economy

Civil disobedience in the face of desperate government: John Rubino video

Posted by

0

The United States is in serious financial trouble. In 2011, the Federal Government borrowed over 40 cents for every dollar it spent, and the Federal Reserve Bank bought 61% of all the debt that the United States Treasury issued. When the Federal Reserve buys the debt, it is called “quantitative easing”, which is a euphemism for creating money out thin air (not money printing--but the creation of electronic money). Eventually, that will lead to high inflation, which is already becoming painfully visible in the prices for food and gas.

Tax freedom day in the United States is allegedly in April, but the hidden taxes of inflation make it much later in the year–in a manner that is completely dishonest. Hazlitt wrote in Economics in one lesson (p. 20):

Here we shall have to say simply that all government expenditures must eventually be paid out of the proceeds of taxation; that to put off the evil day merely increases the problem, and that inflation itself is merely a form, and a particularly vicious form, of taxation.

Veteran investor Marc Faber suggests that wealthy people will likely face a minimum of 50% reduction of wealth due to inflation, war and civil unrest, and asset price collapse. How can people protect themselves? Physical gold, say some. But alas, gold investors fear desperate measures by confiscatory governments to seize gold and to try to stop the gaps of their own uncontrolled spending.

In this light, John Rubino of dollarcollapse.com predicts that people will have to practice civil disobedience in order to protect themselves against an out-of-control government that is tending towards dictatorship. For example, he suggests putting gold in a foreign bank where the IRS can’t get to it. I have also suggested in certain cases that civil disobedience is a proper reaction to the IRS. For example, it is high time that those of us who are living abroad as citizens of other countries begin to practice disobedience to the unreasonable and unconstitutional demands that the IRS has been making against us. We have the great advantage, over US-based people, of having already made our great escape from the tyrannical grasp of this country, once-great but now turned desperate and evil.

We must do this because we cannot possibly meet the demands of two taskmasters (or tax masters). We must learn to disobey cheerfully, so that our grief does not kill us.

Hat tip: Monty Pelerin

Keystone Aftermath Arrives: Canada Pledges To Sell Oil To Asia, As US Becomes Source Of “Uncertainty” Zero Hedge

Posted by

0

Zerohedge reports that Canadian Prime Minister Stephen Harper has indicated to the United States, “Canada will continue to work to diversify its energy exports.”

History books study catastrophic events such as wars or the collapse of empires and try to determine what were the causes and factors that led up to the disaster.  What will the future history books say about the collapse of the American hegemony in the global economy?  Here are four possible factors:

(1) The leadership did not secure cheap and safe energy from Canada, starving the nation of the resources that they needed to secure the economy.

(2) The leadership refused to reign in spending at all levels of government, leading to a debt-death spiral and to default of the nation finances and the collapse of the dollar.

(3) The leadership overextended itself militarily around the globe, which had at best a dubious, if not a negative, return on investment.

(4) The leadership refused to change arcane tax laws that made it impossible for Americans to set up shop in foreign countries to foster exports and trade of made-in-America products.

Future history books may see Stephen Harper’s statement to the United States as indeed a pivotal moment.  Harper is saying, Fine!  If you don’t want our energy, we can find other buyers.

Why are manufactured goods cheap in the United States?

Posted by

0

I enjoy reading Kevin Graham’s blog, because he often has observations that disagree completely with my own.  Recently, he’s blogged that inflation has increased the standard of living.  Kevin and a certain Joel got into an interesting conversation about it.  But here is the picture that Kevin got from Carpe Diem from the 1964 Sears Catalog:

Kevin’s point is that big screen HDTVs today are hardly more expensive in nominal dollars, and far cheaper in inflation adjusted dollars.  But furthermore, the actual TV product is superior.

