The People Who Engineered Record Inflation Want to Control Cryptocurrency

On the First of May in the year 1716, a swashbuckling Scottish entrepreneur was making this pitch of his lifetime to the head of the French government in Paris.

The entrepreneur’s name was John Law. By all accounts he was incredibly charismatic and had a flamboyant, larger than life personality. He was something like Adam Neumann, formerly of WeWork… the kind of person who could talk anyone into anything.

And John Law’s pitch that day was to launch an entirely new financial system.

King Louis XIV had just died eight months before, leaving France in terrible financial ruin. Decades of endless wars, palaces, and profligate spending had bankrupted the French government.

The situation was so dire, in fact, that there was hardly any gold left in the French treasury. So the new head regent of the government, Duke Philippe II of Orleans, was desperate for a solution.

Law made him a bold proposal: the Duke would provide Law with a special banking license. And in exchange, Law would create a new system of paper money that would bring more gold into France and help pay off the crippling national debt.

Philippe agreed. And, only a few weeks later, John Law’s new Banque Generale Privee was in business.

It turned out that people loved the idea of paper money. And within a year, his paper bank notes were circulating widely throughout the French economy, and the government even accepted them for tax payments.

Law made his paper money even more valuable in late 1717, after he had taken control of the Mississippi Company.

The French Mississippi Company was something like the Dutch East India Company; it was a private enterprise that had received a royal monopoly over all the land and resources in France’s American colonies.

Almost immediately after securing rights to the monopoly, Law offered shares of the Mississippi Company to the public; it was like a giant IPO.

But Law sweetened the deal by allowing people to pay up to 75% of the share price using his bank’s paper money.

The Mississippi Company IPO was a smashing success. It was so popular that Law was offered bribes, sex, and political favors from French nobles in exchange for the opportunity to buy a few extra shares.

The famous philosopher Voltaire was eye witness to this, and wrote, “I myself saw him pass through the galleries of the Palais-Royal followed by dukes and peers, Marshalls of France, bishops of the Church.”

And at first, the share price soared. Bear in mind the Mississippi Company had zero activity. Hardly anyone was living in France’s southern colonies in America, and there was virtually no trade or commerce going on.

The government even tried deporting criminals to America, trying to increase the population of the colonies. They offered hundreds of acres of land for free to anyone who would go. Yet economic activity still failed to transpire.

Eventually, the French public realized the truth; there would be no gold, no gems, and no riches coming from the Mississippi Company. And the stock price began to quickly collapse.

Law tried to prop up the stock price by creating more paper money (backed by absolutely nothing), and using that new money to buy shares of the Mississippi Company.

But all he ended up doing was creating inflation; with so much new paper money circulating in the economy, prices everywhere rose.

By May 1720, retail prices in France had doubled. It was full-blown hyperinflation, and people panicked. They feverishly began selling off their Mississippi Company shares and trading their paper money, for any real asset they could get their hands on.

One nobleman, Duke Henri-Jacques de Caumont, dumped all of his paper in exchange for a warehouse full of candles. A Parisian merchant sold his in exchange for crates of chocolate and coffee.

(This is one of many examples of history showing that real assets tend to do well in times of inflation.)

Shortly after, Law officially suspended the conversion of his bank notes into gold and silver, and the paper money instantly became worthless.

At the peak of all this insanity, if you can even believe it, the French government made John Law its Comptroller-General.

In other words, the guy who created the biggest financial bubble in French history was put in charge of government finances.

I couldn’t help but think of this story when I watched a group of central bankers talking about cryptocurrency at a conference in Paris last week.

Among others, the heads of the US Federal Reserve and the European Central Bank participated in a panel discussion that, for anyone who actually understands crypto, can only be described as hilarious.

Naturally, they started with the old anti-crypto tropes, talking about “the lack of transparency” and how criminals use crypto.

These are completely laughable points. Criminals use iPhones, American Express, and JP Morgan Chase as well. Should we cancel those too?

And as for crypto’s lack of transparency, the opposite is true. Every Bitcoin transaction is traceable on the blockchain for the entire world to see.

Yet with every passing sentence, these bankers demonstrated that they know absolutely nothing about crypto… and quite possibly banking too.

At one point they slammed stablecoins that didn’t have a 1:1 backing; stablecoins are specialized tokens that represent, for example, 1 US dollar per token. So there is supposed to be at least one US dollar in reserve for every token in circulation.

Lately there have been a handful of high profile stable coins that didn’t have sufficient reserves. So their criticism is fair.

But this leads to an obvious question: if a 1 to 1 reserve standard for stable coins is so critical, why don’t we demand the same of our banking system?

Central Banks are among the most prominent regulators in banking. And they have completely condoned a fractional reserve system whereby commercial banks are only required to keep 10% (or less) in reserve.

In other words, these people are perfectly fine that commercial banks gamble most of their customers’ money on the latest investment fad of the day.

It’s fine to be outraged when a few stablecoins aren’t 100% reserved. But they should be equally outraged that commercial banks aren’t even 10% reserved.

The biggest laughs, though, took place when these central bankers started talking about rolling out their own digital currencies.

The Fed wants to create a DollarCoin. And the European Central Bank wants a EuroToken.

This is truly rolling on the floor, laugh out loud funny given that these people have no clue about technology.

The Federal Reserve’s most important payment system, FedACH, which processes over 50 million transactions per day, still takes 2-3 days for payments to clear. It’s so outdated, it’s as if they’re still sending satchels full of cash via Pony Express.

It’s also ridiculous that the people who have failed in every possible aspect of their responsibility think that they’re qualified to administer a brand new financial system.

These Central Banks failed to anticipate inflation. They failed to recognize it. They failed to do anything about it for more than a year. And now they’re hellbent on causing a recession.

They’ve pretty much been a complete disaster. Yet now they want to be in charge of crypto too. Are these people serious??

To me this is really one of the great benefits of crypto, and of real assets. Holding paper money is ultimately a vote in favor of central bankers, an expression of confidence that they know what they’re doing.

