Avsnitt
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At the center of Sovereign Man’s core ethos is the indisputable view that the United States is in decline.
I take absolutely zero pleasure in writing that statement. But it’s incredibly difficult, if not impossible, to objectively appraise the bountiful evidence at hand and not reach the same conclusion.
Consider the following:
US government finances are appallingly bad. The national debt exceeds 100% of GDP, annual deficits run into the trillions of dollars with no end in sight, and major trust funds for Social Security and Medicare will soon run out of money.
Political incompetence is mind-blowing; politicians fail to be able to even identify problems, let alone understand them, let alone reach compromises to solve them.
Ditto for central bank incompetence. These people simply cannot understand how, by keeping interest rates at zero for nearly a decade and conjuring trillions of dollars out of thin air, they engineered record high inflation. And they also fail to understand how their actions to ‘fix’ inflation are causing widespread havoc in the economy and financial system.
Social divisions across the country are extreme. Censorship and cancel culture prevail, and corporations now wag their fingers at their own customers to “be better”.
The education system is in pitiful shape, with many politicians and school board officials turning classrooms into activist training camps.
The population is terribly unhealthy. Obesity and drug addiction are epidemics. Plus there’s an obvious mental health crisis that drives far too many people to commit horrific acts of violence on innocent people, including children.
National security is in decline. Military readiness is down, yet top officials seem more concerned about diversity and inclusion rather than the ability to prevail in war.
The rule of law has been perverted, including for political purposes and self-aggrandizement. We just saw another example of this yesterday.
Even the national fertility rate continues plummeting-- an indication of the rising cost of living and social apathy.
The Wall Street Journal recently published a series of polls indicating that most Americans doubt their children will have a better future; pessimism is strong.
They also found that certain values which once defined American culture, including a sense of community, hard work, and civility, are no longer important to the majority of people.
This is all happening at a time when adversaries are circling. And that includes China.
Now, usually whenever I bring up China, there are always people who are quick to assert that China cannot possibly replace the US as the dominant superpower because they have just as many problems.
And it’s true that China has a ton of problems. They have their own debt issues, financial system chaos, and economic problems. They have social challenges, a major demographic crisis, and even a serious issue with childhood obesity.
But no civilization or empire throughout history has ever been problem-free.
Ancient Rome, even during its early republic days, had enormous problems. They had to deal with constant revolts, civil war, the genocidal dictatorship of Sulla, famine, war, plague, and more.
Yet there’s an enormous difference between taking on challenges while you’re on the rise… versus succumbing to them while on the way down.
Rome was able to deal with its challenges and continue its rise to become the dominant superpower. China may be able to do the same.
The US finds itself in a precarious position where they have a mountain of compounding problems… and no ability to even slow them down, let alone solve them.
I’ve written before about what I call the “Four Forces of Decline”, which I define as
1) Forces of History-- the inevitable, cyclical nature in the rise and fall of Empire. No empire, no civilization in human history has ever retained the top spot forever, and most tend to experience similar challenges on the way down. -
In 1898, a Polish author named Jan Bloch published a 3,000+ page volume on modern warfare entitled Future War and its Economic Consequences.
Bloch had studied military technology and saw the rapid pace with which destructive new weapons and munitions were being developed. And he came to the conclusion that the next war would be absolutely devastating.
Bloch predicted, in fact, that the days of classical warfare-- cavalry charges and large troop movements on an open battlefield-- were over. And that the next war would entail long, bloody, pointless trench warfare that would be unimaginable in its destruction.
In short, he predicted World War I.
Bloch was even invited to speak at a diplomatic conference in the Hague in the following year in 1899, and he urgently warned the attendees to do everything they could to prevent war.
The experts listened politely… and then completely ignored him. 15 years later Bloch’s prediction came true when the Great War broke out. Millions died. Europe was destroyed.
And yet in retrospect it was all so obvious. The warning signs were there all along. But somehow the people in charge not only managed to NOT avoid war, they managed to steer directly into the path of destruction.
This is often the case with major world events, including wars and major economic catastrophes. They’re seldom accidents, nor do they sneak up without announcing themselves years in advance.
And after the crisis is over, it all seems so obvious in retrospect. Yet the people in charge failed to see it coming, and often contributed to the cause.
Another great example is the Global Financial Crisis of 2008, where banks and financial institutions engaged in high-risk behavior that nearly brought down the entire global economy.
Once again, the people in charge not only failed to notice, but they played a key role in engineering the crisis to begin with.
The Federal Reserve slashed rates to just 1% after 9/11 in the early 2000s, which led to a massive asset bubble. The Fed didn’t seem to notice.
Then when they started aggressively raising interest rates in 2005 (to help fight inflation), asset prices fell dramatically. The Fed failed to predict this too.
Banks lost billions of dollars as a result, and many banks failed entirely. This triggered a chain reaction in the financial system and the worst economic crisis since the Great Depression. And the Fed not only missed the warning signs, they steered directly into the disaster.
We’ve just seen a similar crisis unfold with this month’s bank runs.
The Fed slashed rates to zero, sparking yet another major asset bubble. The Fed failed to notice.
Banks paid record high prices to buy US government bonds using their depositors’ funds. The Fed failed to notice.
Then when the Fed aggressively raised rates, they failed to predict that asset prices (including bonds) would plummet in value, causing widespread solvency problems at banks.
Banks have even reported $600+ billion in unrealized bond losses to the Federal Reserve-- one of the banks’ primary supervisors. And yet the Fed still failed to notice.
In fact just three days before Silicon Valley Bank went bust, the Fed insisted to Congress that everything was fine in the financial system.
These experts are consistently wrong. And it reminds me of World War I: the warning signs were obvious, yet the people in charge failed to notice… and steered directly into the path of disaster.
So in today’s podcast, I spend some time exploring an important question: what other key risks are lurking out there which the people in charge have failed to notice?
At this point, frankly, it would be stupid to assume that the government and central bank have everything under control. What are they missing?
I talk about five separate risks today-- including further fallout from these aggressive interest rate hikes. We also discuss Social Security (which is a pretty obvious risk), war, -
Saknas det avsnitt?
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Throughout history, whenever there has been a major shift in the world, it has usually been accompanied by a single iconic event that is associated with that change.
For example, historians often point to 476 AD as the year that the Western Roman Empire fell, when Odoacer and his barbarians forced the abdication of the Emperor Romulus Augustus— even though it was obvious that Rome was in decline way before 476.
People also often associate the start of the Great Depression with the stock market crash of 1929 (even though there were many signs of economic distress well in advance of that).
But these clean, precise dates are only chosen in retrospect. People experiencing the events at the time rarely understand their significance.
I think it’s possible that future historians may look back at Silicon Valley Bank’s collapse as one of those iconic events that signals a major shift... potentially the end of American geopolitical and economic dominance.
I’m not making this assertion to be dramatic; rather I think that anyone who takes an objective look at the facts—
the appalling $31+ trillion national debt
the government’s addiction to spending and multi-trillion dollar deficits
social dysfunction and “mostly peaceful” protests
the decline in military strength
rampant inflation and central bank folly
extreme government incompetence
insolvency in major programs like Social Security
— will reach the same conclusion that the United States is past its peak and in decline.
Now on top of everything else we can add a loss of confidence in the US banking system.
Obviously I take no pleasure in acknowledging the US is in decline. But that doesn’t make it any less true. And this has been Sovereign Man’s core ethos since inception back in 2009.
Back when I started this company it was considered extremely controversial when I said the US was in decline, or that there would be larger problems in the banking system, or that the breakdown of social cohesion would only get worse.
But today these challenges are so obvious that they’re impossible to deny.
You can never solve a problem until you first admit you have one.
And most of the corrupt sycophants masquerading as political leadership are incapable of admitting problems, nor discussing them rationally, let alone solving them.
