approved, the filer is no longer subject to the 15.3% payroll tax that funds those programs. At the same time, obviously, you renounce your rights to receive Social Security and Medicare benefits in the future.

(You also forfeit any taxes that you’ve already paid into the program… so you won’t receive a refund.)

I’ve written at length that both of these programs are doomed. And it’s not even my own analysis; the Boards of Trustees for Social Security and Medicare each conclude that their trust funds are quickly running out of money.

Medicare’s primary trust fund (known as the Hospital Insurance, or HI fund) is scheduled to be fully depleted in 2031; this is according to the trustee report from last year which states, “Medicare still faces a substantial financial shortfall” and “is not adequately financed over the next 10 years.”

And Social Security forecasts that its biggest trust fund, known as Old Age Survivor’s Insurance (OASI), will be fully depleted two years later, in 2033.

It’s hard to say exactly what the impact will be on retirees when these trust funds run out of money. But it won’t be good.

Social Security claims that they would still be able to pay 77% of scheduled benefits, at least for a little while. But they’ve been so notoriously wrong with their projections in the past that it’s difficult to accept this number at face value. The reality could be much worse.

Younger people in particular are the most threatened. If you’re 20 or younger, you will spend your entire working life paying taxes into a retirement system that simply will not be there for you in 40-50 years.

Opting out of the Social Security and Medicare system is the equivalent of a 15.3% raise. That money could be invested– even in something as simple as an index fund– and compound for decades. And the math is very favorable.

With a $50,000 salary, for example, the Social Security / Medicare tax savings would be $7,650 per year. Investing that savings for ~40 years would result in a retirement nest egg of over $1 million, conservatively assuming an average inflation-adjusted return of just 5% per year.

And that’s $1 million in today’s money… which is worth a hell of a lot more than the present values of dwindling Social Security and Medicare benefits.

Naturally, though, the government has no intention of offering such a deal to the general public. They want as many people as possible paying into their hopelessly insolvent programs.

Even more bizarrely, despite the programs’ administrators screaming for action, politicians intend to do absolutely nothing. In his 2023 State of the Union address, Joe Biden famously goaded Congress into promising that Social Security and Medicare reforms were off the table.

So, at the moment, the religious exemption is one of the only ways to avoid this train wreck.

The original exemption back in the 1960s was for groups like the Amish, Christian Scientists, Mennonites, etc. who have well-known and long-standing religious objections to such programs. But in theory, other religions and denominations could qualify as well.

Obviously, the belief system has to be real and bona fide. Form 4029 requires the applicant to swear under penalty of perjury that they are “conscientiously opposed” to programs like Social Security and Medicare.

But something tells me that if a financially pious young person were to one day establish the Church of the Holy Deficit, and win its inclusion as an exempt religious group, it would quickly have millions of devoted followers.

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The most popular and by FAR the EASIEST residency program in the world attracted over 300,000 immigrants in the month of December alone.

And for the entirety of 2023, it drew over 2.5 million people.

There’s a reason why this residency program is so popular:

1. The government makes it absurdly easy for incoming foreigners.

There is practically zero paperwork, no criminal background check, and no health inspection. You don’t have to buy property. You don’t have to make an investment. You don’t have to demonstrate proof of income. It’s really simple. Basically you just have to show up.

2. It is available to all nationalities and all ages.

Unlike many residency programs which favor some nationalities over others, or have age restrictions, this one is available to literally anyone on the planet. And, per the above, the program’s easy procures apply equally to everyone.

3. The government rolls out the red carpet for new residents.

Foreigners who become new residents are eligible almost immediately to apply for, and receive, lucrative government benefits… ranging from free healthcare to childhood education. Many are even eligible for free housing and complimentary bus transportation to the nation’s most prominent cities.

So what country holds claim to this unbelievably great, super-easy residency program?

Why, the United States of America, of course.

The only catch is that it’s only available to people who walk across the southern border.

Rather ironically, however, foreigners who take a more civilized approach and actually, you know, apply for a proper immigration visa, are subjected to a Byzantine, highly bureaucratic, multi-year process that would test the patience of even the most enlightened Buddhist monk.

