Monday, July 29, 2013
The individual with complete control of all his assets is the only truly wealthy person in a kleptocracy.
Correspondent Jeff W. recently posed a deeply insightful question: are we investing or are we really just trying to dodge thieves? This question slices right through the carefully cultivated illusion of trust and prosperity and plunges straight into the heart of our cartel-state financial system. Here are Jeff's initial thoughts on the question: -------------------------------------------------------------------------------- "As we try to preserve capital and earn a return on it, are we investing today or are we really just trying to dodge thieves? First of all I question how much real investing is going on in America today. We continue to lose manufacturing in this country, so in manufacturing, disinvestment is what is going on. People speak of investing in houses, but today’s McMansions, if you look at how they are built, do not qualify as long-term investments. They are built more to allow their owners to participate in a real estate asset bubble rather than to live in and enjoy for generations (which is the purpose houses would be built for in a sane and honest world). Investments in strip malls and big-box stores do not increase the wealth of the nation. When you have enough retailing, it is enough. You don’t need any more. Adding more retail space is malinvestment. A lot of retail space that is being added now will have to close down if The Federal Reserve ever starts tapering in a serious way. So there is reason to suspect that not very much productive investment is really taking place in American at all. Regardless of that, investors still have to dodge the ubiquitous thieves who are swarming all over the landscape. If you leave your money parked in cash, you will lose it to inflation. As you have pointed out, each person experiences a differing inflation rate; for some people, today’s rate could easily be 10%-15%. That’s how much they lose if they stay in cash. If you buy commodities futures, you are at the mercy of the thieves who suppress prices with massive naked shorting. Price manipulation is a form of stealing, and many precious metal investors have been victimized lately by the thieves who do it. If you buy bonds, you are likely buying at the top of a bubble. Running Ponzis in the form of asset bubbles is, of course, another kind of theft. How about stocks? Looking at the disinvestment going on in the U.S., an investor might think that Chinese stocks would be the way to go. That’s where manufacturing is booming. But if an investor were to go that route in recent years, he would also have been burned. I believe that Chinese stocks, like commodity prices, have been manipulated in recent years by the Powers That Be. Does it make sense that Chinese stocks should have lost 40% of their value since 2010 if their economy is growing 8-10% a year? Does it make sense that U.S. stocks should have gone up as they have? The whole investment environment today stinks of price manipulation. So the skill we need today is not traditional investing skill; it is thief-dodging skill. It consists of knowing the thieves’ techniques and whom they are targeting, of knowing the bad neighborhoods to avoid, knowing how to avoid being a target, trying to stay one jump ahead of them as they target new victim groups. These are skills people had back in the Dark Ages, and as we enter a new Dark Ages, these are skills we need again. Millions of middle class Americans are being wiped out by thieves, and millions more will be wiped out as trends continue. But those who can successfully dodge the thieves can continue to maintain some civilized standards as they hope for better days." -------------------------------------------------------------------------------- Thank you, Jeff, for posing a thought-provoking question and commentary. How do we avoid thieves when the financial system itself is theft? The obvious answer is to peel away from the crowd of lemmings running full tilt for the cliff edge of asset bubbles. This requires substituting skepticism for blind faith. Please glance at this chart and ask yourself if this bubble is different and boom will not be followed by bust for the first time in human history: The first step to avoid losing to thieves is avoid being a mark in the thieves' game.To some degree, this may mean absorbing a smaller, known loss (inflation by holding cash) to avoid the thieves' high-risk asset-bubble games where a potential loss of 40% of one's capital is not just possible but the unstated purpose of the game. Another is to remove as many assets as possible from exposure to the thieves' systems. This means withdrawing your capital from Too Big to Fail Banks, pulling capital out of Wall Street, and limiting the amount of cash you hold in any one bank to limit losses from "bail-ins" where your cash is stolen to pay off banking-sector thieves. The cartel-state debtocracy indentures the unwary with debt. Debt is the thieves' poisoned-sugar method of addiction and servitude. The high from debt is like the high from crack cocaine: it seems so "cheap" at first, and then the addiction kicks in and withdrawal becomes impossibly painful. Welcome to the Thieves' Den of Debtocracy. Since the system yokes those with high earned incomes into teams of tax donkeys, one way to minimize one's time on the tax donkey team is to reduce one's earned income, either by working less or by deploying one of the vanishingly few incontestably legal tax shelters open to the lower 99.9% (for example, socking away money for retirement). The cartel-state Den of Thieves will naturally skim and steal what is most easily stolen, which is money and assets held in their own systems (banks, Wall Street, Treasury bonds, etc.). This explains the popularity of the coffee-tin/glass-jar bank in kleptocracies: the cost to the authorities of trying to locate and confiscate millions of coffee-tin banks is prohibitive, and prone to marginal returns. Stealing money from depositors via a "bail-in" is effortless and essentially cost-free to the state, as is requiring all retirement funds be invested in Treasury bonds ("for your own good," of course). No matter how desperate the cartel-state thieves are for more cash, they know that confiscating the serfs' tools and land without the cover of taxes and debt would trigger revolt. So assets that are physical objects or immaterial assets such as human and social capital are beyond the easy reach of the cartel-state thieves. Taxes and debt are the two methods used for wholesale thievery via confiscation.Can't pay your mortgage or property taxes? Oops, your assets, land and home are confiscated. The ideal situation is not have a mortgage or any other debt, as debt is what gives the thieves leverage over you. The only protection against wholesale theft via suddenly higher property taxes is a limit on annual tax increases (a.k.a. Prop 13). Our financial system is structurally a kleptocracy. The less exposure one has to Wall Street and the financial debtocracy, the lower one's exposure to the thieves. It's called opting out, or voluntary poverty. Poverty is of course a relative term. If all one's assets are real-world possessions and immaterial assets such as skills, personal integrity and networks of trusted associates, one is indeed poor in financial assets. But if control of one's assets is the only real measure of wealth, then the individual with complete control of all his assets is the only truly wealthy person in a kleptocracy.