But you and I do not have that disability. We are free to exercise the full range of human ingenuity and creativity with which we have been fortunately endowed.
So while the people in charge continue to never miss an opportunity to demonstrate their uselessness, we have a whole world of freedom and opportunity at our disposal.
This is the topic of today’s podcast.
First I review the huge issues with the Silicon Valley Bank collapse. Honestly when you look at it from a big picture perspective, it’s littered with mind-numbing incompetence.
The politicians who received donations from SVB’s Political Action Committee missed it. The Wall Street hot shots missed it. The credit ratings agencies missed it. The regulators missed it. The Federal Reserve missed it.
But now the Federal Reserve has launched a new program that exposes the US dollar— and everyone who uses it— to significant risk.
Think about this from the perspective of foreign governments and central banks.
Foreigners bought boatloads of US government debt over the past few years, especially in the early days of the pandemic.
In fact foreign ownership of US government debt has increased by $1 trillion since the start of the pandemic, and now amounts to more than $7.6 trillion.
But thanks to Fed policy, these foreign institutions are in the same boat as Silicon Valley Bank— they’re sitting on huge losses in their bond portfolios. They’ve also suffered from pitiful returns, high inflation, AND exchange rate losses.
In short, any foreign institution that bought US government bonds over the past few years is sitting on huge losses.... -
Last June, during the European Central Bank forum, the host asked the chairman of the Federal Reserve about inflation.
The Fed Chairman responded, “I think we now understand better how little we understand about inflation.”
“Uh, that’s not very reassuring,” the host chuckled.
Talk about an understatement. It’s downright terrifying.
This is the Fed Chairman— the High Priest of finance— who has the power to control virtually everything in the economy.
He can conjure trillions of dollars out of thin air practically at will, raise and lower interest rates, push businesses and banks into bankruptcy, and cause people to lose their jobs.
And here he is acknowledging that they didn’t have a clue about inflation.
Thank goodness that was 8 months ago! Certainly by now they've really learned everything they need to know.
Wrong. They still don’t have a clue.
This week Fed officials have been busy giving speeches in advance of their interest rate policy meeting later this month.
And they keep complaining that the unemployment rate is too low. Too many people have jobs!!
The Fed is trying to put more people out of work... under the assumption that if more people are unemployed, there will be less spending in the economy, and therefore inflation will fall.
But this is such idiotic thinking.
They may very well be successful in pushing millions of people into the unemployment line.
But everybody knows that as soon as this happens, the government will step in and bail those people out with generous unemployment benefits.
Think about it— the government did this in the 2008 recession, doling out luxurious unemployment benefits that lasted for YEARS.
And during COVID they paid people to NOT work and stay home.
So it’s practically a given that the government will dish out fresh new benefits to newly unemployed workers.
And where will the government get all that money from to pay unemployment benefits? From the FED! Duh. How do these Fed officials not understand this?!?!?
Another thing the Fed has totally missed is the ‘quality’ of the employment numbers. They fret that there’s too much job growth in the US— because they’re just looking at the QUANTITY.
But if you take even a casual look beyond the headline numbers, you’ll see that most of the job growth is for waiters and bartenders. The US labor market doesn’t have red hot job growth for software engineers, biomedical researchers, or senior investment analysts.
America is essentially becoming a bartender economy now.
This is going on in front of their very eyes, but the Fed can’t see it.
If you look at the official minutes and records from the Fed’s policy meetings, you can see what they actually discuss... and it becomes even more obvious they still don't understand inflation.
They STILL blame inflation on Putin and the evil virus.
There is ZERO discussion about how the government destroyed the economy and labor market with lockdowns, or how oil companies are being chased out of town (leading to higher energy prices), or all the idiotic new rules penned by the woke capitalism mob.
And of course there’s zero discussion about the Fed’s own role in slashing interest rates to zero (and keeping them there for the better part of a decade), or printing more than $8 trillion since the 2008 recession.
There’s no discussion of the $31+ trillion government debt, or last year’s $4 trillion deficit, or the impact of idiotic legislation like the poorly named “Inflation Reduction Act”.
Ultimately they consistently prove that the people in charge of managing the US dollar have still learned absolutely nothing.
When you think about it, that goes for nearly every major institution.
The White House appears to have learned nothing, the media has learned nothing, the high priests of climate change have learned nothing.
The good news though, is that everyone else— who feel the impact of these destructive policies— is learn... -
Two weeks ago, I told you that the US government had just published its annual financial report.
The government by its own admission lost $4.1 TRILLION in FY 2022. And this is 34% worse than the the previous year’s $3.1 trillion loss.
And the rest of the financial report only gets worse from there...
They describe Social Security’s extreme insolvency, projecting total unfunded liabilities of the program to be $76 trillion.
And they forecast that US government debt will one day reach 566% of GDP.
I’ve written about this extensively over the years, because history tells us that the consequences of this type of financial mismanagement are severe.
This is not the first time that a country has had a lot of debt, nor the first time incompetent leadership has consistently failed to recognize and solve big problems.
So in today’s podcast episode we go back in time thousands of years to heed the lessons of one of history’s biggest scumbag rulers.
Unsurprisingly, he raised taxes, debased the currency, violated the rule of law, confiscated property, eliminated dissent, vastly expanded the government, and created all sorts of idiotic and destructive laws.
BUT, this is fixable.
And today we actually discuss some common sense ideas to demonstrate how easy it should be, at least conceptually, to take giant leaps in the right direction once again.
Unfortunately, the people in charge seem to have zero interest in doing any of that.
So I wouldn’t hold my breath waiting for politicians and bureaucrats to ride to the rescue.
But at the same time, as I often point out, this is not a bad news story.
The world is not coming to an end.
In fact, I believe the world is still full of abundant and incredible opportunities, despite the trajectory of its largest superpower.
And we close this episode with the core central message of this organization: we have control over our own lives.
Regardless of what they do or how badly they screw up, you do not have to go down with a sinking ship. You have the power to solve these problems for yourself.
You can listen to today’s podcast here.
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[00:00:00.810]
Today we're going to go back in time to the 26 September in the year 480 BC to a very critical island in the Mediterranean. Now, if you know your history, you might be thinking, I know what he's going to talk about, because 480 is a very famous year. 40 BC is a year where Greece, which I'm going to do Greece and air quotes for right now. I'll explain why in a moment. Greece and Persia, they're at war with each other in a in a war that historians is often described as this epic battle between eastern civilization and western civilization.
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If Greece loses against Persia, there is no Socrates, there is no Plato, there is no Western civilization. So it's a really important year. 480 BC was the famous battle of thermopole 300 Spartans fending off the Persian. There are other people there as well. There's 700 Thespians and some others as well.
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But this very small number of people in this, like the battle of the Alamo, fighting off the whole army so that everybody else can live and regroup and defeat the Persians, this is followed by the Battle of Salamis, this famous naval battle. Salamis was a very important island in the Mediterranean. And this battle of Salamis where the Greeks vanquished this much larger Persian fleet and embarrassed Xerxes, and it was the turning point in the war, again, supposedly took place on September 26, 480 BC. I say supposedly took place. This is according to very painstaking astronomical calculations.
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It's not like the Greeks tell us, oh, it was September 26. There was no such thing as September in 480 BC. So the people have gone back and done these astronomical calculations to figure out the date of this based on information that we know. -
Imagine if Elon Musk stood up one day and told the world, “My #1 goal is for Tesla stock to lose 2% of its value every year.”
First of all, people would probably rightfully conclude that Elon had finally lost his mind.
And second, everyone would dump the stock. Who would possibly want to own an asset where the management is TRYING to lose 2% every year?
Yet that’s precisely the stated goal of the people who manage our currencies. They tell us flat out that they WANT 2% inflation, i.e. they WANT the dollar, euro, etc. to lose 2% every year.