It is quite a testament to a nation’s priorities that they make things so difficult for talented and qualified people who actually follow the rules, while simultaneously welcoming everyone else whose sole qualification is a willingness to sashay across the southern border.

For its part, Europe is making a valiant effort to not be completely outdone by the United States with respect to illegal immigration.

Boatloads of refugees continue arriving each day to the old continent, much to the delight of European politicians who willfully ignore the spike in rape, violent crime, and mostly peaceful protestors chanting Allahu Akbar in the streets of London, Paris, and Berlin.

At least Europe (in most cases) still makes it relatively easy to legally become a resident.

Portugal, for example, launched its ‘Golden Visa’ program in 2012, offering very favorable residency terms to foreigners who made an investment in the country.

For years, the most popular investment was the purchase of real estate. So foreigners could obtain Portuguese (and hence European) residency by buying a sun-soaked villa on the coast.

This program resulted in billions of dollars worth of transactions… and the surge in demand (much of which was from Chinese nationals seeking European residency) caused property prices to spike.

Locals complained about the high cost of housing, so the government eventually changed the program and eliminated real estate purchase as an investment option.

You can still obtain Portuguese residency by making other investments in the country (like venture capital). But Portugal is a great example that, if a good residency opportunity presents itself, it will not last forever.

Fortunately, plenty of other countries have some Golden Visa type residency program, including Greece and Malta in Europe, and Panama in Central America.

Article 193 of Panama’s immigration law, for example, allows foreigners to apply for permanent residency with a real estate purchase of at least $300,000. And $300,000 still goes a very long way in Panama, where homes and condos still sell for $100 to $200 per square foot.

Then there are countries which couldn’t care less if you make an investment.

Mexico is a great example; you can obtain Mexican residency simply for demonstrating that you have sufficient savings or income to live in the country— which isn’t a very high bar.

There are so many more examples we could go into (and we have a lot of great free material on the topic). But in general it’s worth noting that there is very little downside to having a second residency because it means that you’ll always have another place to go.

How crucial is it to have another place to go, i.e. a backup plan? Hopefully it will never be crucial at all. But if the day ever comes and you need to leave immediately, having legal residency somewhere else (ideally in place you like to spend time) will be extremely valuable for your family.

There are other benefits as well.

In many cases, your legal residency in a foreign country can also set you up to eventually apply for naturalization… meaning you could one day obtain a second passport.

This is a pretty great benefit given that a second passport confers all sorts of additional privileges, including the right to movement and visa free travel just for starters.

Additionally, citizenship can often be passed to future generations. So your grandchildren’s grandchildren could be entitled to the same passport that you’re able to obtain after a few years of legal residency.

Perhaps the biggest benefit of having a second residency and/or citizenship is simply having additional options. More options not only mean more freedom, but it also mean less risk. And there’s a lot of that in the world these days.

Risk is something that, as investors, we try to hedge. In business, we make efforts to reduce it. And even in our personal lives we buy insurance policies to protect our homes, vehicles, and valuables from certain risks.

Residency and citizenship is like an insurance policy— it’s a hedge against certain sovereign and lifestyle risks.

Many people have a very insular view and think to themselves, “why would I ever need to do anything outside of my home country?”

This is a naive, almost medieval view of the world. Besides, having a second passport or residency doesn’t mean that you have to do anything. That’s the whole point: it’s just an option in case you ever need it. If you don’t, you’ll hardly be worse off.

I read recently that prominent investor Ray Dalio received a passport from the United Arab Emirates, no doubt due to his political connections and strong economic ties to Abu Dhabi.

(I’d also bet that, for a guy as sophisticated as Dalio, this is probably not his second passport… but probably his third, fourth, or even fifth.)

But you don’t have to be a billionaire to obtain a second passport. There are several ways.

For example, many European countries grant citizenship by descent to those who can trace their ancestors back to places such as Italy, Greece, Ireland, Poland, Lithuania, and others.