Now, I encourage readers to read both Joel and Kevin to see the two sides of the coin.  I interjected myself with a couple of comments that I wish to record here:

@Joel, thanks for your thoughtful responses to Kevin’s stimulating post. I would like to add one point, which is crucial in this whole picture. The 1964 TV is American made in factors in the United States with US workers; back then, TVs were likely exported to other countries. The 2012 TV is made in China. The reason it is cheap is because the Chinese sell their products in exchange for the United States fiat dollars, which the Chinese can then use on world markets either to invest or to buy the raw materials that they need. The United State has a three-decade trade deficit. All that means is that the United States has been able to export its own currency receiving manufactured goods in return, currency which it costs virtually nothing to make–particularly when it is created electronically and not printed. Now the United States by inflating its currency over this period has been a big winner in global trade. And those TVs and such are indeed cheap. But I defy you to go to a country which is not able to export its currency to China. Say a poor African country. There, people still fix, e.g., 30 year old refrigerators, because the cost of labour and parts is still much, much cheaper than replacing the unit. All this means is that it is possible for the United States to overdo it–I think inevitable at this point. Then the rest of the world will reject the US dollar and there will be completely new dynamic, where the cheap money is unable to chase real goods. This is an unprecedented situation in the world today; to my knowledge, no fiat currency has ever enjoyed the ascendency of the dollar, and so no such currency has ever fallen from such a pinnacle. When it does, watch out. It will be the end of the global economy as we know it.

By the way, Kevin, did you take into consideration that that TV you picture is in a fine piece of crafted wood furniture? I know the TV cabinet is out of style, but if you were able to purchase something comparable in quality and materials, say a buffet cabinet without the hutch, it would cost starting  at around $2000, and that is without a the TV. How does that figure into your calculations about the benefits of inflation?

FATCA’s impact on publicly traded trusts

Posted by

0

My friend’s blog, Beating the Index, has recently been promoting the virtues of two high payout energy trusts that the Calgary oil guys have set up to exploit US legacy oil and gas by using horizontal drilling and multi-fracking technologies.  The Canadian government ended the income trust structure for most Canadian companies on January 1, 2011, because it provided a tax loophole for foreigners investing in Canada, and corporate profits could escape the country with a mere 15% withholding–in the income trust, the profits flowed through to individual distribution recipient who then declared it on their taxes as unearned income.  Apparently, the income trust structure (or something similar) is still available for Eagle Energy Trust (EGL.UN) and Parallel Energy Trust (PLT.UN) because they are exploiting a foreign source of income.

In the past, I’ve merely responded to Beating the Index by saying that I’m out of the US market because of the persecution of US persons, though I thought that EGL.UN, an asset held in Canada, would be a safe because Mich could buy or sell it without IRS implications.  But now I am not so sure, because it dawned on me this morning that FATCA doesn’t impact Foreign Financial Institutions (FFIs) only but also foreign trusts.  So this morning I asked Mich:

Hey Mich: I was wondering if you have had a chance to determine what the implications of FATCA will be on these Canadian trusts, considered “foreign trusts”. I think that companies like Eagle Energy Trust or Parallel Energy Trust like banks, foreign trusts must determine and declare to the IRS all of their US persons. If they do not become FATCA compliant they will experience a 30% withholding of their US source income. In order to be FATCA compliant such trusts would have to either go off the public market (because ownership changes on daily basis), or brokers would have to keep track of who is the US person (i.e., the trust could only be traded by a FATCA compliant FFI).

I don’t know what the implications of this are. It may result either in the conversion of the trust to a regular corporation or to these trusts going private before 2014. Let me do some homework, but this sort of thing is complicated enought and too few people realize the financial damage that the Obama administration is doing to the world economy. FATCA threatens to dismantle the world economy, or at least, the United States’ participation in it.

I am still of the opinion that the Canadian FFIs will either comply with FATCA, thus violating the Human Rights of their clients who are deemed by the IRS to be US persons (that includes permanent residents who hold Green Cards and US citizens, and dual Canadian and US citizens, and potentially anyone born in the United States); or because of complaints, they will not be able to comply, and as a result, there will be a sudden exodus of Canadian investments from the United States. The worldwide impact of FATCA is estimated to be at least 14 trillion of foreign assets leaving the United States (see http://isaacbrocksociety.com/2011/12/11/fatca-a-ticking-time-bomb-for-the-economy/ ).

I am wondering if anyone knows the answer to this question:  How will FATCA impact trusts like Eagle and Parallel?