Category: simonblack

November 24, 2014
London, England

[Editor’s note: This essay was penned by Tim Price, a London-based wealth manager and editor of Price Value International.]

On Monday 15th November 2010, an open letter to Ben Bernanke was published:

“We believe the Federal Reserve’s large-scale asset purchase plan (so-called “quantitative easing”) should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed’s objective of promoting employment.”

Among the 23 signatories to the letter were Cliff Asness of AQR Capital, Jim Chanos of Kynikos Associates, Niall Ferguson of Harvard University, James Grant of Grant’s Interest Rate Observer, and Seth Klarman of Baupost Group.

Words matter. Their meanings matter. Since we have a high degree of respect for the so-called Austrian economic school, we will use Mises’ own definition of inflation:

“..an increase in the quantity of money.. that is not offset by a corresponding increase in the need for money.”

In other words, inflation has already occurred, inasmuch as the Federal Reserve has increased the US monetary base from roughly $800 billion, pre-Lehman Crisis, to roughly $3.9 trillion today.

What the signatories likely meant when they referred to inflation in their original open letter to Bernanke was the popular interpretation of the word – that second-order rise in the prices of goods and services that typically follows aggressive base money inflation.

To put it in terms which Ben Bernanke himself might struggle to understand, just because something has not happened during the course of four years does not mean it will never happen.

We say this advisedly, given that the former central bank governor himself made the following observation in response to a question about the US housing market in July 2005:

“INTERVIEWER: Tell me, what is the worst-case scenario? Sir, we have so many economists coming on our air and saying, “Oh, this is a bubble, and it’s going to burst, and this is going to be a real issue for the economy.” Some say it could even cause a recession at some point. What is the worst-case scenario, if in fact we were to see prices come down substantially across the country?

“BERNANKE: Well, I guess I don’t buy your premise. It’s a pretty unlikely possibility. We’ve never had a decline in house prices on a nationwide basis. So what I think is more likely is that house prices will slow, maybe stabilize: might slow consumption spending a bit. I don’t think it’s going to drive the economy too far from its full employment path, though.” [Emphasis ours.]

To paraphrase Ben Bernanke, “We’ve never had a decline in house prices on a nationwide basis – therefore we never will.”

One more quote from Mises is relevant here, when he warns about the essential characteristic of inflation being its creation by the State:

“The most important thing to remember is that inflation is not an act of God, that inflation is not a catastrophe of the elements or a disease that comes like the plague. Inflation is a policy.”

Many observers of today’s financial situation are scouring the markets for evidence of second-order inflation (specifically, CPI inflation) whilst either losing sight of, or not even being aware of, the primary inflation, per the Austrian school definition.

James Grant, responding to Bloomberg, commented:

“People say, you guys are all wrong because you predicted inflation and it hasn’t happened. I think there’s plenty of inflation – not at the checkout counter, necessarily, but on Wall Street.”

“The S&P 500 might be covering its fixed charges better, it might be earning more Ebitda, but that’s at the expense of other things, including the people who saved all their lives and are now earning nothing on their savings.”

“That to me is the principal distortion, is the distortion of the credit markets. The central bankers have in deeds, if not exactly in words – although I think there have been some words as well – have prodded people into riskier assets than they would have had to purchase in the absence of these great gusts of credit creation from the central banks. It’s the question of suitability.”

And from the vantage point of November 2014, only an academic could deny that the signatories were wholly correct to warn of the financial market distortion that ensues from aggressive money printing.

Ever since Lehman Brothers failed and the Second Great Depression began, like every other investor on the planet we have wrestled with the arguments over inflation (as commonly understood) versus deflation.

Now some of the fog has lifted from the battlefield. Despite the creation of trillions of dollars (and pounds and yen) in base money, the forces of deflation – a.k.a. the financial markets – are in the ascendancy, testimony to the scale of private sector deleveraging that has occurred even as government money and debt issuance have gone into overdrive.

And Albert Edwards is surely right that as the forces of deflation worsen, they will be met with ever more aggressive QE from the Fed and from representatives of other heavily indebted governments.

This is not a recipe for stability. This is the precursor to absolute financial chaos.