Others offer passports through citizenship by investment programs, from small Caribbean countries like St. Lucia, to large major nations like Turkey.

I think there’s going to be more of these to come. I’d be willing to bet, as I’ve written before, that we could see one in Argentina, which would be a really smart move for that country.

And of course, you could opt to naturalize.

Mexico, for example, offers very favorable terms. After five years as a resident, with about 18 months of the last two years spent living there, you become eligible to apply for Mexican citizenship.

In Brazil you can apply for citizenship after four years as a permanent resident. In Peru and Argentina, it’s as little as two years.

The world is a big place and you have plenty of options.

And it’s important to keep them in mind and recognize that in most cases there’s no downside to doing this.

It’s like having a free ‘put option’ in finance, or a really cheap insurance policy. And in a world like ours, that makes a lot of sense right now.

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Jacques Turgot must have cried himself to sleep the night that he reviewed the French government’s annual financial report in early 1775.

The numbers were gruesome; France was so heavily indebted by the mid-1770s that the entire nation was on the verge of a major financial crisis.

But Turgot was smart. Borderline brilliant. So, if anyone could turn things around and restore France to its former glory, it was him.

Turgot was born in the 1720s when France was still the clear, dominant superpower in the world… wealthy, admired, and strong. But decades of overspending had created a massive national debt.

By the time he took over as Controller-General in the summer of 1774, the French public debt was so high that just making interest payments consumed most of the tax revenue.

This meant that the government had to go even deeper into debt every year just to fund its most basic operations, thus making the problem exponentially worse.

Turgot knew how to fix it. And then had the balls to do it.

He advocated for major reforms, including steep budget cuts and free trade. He demanded the church and nobility to pay taxes (workers, artisans, and merchants already did).

He wanted to dismantle the medieval version of unions, known as guilds, to allow French citizens the freedom to work without regulation.

And he wanted to abolish the remnants of the feudal system, enabling freedom and opportunity across the country.

These were all logical proposals that could have solved France’s debt crisis. So naturally they were all rejected.

In fact, Turgot’s proposals, as sensible as they were, made him the most hated guy in France.

The royals hated him for curtailing their lavish lifestyle. The parliament hated him for his budget cuts. The church and nobles hated him for demanding they pay taxes too. The unions hated him for reducing their power.

Honestly, it’s kind of amazing that Turgot didn’t get suddenly suicided like Epstein. Though he did find himself thrown out on his keister and out of a job by the spring of 1776.

Coincidentally, 1776 was also the year that Benjamin Franklin formally requested financial support from France to support the American Revolution.

Turgot would have rejected that request flat-out. France simply didn’t have the money to fund someone else’s war.

But with the former-minister now in his forced retirement, the French government happily obliged Franklin’s request and shoveled billions of dollars out the door– money that they didn’t have.

We all know how the story ends: the French Revolution, the Reign of Terror, Napoleon, etc. And this is far from an isolated tale; history books are filled with stories of once-dominant superpowers who indebt themselves into weakness and decay.

I am not a pessimistic person. In fact, I consider myself wildly optimistic about the future; our species has seen its share of horrendous crises… yet we always manage to ascend higher.

This time is not different. Despite the challenges that the world faces, and despite the complete idiots who run the show, humanity will continue to surpass its previous peaks.

But at the same time, it would be completely naive to ignore the obvious lessons of history about how excess debt ultimately destroys a nation’s economic power.

I’ve been spreading this message for years: many of the world’s most advanced nations are in this position– like Japan, Italy, etc. And of course, the United States.

The US national debt actually reached a new milestone of $34 trillion on the very last day of the year (2023).

Bear in mind that the national debt at the beginning of the year was $31.4 trillion. So, the debt increased by a whopping $2.6 trillion over the course of the 2023 calendar year.

Now, back in 2020 and 2021, the US government could borrow money at just 1% interest.