Personally I have little confidence in these people. And that’s why I think it makes sense to hold other types of assets that they don’t control, including real assets (real estate, commodities, productive businesses, etc.) and decentralized crypto assets.

My Personal Story From the Collapse of The Soviet Union

When I was a kid growing up in the Soviet Union, it was essentially forbidden to make a better life for yourself.

You couldn’t just decide to go back to school, start a business, or switch careers to a thriving new industry. And it didn’t matter how hard you worked– you were most likely NEVER going to be promoted. All the top jobs in the Soviet Union were reserved for party loyalists.

The government removed EVERY possible economic incentive to achieve more… which is why service was pitiful, technology was lagging, and the Soviet economy was consistently in the dumps. Now, on occasion, the government would decide that they wanted to populate certain rural areas of Russia, such as remote parts of Siberia. Quite often families were simply ordered to pick up and move, as was famously the case under Stalin.

But by the 1970s, the government would provide a small financial incentive for families– if you moved to Siberia, you could earn a slightly higher salary. This became literally the ONLY way that anyone could (legally) make more money in the Soviet Union. And that’s how my parents and I ended up moving to a cold, little town in western Siberia in 1985.

The plan was to stay there for a few years, save money, and then move back to a nicer, bigger city in Russia with a better climate. The fact that our new Siberian town didn’t have a single restaurant, cinema, or even an ice-cream place, made the ‘saving money’ part really easy.

My parents followed through on their plan. And by the early 1990s they had saved enough money to buy a decent house, plus a car, and still have some savings left over. But then, the unimaginable happened– the Soviet Union collapsed. And the economy crashed.

Inflation, then hyperinflation, followed, as the government started printing money like crazy in an effort to continue making interest payments on its debt. Prices skyrocketed. At some point, stores stopped displaying price signs. Why bother, if they were doubling every other week or so?

Salaries and pensions did not keep up with inflation; almost everyone became more poor with each passing day. Most people, including my parents, were caught completely unprepared.

The general level of financial literacy at the time was pitiful; most Russians didn’t know the first thing about money, finance, or economics, so no one knew how to react to the hyperinflation that was unfolding in front of our very eyes.

It was as if everyone was frozen in disbelief, including my parents. By 1990, before the crisis, my parents had saved 50,000 rubles. At the time, that would have been enough to buy a house and a car.

After a few years of crisis, my parents still had the same 50,000 rubles. But by then, all they could afford to buy with it was a pair of winter boots for my mother. Their entire nest egg had been completely inflated away in a few short years.

But not everyone had lost during that time. Those who successfully navigated the financial Wild West of the 1990s in Russia turned this crisis into the opportunity of their lifetimes.

For example, I remember seeing ads in a newspaper offering to exchange a flat in Moscow for a poor-quality Soviet car.

It was an unbelievable trade when you think about it; the guy with the apartment was probably panicking and trying to leave the country, so he thought it would be a good idea to trade his apartment for a car.

But ten years later, the car was a worthless pile of scrap. Meanwhile the owner of the flat still held a valuable asset that had appreciated significantly in value and kept up with inflation.

And naturally the savviest people were able to buy extremely high quality assets on the cheap– like real estate and businesses, including shares of newly-privatized oil companies.

Investing in Gazprom in the early 1990s was like buying bitcoin in 2010. Later these people became known as Russian oligarchs. Now, I’m not writing this to suggest that the same financial catastrophe will take place in the US or Europe.

After all, the ruble didn’t enjoy the status of being the world’s reserve currency in the early 90s. And the economy of the late Soviet Union was already in terrible shape. Still, this very recent history should serve as a reminder: idiotic economic policies almost always have consequences.

When a government goes out of its way to destroy economic incentives, through higher taxes or abusive regulations, bad things usually happen. When a government accumulates a mountain of debt that is impossible to pay, bad things usually happen.

When a central bank conjures trillions of dollars out of thin air, bad things usually happen.

And I can tell you from personal experience that when a society actively embraces a Communist ideology, bad things usually happen. And all of these issues in North America and Europe certainly could create consequences for the dollar and euro some day.

This isn’t a dire prediction, it’s just common sense… something that most politicians seem to be lacking these days. It’s important to think about risks and consequences and prepare for them in advance; I watched my parents lose their entire nest egg and become victims of other people’s stupidity, because they were unprepared.

But today we have access to so much more information and education. We can learn about how gold and silver have maintained their value against inflation for thousands of years. We can learn about other assets, whether productive land, cryptocurrency, or profitable business ventures, that can do well, even in times of crisis.

The Bolsheviks Aren’t Coming. They’re Already Here.

The average Westerner who hasn’t traveled very much believes Moscow to be a cold, bleak, desolate capital city that’s filled with Stalinist-era architecture and a population that lives in utter misery.

But the reality of this place is nearly the complete opposite.

Moscow is a bright, beautiful, cosmopolitan city. I’ve always found Moscow to feel more European than most European capitals, with gorgeous architecture that never seems to end.

Moscow is easily as nice as Paris, London, or Vienna… with a population larger than all three. I like it here more and more every time I visit.

It has some of the nicest restaurants in the world, beautiful parks and monuments, and a highly sophisticated, educated, cultured population.

The city is quite prosperous too. But it wasn’t always that way.

Moscow was once the capital of the Soviet Empire… the most infamous and failed experiment with Socialism in the history of the world.

Russia’s humiliating tale of Socialism grew out imperial discontent– a period starting in the 1500s when wealth was concentrated in the hands of the Tsar and his key lieutenants. Everyone else lived as peasants in abject poverty.

My friends and I toured a museum at the Kremlin over the weekend and saw endless artifacts from the days of the Empire– golden chalices, diamond-encrusted silverware, magnificent carriages.

No doubt the royals lived absurdly well at the expense of everyone else. And by the early 20th century, the seeds of revolution had been firmly planted.