Because the price of every tradeable financial asset is now subject to the whim and caprice of government, rational macro-economic analysis (i.e. top-down investing and asset allocation) has become impossible.

Only bottom-up analysis now offers any real potential for adding value at the portfolio level.

We discount the relevance of debt instruments almost entirely, but we continue to see merit in listed businesses run by principled and shareholder-friendly management, where the shares of those businesses trade at a significant discount to any fair assessment of their underlying intrinsic value.

A word of caution is warranted – these sort of value opportunities are vanishingly scarce in the US markets, precisely because of the distorting market effects of which the signatories to the November 2010 letter warned; today, value investors must venture much further afield.

The safe havens may be all gone, but we still believe that pockets of inherent value are out there for those with the tenacity, conviction and patience to seek them out.

from SOVEREIGN MAN http://ift.tt/1uxq54Q
via IFTTT

November 24, 2014
Sovereign Valley Farm, Chile

Gallup recently conducted a poll asking Americans to rate thirteen of the most visible agencies/quasi-agencies of the United States government.

These included:

• US Postal Service (USPS)
• Federal Bureau of Investigation (FBI)
• Central Intelligence Agency (CIA)
• Department of Homeland Security (DHS)
• National Aeronautics and Space Administration (NASA)
• Centers for Disease Control and Prevention (CDC)
• Federal Emergency Management Agency (FEMA)
• Food and Drug Administration (FDA)
• Environmental Protection Agency (EPA)
• Secret Service
• Internal Revenue Service (IRS)
• Federal Reserve Board
• Veterans Administration (VA)

[Curiously the Social Security Administration wasn’t on the list.]

Gallup asked the survey participants to rate each one of the agencies as excellent, good, fair, or poor.

Now, you can probably imagine that few people are going to rate the IRS particularly highly. But of the 1,020 random adults who participated, the most favorably viewed agency was… 

The United States Postal Service.

Think about that for a moment.

The USPS’s own balance sheet shows a negative equity of MINUS $44 billion.

They lost $2 billion in the last quarter alone, their net loss so far this fiscal year is a whopping $4.1 billion, and they continually suck taxpayer funds into a never-ending black hole.

In fact, the United States Postal Service ranked dead last in terms of potential revenue growth when compared to 24 other postal agencies around the world according to a study published by global consulting group Accenture.

And according to the American Customer Satisfaction Index, Americans find banks, utility companies, and even some airlines to be easier to deal with than the US Postal Service.

And yet, despite all of this, Americans still prefer the US Postal Service to nearly every other government agency.

This pretty much tells you everything you need to know about government.

from SOVEREIGN MAN http://ift.tt/1y8FxKJ
via IFTTT

November 21, 2014
Santiago, Chile

John Lynn was bound and gagged, as the angry mob tied him to a tree and poured a barrel of scalding hot tar over his freshly shaven head and coated him in feathers.

It was June 1794 and the crowd was absolutely frantic. They were taking justice into their own hands.

Lynn’s crime, in their eyes, was having extended lodging to a federal tax collector, who’d come down to enforce a recently imposed excise tax on whiskey.

The brand new US government was deeply in debt and starved of revenue sources to pay back their bondholders. So they did what all governments do in that position: they created a new tax.

They targeted whiskey simply because it was far and away the most popular drink in America.

It was so popular that it was even used as a medium of exchange and a store of value.

You could pass a bottle of the stuff to somebody as a payment for debt owed, and farmers would often turn their excess crop into whiskey as a way to store value for the future.

Whiskey is what people had, what people used, and what people wanted. Therefore it was whiskey that was taxed.

This was a dangerous move, as the American-made drink had risen to popularity during the Revolution, giving it a flavor of patriotism and rebellion—which is why the citizens of Western Pennsylvania weren’t going to take this lying down.

So to enforce their tax law, the new government did so at the point of a gun. Going against all the principles that people had just fought for in the Revolution.

It was the first time in US history that this happened, but it certainly would not be the last.

You can learn more about this in today’s podcast as we discuss where this is going and what bankrupt governments are going to tax next.

from SOVEREIGN MAN http://ift.tt/1HvyBeU
via IFTTT

from SOVEREIGN MAN http://ift.tt/1xWwxHy
via IFTTT

November 20, 2014
Sovereign Valley Farm, Chile

As we discussed yesterday, the world has certainly gotten itself into a serious pickle.

