Posted on 02/06/2017 9:49:58 AM PST by SeekAndFind
Your skills, knowledge and and social capital will emerge unscathed on the other side of the re-set wormhole. Your financial assets held in centrally controlled institutions will not.
Longtime correspondent C.A. recently asked a question every American household should be asking: which assets are most likely to survive the "system re-set" that is now inevitable? It's a question of great import because not all assets are equal in terms of survivability in crisis, when the rules change without advance notice.
If you doubt the inevitability of a system implosion/re-set, please read Is America In A Bubble (And Can It Ever Return To "Normal")? This brief essay presents charts that reveal a sobering economic reality: America is now dependent on multiple asset bubbles never popping--something history suggests is not possible.
It isn't just a financial re-set that's inevitable--it's a political and social re-set as well. For more on why this is so, please consult my short book Why Our Status Quo Failed and Is Beyond Reform.
The charts below describe the key dynamics driving a system re-set. Earned income (wages) as a share of GDP has been falling for decades: this means labor is receiving a diminishing share of economic growth. Since costs and debt continue rising while incomes are declining or stagnating, this asymmetry eventually leads to insolvency.
The "fix" for insolvency has been higher debt and debt-based spending--in essence, borrowing from future income to fund more consumption today. But each unit of new debt is generating less economic activity/growth. This is called diminishing returns: eventually the costs of servicing the additional debt exceed the increasingly trivial gains.
What happens when the bubbles pop, despite massive central bank/state interventions? The entire socio-political/financial system goes through a "system re-set" in which all the fantasy-based valuations, political denials, false promises and fraudulent claims collapse in a heap.
In a crisis, the privileged Elites will change the rules in a desperate attempt to expropriate the income and wealth of the bottom 99.5% to preserve their own power.
The trick is to do so in ways that won't spark an immediate political insurrection.
We can better understand their policy choices by asking: What's easy to expropriate, what's difficult to expropriate?
Those assets that are easy to expropriate will be expropriated first. Those that are difficult to expropriate are far less likely to be grabbed, due to the high costs of expropriation and the high risks of sparking a political insurrection.
History suggests the privileged Elites will pursue two basic strategies to expropriate the income and wealth of non-elites:
1. They will expropriate what is easy to expropriate: financial assets in centralized institutions the state controls: banks, brokerage accounts, insurance policies, etc.
2. They will use the time-honored "stealth expropriation" methods: inflation and taxes.
Any "money" held in a centrally controlled institution can be expropriated overnight. The rules will change without warning, so there will be no opportunity to escape the system.
Direct expropriation takes many forms. Your funds could be "bailed-in" (transferred to the bank). Large currency bills could be declared worthless. IRA and 401K accounts could be transferred into government bonds, to "protect the account owners from risky investments." (Naturally, any expropriation will be presented as "for your own good.")
Or a new currency could be issued that strips away 90% of the purchasing power of the old currency. It could be a New Dollar, an SDR global currency, or a state-issued cryptocurrency. The point is to strip away 90% of the wealth held in the old currency.
Indirect "stealth" expropriation has several forms: slow currency devaluation, also known as inflation, or higher taxes and junk fees (not called taxes, but you receive no additional value for the higher fees).
The end result of these policies is you may receive the $2,000 monthly pension you were promised, but after inflation, currency devaluation and taxes, your real purchasing power is $100 in today's currency.
So what's difficult to expropriate? I present some answers in my books An Unconventional Guide to Investing in Troubled Times and Get a Job, Build a Real Career and Defy a Bewildering Economy.
It's impossible to expropriate one's skills, experience and social capital. These are intangible forms of capital and so they cannot be confiscated like gold, currency, land, etc.
Land and homes are difficult to expropriate for two reasons: private property is the backbone of capitalism and democracy, and the state confiscating private property would very likely spark a political insurrection that would diminish or threaten the power and wealth of the privileged Elites.
Secondly, it's very costly for the state to maintain the productive output of real property it has confiscated. Guards must be posted, sabotage repaired, and the immense difficulties of coercing a rebellious populace to continue working what they once owned for the benefit of the state and its privileged Elites must be solved and paid for.
The state can expropriate farms, orchards and workshops for back taxes (or some similar extra-legal methodology), but how do you force people to work these properties productively?
As a general rule, whatever the super-wealthy own will be protected from expropriation. Private real property is the foundation of the Elites' wealth, and while the land of debt-serfs may well be confiscated for back taxes (the wealthy will buy exemptions from rising taxes), those who own land and buildings free and clear constitute a political force to be reckoned with.
As I discuss in my book Resistance, Revolution, Liberation: A Model for Positive Change, there's one other asset the state and its ruling Elites cannot expropriate: community.
The state will also have difficulty confiscating assets that are outside its reach. This explains the propularity of owning assets in other nations, and the debate over cryptocurrencies: will states be able to confiscate all cryptocurrencie at will, or is that technically unfeasible?
The main takeaway is this: your skills, knowledge and and social capital will emerge unscathed on the other side of the re-set wormhole. Land and real property you own free and clear (no debt) is likely to remain in your possession, as long as you can pay soaring taxes/junk fees during the crisis phase. Your financial assets held in centrally controlled institutions will not make it through unscathed; they are simply too easy for central authorities to expropriate.
Inflation generally helps those who owe money... it's hurts savers.
This is one reason I got out. And though I think the Trump election is a pause before the inevitable, I believe our situation is beyond any human solution. This is why I got out several years ago.
For me, EVERYTHING is in hard assets and the real-estate I live on - a home and 32 acres that can completely sustain my family.
Cash
PMs
Cryptocurrencies
Firearms
Tools
Equipment
Real property
Food Storage
Reputation
...
I read it as which of you asshats and wondered how you knew.
PMs-—????????????????????????
.
Any real reset on the scale that ZH is talking about will destroy or bankrupt 95 out of 100 people in America.
The game has been rigged for far too long.
The plus side is that when the market goes up in any quarter or over the year from the anniversary of the IRAs, they generate interest above the guaranteed - got almost $8K extra on mine this year.
We were prudent with our lifestyle and right now it would take a pretty substantial spike in inflation to put us behind the 8-ball.
Too bad most folks in the Middle Class prefer to live beyond their means and not prepare for the inevitable retirement or work at Walmart until you die event.
This is a silly article. Let’s just say, Washington elites “expropriate” all funds in centrally managed institutions. And the article thinks after doing that, it is hard to then steal property? Nonsense.
And after stealing that much net worth from so many people, exactly what do you think the life expectancy of these these thieves to be?
There have been bubbles, depressions, etc. The only way I’ve seen in history to wipe everyone out is a revolution - like Russia 1917 and the like. If that happens, private property and other tangible assets are absolutely not safe. The you choice is to leave the country to a safe haven with whatever you can carry, or fight back with armed resistance to the death.
This article is silly.
That is admirable as long as some layer of government doesn't decide it wants your property.
Ammo.
Precious Metals
Thanks !
Cats. Invest in cats.
I look at the whole thing kind of like insurance. You can only mitigate risk, not eliminate it.
And the good news is that my property would be of no use to the government. If they were coming after my property, things would have to have deteriorated so much that that would be the least of my, or anybody else’s problems.
Like I used to say in 1970 in high school: If the day comes where the government is not honoring your valid savings bonds, that will be the least of your problems.
Whenever I see a scare piece like this I examine the basic tenets and see if they are sound. Right off the bat, this one hit me:
” this means labor is receiving a diminishing share of economic growth. Since costs and debt continue rising while incomes are declining or stagnating, this asymmetry eventually leads to insolvency.”
First, the chart is interesting showing labor receiving a declining share of GDP. However, note that it is not a zero-based chart. Thus, it shows a trend, but not an inevitable “result” or crash, which is implied.
Second, the chart “assumes” GDP is static. This is a typical liberal mistake. It is the same one as assuming that if some people are getting rich, then others must be becoming commensurately poor. If the GDP is rising during this same period, then labor is not suffering and may be thriving!
Thus, “leading to insolvency” is NOT an appropriate conclusion based on the chart, alone. It may be an appropriate conclusion, but it hasn’t been even remotely demonstrated.
I fail to see any basis for the prepper fascination with so-called cryptocurrencies. The means of distribution and even the existence of them is completely controlled by government just as surely as any other, and what’s worse, it’s also dependent upon not just electricity but the telecom grid.
And talk about fiat money, good grief, what exactly determines the value of cryptocurrency? “Mining,” lol? I remember my young niece being fascinated with Minecraft, not exactly a big money-maker for her.
Don’t put your faith in any form of currency if you believe the governing systems to which they inevitably belong will cease to exist. Scrip and local currencies will arise in the absence of any other alternative, as they have in the past, with the value agreed upon by those participating and policed by those participating as well.
Too true.
Precious metals, i.e., gold and silver. :)
Thank you.
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