Lenin and his Bolsheviks finally seized power in 1917. And after they stamped out all remaining resistance and opposition, they set out to remake the country into a communist masterpiece.

It took 69 years for the Soviet Union to collapse. And by the time that happened, there was no private property, private business, or private wealth.

Decades of central planning had extinguished any incentive to work hard, take risks, and innovate. And most people were destitute and impoverished.

Yet over the past 30 years this country has become wealthy once again. Russians enjoy a high standard of living– much higher than many European countries– with some of the lowest tax rates on the continent.

(GDP per capita in Moscow is actually slightly higher than in Washington DC, and much higher than most US cities like Houston, Dallas, Los Angeles, or Miami.)

None of this is due to Socialism. And Russians know it.

They still pay lip service to Lenin… there are tombs and monuments and buildings bearing his name, mostly out of reverence for history and traditions.

But Russians embraced capitalism long ago. They had their experiment with Socialism when the Bolsheviks took over in 1917. And they’re not going back.

Meanwhile, over in the Land of the Free, nearly half the country is running as fast as they can to Socialism.

The reasons are much the same as in imperial Russia– there’s growing discontent about the divide between rich and poor.

And as more and more people in the West feel left behind and barely able to make ends meet, the call to Socialism grows stronger.

There have been two formal debates so far among US Presidential candidates, both of which seemed to be Bolshevik beauty pageants.

The candidates talk about guaranteeing a government job for everyone, free education, free healthcare, eliminating private insurance altogether.

They demonize private profit and wealthy individuals, and propose more government as the solution to everything that ails the nation.

These are all Bolshevik principles ripped straight out of the Communist Manifesto– nationalization of private industry, central planning, government controlled labor and education, heavy taxation, and constantly complaining about the Bourgeoisie.

I’ve been looking back lately over the last decade of Sovereign Man (we recently hit our 10 year anniversary two weeks ago.)

Over the years I’ve written extensively about how the Bolsheviks are coming to the Land of the Free… and most of the West.

Well, those days are over. It’s clear that the Bolsheviks are no longer coming. They’re here. And their movement is firmly entrenched.

One of the Presidential candidates was actually booed and jeered at a political rally in California earlier this month by voters in his own party simply because he suggested that “Socialism is not the answer.”

[youtube https://www.youtube.com/watch?v=GOdNC55ROLQ]

A growing number of constituents believe quite adamantly that Socialism is absolutely the answer. A recent Gallup poll showed that 43% of Americans now prefer socialism to capitalism.

This isn’t some fake news conspiracy theory. It’s happening.

The Return of The Inquisition

In 279 BC, the vast army of King Pyrrhus of Epirus was met by Roman forces at the Battle of Asculum in southern Italy, in what would be one of the costliest military engagements of ancient history.

Pyrrhus fancied himself the second coming of Alexander the Great and believed that he was a descendant of Achilles.

Many of his peers and contemporaries believed Pyrrhus to be the greatest military commander of all time.

His exploits were legendary. And when he set sail for Italy in 280 BC, the Romans did not underestimate him.

The Battle of Asculum was decisive. Pyrrhus actually won the battle; but in defeating the Romans, he lost so many of his men that his army was practically broken.

Pyrrhus purportedly said of his victory, “If we are victorious in one more battle with the Romans, we shall be utterly ruined. . .”

This gave rise to the term “Pyrrhic victory,” which refers to a win that’s incredibly costly.

Pyrrhus also tried his hand at diplomacy with Rome, sending one of his ablest statesmen to the capital to negotiate peace with the Roman Senate.

The emissary was not successful. But he reported back to Pyrrhus that Rome’s Senate was incredibly impressive– “an assembly of kings” comprised of its noblest citizens.

And he was right. In the early days when Rome was still a republic, its Senate was a highly revered institution that stood for wisdom, dignity, and virtue.

They were far from perfect. But the men who served in the Senate during the early republic were heavily responsible for building the most advanced civilization the world had ever seen up to that point.

Needless to say, times changed. Within a few hundred years, the Senate had become a corrupt joke, filled with venal criminals, weak sycophants, and mediocre minds.

I couldn’t help but think of this analogy yesterday watching the Inquisition of Brett Kavanaugh.

If you’re living under a rock (or reading this letter many years from now), Brett Kavanaugh has been nominated to serve as a Justice of the United States Supreme Court. This requires that he be confirmed by the Senate.

Recently a woman emerged who accused Kavanaugh of sexually assaulting her when they were all teenagers, several decades ago.

This is tantamount to accusing the man of a crime.

But rather than treat this as any other criminal matter in which the authorities would investigate the evidence to determine if charges are warranted… or the case is put to a court and jury to decide… the once-hallowed halls of the US Senate have been turned into an embarrassing circus that shines a giant spotlight on the deep, social divides in the Land of the Free.

The whole charade is a horrible offense to the basic principles of justice in which a person is presumed to be innocent until proven guilty.

When it comes to claims of sexual assault, however, the man is automatically deemed guilty … and the accuser praised for her courage and bravery before the veracity of the assertion is ever deliberated.

Senator Maize Hirono of Hawaii recently stated, “Not only do women like [Kavanaugh’s accuser], who bravely come forward, need to be heard, but they need to be believed.”

By definition this is neither fair nor impartial, and turns the entire process into a Kangaroo Court… which is what the Senate has become.

At a certain point yesterday, one Senator introduced multiple pieces of evidence on behalf of the accuser, including ‘expert reports’ that justify her inability to remember details from the assault.

This is truly bizarre.

These Senators are playing the role of judge in this matter. It seems impossible to do this while simultaneously acting as advocate for the accuser.

Another Senator sat smugly and sanctimoniously, leering down at Brett Kavanaugh and demanding explanations about code words for beer and flatulence that date back to Kavanaugh’s high school days.

The fact that a United States Senator would actually consider this important evidence is an utter embarrassment.

Another disgusting perversion of justice is that the United States Senate actually felt compelled to negotiate with the accuser about when/how she would testify.