World population growth and economic trends are causing food demand to soar.

Demographers tell us that over 200,000 people will be present at the dinner table tonight who weren’t even alive yesterday.

And with over a billion people having been lifted out of poverty in the developing world (and more to follow), people are eating more food (and more resource intensive foods like meat) than ever before.

At the same time, farm yields have peaked in the developed world. Science has managed to extract from the ground as much as the earth can give.

Many farmers are quitting the business altogether thanks to rising input costs and absurd regulation, and the amount of farmland is in clear decline.

The arithmetic here is quite simple: the demand for food Calories is rising while the ability to provide those food Calories is falling.

This suggests rising food prices over the long-term, and potentially even shortages.

But behind this uncomfortable data is a clear opportunity: if demand for food is increasing while the supply of farmland is in decline, then high quality farmland is an obvious asset to own.

The question is: where? Not all farmland is created equal.

In fact, much of the farmland in the developed West is already at or near an all-time high, and much of it lacks available water.

Having traveled to over 110 countries, I’ve looked at farmland across the world to see where is the best mix of soil quality, secure water, land title rights, favorable weather, developed infrastructure, labor and land costs, etc.

Far and away the best opportunities lie overseas. And below are some of my top picks which are presently underdeveloped:

CHILE

Farmland in Chile is already inexpensive when compared to North America or Europe; what would cost $15,000 per acre in California would cost barely $5,000 in Chile.

Yet at the same time, the productive output is just as high, if not higher. The weather here is temperate, the soil quality is off the charts, and the all-important land title rights provide clear protection for foreign owners.
PERU

If land in Chile is cheap, it’s even cheaper in Peru. That said, the two countries are entirely different. Peru is still the wild west; there’s very little infrastructure and a million ways to get screwed by locals.

But by comparison, Perus is enormous. And climatically Peru is like a natural greenhouse– steady, constant temperatures year-round that in many cases can double or triple an annual crop yield.

(The downside of this is that Peru lacks the cold hours necessary to properly grow certain stone fruits or develop the sugars which sweeten many foods).
COLOMBIA

As you can imagine, land in Colombia is even cheaper than in Peru. And if you believe the conventional wisdom about the country’s stability, Colombia is even more Wild West.

One of the reasons that Colombia is so full of opportunity is because it’s on few people’s radars as an agriculture option. Yet many of the highland areas provide ideal climate, soil, and water conditions for an abundance of crops to thrive, yet with ultra-low investment costs.

And the government is on an all-out rampage trying to attract investment dollars with generous incentives for foreigners who brave the “Colombia stigma” and come to the country.

MYANMAR

Asia’s greatest agricultural treasure trove is in Myanmar right now; the country is vast and boasts climate zones as diverse as Chile’s, so you can grow just about anything.

Labor costs are almost nothing, and the government is on a clear push to lift restrictions on foreign asset ownership (foreign companies can already lease land for up to 70 years based on a 2012 law).

It’s still completely virgin; Myanmar lacks critical infrastructure or even a functioning financial system, so it’s toally ground floor. But the long-term potential is enormous.
Each of these places has the potential to become an agricultural powerhouse and slow this disturbing food production trend. And this is important.

All the traditional food exporters in the world (like the US) are tapped out. So if there is to be any serious growth in global food production, it absolutely MUST be from up and coming locations that are currently off the radar.

Chile, Peru, Colombia, and Myanmar are four among some of the top countries (there are others) which have all of the right characteristics, including CHEAP LAND. This is a critical variable.

And from my vantage point as a fund manager overseeing agricultural investments, I’m already noticing hundreds of millions of dollars being raised by funds to acquire land in these areas.

And these are the early ones. I expect much more capital will follow behind.

Given this surge of funds, I have no doubt that that the market will eventually correct this anomaly, and we’ll see much higher land prices in the coming years.

The global land rush has begun. So if you’re interested in investing in agriculture, these are some of the places to start looking.

from SOVEREIGN MAN http://ift.tt/14RpVAF
via IFTTT

November 19, 2014
Sovereign Valley Farm, Chile

More than six thousand years ago, the most advanced civilization on planet was Sumer, rulers of the fertile plains of ancient Mesopotamia in modern day Iraq.