Obviously these ‘experts’ have completely failed to achieve their goal lately… but the larger point is that incentives are clearly not aligned.
In the case of businesses, managers generally have the same incentives as their shareholders. Elon’s wealth only increases if his stockholders’ wealth increases.
But the people who manage currencies (politicians and central bankers) do not share the same incentives as the people who own the currency (i.e. responsible individuals who save money).
Savers want the currency to be stable. Politicians want it to lose value. It’s a totally perverse incentive structure… but it may get a lot worse-- at least for the United States.
And it has a lot to do with the war in Ukraine.
History is full of examples of former superpowers who lose their dominance. Egypt. Greece. Rome. France. The Ottoman Empire. Mongolia.
And quite often there’s a ‘changing of the guard’, a reshuffling of the world order, when a rising power and declining power are involved in a war.
Carthage was once the dominant power in the western Mediterranean. But after losing the Punic Wars, Rome asserted its dominance over the region.
Spain was once the dominant power in Europe. But after the Thirty Years War, it became clear that France was the new superpower on the continent.
The two powers don’t even need to be fighting each other; after World War II, for example, it was clear that the US had surpassed Britain as the dominant superpower, even though both nations were on the same side during the war.
Today we see the same ingredients that may result in another reshuffling of the world order: a declining power (US), rising power (China), and a war.
Today is the first and hopefully only anniversary of the war in Ukraine. And I spend some time in today’s podcast episode exploring the larger implications, specifically focusing on the US dollar.
I think it’s very probable that, whenever this war finally ends, China will emerge as a clear superpower.
That doesn’t mean America will vanish. But it would mark the start of a new era in which the US can no longer do whatever it wants… and quite possibly share the dollar’s ‘reserve status’ with China.
For decades now, the US has enjoyed the exorbitant privilege of being the primary issuer of the world’s reserve currency.
This gives the US the luxury of having endless demand from foreign investors who have to own US dollar assets, and specifically US government debt.
Because of this endless demand from foreigners, the US government has been able to get away with the fiscal equivalent of double-homicide: multi-trillion dollar deficits, a $31.5 trillion national debt, etc.
Yet despite such irresponsible spending, foreigners STILL buy US government bonds… simply because the US dollar is the world’s reserve currency.
Anyone who wants to participate in global trade, buy oil from Saudi Arabia, etc. HAS to own US dollars… and hence hold their noses every time Nancy Pelosi said “it costs nothing”.
But imagine a world where the US dollar is no longer king. Sure, the dollar would still be relevant. But not king. Maybe a duke or viscount.
Without its status as the undisputed king of currencies, suddenly the US government wouldn’t be able to get away with outrageous deficits anymore. The Federal Reserve wouldn’t be able to get away with printing trillions of dollars, or slashing interest rates to zero, -
There’s hardly anything that POTUS loves to brag about more than his ‘economic success’. He is, after all, a self-proclaimed “capitalist”.
Even in last week’s State of the Union address, he boldly claimed that he “cut the deficit by more than $1.7 trillion-- the largest deficit reduction in American history.” And he’s made that same assertion over and over and over again.
Unfortunately it’s a complete lie. And just yesterday the Treasury Department released financial documents proving it.
Every year the federal government publishes an annual financial report; it’s sort of like what big public company like Apple does. The annual report contains financial statements, plus hundreds of pages of discussion, details, and footnotes.
And yesterday afternoon they released the annual financial report for Fiscal Year 2022, which just ended a few months ago.
It goes without saying that the government’s financial condition is completely atrocious.
Their “net financial position”, which is sort of like the net worth of the federal government, fell to MINUS $34.0 trillion… which is worse than the MINUS $29.9 trillion in FY21.
The projected social security funding deficit also got worse… from $71 trillion to $75.9 trillion.
The real headline to me, though, is the budget deficit lie. The President claims that deficit last fiscal year was $1.4 trillion, and that he (and he alone?) brought it down by $1.7 trillion. But that’s not true at all.
It turns out that the “budget deficit” is actually an inaccurate figure that can easily be manipulated. If you’re a finance or accounting type, you might be surprised to learn that the budget deficit is determined on a ‘cash basis’ and not ‘accrual basis’.
This means that officials can easily accelerate certain revenues and push off certain expenses to massage the data and make the budget deficit appear better than it really is.
Businesses aren’t allowed to do this. Nearly every other organization in the country of any reasonable size has to follow strict accounting rules, booking revenue when it’s earned, and accruing expenses when they’re incurred.
This provides a more honest, transparent, and standardized way of reporting financial results.
So whenever they talk about the ‘budget deficit’, this is really just a manipulated number that doesn’t conform to proper accounting standards.
Naturally this raises an important question: how much would the federal government’s annual budget deficit be if they conformed to those proper accounting standards? i.e. the same ones that every major corporation has to follow?
Well, lucky for us, we don’t have have to guess. Because the government actually publishes that number too.
They call it their “Net Operating Cost”. And it essentially represents the REAL budget deficit.
It turns out that the FY22 Net Operating Cost of the federal government was MINUS $4.1 trillion. And that figure was MUCH worse than FY21’s Net Operating Cost of $3.1 trillion.
So this guy did not, in fact, “cut the deficit”. The real deficit, as determined by Net Operating Cost, INCREASED by a trillion dollars.
There’s so much more in this report, though.
One of the other interesting points, in fact, is that the government actually failed its audit. Again. The Comptroller-General states very plainly that there are numerous “material misstatements” in the government’s financial reporting and internal controls.
There are actually laws that are supposed to prevent this from happening. Twenty years ago Congress passed something called the Sarbannes-Oxley Act, which imposed CRIMINAL penalties for company executives who fail their audits.
If the federal government were held to the same standard as the private sector, dozens of officials should be facing jail time right now. Instead they’ll retire to their generous, fully-funded pensions and receive lavish board seats and prestigious awards. They will never be held accountable.
You, on the other hand, -
Most people have a peasant mentality.
Throughout human history, in fact, the vast majority of people never thought much beyond their tiny village, let alone traveled.
But there have always been some people who have had the intellectual courage and curiosity to think far beyond their own borders. And they’ve often been richly rewarded for it.
Adopting a global mindset essentially means thinking about the entire world when considering your options. And more options is almost always more beneficial.
If you’re thinking about retirement, more options will greatly increase the chances of finding the right place that has the right weather, cost of living, medical care, and lifestyle that you desire.
If you’re thinking about business, considering your overseas options will greatly increase your chances of finding high quality, cost effective labor… or lucrative new markets to sell your products and services.
If you’re thinking about investments, looking abroad increases the likelihood of finding wonderful, well-managed businesses trading at a steep discount to intrinsic value. Or a trophy property selling for less than the cost of construction.
This is the topic of our podcast today-- we discuss WHY it makes so much sense to look abroad, and cite some very specific examples.
We talk about asset protection, for example, and I explain why foreign asset protection structures are so much more effective.
(I also explain why asset protection structures exist to protect against professional criminals who abuse the legal system to steal from law-abiding, hard-working people.)
I cite specific legislation from some of the best jurisdictions to show precisely why they are so much more effective at helping to protect honest people from thieves.
We also discuss taxes… and specific ways that thinking globally can dramatically reduce your taxes. These are all completely legal. We’re not talking about any ‘loophole’ that requires a creative interpretation of the tax code.
I tell you about one international strategy, for example, to slash your tax bill by 50%. It’s no loophole. In fact there’s an entire section of the tax code dedicated to it.
Bottom line, diversifying internationally doesn’t mean you need to go anywhere or do anything exotic. It just means expanding your thinking to consider a wider variety of options… and that can have an enormous benefit in your life.
You can listen in to today’s episode here.