For example, the accuser wanted to prohibit certain questions, control who could/could not ask questions, determine the order of witness testimony, etc.

This is simply NOT how the justice system is supposed to work.

Accusers must face the accused in a court of law and submit to cross-examination, following the same rules that everyone else has to follow.

No one is supposed to get special treatment. That’s the point. And it is through this process that the truth is eventually discovered.

It’s not that I don’t believe the accuser. It’s entirely possible that she’s telling the truth.

But as this case has not been deliberated objectively through the normal due process that is guaranteed by the Constitution, no one can reach a valid conclusion.

Yet there are countless legions of people, including United States Senators, who have already made up their minds, like the Inquisition demanding, “Do you confess?”

And that’s the saddest part– this manner of Inquisition… trial by social media… has now been condoned and advanced by the United States Senate, an institution whose members have ALL taken a solemn oath to support and defend the Constitution which they are now violating in the worst way.

Clearly the Senate is no longer an assembly of kings… but a brood of bickering, immature weaklings.

(The only resilience displayed has been from the accused and accuser, both of whom have had to endure insane public scrutiny.)

There’s obviously an agenda here.

Perhaps some Senators are trying to win points with the #metoo movement for the upcoming elections.

Or they’re intentionally blocking Kavanaugh simply because he is a Trump nominee.

Whatever their reasons, they may be victorious in achieving their desired outcome.

But it will be a Pyrrhic victory… for it will come at the expense of establishing a dangerous new standard that destroys the most important principles of Justice.

“If You Can Keep it…”

On September 17, 1787 on the final day of the Constitutional Convention in Philadelphia, Benjamin Franklin was approached by a woman as he walked out of Independence Hall.

“Well Doctor, what have we got– a republic, or a monarchy?” she asked.

It was a burning question on everyone’s mind: what form of government would the Constitutional delegates establish for the new country?

Franklin didn’t hesitate. “A republic– if you can keep it.”

(The exchange was noted by Maryland delegate James McHenry and included in the Records of the Federal Convention of 1787.)

Franklin’s answer spoke volumes.

The Constitutional Convention had just ended, and it had been a bitter four months as the delegates fought and argued over every single word in the draft.

Factions had developed. Some delegates wanted a federal government with absolute power. Others wanted fewer guaranteed liberties for individuals.

Franklin knew that the representative government he had worked so hard to establish was incredibly fragile, and that it could easily slip away.

It was the same fight two years later when the 1st United States Congress fought over whether or not to establish a Bill of Rights.

As one delegate wrote, “Bill of Rights– useful, but not essential.”

Once again, after months of bitter arguments, Congress finally reached a compromise in September 1789, approving ten Constitutional amendments that guaranteed certain freedoms for the people.

More than two centuries later it’s clear that most of what they worked to achieve has completely changed.

The First Amendment, which ensures that Congress can make no law restricting freedom of speech, press, religion, and peaceable assembly, has become almost a punch line.

Ironically the greatest assault on Free Speech today doesn’t even come from government, but from university students who protest against any ideas they find offensive.

Violence on university campuses is now common as students come out of their Safe Spaces to physically obstruct and violently impede controversial speakers.

Any statement that doesn’t conform to their very narrow agenda is now considered hate speech.

And it’s the students themselves who want any sign of dissent banned, and more mandatory indoctrination of their newspeak ideology.

Then there’s the Second Amendment, which guarantees “the right of the people to keep and bear arms, shall not be infringed.”

This one seems to be under fire on a regular basis, with mainstream media from Rolling Stone to Vanity Fair calling for its outright repeal.

The Third Amendment guarantees that no soldier shall be quartered in any home without the consent of the owner.

This seems almost a quaint, obsolete historical reference at this point given that the US military hasn’t had to be housed among the civilian population… ever.

So, OK, great. The Third Amendment is still in-tact.

Then there’s the Fourth Amendment, which ensures “the Right of the People to be secure in their houses, papers, and effects, against unreasonable searches and seizures, shall not be violated.”

Forget it. The federal government spends tens of billions of dollars each year to illegally spy on EVERYONE, including Americans and American allies. This one is a total joke.

The Fifth Amendment is a big one.

It ensures that no one can be held to answer for a crime, including a felony, without grand jury indictment.

This protection died a few years ago when Barack Obama signed the National Defense Authorization Act for Fiscal Year 2012, which authorized the military detention of US citizens on US soil, no due process required.

The Fifth Amendment also famously protects against self-incrimination, ensuring that an individual cannot be called as a witness against himself.

This provision is also gone, considering that legal precedent now exists for police to force you to give up your mobile phone or computer password.

The Sixth Amendment guarantees due process, that in a criminal trial, “the accused shall enjoy the right to a speedy and public trial, by an impartial jury.”

This is now a complete farce given the widespread use of top-secret FISA courts, military detention facilities, and drone-strike assassinations.

The Seventh Amendment guarantees the right to a jury trial if there’s a dispute over property that exceeds $20.

Now, the $20 threshold might be a little bit outdated (not that there’s any inflation!)

But considering that the government has stolen billions of dollars worth property from Americans through Civil Asset Forfeiture in recent years, all without a trial, it seems the Seventh Amendment isn’t worth the paper it’s printed on.

Then there’s the Eight Amendment, which protects against “cruel and unusual punishment.”

I thought about this one the other day when I was walking through the terminal at DFW International Airport.

A sign caught my eye that as prominently displayed on an emergency exit door, warning passers-by that opening the door was a violation of the law and subject to up to one year in prison.

I was dumbfounded. A year in prison for opening a door?

People go to jail and do hard time for smoking certain plants (but not others), failing to file tax forms, and a number of completely obscure and innocuous crimes.

There were four federal crimes when the Constitution was ratified. Today there are thousands. On any given day you and I probably commit several of them without even knowing. And each comes with absolutely insane penalties.

The reality is that you cannot even apply for a passport anymore in the Land of the Free without being threatened with fines and imprisonment.

