Creating Wealth

"If the practice persists of covering government deficits with the issue of notes, then the day will come without fail, sooner or later, when the monetary systems of those nations pursuing this course will break down completely. The purchasing power of the monetary unit will decline more and more, until finally it disappears completely."

Ludwig von Mises (1881-1973)

This happened before and after von Mises said this in 1931. This was an article he wrote, compiled later into a book called "Causes of the Economic Crisis."

When he wrote this the collapse of the first and second most powerful countries at the turn of the 20th century was occurring.

Which countries were they? The most economically powerful, and most modern in terms of infrastructure and communication, was Argentina. One certainly does not think of Argentina as a world power. Well, it was. And look it up to see what happened to them.

WE ARE RIGHT NOW FOLLOWING THE PATH THEY TROD EXACTLY!

The second country was Great Britain. Just beginning to follow its path to socialism, finalizing it all after World War II (remember, Churchill warned against it and was drummed out of office). It was said that the sun never set on the kingdom of Great Britain. Now it sets pretty quickly. (Note: by saying this am I condoning colonialism? No.)

WEALTH CANNOT BE CREATED FROM OTHER PEOPLE'S MONEY OR ON THE BACKS OF FUTURE GENERATIONS!

The humongous elephant in the room that nobody is paying attention to is debt. The Democrats love it. The current "crop" of Republicans sent to Washington to turn it back have no backbone to do so.

The debt created in the first year of the current regime was calculated at nearly that created by all previous administrations combined. That is a lot of debt.

How is it paid for?

Much of it is borrowed. And much is paid for with worthless currency, called Federal Reserve Notes. Worthless? Yes, and getting more so every day. It is worthless because it is valued only at what people think it is valued. Its current worth is still there because it is the world's reserve currency. That means that when the Japanese, for example, want to buy oil, which is pegged to the U.S. dollar, they must first purchase dollars to do so. Each time they do this, the dollar is getting cheaper (have you not noticed how devalued the dollar has become in the past two years?) and it costs their economy more and more yen.

DO THEY LIKE THIS? UMMM....

How long will they, and the rest of the world, put up with this? It is said in international circles that for not much longer. If we Americans had to purchase another currency to buy oil from our foreign "friends," our gasoline prices would double and maybe triple overnight! That will make life as we know it unbearable. Society as we know it now will end.

And the borrowed debt? It is paid for in the form of Treasury Notes, which are purchased around the world for their safety. But they are also purchased for their return. The notes this regime have been selling are at nearly 4%. China wants a higher rate.

How quickly will the debt foisted upon us in just two years grow? Employ the old financial 72 rule. Simply divide the interest rate into 72 to see what your return will be on any investment. 4 into 72 is 18. That means that the debt accumulated in these two years will double every 18.

So, my new grandson, born last October, has already inherited a new debt (over and above previous national debt) that will double by the time he is 20.

THAT MEANS IT WILL DOUBLE BY THE TIME HE IS 20!

There is only one way debt is ultimately paid for. By taxes levied on the population that issued that debt.

Read history. This is what happened to Argentina and Great Britain. It is happening in various countries of Europe.

Do you remember how the Beatles moved to the United States when they started making money? Why did they do that? Could it have had anything, anything at all, to do with taxes?

So, where will my grandson be able to go?