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[00:00:00.890]
Today we're going to go back in time to the 8 January in the year 1198 Ad. To the ruins of the ancient Septicoleum Temple, located in the city of Rome. Now the Septic Soleum temple doesn't exist anymore. It was demolished hundreds of years ago. But if you know Rome at all, it was used to be located nearby, the Circus Maximus.
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And on that day, the 8 January 1198, the Pope Celestein III, he had just died at the tender young age of 92 years old. And the College of Cardinals met very quickly at that Roman temple, the Septicoleum Temple, to elect his successor. By Vatican standards, the deliberation was very quick. The vote only took two ballots. You probably know, the black smoke and the white smoke and all of that.
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It was very, very fast. They had two ballots. And so very quickly they chose their new Pope. It was a young guy's, 37 year old Italian nobleman. His name was Latario Descendy.
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Latario descende chose as his new papal name. He chose innocent III. And right from the beginning, this young guy, he's young, he's full of energy, he's actually quite fixated on power. Innocent III felt that his predecessor had really weakened papal authority. You got to remember that for a long time the Church was the dominant influence in everything in Europe.
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Politics, economics, daily life. They controlled everything. And over time, at this point, -
Gold is really an amazing metal when you think about it.It doesn’t corrode. Coins buried underground or sunk at the bottom of the ocean for hundreds of years are routinely pulled up and brushed off, and they’re good as new.This strength and durability is precisely what makes gold so interesting as an inflation hedge.It undoubtedly takes a lot of work to produce a gold coin or bar-- so much labor, energy, technology, etc.A gold coin essentially represents all of the work… all of the effort and labor… that went into producing it.This is not unique. In the same way, a bushel of wheat represents all the labor that went into producing the grain. An iPhone represents all the labor and effort that went into producing it. Except that wheat doesn’t last. iPhones don’t last. Gold does.So gold essentially encapsulates all of the resources, including TIME, that went into producing it… in a way that lasts forever.Right now, for example, it costs major mining companies about $1,270 to mine a single ounce of gold. So if you buy gold today, you’re essentially locking in a $1,270 production cost.This is the reason that gold does such a great job of maintaining its value against inflation, because, over time, production costs tend to increase. And higher production costs eventually result in higher prices.This is true with just about any product or industry. We’ve seen companies like Procter&Gamble, Unilever, CocaCola, McDonalds, etc. all increase prices because their production costs are rising.Again, though, you cannot use a Big Mac as a store of value. It won’t last forever. It won’t even last a day.But gold lasts. You can buy a Canadian Maple Leaf coin today, and, ten years from now, your 2023 coin will be worth exactly the same as a brand new coin minted in 2033.And if you anticipate that inflation will push up production costs over the next decade (which tends to happen), you can easily make a case that gold prices will be higher by then.This is the topic of our podcast episode today; we take a deeper look at why gold has long-term value-- a variation of ‘proof of work’ that I call Proof of Time.We start out in Yap Island, in Micronesia, and discuss how the natives there developed one of the most advanced financial systems in the history of the world based on the concept of ‘Proof of Work’.Anthropologist William Furness wrote that, despite the Yapese having no understanding of economics, they realized that “labor is the true medium of exchange and the true standard of value.”I believe this is true. But more than labor, I believe that TIME is real standard of value.Time is the ultimate scarce resource. No one, no matter how rich or powerful, can create any more of it. And once it is used, it is gone forever.Labor is one of the ways that we use time. And gold is a rare asset that transmits both time and labor… forever.We also talk about different BUY signals for gold. We talk about miners’ gross profits-- and why it makes sense to think about buying when profits are low… or even when the price of gold falls below the price of production.In a way that’s like buying a house for less than the cost of construction; it’s a SCREAMING deal and definitely worth considering.Gold isn’t at that level right now. But it could be soon… and that’s why it’s worth understanding how to think about gold, and many other assets, through this lens of ‘time’.You can listen to this week’s episode here.Download Transcription as PDF Open Podcast Transcription [00:00:00.970]Today we're going to go back in time to the 26 January in the year 1543. Our location is absolutely nowhere, just the middle of nowhere in the middle of the Pacific Ocean. A tiny speck that you'd have to zoom and zoom and zoom in just to find a little tiny island that's a couple of dozen square miles, an area at most. Now, this is a time in history where you've got super powers that are...
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As a member of the Boards of Directors of several companies, I regularly attend board meetings to help oversee and guide businesses.
One company in our portfolio is run by some very sharp and talented young guys who have created one of the first metaverse advertising companies. It’s growing rapidly, and they’re even expanding into video games now.
In a recent board meeting, the management team was telling me about their ‘KPIs’ for this year; KPI stands for ‘key performance indicator’, which is essentially a key metric that a company monitors to get an overall sense of the business.
Apple, for example, probably monitors iPhone sales very closely as a major KPI.
These guys at the metaverse business had a long list of KPIs. And as they were explaining the metrics to me, at a certain point I had to stop them.
I told them that, first of all, you can only focus on so many things at once. You cannot prioritize everything. You have a certain amount of time, money, people, and energy, and leaders need to make deliberate decisions about how to allocate those resources.
And second, you have to focus on things that you control.
I told the guys that they cannot control the number of daily active users in the metaverse, or in the video games where they're advertising.
But they can absolutely control the number of advertisers they work with, the properties in their inventory, etc.
I’m telling you this story because I think it’s a sensible way to think about a Plan B.
Right now, it feels like the world is chain-smoking crisis after crisis.
Consider inflation, for example, which has remained stubbornly high. I can’t do anything to bring down price levels; there are only a handful of policymakers who have that ability, and they clearly don’t get it.
What I can do, however, is focus on the things that I can control in my own life.
And I can absolutely control, for example, the impact that inflation has on me, because of the decisions that I make with my savings and income.
I can’t control the solvency of Social Security either. But I can make sure that I have plenty of money stuffed away for my own retirement, regardless of what happens to the Social Security trust funds.
But today I really wanted to discuss how the future is far from certain.
We discuss regularly in these letters that the US, and the West in general, have set themselves on a very destructive trajectory. Too much debt, too much spending, too much money printing, too much conflict, etc.
And based on this current, destructive trajectory, if we fast forward 10-20 years, it doesn’t look good.
I also write a LOT about various historical examples of once great empires that fell from glory for many of the same reasons.
But again, the future is not certain. If there’s anything we’ve learned over the past few years, it’s that ANYTHING can happen. The world can change overnight.
And today I wanted to tell you a different story... not one of decline, but really more of a turn-around story.
It’s the story of a country that was on the brink of disaster... heavily indebted up to its eyeballs and about to be invaded. And they also happened to have a head of state with hardcore dementia who reportedly went around shaking hands with trees.
But they fixed it.
They managed to right the ship, turn everything around, and usher in a period of unprecedented peace and prosperity.
So it is possible. But in case this turnaround doesn’t happen... well, that’s why we have a Plan B.
This is the topic of our podcast today; you can listen in here.
Click here to listen in to this week’s episode.
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[00:00:01.050]
Today we're going to go back in time to April 215 two, to a place called Ludlow Castle, located in the West Midlands region of England. It's about today, an hour and a half drive or so from Birmingham, and we find on that day in Ludlow Castle, -
On January 24, 1971, a Swiss-German university professor managed to raise money from the European Commission to fund his new idea— he wanted to start a business conference that would become a major global brand.
He secured the funding and held the first conference the following month in the tiny Swiss town of Davos; it was a smashing success— more than 400 executives attended. The following year, the President of Luxembourg was a featured speaker.
And for decades since, attending the annual conference at Davos has become a rite of passage among the world’s business and political elite.
The professor turned conference organizer, of course, is Klaus Schwab. And the organization he started is now known as the World Economic Forum (which is meeting right now for its 2023 event).
The WEF has turned into an overzealous, supranational, undemocratic organization with a dangerous amount of power; Schwab openly brags about the influence he has with world leaders.