Last were the Ninth and Tenth Amendments, which were supposed to limit the power of the federal government in favor of the states and the people.

Those went out the window a LONG time ago, especially after 9/11.

Look, don’t get me wrong: I’m not suggesting that America is some vicious, brutal dictatorship. It’s not.

But anyone who has the courage to be honest and objective can see the obvious decay.

Benjamin Franklin’s warning is coming true. And the trend is accelerating.

Millennials: Read This….

Every year the Swiss banking giant Credit Suisse publishes a detailed report about Global Wealth.

And while drawing conclusions about ‘wealth’ (i.e. ‘net worth’) for the world’s 7.6 billion people is far from an exact science, the report routinely offers some interesting insights and trends.

This year’s report was just released this morning.

As an interesting finding, researchers noted that at the early part of this millennium, between 2000 and 2008, the wealth of the POOREST 50% of people in the world actually climbed at a HIGHER rate than everyone else.

And over that same period, the share of global wealth owned by the top 1% actually declined.

Then the financial crisis broke out in 2008. And in the subsequent recovery from 2009 through today, wealth of the top 1% soared, leaving the bottom 50% in the dust.

Now, don’t get me wrong– there’s absolutely nothing wrong with wealthy people becoming wealthier. It makes sense.

Think about it: Warren Buffett clearly has a greater level of financial sophistication than the Average Joe… so it stands to reason that Warren’s wealth will increase at a faster rate.

The issue (as we discussed in last week’s podcast on Class Warfare), is that the asset booms bubbles around the world that have driven stock prices higher over the last several years have disproportionately benefited people who were already wealthy.

So folks in the bottom 50% certainly have good reason to feel like the system is rigged against them. They feel stuck… with limited prospects for future growth.

I remember reading a recent article in the New York Times telling the tale of two janitors: one, who is currently a contract janitor for today’s most celebrated company– Apple.

The other was a janitor back in the early 1980s for one of that era’s most celebrated companies– Kodak.

The Kodak janitor in the 80s had access to opportunities and education that helped her rise through the ranks; within a decade, she was the company’s Chief Technology Officer.

Today’s Apple janitor sees her only possibility for advancement as becoming a supervisor of other janitors, a job that pays 50 cents per hour more.

Again- this is not a problem of wealth inequality. It’s a problem of mobility: people at the bottom don’t see any way of getting out.

From a generational basis, the issue is intensified for Millennials.

The Credit Suisse report has an entire chapter devoted to “the unlucky Millennials” who have been hit by rising debt and poorer job prospects.

And it’s true. Recent reports from the Treasury Department show that the US government owns nearly $1.5 trillion in student loans.

That’s pretty sad when you think about it: the US government’s #1 financial asset is debt owed by tens of millions of its young people for university education that didn’t even necessarily qualify them for a real career.

Millennials are the most educated generation in history. Yet there are record numbers of them working off student debts as waiters and bartenders, and supplementing their income on the side with ‘gigs’ (like being an Uber driver).

These are all perfectly good ways to generate some extra cash and pay the rent.

But they’re hardly long-term career prospects which afford opportunities to learn valuable skills and move up.

For Millennials who do have careers, they’re earning less (when adjusted for inflation) than Generation X or Boomers did at their age.

On top of all that, young people will spend their entire working lives paying into a pension system that likely won’t be there for them when it comes time to collect.

The Board of Trustees of Social Security tells us that the program is going to completely run out of money within the next 15 years. Millennials’ retirement horizon is far beyond that.

Overall the report paints a grim picture for the future prospects of young people.

But I have a far more upbeat view.

Young people have an incredible gift that previous generations never had.

Despite the ever-increasing cost of university tuition, access to extremely valuable information is incredibly cheap… in many cases free.

This means that learning important skills to help you build wealth and get ahead is easier and cheaper than ever before.

So is starting a business.

It’s possible to register a company online in minutes. To purchase and build a website in a few hours. To reach a worldwide network of suppliers without leaving your living room. To setup a store with the world’s largest online marketplaces with ease. To reach millions of targeted prospective customers in an instant.

None of this was ever possible before.

And while I know that starting a business is a scary, uncertain prospect for a lot of people, entrepreneurship remains the most consistent way to generate substantial wealth… while at the same time providing a lot of value to the world.

It starts with a simple commitment to your own business education: there are countless, free resources to get started learning those skills.

The system is undoubtedly rigged, and as the report shows, leaving a lot of people behind.

But especially for younger people who have the luxury of time, starting a business is a great way to take control of your future… and at a minimum, obtain valuable skills and experiences that will be highly beneficial in the future.

This New Bubble Is Even Bigger Than the Subprime Fiasco

In 1988, a bank called Guardian Savings and Loan made financial history by issuing the first ever “subprime” mortgage bond.

The idea was revolutionary.

The bank essentially took all the mortgages they had loaned to borrowers with bad credit, and pooled everything together into a giant bond that they could then sell to other banks and investors.

The idea caught on, and pretty soon, everyone was doing it.

As Bethany McLean and Joe Nocera describe in their excellent history of the financial crisis (All the Devils are Here), the first subprime bubble hit in the 1990s.

Early subprime lenders like First Alliance Mortgage Company (FAMCO) had spent years making aggressive loans to people with bad credit, and eventually the consequences caught up with them.

FAMCO declared bankruptcy in 2000, and many of its competitors went bust as well.

Wall Street claimed that it had learned its lesson, and the government gave them all a slap on the wrist.

But it didn’t take very long for the madness to start again.

By 2002, banks were already loaning money to high-risk borrowers. And by 2005, all conservative lending standards had been abandoned.

Borrowers with pitiful credit and no job could borrow vast sums of money to buy a house without putting down a single penny.

It was madness.

By 2007, the total value of these subprime loans hit a whopping $1.3 trillion. Remember that number.

And of course, we know what happened the next year: the entire financial system came crashing down.