The Sumerians weren’t powerful from their military strength or political system; rather, it was agriculture that developed their civilization.

Quite simply, the ancient Sumerians had developed techniques to produce far more agriculture than they could possibly consume.

This food surplus meant that they could build up a large pool of savings to be used in trade, or to feed workers who could pursue other careers like science and architecture.

Nearly every great civilization ever since has shared the same characteristics– being able to produce more than it consumes.

In fact, no society can survive without the ability to feed itself. We’ve seen this throughout history.

When the Sumerians’ complex , centrally-planned network of canals failed to adequately irrigate their farmland, the civilization quickly declined.

The Roman Empire was notorious for routinely invading other lands looking to secure additional sources of food.

During the American Civil War, a large part of the Union’s strategy was to cut off the South from its food sources, and burn to the ground every acre of farmland they could find.

And despite decades of economic hardship, the French Revolution finally kicked off in 1789 because the nation could no longer feed itself… and people were starving.

Early on in US history, the country’s strength came from this same ability to produce more than it consumed.

And over the centuries the US became farmer to the world, exporting interminable quantities of food like a never-ended breadbasket.

But that trend peaked long ago.

Over the past five years, for example, the amount of farmland in the US has decreased by 5 million acres each year, often due to land development or aging farmers quitting the business.

This is equivalent to losing nearly one square mile of farmland every hour, or 9.5 acres per minute.

The same trend is taking place in China, where more than 40% of the country’s arable land has been lost in recent years due to development, drought, and topsoil erosion.

Yet while we’re seeing a dramatic decline in the amount of farmland available per person in the world’s largest powers, demand is rapidly increasing.

I’m not just talking about population growth, which is a given. There’s also the growth in demand that comes with economic development.

As a nation’s wealth increases, so does its demand for food.

The billion people across Asia being lifted out of poverty into the middle class are consuming more Calories than ever before, and consuming meat for the first time ever.

Raising animals for meat production requires far more land per Calorie than growing fruits, vegetables, and grains.

So not only are people consuming more Calories, but they’re also requiring more land per Calorie.

This is a clearly unsustainable trend: the world needs more farmland per capita to meet food production needs at a time when the amount of farmland is in decline.

On top of all this are the water challenges that many parts of the world are experiencing. California is a great example.

It’s well known that the entire state of California is experiencing EXTREME drought conditions.

What’s less known is that, along with many other crops, California is the world’s top almond producer.

The state produces 80% of the global almond supply, completely dwarfing production in the rest of the world combined.

Yet at the same time, California almond growers consume nearly 10% of the state’s water supply.

Think about it– when you export agriculture, you are also exporting all the resources and inputs that go into producing that agriculture.

So at a time when the entire state is suffering from extreme drought, California almond farmers are essentially exporting 10% of the state’s dwindling water supply.

This math doesn’t add up. And it doesn’t take a rocket scientist to figure out that, at a minimum, the price of almonds is due to rise dramatically in the coming years.

Almonds are just one example. We can see this across the board with food in general.

For most crops, yields peaked long ago; in other words, human beings are already extracting the maximum amount of tons, kilos, bushels, etc. per acre.

And thanks to absurd government and monetary policy, we’re simultaneously seeing rising production costs, as well as idiotic incentives to turn food into inefficient fuel. Or subsidies which pay farmers to not grow at all.

These trends are all converging at the same time, suggesting a long-term rise in food prices, and in some cases even shortages.

This isn’t some sensational, headline-grabbing nonsense. It’s simple arithmetic based on objective, publicly available data.

And it’s a trend that will affect nearly everyone on the planet.

On a small scale, you can do well for yourself by planting a small garden with some fruit and nut trees in your own backyard. Worst case you enhance your property value and have a small supply of organic food.

On a larger scale, owning productive farmland and selling food across the value chain may turn out to be one of the best investments of the decade.

But with farmland prices at all-time highs in the US, and water availability highly questionable, the real opportunities lie overseas. More on that tomorrow.