But interest rates surged throughout 2023 to 4%, 5%, and more. This means that the $2.6 trillion in new debt that the government borrowed will cost taxpayers AT LEAST $100 billion in additional interest… PER YEAR. ($2.6 trillion x 4% = $104 billion annually)

It’s no wonder that 2023 saw a record $900 BILLION in gross interest paid on the US national debt. And this year’s interest on the national debt will likely surpass $1.2 trillion.

2023 was one for the record books in many other ways as well.

There was the debt ceiling crisis at the beginning of the year– in which the guy with five decades of experience refused to negotiate with the other side, leading the country to the brink of default.

Naturally they didn’t actually solve the problem. So, at the last minute they kicked the can down the road to January 1, 2025– just 364 days from now.

This was followed by a downgrade of the US sovereign debt rating, and then another downgrade of the US sovereign debt outlook (which are technically two different things).

The guy with five decades of experience reacted with genuine confusion… which is understandable considering he doesn’t know where he is half the time.

But even those around him, including Treasury Secretary Janet “Expert” Yellen, and the eminently articulate Secretary of Doublespeak, Karine Jean-Pierre, rejected the downgrades as “puzzling” and “entirely unwarranted”.

The voice of reason last year came from the Congressional Budget Office, which seems to at least have some grasp of the situation.

Whereas in mid-2022, the CBO had forecast a 10-year deficit of $15.7 trillion, by early 2023 they had to revise their projection downward to an $18.8 trillion deficit.

It probably didn’t help that US federal tax revenue declined significantly in 2023, down to $4.4 trillion from $4.9 trillion the year before.

A decline in tax revenue is hardly a surprise given the never-ending onslaught of new regulations that make it more difficult for people to work and do business.

Yesterday I wrote to you about the nearly 100 pages of regulation that requires small business owners to file a new report to the federal government each year.

Never mind that businesses already must file the exact same information to the IRS. No, they want to double your compliance burden by requiring you to send the same information– in a different reporting format– to another a second government agency.

If that weren’t enough, in December the Labor Department published a new proposal to heavily regulate apprenticeship programs; the proposal went on for nearly EIGHT HUNDRED PAGES and includes rules about body-positive PPE (personal protective equipment) and mandating bathrooms that correspond to gender identity.

So, if you have interns who identify as polygender, demiflux, and autigender (all real terms), get ready to build three new bathrooms for they/them.

Naturally this whole situation is a complete train wreck. At least France in the 1770s had someone with the brains and the balls to raise the red flag… even though he was summarily dismissed.

Today the ‘experts’ in charge seem willfully, blissfully ignorant… which gives rational, thinking people every reason to have a Plan B.

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Hunter Biden most likely isn’t going to jail any time soon despite an obvious track record of fraud and criminality. But if you happen to be a small business owner in the Land of the Free, you are looking at potentially two years in prison if you don’t comply with new law that just took effect yesterday.

It started nearly five years ago, in the spring of 2019.

Back then, a member of Congress from the state of New York– a career politician with five decades of experience named Carolyn Maloney– introduced a new bill to the House of Representatives called the Corporate Transparency Act, or CTA.

At first her bill didn’t go anywhere.

But the following summer, during the peak Covid insanity of 2020, the CTA was jammed into the nearly 1,500-page National Defense Authorization Act (NDAA), i.e. the military budget that Congress is required to pass each year.

The NDAA (and hence the CTA along with it) were passed on January 1, 2021. And now, three years later, the CTA has formally taken effect.

Now, the whole premise behind the Corporate Transparency Act is the classic boogeyman premise that evil criminals and terrorists use US corporations and LLCs to conduct their illicit activities, so therefore the government wants more rules, regulations, and reporting for US companies.

This is the same simple-minded hysteria that we always hear about cryptocurrency, i.e. criminals and terrorists use Bitcoin, therefore it should be tightly regulated by hapless government bureaucrats.

Obviously, it’s true that criminals can and use crypto– or US business entities like Delaware LLCs– to commit their crimes.

Criminals also use iPhones, Facebook, Gmail, Dell laptops, JP Morgan Chase bank accounts, Ford F-150 pickup trucks, Amazon gift cards, and Verizon Wireless to commit their crimes.