Duh. It turned out that making $1.3 trillion worth of idiotic loans wasn’t such a good idea.

By 2009, 50% of those subprime mortgages were “underwater”, meaning that borrowers owed more money on the mortgage than the home was worth.

In fact, delinquency rates for ALL mortgages across the country peaked at 11.5% in 2010, which only extended the crisis.

But hey, at least that’s never going to happen again.

Except… I was looking at some data the other day in a slightly different market: student loans.

Over the last decade or so, there’s been an absolute explosion in student loans, growing from $260 billion in 2004 to $1.31 trillion last year.

So, the total value of student loans in America today is LARGER than the total value of subprime loans at the peak of the financial bubble.

And just like the subprime mortgages, many student loans are in default.

According to the Fed’s most recent Household Debt and Credit Report, the student loan default rate is 11.2%, almost the same as the peak mortgage default rate in 2010.

This is particularly interesting because student loans essentially have no collateral.

Lenders make loans to students… but it’s not like the students have to pony up their iPhones as security.

That’s what made the subprime debacle so dangerous.

Millions of homes were underwater, so when borrowers didn’t pay, lenders didn’t have sufficient collateral to cover their loan exposure.

With student loans, there is no collateral. Lenders have no security to recoup their loans.

So when students don’t pay, someone is going to take a hit.

That ‘someone’ will likely be you.

That’s because hundreds of billions of dollars of these student loans are either owned or guaranteed by the United States government.

So as borrowers stop making payments, it’s the taxpayer who will suffer yet another massive loss.

Let’s be honest, though, there’s something seriously screwed up with this system.

Young people are pushed into this system by a society that places an irrationally high value on university degrees.

Kids are told for their entire lives that if they study hard to get into a good school, there will be a great career waiting for them.

For many young people this turned out to be a total lie.

In fact, Federal Reserve data once again show that, for at least 25% of college graduates, salaries are no higher than for people with just a high school diploma.

Racking up so much debt hardly seems worth it.

It seems bizarre to begin with that an 18-year old will know what s/he wants to do in life, to the point that they should take on $50,000 in debt for a piece of paper that might not even make them marketable.

What did any of us really know at age 18? And how many of us could have accurately predicted our life’s path?

Very few.

And yet there’s an absurd amount of pressure to force young people into this system that heaps debt upon them.

If you’re a young person about to go down this path of debt, I’d suggest two alternatives:

1) Look overseas.

There’s a multitude of top-ranked universities around the world that you can attend for a fraction of what you might pay at home. See here, and here.

2) Seek mentorship.

The master-apprentice relationship worked well for thousands of years. And it’s so simple.

If you want to be successful, learn from successful people.

If you want to be great at something, find someone who’s already great at it and learn from them.

And if you’re not sure, find someone who you respect admire… someone whose activities and values excite you… and make yourself indispensable to that person.

Privacy is No Longer a Western Value

The Most Shocking Revelation from the CIA Spying Scandal

It happened again– another spying scandal in the Land of the Free.

Yesterday Wikileaks released 8,761 CIA documents detailing the agency’s hacking of smart phones, routers, computers, and even televisions.

These files reveal that the CIA can and has hacked devices that were supposedly secure– iPhones, iPads, and Android devices.

The documents further reveal that the CIA is deliberately infecting personal computers with spyware, including Windows, Mac OS/X, Solaris, Linux, and other operating systems.

They’re also hacking WiFi routers to deploy software that monitors Internet activity, and have even figured out how to bypass anti-virus software so that their spyware cannot be detected.

They’ve also managed to make the rest of the world believe that Russian hackers, not the CIA, are behind all this malware and spyware.

It’s like a restatement of that old Mission: Impossible line– “Should any of your IM force be caught or killed… we’ll blame Russia.”

The CIA is pretty shameless about its activities, nicknaming its various hacking programs “Assassin”, “Medusa”, and “Brutal Kangaroo”.

One of the deepest revelations is that the agency is able to hack Internet-connected televisions, including Samsung smart TVs, through a program called “Weeping Angel”.

Basically the CIA can turn your TV into a listening device, recording conversations in the room and transmitting the audio to a CIA server.

Even if you think the TV is off, it’s not.

CIA hackers have been able to spoof the on/off display and set the television to a “false off” mode.

Bottom line, no device that’s connected to the outside world is truly safe.

And future Wikileaks publications may show that the intelligence community is hacking home automation devices, Internet-connected automobiles (including driverless vehicles), and artificial intelligence like Amazon’s Alexa.

It’s hard to be shocked at this point that the government is spying on its own allies and citizens.

This is just the latest in a pattern of brazen surveillance and flagrant Constitutional violations on the part of the US intelligence community.

But that’s precisely what I find MOST concerning– the LACK of concern over these new CIA documents.

People have such a low expectation of their government now, and have become so accustomed to the government routinely violating their civil liberties, that there’s hardly any public outrage anymore about these spying scandals.

More importantly, the lack of concern is indicative of what freedom means in the Land of the Free today.

Here’s a great example–

Young people are traditionally the most politically charged activists in the country.

But where are the protests across university campuses demanding freedom and privacy?

It’s not happening.

That’s because university students are too busy protesting against ideas they don’t want to hear about.

At Middlebury College last week, a small liberal arts school in Vermont, a small mob of student protestors physically assaulted a conservative speaker because his ideas offended them.

They couldn’t simply skip the lecture and allow interested students to attend.

No, they had to engage in violent censorship, oppressing any idea that doesn’t conform to their narrow agenda.

The only thing these cry bullies are interested in hearing is apologetic white men groveling over their privilege.

This is the new reality in the Land of the Free: freedom has deteriorated into some gender studies professor’s socialist fantasy.

Constitutionally guaranteed liberties have become irrelevant.

Forget about “free speech”.

Any intellectual dissent from the intolerant Social Justice view is now considered “hate speech”.

And the Fourth Amendment, which establishes “the right of the people to be secure in their persons, houses, papers, and effects against unreasonable searches and seizures,” has become a distant memory.