For example, in 2017 Klaus Schwab spoke about all the world leaders who had previously been involved with the World Economic Forum through its Young Global Leaders program.
He named Russian President Vladimir Putin, former German Chancellor Angela Merkel, and Canadian Prime Minister Justin Trudeau, as examples to explain, “what we are very proud of... is that we penetrate the cabinets” of governments around the world.
Schwab said that half of Trudeau’s cabinet were Young Global Leaders of the WEF.
And Trudeau is a great example of the type of world the WEF wants to create; one where the government can, for example, form “public-private partnerships” to freeze your bank accounts for protesting against being required to take a vaccine in order to earn a living.
And yes, representatives of the big banks and pharmaceutical companies are present in Davos this week.
The WEF’s goals aren’t a theory. Schwab wrote a book about it. You can read exactly what his worldview is, and see how it has made its way into legislation and national policy.
Just four months after Covid was declared a pandemic, Schwab published a book called Covid-19: The Great Reset, arguing that the pandemic presented a “unique window of opportunity” for global elites to reshape “the direction of national economies, the priorities of societies, the nature of business models and the management of a global commons.”
The WEF was instrumental in promoting Covid lockdowns, vaccine mandates, and censorship of “misinformation.”
In 2021 in a now deleted Tweet, the WEF wrote, “Lockdowns are quietly improving cities around the world.”
Months before the outbreak of Covid, it hosted a “Global Pandemic Exercise” to simulate “an outbreak of a novel zoonotic coronavirus.”
One recommendation the conference put out was for governments “to partner with traditional and social media companies” to “combat mis- and disinformation” to ensure “that false messages are suppressed.”
Naturally, an unelected group of global elites would have the final word on what constituted disinformation and needed to be suppressed.
The WEF also sees combating climate change as the perfect crisis to exploit to push through its anti-capitalist agenda.
For example, in a recent article, the WEF argued for “uneconomic growth” in order to prevent climate change. It linked GDP growth to the number of natural disasters that occur, and even the likelihood of war.
Their lesson: humanity is better off if people are poorer.
Well, most people. Certainly not the very important elites flying in on private jets to Davos, Switzerland this week for the WEF’s annual conference.
They pretend to extol the virtues of representative democracy. But you’ll find absolutely none of that in the room. Instead it is a bunch of people who think they know better, and everyone else should live according to their will and dictates.
For example, a close partner in Schwab’s “public-private partnerships” to promote “stake... -
By the third century AD, it was hard to imagine Rome being in worse condition. Historians literally refer to this period in Roman history as the Crisis of the Third Century. And it was brutal.
Roman citizens couldn’t believe what they were experiencing... it was incomprehensible to them that their fatherland had become so weakened.
Inflation was running rampant. The Empire was stuck in a quagmire of foreign wars and had suffered some humiliating defeats.
Rome experienced multiple bad pandemics, coupled with even worse government response.
Foreign invaders were flooding across their borders on a daily basis. Trade broke down, causing shortages in many vital goods.
And terrible social strife dominated people’s daily lives. Ordinary Roman citizens were at each other’s throats, and it was a time of disunity and outrage.
One contemporary writer of the era named Cyprian described the situation as follows:
“The World itself... testifies to its own declines by giving manifold concrete evidence of the process of decay... There is a decrease and deficiency in the field, of sailors on the sea, of soldiers in the barracks, of honesty in the marketplace, of justice in court, of concord in friendship, of skill in technique...”
Cyprian wasn’t just describing Rome’s obvious decline. Rather, his summary is an indictment of Rome’s inability to stop it’s decline.
Everyone in the imperial government knew what was happening in Rome. They simply lacked the ability to do anything about it.
Historian Arnold Toynbee called this the “Challenge and Response” effect... and it’s an interesting idea.
The concept is that every society has to deal with certain challenges; if the challenges are too great, the society will not survive... i.e. the desert is too harsh, the tundra is too frozen, etc.
But sometimes a society becomes so decadent, so prosperous, that it loses its ability to address challenges. It no longer has the social capital necessary— unity of purpose, the ability to compromise, the capacity to engage in rational debate.
That is the position where Rome found itself in the 3rd century AD. And I believe the West is quickly heading in this direction.
This is the subject of today’s podcast.
We start out talking about Rome’s mortal enemy... and how, after more than a century, Rome emerged victorious as the lone superpower in the Mediterannean.
Everything was great, and peace and prosperity reigned for more than 200 years.
But over that time, the decadence set in. Wheras once Romans had valued hard work, freedom, and unity of purpose, their entire value system changed.
People expected, then demanded, to be taken care of by the state. Corruption became commonplace.The bureaucracy multiplied. Social conflict soared.
And eventually Rome lost the ability to meet its challenges.
I make a lot of historical parallels to our modern world, including some specific examples of absurdities which occurred just in the last couple of days.
But I also discuss why, in the end, these conditions actually create unique opportunity for creative, hard working, talented people.
You can listen to the podcast here.
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[00:00:01.290]
Today we're going to go back in time nearly 3000 years ago to the year 821 BC. To a city called Tyre, which is located in modern day Lebanon. Now, I want to give you an appreciation for just how old Tyre is, because if we go back to 821 BC, tire had already existed for nearly 2000 years prior to that. That's basically the the difference between us and Julius Caesar, right? So that's how old Tyre is.
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That even nearly 3000 years ago, it was already nearly 2000 years old. So that's an old, old city. And again, it still exists today. It's got a population of around 200,000 people. This is a real city today, located again on the Mediterranean and modern day Lebanon thousands of years ago. -
By the turn of the 18th century, Great Britain was well on its way to becoming the dominant naval power of Europe.
Brits had come to understand that a strong navy and merchant fleet were necessary to grow powerful and prosperous as a nation. And a mythology was already building around the Royal Navy.
However all was not rainbows and buttercups. In 1796, the Royal Navy lost control of the Mediterranean. And in 1797, despite several victories, including repelling a French invasion of the British Isles, the navy also suffered two mutinies. And the threat of French invasion persisted.
It was amid this backdrop that a young poet named Samuel Taylor Coleridge wrote The Rime of the Ancient Mariner.
In it, a mariner is cursed to wander the earth telling his story about his grave error of killing an albatross which had led his ship out of icy, mist-shrouded seas.
One of the most famous lines occurs as the ship is stuck in a silent and motionless sea, with stagnant air which refuses to fill the sails:
“Water, water, every where,
And all the boards did shrink;
Water, water, every where,
Nor any drop to drink.”
The ship had drifted into what is known as the doldrums. This is the area between the distinct trade winds systems of the northern and southern hemispheres. Trade winds easily carry ships across the ocean; you can just sit back and let nature do the work.
In the doldrums, conversely, the sea is silent and winds still. You can’t move forward, and you can’t go back.
It’s not immediately dangerous, like a storm. But it is extremely dangerous to be stuck, with dwindling supplies, just waiting for a catalyst.
(In Coleridge’s poem, the men were despondent, depressed, and constantly expecting disaster.)
As we enter 2023, this is essentially the psychological condition of most of the world.
In the US, for example, there’s no major cataclysm; the job market still seems to be fine, and inflation has ticked down ever so slightly.
But everyone seems to be braced for something much worse to come; businesses have started to freeze hiring, and some are laying off workers. They are conserving cash, and not being very aggressive with innovation or investment.
Economic activity has declined, as everyone holds their breath waiting for a recession. And these conditions can actually cause a recession, because it is expectation driven.
This behavior is also driven by the endless chorus of “experts” predicting the future.
Of course, no one can predict the future.
And it is doubly absurd to take the word of “experts” who have been so extremely wrong about everything...