PS. You might also be interested in our latest post on how to protect yourself from Civil Asset Forfeiture.

from SOVEREIGN MAN http://ift.tt/11CwhTe
via IFTTT

November 19, 2014
Sovereign Valley Farm, Chile

Tan Nguyen was stopped on the highway for driving three miles over the speed limit. The policeman searched the car and found a briefcase of money that Tan said he just won at a casino.

There weren’t any drugs to be found, but suddenly the cop said he smelled marijuana and confiscated the money.

Now, if you or I were to have taken Tan’s money at the point of a gun, it would be called armed robbery, and we’d go to jail.

But when the state does it, it’s called Civil Asset Forfeiture. And it’s perfectly legal.

What’s more, they’re able to commit this highway robbery without a shred of proof or evidence. And then it’s up to the victims to prove their innocence to get the money back.

It’s not surprising that the system is being abused. It’s such easy money.

And what do these police departments do with the money that they steal? Whatever they want, as it turns out.

Police departments in the Land of the Free have used seized funds for things like a margarita machine, a Zamboni (that thing that cleans the ice on a rink), hiring a clown, or a trip to Hawaii.

And as infuriating as these examples all are, often overlooked are the more sinister examples of what these funds have been used for.

Take the $227,390 used to purchase an 8-ton Ballistic Engineered Armored Response Counter Attack Truck (yes, that spells BEARCAT).

Or the $54,000 spent on twenty-seven military grade M-4 assault rifles. (Both by of these were in Georgia).

Between $382,000 on license-plate readers, $208,000 on electronic surveillance tools, and an undisclosed amount on a “cell site simulator” that can surreptitiously track cellphones—you can see that the stolen money is being used to get better at cracking down on your liberties even further.

The institution that claims to be there to protect is now among the biggest threats to liberty.

Think about it– you have a far greater chance of having your assets wrongfully seized than being the victim of some terrorist attack.

What can you do about it? First off– don’t drive around with a lot of cash. And definitely don’t try to leave the country with a lot of cash.

Leaving the country with more than $10,000 requires making a report with the federal government’s Financial Crimes Enforcement Network (FinCEN), as if it’s some sort of crime to move cash overseas.

Bottom line, if you want to move a lot of wealth, there are better options.

For smaller amounts under $25,000, a few gold coins in your briefcase are a lot less conspicuous than bricks of cash.

If you have trustworthy sources (premium members- see our previous alerts about this), you can buy rare coins and collectibles that are worth much more.

For example, a single five cent buffalo nickel in excellent condition can be worth half a million dollars or more. This is something that you could stick in your pocket and walk out of the country, and no one would ever know.

Digital currency is another option. Through cold storage and paper wallets, millions of dollars worth of digital currency can be held in a simple, random string of characters.

Civil asset forfeiture is clearly a growing problem. But all of the tools and technology already exist to take back your freedom and make sure you don’t become another statistic.

from SOVEREIGN MAN http://ift.tt/11u2FXd
via IFTTT

November 18, 2014
Sovereign Valley Farm, Chile

When the two young petty thieves, Rinconete and Cortadillo, came to Seville they were quickly censured for stealing.

To their surprise, it wasn’t for the theft itself, but instead because they were not registered with the local thieves’ guild.

In this upside-down world imagined by Miguel Cervantes, theft was not a crime, but a craft—performed in the name of God and justice.

And like any other craftsmen of the day, the thieves had formed a guild. There they provided training and support to their members, while maintaining an exclusive right to engage in the trade.

This past month, a real-life guild of thieves was formed. With 51 governments pledging their support to each other for the protection of their ignoble craft of theft. And another 30 pledging to join by 2018.

From day one, governments have been pilfering their citizens’ assets through taxation, claiming a monopoly on thievery.

From the largest institution to the pettiest pickpocket, anyone else who tries to engage in theft is severely punished, as governments work to protect their exclusive right to steal.

Frighteningly, they do this all out in the open, believing that they actually have a moral right to commit theft.

You can see this delusion in the US government’s claims that last year they “lost out” on $337 billion from people avoiding taxes. As if they have some moral claim to the money they’d failed to pilfer.

Nonetheless, they use this claim to justify actively hunting down and penalizing anyone who takes action to avoid being stolen from.

The ones that are doing this are the bankrupt countries, and the deeper they slide into debt, the more desperate they become.

Which is why these broke governments are now joining forces, pledging to to collect and share information amongst themselves about citizens’ bank accounts, taxes, assets and income outside local tax jurisdictions.

Basically—I’ll help you steal from your citizens if you help me steal from mine.

Both the punishment and the likelihood of getting caught for tax evasion are growing. Don’t even bother trying.

However that doesn’t mean that you have no choice but to sit there and let your self be stolen from.

While there are still ways of legally reducing your tax burden from within a country, your best option is to move and diversify.

Diversification is key, because if you have all your eggs in one bankrupt basket, you are really taking on extraordinary risk.

Moving some assets abroad can legitimately reduce some of this risk. And an even greater strategy is considering moving yourself.

Citizens of most countries have the benefit of divorcing themselves from the tax system simply by moving abroad.

It’s a bit more onerous for US citizens. But for Americans living abroad, it’s still possible to earn roughly $100,000 without paying income tax.

In fact, between the Foreign Earned Income Exclusion, Foreign Housing Exclusion, SEP IRA contributions, and more, an American couple can sock away roughly $300,000 per year while paying almost zero income tax.

And if you become a resident of Puerto Rico (which any American can do), it’s possibly to completely eliminate US federal income tax on any amount of money.

By doing so, not only are you taking yourself out of the reach of this gang of thieves, but you are also casting a vote with your feet.

More important than the ballot box, this is a vote that actually counts. And one you have complete control over.

(Don’t worry– if you can’t move, there are still plenty of options to reduce your tax burden and take back your freedom. More on this in upcoming letters.)

from SOVEREIGN MAN http://ift.tt/1yk2iJX
via IFTTT

November 18, 2014
Santiago, Chile

Walking across a bridge with ornate classical Roman sculptures trimmed in gold,
I turned down a little Italian street to meet up with a friend for lunch.

As the aroma of pizza wafted around me, I couldn’t help but feel that something was out of place.

It wasn’t the food. It wasn’t me. In fact, it was the street itself.

Because despite all the evidence around me, I wasn’t actually in Italy. I was in Tianjin, China.

Here in the midst of sky-high apartment buildings is a little Italian neighborhood, a historical remnant of the days when the port city was sectioned off by the Western powers.

The Middle Kingdom had once been the most technologically and culturally advanced in the world, but from thinking they were at the top, they had stopped trying to learn from those around them.

So confident in their superiority the Chinese elite had no idea how far from the top they’d fallen.

Thus, when Westerners came to Chinese shores seeking to open up trade, they were flatly rejected.

After all, what did these white devils have to offer them? Were the Chinese supposed to be impressed by these cheap, boring pieces of cloth? Anyone could tell that Chinese silks were far superior.

(Remember, at one point it was the British that were the ones with the cheap manufactured goods.)

With better weaponry and cheaper industrial goods the Western powers easily overwhelmed the Qing empire, saddling the government with huge indemnities and forcing the door open for them to enter the country and trade.

Unrest began to stir across the country. In 1900 this culminated in the anti-foreign ‘Boxer Rebellion’ that launched attacks on foreign businesses and people in Northern China.

Eight of the foreign powers united to quash the rebellion, and once they did, the foreign states took the port town of Tianjin and split it amongst themselves as payback.

No person, business, or country likes to find out that they’ve lost their edge. But the sooner that fact is accepted, the quicker they can get to learning and improving in order to regain that dominance.

In that situation there are essentially two options: you can either get angry and try to reject the fact that the world is changing or you can position yourself to take advantage of it.

Choosing the first option, the Boxers’ actions actually led to greater Western control of China. Achieving exactly the opposite of what they’d intended.

Whereas those that decided to work with the foreigners not only survived, but thrived, taking advantage of the influx of capital, knowledge and cheap products.

Deeply submerged in debt and with increasingly slowing economies, the US and Europe are facing the same two options today as China did merely a century earlier.

Rather than the Italian Concession in Tianjin, we are now seeing an influx of Chinese to Italy.

Businesses that can’t keep up with the heavy regulatory and tax burdens imposed by the Italian government are looking to sell, and the Chinese have the capital and interest to buy.

So while the economy may look bleak in Italy, thanks to globalization there is still an abundance of business opportunities there.

Take for example the three guys who created http://ift.tt/1bhWkBz, which quite literally means “sell to Chinese”. The concept is simple—to help connect the Italian sellers of businesses, real estate and etc. with the Chinese market—and they’re doing great.

The simple shift in attitude, to view outsiders as an opportunity rather than a threat creates a new whole world of possibilities. Those who do that stand to profit most.

from SOVEREIGN MAN http://ift.tt/1qSUomm
via IFTTT

November 17, 2014
Sovereign Valley Farm, Chile

Something is dreadfully wrong with this picture.

In a report just released today by the National Center on Family Homelessness, a team of academics has demonstrated that the number of homeless children in the Land of the Free now stands at 2.5 million.

This is far and away an all-time high and constitutes roughly one out of every 30 children in America.

The report goes on to explain that among the major causes of this problem are the continuing impacts of the Great Recession that began in 2008.

Funny thing, someone ought to tell these homeless kids that the economy is doing great. Of course, we know this to be true because the stock market is near its all-time high.

The Dow Jones Industrial Average now stands at 17,633, just off its all-time high.

Also near its all-time highs is the bond market, and coincidentally, the US debt—which is now within spitting distance of $18 trillion.

In other words, if these kids ever do manage to pick themselves up off the streets, they’ll work their entire lives to pay off a debt that they never signed up for.

And it all comes down to a completely perverse, corrupt, debt-based paper money system.

Yes, no matter what happens in the world, there are always going to be rich and poor. And as painful as it may be, there will always be homeless children. That’s not really the point.

For the most part, financial wealth used to be something that people had to work to achieve. They had to produce something valuable for consumers. They had to develop new technologies and be innovative. They had to take chances and in many cases risk it all.

That’s less and less the case today.

Today one’s station in life is much more tied to how you grew up. If you were born poor, you have a 70% chance of staying poor (according to a recent study from the Pew Charitable Trust).

And needless to say, if you’re born rich, you’re going to stay rich. Much of that is due to the monetary system.

In our system today, unelected central bankers wield total control of the money supply. In their sole discretion, they have conjured trillions of dollars out of thin air, and have thus greatly inflated the money supply.

This monetary inflation has created a number of effects.

On one hand there has been substantial asset price inflation. We’ve seen the prices of stocks, bonds, luxury properties, etc. hitting fresh highs again and again.

And, naturally, it’s people who are already very wealthy who own these assets.

Then there’s the other side– retail price inflation. Think ‘cost of living’. Rent. Food. Fuel. Medical costs. All the stuff that normal people need to live.

Both asset prices and retail prices have gone up.

Now, if you’re already very wealthy, you might spend as little as 1% of your annual income on living expenses, and you keep the other 99% to invest in these assets that keep hitting fresh highs.

In this case, retail price inflation is irrelevant; central bankers are putting so much money in your pocket you don’t even notice the increase in retail prices.

Then there’s the case for everyone else. People who struggle to make ends meet and have to spend 99% of their income on living expenses. If they’re lucky they save 1% of their income.

Obviously to these folks, retail price inflation eats away at their living standards. And a substantial portion of them fall out of the system entirely and end up on the streets.

Again, this isn’t intended to rant against wealth. We tell our students each year at our entrepreneurship camps– wealth accumulated by producing valuable products and services, through hard work, great ideas, and risk-taking, is pure and noble.

By creating wealth for yourself you create wealth for others, and you create progress for humanity.

But we’re not talking about wealth creation. We’re talking about theft.

This system puts money in the pockets of people who are already wealthy by sacrificing the purchasing power and savings of everyone else. The rich get richer, the middle class gets hollowed out, and pensioners get squeezed.

They have completely broken capitalism and replaced it with state-sponsored welfare for select corporations and special interests. Totally destroying upward mobility in the process.

If you want a brighter future for your children look for growth, look for where the possibility of your child ending up on the street is not even an option.

Moving abroad is not just a luxury for wealthier families. In fact the less you have, the more crucial it is to get out of a system that is stacked against you.

from SOVEREIGN MAN http://ift.tt/1xIuJli
via IFTTT