As a child who grew up in the 80s during the height of the Cold War, I imagine there would have been widespread disgust if a similar scandal had been exposed.

Spying on citizens and allies? That’s what the Soviet Union did.

But today, everything else is more important.

Transgender bathrooms. Silencing hate speech. Forcing elementary school children to feel guilty about their white privilege. Political correctness in extremis. #everyone-else-but-white-people’s-lives-matter.

This is what dominates the social conversation now in the Land of the Free.

Privacy is no longer a Western value.

After all, people narcissistically upload their entire lives to social media (as if anyone cares what they’re having for dinner) so that Mark Zuckerberg can auction off our details to the highest bidder.

And it is precisely this decline that I find most disturbing.

Some people hold the idiotic belief that, “If I have nothing to hide, I have nothing to fear.”

This is dangerous logic, for so many reasons.

Even the use of the word ‘hide’ is ridiculous… as if the fact that I don’t upload photos of my nether regions to Instagram means that I’m “hiding” something.

We all keep things private. It’s why we wear clothing, don’t discuss our personal finances in polite company, and worry when our social security number is stolen.

But more importantly, if it doesn’t matter that the CIA is monitoring people’s most intimate moments, then does anything matter?

They keep moving the line, probing deeper and deeper into our lives and enveloping the nation inside an Orwellian surveillance state.

And it doesn’t stop… because we’re in the midst of a complete breakdown of western values.

Related columns and Scary Video:

[youtube https://www.youtube.com/watch?v=j1sweT5kPP8?rel=0?ecver=1]

Wiki leaks: CIA Explored Car Hacking to Carry Out “Undetectable Assassinations”

Government Spooks Can Use The Mic And Camera On Trump’s Phone Even When He Thinks It Is Turned Off.

Is America Still the Land of Opportunity?

Last week during a long overdue vacation, a close friend of mine recommended reading the autobiography of Rich DeVos called Simply Rich.

DeVos is a billionaire entrepreneur who started countless ventures during his nine decades on this earth.

Back in the 1946, for example, DeVos started an airline… virtually overnight.

He just bought an airplane and started flying people around. No rules. No regulations.

They didn’t even have an airport. The local airfield north of Grand Rapids, Michigan, where they were based, hadn’t been completed yet.

As DeVos recounts in his book, “We put pontoon floats on our plane and took off and landed on the Grand River, which ran along the airfield.”

His first office at the airfield was an old chicken coop that he found, washed in the river, and re-painted.

The following year he and his partner opened up one of Michigan’s first “Drive Through” restaurants at the airfield, catering to passengers, workers, flight students, and spectators who came by in the evenings just to marvel at the planes.

Again, no rules. No regulations.

They just saw an opportunity and went for it.

DeVos started another business selling ice cream; another offering fishing excursions on Lake Superior; and another delivering trucks cross-country.

The truck delivery business was one of the more interesting ones; it started when he was just a kid– someone asked him to drive two pickups from Grand Rapids to Bozeman, Montana.

There were no hotels or motels… or even interstates back then.

So DeVos and his friend had to zig-zag their way across corn fields to get there, sleeping on haystacks each night along the way.

The book is a hell of an adventure– a reminder of how free and unencumbered things used to be.

Back in America’s heyday, people succeeded based on their hard work, ingenuity, and willingness to take action.

They didn’t have to spend three years filling out paperwork so that some government bureaucracy could justify its existence.

It was an environment that created unparalleled opportunity and prosperity which, candidly, have long since faded.

Today there are rules for everything; in fact, just this morning, the US federal government published an astonishing 709 pages of new regulations.

And that’s just for today. They publish new regulations every single business day. So tomorrow there will be even more.

These rules make it more difficult to produce, to start a business, to sell a product or service to a willing consumer.

And these rules carry costs, whether it’s in paying a fee, filling out paperwork, etc.

So just imagine the effect that literally decades worth of rules and regulations has had on US productivity (which is now noticeably contracting, even according to government data.)

It’s also worth noting that roughly 30% of occupations in the Land of the Free now require some sort of government license.

In its study “License to Work”, the Institute for Justice reports that 45 out of 50 of the largest cities in the United States have put up substantial obstacles to prevent budding entrepreneurs from selling food from street carts.

A manicurist in Alabama requires 163 days of training, while a shampoo specialist at a Tennessee hair salon must undergo 70 days of training, take two exams, and pay $140 in fees to obtain a license.

Hawaii requires fire alarm installers to undergo a whopping four years of training, pass two exams, and pay $380 in fees to obtain a license.

And a tree trimmer in California must also undergo four years of training, pass two exams, and pay $851 in fees to obtain a license.

It’s absurd.

Nothing that Rich DeVos his partner accomplished in their teens and 20s is even legal anymore.

It makes me think about all the people today who will never have the chance to realize their full potential thanks to the mountain of regulations blocking their way.

This is an important point to understand.

Looking at the data– the incredible overregulation, $20 trillion in debt, insolvent pension funds, etc., it’s painfully obvious that the US is past its prime and holding back millions of people from achieving greater prosperity.

Rich DeVos started so many businesses back in the 1940s because the government stayed out of the way and enabled hard-working risk takers to succeed.

Today the government spends $2 billion to build a website and churns out hundreds of pages of regulations each day.

And this trend gets worse each year.

Understanding this simple reality doesn’t mean that you’re pessimistic, unpatriotic, or expecting the end of the world.

It just makes you rational.

Things change. That’s the bottom line.

The US is still a fantastic place. But it’s no longer the same Land of Opportunity it was when Rich DeVos was getting started.

As I’ve summarized before, the US is a great place to consume… but an increasingly difficult place to PRODUCE.

That imbalance has serious long-term consequences, which we are only starting to experience.

Editor’s final thoughts:

French economist and statesman Frederick Bastiat called it the desire to rule over others, or the lust for power. Bastiat wrote,

There are too many “great” men in the world—legislators, organizers, do-gooders, leaders of the people, father of nations, and so on….