For example, central banks and Treasury officials who failed to predict the dot-com bubble, sub-prime loan housing bust, 2008 Global Financial Crisis, sovereign debt crises, inflation, and supply chain problems... are among the leading voices making economic predictions for 2023.
Does anyone actually still take these people seriously???
It’s more important than ever to decide for yourself how to react to the current conditions.
This is the subject of today’s podcast— having the independence of mind to reject the experts and take back control, in light of the abundance of opportunity that truly exists today.
You can listen to the podcast here.
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[00:00:01.370]
Today we're going to go back in time to Sunday, March 30 in the year 1519. It was Easter Sunday, and on that day, a group of imperial emissaries from the Aztec empire arrived to what is today the modern day Mexico and the city of Veracruz on the Caribbean coast. And they arrived there. They traveled a great distance from their capital city of Tenochtan and arrived arrived to meet foreign visitors that had arrived. They'd heard that these foreigners were there and arrived to the shore.
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And of course, we know that the visitors were in fact Spanish invaders led by Er... -
On December 10, 1896, in the picturesque seaside town of San Remo, Italy, the famed Swedish chemist breathed his last breath after suffering a devastating stroke, and died.
Nobel was an incredibly wealthy man at the time of his death, and most of his wealth had been placed in a trust.
(In doing this, Nobel managed to sidestep Sweden’s gargantuan inheritance tax that had been in place since 1884, AND the Kingdom of Italy’s estate tax.)
Nobel’s death is commemorated every year on December 10th, at the annual banquet which honors the newest recipients of the Nobel Prize.
That’s tomorrow. And among the honorees at this year’s banquet is the former head of the US central bank, Mr. Ben Bernanke.
I’m sure Bernanke is a wonderful human being who certainly tried his best. But, as you may recall, he was the “expert” who established the precedent of slashing interest rates to zero and conjuring trillions of dollars out of thin air.
When Bernanke first became Fed Chairman in 2006, the central bank’s balance sheet was about $850 billion. And as the housing market began to decline, he continually insisted that there wouldn’t be a housing crash… nor a recession… nor certainly a major economic crisis.
He was completely wrong on all three accounts.
Within a couple of years, the entire global economy had nearly collapsed. Bernanke responded by printing so much money that the Fed’s balance sheet ballooned to $4.5 trillion (from $850 billion). And he cut rates to zero.
Bernanke had this power because the nature of our financial system awards dictatorial control of the money supply to a tiny group of unelected central bankers. And Bernanke was the chief of that unelected committee.
Bernanke faced some criticism for his actions, most vocally by then Congressman Ron Paul.
But similar to the incorrect predictions he made about the economy and housing, Bernanke insisted that there would be no consequences… that the Federal Reserve could continue to keep rates low and print money, and nothing bad would happen.
Once again, this view proved to be totally wrong. And we’re seeing the consequences now with record high inflation.
It’s not Bernanke’s fault. He’s human. He made mistakes. All of us have.
The real problem is having a system that gives supreme control to a tiny group of imperfect, mistake-prone human beings.
The Fed has virtually zero oversight, zero accountability. They do whatever they want, and hundreds of millions of people have to suffer the consequences of their actions.
More perversely, though, they’re held up as “experts”. And even though they’re just as human as the rest of us, these “experts” are somehow seen as infallible.
We experienced the same thing during the pandemic; a tiny, unelected group of public health “experts” were given near totalitarian control over how hundreds of millions of people were allowed to live their lives.
And we were expected to suspend all doubt and scrutiny, and to believe everything they say without question… because they were the experts.
The most absurd part of all, though, is that even when they’re proven to be completely and totally wrong… these “experts” are awarded our society’s most esteemed prizes for achievement.
Again, Bernanke may be a wonderful guy who tried his best. But his approach had devastating consequences. He created one of the biggest financial bubbles in human history. And tomorrow he’s won the Nobel Prize.
This makes about as much sense as giving the Nobel Peace Prize to Henry Kissinger or Barack Obama.
Or the special 2020 Emmy award to New York’s governor Andrew Cuomo.
Or when Will Smith received a STANDING OVATION when he won the 2022 Academy Award for Best Actor, literally minutes after assaulting Chris Rock on stage.
Or Vladimir Putin receiving the French Legion of Honor. Or Kamala Harris winning Time Magazine’s Person of the Year.
Or the New York Times and Washington Post winning the 2018 Pulitzer Priz... -
On the 21st of February, 1978, workers for the state-owned electrical company in Mexico City, Mexico were digging in a neighborhood near city center to bury some cables.
After digging about two meters below the street’s surface, they hit a large rock that their equipment could not penetrate. As they dug further, around the rock, they discovered it wasn’t natural… but instead a large stone disk that was at least hundreds of years old.
Archaeologists uncovered the rest. And it turned out that site had once been the location of the main Mexica/Aztec temple, known as Hueyi Teocalli in the native language.
Over the past several decades, the temple has been a treasure trove of Aztec cultural artifacts, providing incredible insight into how this civilization lived.
And among other things, archaeologists have found the remains of more than 600 skulls on the temple grounds-- most likely victims of the Aztec’s human sacrifice rituals.
Human sacrifice has been a common practice throughout the history of many civilizations, from the Aztec and Maya, to the Celts and Babylonians.
And there always tended to be some High Priest or ruler who decided in his sole discretion that a blood offering to their gods was necessary… for the ‘greater good’ of their society.
(Naturally the rulers rarely offered their own blood; it was always some peasant who had to be sacrificed.)
This decree was rarely questioned. After all, the High Priest was an expert. And anyone who dared question his authority would most likely end up being the one sacrificed. So people had an incentive to keep their mouth’s shut and go along with the ritual.
Though we’re not quite as barbaric today, you can still see evidence of human sacrifice in our modern world. And COVID was a clear example.
The High Priests of Public Health decided that if anyone died for lack of cancer screenings, a drug overdose, or suicide, that was OK. As long as you didn’t die of COVID.
If your kids lost two years on their social and educational development, if your business closed, if your entire life was turned upside down, that was fine too.
Everyone was expected to sacrifice for the greater good.
Everyone, of course, except for the politicians.
Nancy Pelosi was infamously caught going to the hairdresser during home district of San Franciso’s lockdown... and then blamed the hairdresser for the transgression. Clearly Ms. Pelosi cares about the working class.
Chicago Mayor Lori Lightfoot was also caught going to the hairdresser after locking her constituents down, but she then justified her behavior saying “I take my personal hygiene very seriously.”
Then California’s governor Gavin Newsom was caught breaking bread with friends at a fancy restaurant in Napa Valley during his state’s lockdowns.
The list goes on and on.
We’re starting to see this same attitude applied towards Climate Change. Most recently, the ruling class had its big climate summit in Egypt called COP27; they flew in on their private jets and ate expensive steak, while their ideas for the rest of us include travel restrictions, taxes on cow farts, and eating bugs and weeds.
You just can’t make up this level of incompetence and hypocrisy.
The trend, though, is very real. Momentum towards climate regulation is only picking up speed. And it doesn’t look like there’s anything on the horizon to stop it.
It would at least be somewhat digestible if their ideas were actually sensible. But instead their ‘solutions’ are borderline insane.
They spent an entire day at COP27 talking about gender identity, as if that has something to do with the climate. They obsessed over incredibly inefficient sources of energy (like corn-based ethanol, which has soundly been proven to be one of the WORST and most INEFFICIENT forms of energy).
But was there any discussion at COP27 about nuclear power? None.
And that makes it really difficult to take these people seriously. -
You’ve probably been following the news that FTX, one of the largest cryptocurrency exchanges in the world, is in hot water. And frankly that characterization is an insult to hot water.
FTX has already filed for bankruptcy. Potentially $10 billion or more of customer money is at risk. The new CEO states that the company’s internal controls were “a complete failure”.
And the company’s founder, Sam Bankman-Fried, has proven himself to be, at a minimum, an irresponsible, reckless child, if not a full-blown fraudster.
It’s easy to lay the blame exclusively on him. And he clearly deserves a lot of it.
But a failure (if not fraud) of this size cannot be perpetrated by a single individual. Even Bernie Madoff had accomplices. Or people who should have noticed but were totally negligent at their jobs.
In fact the Madoff scandal is a great example. Madoff’s firm had to undergo routine regulatory examinations. And yet, year after year, the Securities and Exchange Commission completely failed to notice the rampant fraud.
In the aftermath of the Madoff scandal, a US Department of Justice investigation concluded that in the SIXTEEN YEAR period between 1992 and 2008, the SEC had “more than ample information” and that they “could have uncovered the Ponzi scheme well before Madoff confessed.”
The report further blames the regulatory agency’s failure on “systematic breakdowns in which the SEC conducted its examinations and investigation.”
Talk about being asleep at the wheel...
In the case of FTX, there were also a lot of people who failed to notice what was happening.
Most notably, Sam Bankman-Fried became the #6 biggest political donor in the United States; 99.6% of his contributions went to progressive candidates.
Did any of those politicians really scrutinize where the money came from? Did any of them ask for audited financial statements to make sure the money was clean… or to make sure that the guy wasn’t spending his customers’ money?
Apparently not. Politicians happily cashed the checks and didn’t ask any questions.
This is an outrageous failure. Politicians constantly pass rules and regulations making financial compliance far more onerous for everyone else.
(If you don’t believe me, try going down to your local bank and withdrawing $25,000 in cash… and see how quickly they treat you like a criminal suspect. You’ll be there all day filling out forms and justifying your actions.)
But do they apply those same rules to themselves? Absolutely not. They just take the donations. It’s a despicable double standard.
Also culpable in this massive failure are the prominent venture capital firms who enabled this overgrown man-child to go rogue.
Sam Bankman-Fried raised at least $1 billion from investors, including firms like Softbank and Sequoia Capital.
Softbank, of course, is infamous for its enormous investment in WeWork, effectively encouraging CEO Adam Neumann to recklessly spend other people’s money.
It seems that Softbank didn’t learn its lesson, because they once again dumped a mountain of cash on a guy who is even worse than Neumann.
More importantly, however, Sequoia and Softbank are hard core, sophisticated investors. They have huge teams of lawyers, bankers, and analysts. And, even though FTX is a private company, as investors they would have had access to the company’s financial statements.
In other words, they should have seen the impropriety. They should have seen it, and they should have done something about it.
But they didn’t. They stood by once again in silence, enabling Bankman-Fried’s irresponsibility.
Despite this colossal failure of a major player in the crypto sector, however, it’s important to separate FTX (the company) from crypto (the idea, and the asset class).
In my view, FTX isn’t even a crypto business. It’s a financial institution, little different than Bank of America.
Whenever you make a deposit at Bank of America, that money becomes BOA’s asset. In other words, -
More than 3,000 years ago, between the 12th and 13th centuries BC, the legendary king of Ithaca, Odysseus, set sail from the ancient city of Troy to begin the journey home.
The stories of the Trojan War, and of Odysseus’s voyage home, have been passed down to us in the form of epic poetry from Homer. Most of it is pure fiction.
But like modern film, TV, and ‘true crime’ podcasts that abuse dramatic license to entertain their audiences, Homer’s epics may in fact be “based on a true story”.
The Trojan War, for example, likely happened. The bit about the horse, on the other hand, probably didn’t.
It’s certainly possible (and even probably) that one of the key leaders in the war had an arduous journey back home to Greece, spurring ancient entertainers to weave elaborate tales of sirens and sea monsters.
One of the most important parables in Homer’s tale of the long journey home for Odysseus is the story of Scylla and Charybdis.
Odysseus’s journey took him through a particularly narrow stretch of sea; on one side of the strait was a small, rocky island where a six-headed monster named Scylla lay waiting to destroy any ship that dared to pass.
According to Homer, Scylla was such a dreadful monster that “no one-- not even a god-- could face her without being terror-struck.”
But on the other side of the narrow strait was the deadly whirlpool of Charybdis, which would swallow up the entire vessel and all the men on it.
Odysseus’s impossible task, of course, was to swiftly and stealthily sail right down the middle… to just barely avoid the whirlpool of Charybdis, while somehow managing to avoid the long grasp of Scylla.
For a while, Odysseus refused to believe the situation was hopeless; he was convinced that he would be able to sail, unscathed, between Scylla and Charybdis without a single loss.
After all, he was a king. And an unparalleled expert when it came to sailing. Surely he would be able to succeed.
And yet everyone who had ever come before Odysseus had believed the same thing. But no one had ever succeeded. Literally every ship that ever tried to sail between Scylla and Charybdis had been destroyed by one of the two evils.
Eventually reality set in, and Odysseus knew that had would have to choose between the lesser of the two evils.
He chose the monster Scylla.
Odyssesus realized that sailing too close to the whirlpool would mean losing his entire ship and everyone on it. Sailing too close to the 6-headed monster would mean losing, at most, six men.
Odysseus concluded that it was better to lose six men was than to lose everyone.
And that’s precisely what happened; as his ship sailed through the strait, just barely avoiding the whirlpool, “Scylla pounced down suddenly upon us and snatched up six of my best men.”
But the rest of the crew (and the ship) survived the challenge and passed through the strait.
This story is one of the best allegories of the state of the global economy today.
Central bankers and economic policymakers are like Odysseus. They have managed to sail the global economy into a very narrow strait.
On one side of today’s economic strait is the evil inflation monster. And this monster is guaranteed to chew up and spit out incalculable quantities of unsuspecting, unprepared people.
Yet on the other side of the economic strait is the full-blown collapse of the sovereign bond markets… and by extension, collapse of the global financial system.
Like Odysseus, central bankers were at first in denial. They didn’t want to believe they were even in such dire economic straits. They infamously rejected the notion that inflation existed at all. Then they claimed it was transitory.
Then they finally started trying to do something about it-- to turn the ship around. But it was too little, too late.
Now they find themselves squarely in the middle of these evils-- inflation, and collapse of the sovereign bond market. -
Today’s podcast starts off in the year 1175 BC, where the legendary Pharaoh Ramses III was readying himself for battle against one of the most mysterious enemies in all of human history.
Ramses was literally fighting for the survival of his kingdom, and for all Egyptian civilization. And fortunately for Egypt, he won. But it came at a great price.
Ramses’ treasury was depleted from costly battles (not to mention the vast numbers of expensive monuments and temples that he built). And so to make ends meet, he did what any politician would do-- he raised taxes.
The ancient Egyptians were legendary record keepers; we have detailed accounts of their commercial activities, financial transactions, and even tax receipts. And we can easily observe the trajectory of Ramses’ economic frustration: tax receipts were declining, evasion was becoming rampant, and production continued to decline.
It’s ironic that, even though Ramses III saved his civilization from marauding invaders, his dynasty soon collapsed due to economic mismanagement.
This is an important lesson that politicians have to relearn over and over again: taxation is a huge disincentive. Whenever you impose a tax, you get less of it.
Policymakers understand this in theory; as Mayor of New York City, Mike Bloomberg famously imposed a ‘soda tax’ on sugary drinks. He knew that imposing such a tax would curb people’s behavior and they would purchase less soda.
This is also why taxes on cigarettes and alcohol exist; politicians understand very well that people will consume less of something that is heavily taxed.
But for some reason, they fail to apply the same logic to productive economic activities. They fail to understand that if you place heavy taxes on capital gains, you’ll end up with fewer investments. If you increase corporate tax rates, businesses will leave for lower tax jurisdictions.
And if you impose absurd taxes on oil companies… then oil companies won’t invest or produce as much. Duh.
Yet this seems to be the new rallying cry of the ruling mob; they claim that “war profiteering” oil companies are benefiting from the “windfall of war” and generating “excess profits”.
And their solution, naturally, is an ‘excess profits’ tax.
There is actually precedent for this. The US government started passing excess profits tax as early as 1916. And it still ranks as one of the most complex, bureaucratic, incomprehensible taxes in history. Trust me, if you think your taxes are complicated now, try being a US company during World War I.
They rolled it out again during World War II, charging a tax as high as 95% on ‘excess profits’.
Obviously the concept of ‘excess profits’ raises a number of questions: ‘excess’ according to whom?
But naturally the people who come up with these ideas have no understanding of business of finance. A few months ago, for example, the President of the United States was whining about Exxon-Mobil’s profitability, and he proclaimed:
“We’re going to make sure that everybody knows Exxon’s profits.”
Now I know the guy is a bit slow and doesn’t usually know where he is half the time.
But apparently he doesn’t even realize that Exxon is a public company, i.e. Exxon’s profits aren’t some closely guarded secret. They HAVE to report their profits. Exxon already makes sure that everybody knows Exxon’s profits…
Yet even the most basic understanding of capital markets and financial reporting remains elusive to the people who set economic policy.
Now there’s obviously an election next week, so I’m not terribly concerned about an Excess Profits tax becoming reality.
But here’s something they could (and would) probably do.
There’s a rather obscure tax called the Accumulated Profits Tax that’s already on the books. This is a tax that corporations are supposed to pay if they hold ‘excess’ (there’s that word again) cash profits.
This tax is rarely enforced. But that’s more of a policy choice than anything... -
First, I am really grateful for all the well-wishes and congratulations we received on the birth of my son. He’s doing great, and I’m over the moon.
I decided to record a podcast about the experience-- why my wife and I decided to have our first child here last year, as well as our second child this year, and tell you how great the experience was.
Naturally, though, we start with a historical perspective. Today’s episode begins in ancient India with one of the most famous figures in human history. It turns out that, in addition to being a spiritual icon, he was also an extreme biohacker.
We talk about the evolution of medicine, and how healthcare used to be a ‘patient-first’, science-driven field.
Individual healthcare practitioners today are still that way. Doctors, nurses, and medical researchers have answered a noble calling to help the sick.
But the healthcare industry itself is now ruled by insurance companies and political hacks who have managed to increase the cost of care, make it much more bureaucratic, and severely dilute the doctor-patient relationship.
I share a story of my step father, who died several weeks ago after being chewed up by a healthcare system that did not seem designed to help him.
This is one of the big reasons why we had our children in Mexico; it’s a much more liberated healthcare system.
In Mexico, we have a very close relationship with the physician, who is unconstrained by bureaucratic policies and idiotic regulations.
And if some stupid rule ever does come up? It’s Mexico. We ignore it.
The births of my children were both fantastic experiences. The hospital was great. The physicians and nurses were great. And the cost?
Imagine Nany Pelosi closing her thumb and index finger into a small circle saying, “It costs nothing.”
Frankly it’s almost embarrassing that the all-in cost of my child’s birth was about $1,750, including the ‘Presidential Suite’ at one of the best private hospitals in the country.
My children are both Mexican citizens (in addition to the four others that they receive from mom and dad). Plus parents AND grandparents are both entitled to permanent residency in Mexico.
This proved especially useful for my in-laws; my wife is from Ukraine, so we were able to get the family out of Kiev and relocate them here to Cancun-- because they now have permanent residency.
I tell you the whole story in today’s episode, which you can listen to here.
Open Podcast Transcription
[00:00:01.140]
Today we're going to go back in time more than 2500 years ago to the mid 500 BC. To the Kingdom of Kashi on the Ganges River in northern India. Now you might not have heard of the Kingdom of Kashi, a lot of people haven't, but it's actually quite historically significant for a couple of reasons that we're going to get into. At the time, in the mid 500s, there was a guy in his mid thirty s, a guy that some of you might know. This name Siddharta Gotama.
[00:00:27.520]
And if you don't know his name, you will in a moment. But this is a person who was born into wealth and power and money and status and he renounced it all. As a young man he said, I'm not interested in the money. What I am interested in is spiritual enlightenment. And that might sound a little bit hokey today, but back then that was actually quite a popular social value.
[00:00:49.210]
A lot of people said, you know, I want to seek spiritual enlightenment and their culture and their civilization. That was a prized value. And he walked away from all of his worldly possessions and decided that the way he wanted to do that, he was going to hit the road. And he became essentially a wandering beggar. And during that time he experimented with some really extreme conditions.
[00:01:07.920]
At the time, in fact, there was a commonly held belief that if you starved yourself that eventually you would achieve spiritual enlightenment. And this seems crazy to us, -
We start our podcast today more than 2,500 years ago at a time when the dominant superpower in the western world was the Achaemenid Empire of Persia.Their civilization had reached an unfathomable level of wealth and sophistication; historical records show that, at peak, the Persian treasury had more than $300 BILLION in savings (in today’s money).They had an intricate road network, a highly-functioning postal system, impressive engineering works, and had even invented a crude form of refrigeration and air conditioning.Most of all they had a fearsome military. It was huge. And it was terrifying. Simply put, an invading Persian Army had never been defeated.And yet, early in the 5th century BC, when they went to war against a rapidly rising power in Greece, the Persians suffered a humiliating defeat. Then again. And again. And again.The losses changed the perception of their Empire forever. Practically overnight their reputation sank, and they were no longer viewed as a terrifying superpower able to dominate the world.We’ve seen this story over and over again throughout history, from Ancient Rome to the Mongols to Imperial Portugal in the early 1800s.Simply put, dominant superpowers almost invariably have an equally dominant, fearsome military that inspires awe and intimidation in the rest of the world… and especially in the superpower’s adversaries.But superpowers have a life cycle. They rise, peak, and decline. And at some point during the decline, the military begins to show signs of weakness.Often times there’s some specific event-- something happens that’s so humiliating to the superpower that it shocks the world.This is what happened to the Persians in 490 BC. And it’s what happened to the United States in 2021.As a West Point graduate and US Army veteran, I still hold in my heart that the US military is the finest fighting force on the planet.But facts are facts, and the US military is showing clear signs of decline. Most of it is due to incomprehensible failures of leadership.Today we discuss that decline; I reference a brand new report by the Heritage Foundation, its 2023 Index of US Military Strength, which provides an extremely honest (and distressing) analysis of the US military’s capabilities, capacity, and readiness.The report spells out in nearly 600 pages of painstaking detail how the US military is rapidly losing (or has already lost) its technological advantages. It shows how there are not enough forces to defend American interests against a major adversary like China. And most importantly, the report concludes that the military is simply not ready.These conclusions have far-reaching implications.History has shown over and over again that once a superpower’s veneer of invincibility is pierced, it rapidly loses its status. And that’s even more true when another competing power is on the rise.Loss of status as the world’s sole superpower goes far beyond reputation and military conflict. The economic consequences are devastating.That’s because dominant superpowers also tend to own the world’s primary reserve currency-- in this case, the US dollar.Being the world’s reserve currency means that commercial and financial transactions around the world are conducted primarily in US dollars.So for example, a Brazilian merchant and its supplier in India do business with each other in US dollars. Futures contracts for gold, copper, crude oil, etc. that are traded in foreign commodities exchanges (like the Dubai Gold & Commodities Exchange) are denominated in US dollars.The dollar is so dominant that when Airbus (a European aircraft manufacturer) sells its jets to European airlines, they typically close those deals using US dollars instead of euros. And giant European companies (like Nestle, BP, and Volkswagen Group) issue corporate bonds in US dollars.You get the idea.All of these USD financial and business transactions around the ...
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