But in this case, in the infinite wisdom of Congress, it’s business entities that are being singled out for additional scrutiny.

So, because criminals sometimes use US business entities to launder money, every law-abiding US citizen with a completely legitimate business now must jump through all sorts of hoops and reporting requirements.

And if you fail to report, you’re looking at two years in prison.

There are so many things about this that are completely stupid.

First off, the United States legal code already has dozens of anti-money laundering laws and regulations on the books. Seriously, dozens.

Yet clearly if Congress saw the need to pass a NEW anti-money laundering law (the CTA), then it stands to reason that those existing laws are ineffective… and hence should be repealed.

But that’s not how the government operates. They don’t strike off ineffective laws. They just keep piling more laws and rules on top of the old ones, creating a mountain of regulation for small businesses to navigate.

And I’m saying “small business” on purpose because that’s who is specifically targeted by the CTA.

Large, publicly traded companies are specifically exempt from reporting under the CTA. So are hedge funds, banks, and other large financial entities. Curiously, tax-exempt charities are also exempt.

So the Corporate Transparency Act deliberately goes after the little guy. Goldman Sachs, Black Lives Matter, and Facebook/Meta are exempt. Bob’s Hot Dog Stand is not.

And this is where it gets really ridiculous. One of the big requirements of the CTA is that small business owners must file a new report to the federal government each year to disclose the company’s shareholders.

But current federal law already requires LLCs to provide this information to the IRS each year. So, the CTA has essentially created a double-burden to send the exact same information– but in a different format– to multiple agencies within the Treasury Department.

You can’t make this stuff up.

And exactly what agency does Bob’s Hot Dog Stand have to report to? It’s called FinCEN, which stands for the Federal Crimes Enforcement Network.

Think about the message they’re sending here; it’s as if owning a business in the United States of America is now some sort of f*ck!ng crime that needs to be reported.

For its part, FinCEN issued nearly ONE HUNDRED PAGES of regulations about how to comply with the CTA. Yes, I’m serious. The Corporate Transparency Act itself was ‘only’ about 20 pages. FinCEN’s rules are five times as long.

And, once again, failure to comply carries steep monetary and criminal penalties, including up to two years in prison.

Even this penalty is idiotic. Think about it– is some guy who launders money for some criminal gang or drug cartel really going to be deterred by the prospect of a two-year prison sentence? Probably not.

It’s far more likely that some completely innocent small business owner has his/her life turned upside down for non-compliance… because, as they always say, “ignorance of the law is not an excuse.”

Look, no one is arguing that criminals don’t often rely on US-registered businesses to conduct illegal activities.

The point is– what is the priority here?

The United States government is in extremely precarious financial condition; calendar year 2023 saw the national debt increase by a whopping $2.5 trillion, totaling roughly $34 trillion as of today.

The debt is so large that annual gross interest payments are about to reach $1 trillion, which takes up a huge chunk of federal tax revenue. And this interest expense keeps growing at an alarming rate.

Forecasts from both the White House and the Congressional Budget Office show that, by 2031, interest expense, along with mandatory entitlement spending like Social Security, will consume the entirety of federal tax revenue.

Everything else we think of as the US federal government– from military spending to non-existent border security– will have to be funded by more debt… which just makes the problem worse.

That fiscal cliff is just seven years away. Then, two years later in 2033, Social Security’s primary trust fund will run out of money and require a multi-trillion-dollar bailout.

The ONLY way out of this mess is to have an economic renaissance in the United States which prioritizes productivity and growth.

It’s simple math; if real (i.e. inflation-adjusted) GDP grows by 3% instead of 2%, all of these problems will melt away over time. The federal government will be swimming in tax revenue, Social Security will be properly funded, and the US could re-assert itself as the global economic leader.

The solution is straightforward, and the US private sector has the capability to do it.

But then the government passes bonehead legislation like this that makes it more difficult, more cumbersome to own a business in America.

Hunter Biden will likely never see the inside of a prison cell. But if you’re one of the millions of small business owners that are critical to US economic growth, you’re now officially at risk if you do not comply.

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