Too many persons place themselves above mankind; they make a career of organizing it, patronizing it, and ruling it…. My attitude toward all other persons is well illustrated by this story from a celebrated traveller:

He arrived one day in the midst of a tribe of savages, where a child had just been born. A crowd of soothsayers, magicians, and quacks—armed with rings, hooks, and cords—surrounded it.

One said: “This child will never smell the perfume of a piece-pipe unless I stretch his nostrils.”

Another said: “He will never be able to hear unless I draw his ear-lobes down to his shoulders.”

A third said: “He will never see the sunshine unless I slant his eyes.”

Another said: “He will never stand upright unless I bend his legs.”

A fifth said: “He will never learn to think unless I flatten his skull.” “Stop,” cried the traveller. “What God does is well done.

Do not claim to know more than He. God has given organs to this frail creature; let them develop and grow strong by exercise, use, experience, and liberty.”

Bastiat says that we should try to exercise our God-given liberty because God has given to men all that is necessary for them to accomplish their destinies.

He has provided a social form as well as a human form. And these social organs of persons so constituted that they will develop themselves harmoniously in the clean air of liberty.

Away, then, with quacks and organizers! Away with their rings, chains, hooks, and pincers!

Away with their artificial systems!

Away with the whims of governmental administrators, their socialized projects, their centralization, their tariffs, their government schools, their state religions, their free credit, their bank monopolies, their regulations, their restrictions, their equalization by taxation, and their pious moralizations!

And now that the legislators and do-gooders have so futilely inflicted so many systems upon society, may they finally end where they should have begun:

May they reject all systems, and try liberty; for liberty is an acknowledgement of faith in God and His works.

The Coming Crackdown on Free Speech

It’s amazing what can happen in a week.

Before this publication went on hiatus last week, one of the last letters I wrote to you in 2016 was about the National Defense Authorization Act and its treasure trove of freedom-killing provisions.

Section 1287, for example, creates a new agency called the “Global Engagement Center”, aka Ministry of Truth.

It has one purpose: to combat fake news.

The Global Engagement Center will fund and train journalists around the world to push a never-ending flow of US propaganda and cripple any independent outlet that doesn’t conform to the official government narrative.

Sadly, this is not unusual.

Each year, Congress creates a new National Defense Authorization Act (NDAA), which is essentially the military budget for the following year.

But without fail, each year’s NDAA is crammed full of horrific provisions which either waste taxpayer funds on corrupt pet projects, or destroy Americans’ civil liberties.

You may remember the 2012 NDAA, for example, which President Obama signed into law on New Years Eve 2011.

That year’s NDAA contained a section authorizing the military detention of US citizens on US soil.

Now we’re getting the Ministry of Truth.

President Obama signed this year’s NDAA into law on Christmas Day, which means that the Global Engagement Center will be live and operational within six months.

Four days later on December 29th, he issued an executive order intended to punish the Russian government for manipulating the US election.

The order contains some incredibly vague language targeting anyone engaged in “cyber-related activities” that are “reasonably likely” to pose some threat, including “activities to undermine democratic processes or institutions”.

The order also threatens anyone who provides “goods or services” to those engaged in the aforementioned cyber-related activities

Anyone deemed by the US government to fit those incredibly broad definitions can have their assets frozen instantly.

Now, the spirit of the order is to go after all the Russians and Chinese they think are complicit in hacking the US government and US corporations.

(Mr. Obama also expelled a multitude of Russian diplomats that the FBI suspects of being spies, raising the question of why these people were in the US to begin with.)

Yet such broad and vague language can easily be applied to ensnare just about anyone they want.

If you just happen to have sold a used mobile phone over Craigslist to someone who ends up being a hacker, you can be targeted under this order.

Same with anyone who uses the Internet (engages in “cyber-related activities”) to express strong anti-government opinions (“undermine democratic . . . institutions”).

Now, clearly that’s not the intention with this order.

But when enough time passes, rules and regulations have a strong tendency to be used in ways that dramatically diverge from their original intent.

Case in point: the US government has wrongfully seized billions of dollars worth of cash and property over the years through what’s known as Civil Asset Forfeiture.

Civil Asset Forfeiture is essentially a form of theft.

But it’s perfectly legal for local, state, and federal police agencies to steal from you because of technicalities that were written in laws passed decades ago.

For example, the Archaeological Resources Protection Act was passed in 1979 with the intention of helping to preserve historic sites.

Buried in the law is some vague language authorizing the recovery of any property that was stolen from historic sites.

Now, decades later, police agencies abuse the vague language from that law, as well as dozens of other laws, to give themselves the authority to seize your property.
Their theft of your property has nothing to do with protecting archaeological sites, but they still have the legal authority thanks to a 37-year old law.

So no matter how good the intentions behind a law or executive order, there’s always strong potential for nasty, unforeseen consequences down the road.

And between the NDAA’s Global Engagement Center and the President’s incredibly vague executive order, there’s some serious anti-free speech potential.

By the way, this is NOT just a US phenomenon.

Israel’s government is close to passing a bill that authorizes them to demand Facebook (and other social media platforms) to remove content that they deem threatening.

Germany’s government is talking about passing a similar bill to stop “fake news” during the election cycle, even suggesting that Facebook could be fined if it does not remove certain content within 24 hours of being told by the government to do so.

Yeah, clearly there’s a lot of garbage on the Internet.

Someone can write a post that Hillary Clinton’s campaign is running a child prostitution ring, and it gets retweeted by mindless automatons who believe everything they read.

But at the same time, there’s a lot of independent, boutique journalism out there, and many of these sites are being labeled “fake” because they don’t conform to the official government narrative.

After a terrible year for the status quo, between Brexit and the Trump election, politicians are clearly terrified of any dissent that threatens their position.

And now they’re putting together all the tools they need to stamp it out and keep you in line.

Here are other three excellent articles on the same topic: