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March 13, 2014
Belize City, Belize
Nearly four thousand years ago, King Hammurabi of Babylon laid out his eponymous “Hammurabi’s Code”, a series of laws that is still famous to this day.
Most people know Hammurabi’s Code as “an eye for an eye, a tooth for a tooth”. Yet what few realize is that the code was actually one of the original attempts at government wage and price controls.
Hammurabi’s Code decreed, for example, that the daily rate of pay for a tailor would be five grains of silver, and a farm laborer would be six grains of silver. The cost of hiring a small animal for field work would be four bushels of corn. Etc.
Of course, Hammurabi’s attempts to control prices didn’t work one bit. In his book The Old Babylonian Merchant: His Business and Social Position (published 1950), historian W.F. Leemans writes:
“Prominent and wealthy tamkaru [merchant traders] were no longer found in Hammurabi’s reign. Moreover, only a few tamkaru are known from Hammurabi’s time and afterwards . . .”
Despite the economic failures of Hammurabi’s experiment, though, wage and price controls have been tried again and again throughout history.
2,000 years later, Emperor Diocletian of the failing Roman Empire issued his Edict on Wages and Prices. The ancient Athenians tried (and failed) to set grain prices, and even had a small army of regulators to oversee the price controls. So did the the Zhou dynasty in ancient China.
Today you can see various forms of wage and price controls all over the world– from the blatant (Argentina) to the subtle.
Major farm subsidies in the United States, for example, are a form of price controls. Monetary policy (especially keeping interest rates at effectively zero) are a form of price controls.
Yet today President Obama is set to lauch another far more obvious form.
The central planner-in-chief is going to sign an Executive Order to require employers to expand overtime pay in the Land of the Free. This, on top of his recent proposal to increase the minimum wage 39% to $10.10 per hour (not that there’s any inflation).
Obviously this ‘decree by executive order’ strategy shows the political system for what it is: there is no republic, there are no checks and balances, there is no adherence to the Constitution.
They do whatever they want, however they want, with total immunity.
The troubling part about this executive order (aside from being yet another soon-to-fail wage control) is that it essentially abrogates millions of work contracts across the country.
Employers and their workers have long since agreed to terms of employment that may or may not include overtime pay.
Today President is unilaterally voiding any specific provisions about overtime pay in existing employment contracts, all in his sole discretion, and all without Congressional oversight.
The rule of law means nothing.
And even though any high school economics student can tell you that wage and price controls don’t work, the government is pressing ahead with vigor, damn the consequences.
Given their continued destruction of the middle class, perhaps it’s time we bring back ‘an eye for an eye, a tooth for a tooth.’
March 4, 2014
Sovereign Valley Farm, Chile
Warren Buffet sees a different America than I do. I would wager he sees a different America than untold millions of people do too.
And with due respect to the kind-hearted Mr. Buffet, who is undoubtedly an accomplished and savvy investor, the man has been a major beneficiary of the greatest monetary fraud ever pulled in the history of the world.
In his most recent annual report just released yesterday, Mr. Buffet lauds the United States of America, writing:
“Indeed, who has ever benefited during the past 237 years by betting against America? If you compare our country’s present condition to that existing in 1776, you have to rub your eyes in wonder. And the dynamism embedded in our market economy will continue to work its magic. America’s best days lie ahead.”
Such language is typical for Mr. Buffett, he is one of America’s biggest cheerleaders. Again, with good reason.
For one, the unprecedented monetary expansion over the last decades has created a major boon for Mr. Buffet and his net worth.
His company Berkshire Hathaway has a balance sheet worth $485 billion. 25% of that is simply invested in the stock market with big chunks of Coca Cola and American Express.
These stock prices have boomed in an era of unprecedented money printing, adding billions to Mr. Buffett’s net worth.
Second, it’s important to note that over 75% of Berkshire’s revenue comes from highly regulated, absurdly profitable, tax advantageous businesses that are simply not accessible to the average guy.
For example, Mr. Buffett gleefully writes about the $77 billion ‘float’ from his insurance businesses.
This is money that is collected from insurance customers. And while he might have to pay out insurance claims someday, for now he gets to borrow from that kitty at 0% and generate higher returns elsewhere.
On top of this, Mr. Buffett has been able to defer a full $57 billion in tax, indefinitely kicking the can down the road on his IRS bill thanks to industry-specific tax rules.
Again, you and I couldn’t do this because we don’t have access to these special privileges. Warren Buffett does.
Warren Buffett also has special access to lawmakers in the US who clamor to be in his favor.
During the early days of the financial crisis in 2008, for example, Buffett was getting desperate phone calls from the Treasury begging him to make investments in the financial system.
And as a result, he was able to arrange sweetheart deals, brokered by the US government.
It also may just be a wild coincidence that the US government has rejected the Keystone XL pipeline… and Mr. Buffett’s railways just -happen- to be among the prime beneficiaries.
Yes, I think if we all had the special privilege, access, and benefit that Warren Buffett enjoys, we too would all be jumping for joy about America.
But Uncle Warren lives in a different America– the America of the past.
With due deference to his investment acumen, Mr. Buffett should know that no nation in history has been able to -permanently- stand atop the world’s economic mountain.
Like human beings ourselves, nations also rise, peak, and decline. It is their own life cycle.
And the America that Mr. Buffett doesn’t acknowledge is the one that is in debt past its eyeballs.
It is the America that spies on its citizens and threatens people with imprisonment for victimless crimes and administrative transgressions.
It is the America that conjures trillions of paper dollars out of thin air in total desperation, sending the labor force participation rate to multi-decade lows.
It is the new America that exists for a tiny elite at the expense of everyone else.
November 7, 2013
Check out this chart below. It’s a graph of total US tax revenue as a percentage of the money supply, since 1900.
For example, in 1928, at the peak of the Roaring 20s, US money supply (M2) was $46.4 billion. That same year, the US government took in $3.9 billion in tax revenue.
So in 1928, tax revenue was 8.4% of the money supply.
In contrast, at the height of World War II in 1944, US tax revenue had increased to $42.4 billion. But money supply had also grown substantially, to $106.8 billion.
So in 1944, tax revenue was 39.74% of money supply.
You can see from this chart that over the last 113 years, tax revenue as a percentage of the nation’s money supply has swung wildly, from as little as 3.65% to over 40%.
But something interesting happened in the 1970s.
1971 was a bifurcation point, and this model went from chaotic to stable. Since 1971, in fact, US tax revenue as a percentage of money supply has been almost a constant, steady 20%.
You can see this graphically below as we zoom in on the period from 1971 through 2013– the trend line is very flat.
What does this mean? Remember– 1971 was the year that Richard Nixon severed the dollar’s convertibility to gold once and for all.
And in doing so, he handed unchecked, unrestrained, total control of the money supply to the Federal Reserve.
That’s what makes this data so interesting.
Prior to 1971, there was ZERO correlation between US tax revenue and money supply. Yet almost immediately after they handed the last bit of monetary control to the Federal Reserve, suddenly a very tight correlation emerged.
Furthermore, since 1971, marginal tax rates and tax brackets have been all over the board.
In the 70s, for example, the highest marginal tax was a whopping 70%. In the 80s it dropped to 28%.
And yet, the entire time, total US tax revenue has remained very tightly correlated to the money supply.
The conclusion is simple: People think they’re living in some kind of democratic republic. But the politicians they elect have zero control.
It doesn’t matter who you elect, what the politicians do, or how high/low they set tax rates. They could tax the rich. They could destroy the middle class. It doesn’t matter.
The fiscal revenues in the Land of the Free rest exclusively in the hands of a tiny banking elite. Everything else is just an illusion to conceal the truth… and make people think that they’re in control.
by Simon Black
Simon Black is an international investor, entrepreneur, permanent traveler, free man, and founder of Sovereign Man. His free daily e-letter and crash course is about using the experiences from his life and travels to help you achieve more freedom.
- Ron Paul, Jim Rogers, Nigel Farage and Jim Rickards Warn of Looming Crisis Together for First Time at the SovereignMan.com Offshore Tactics Workshop in Santiago, Chile (prweb.com)
- Ron Paul + Jim Rogers on the government: “They’ll use force and they’ll use intimidation…” (ncrenegade.com)
- Ron Paul, Jim Rogers, Nigel Farage and Jim Rickards Warn of Looming Crisis (dailypaul.com)
- Ron Paul and Jim Rodgers (theburningplatform.com)
- Jim Rogers: Jim Rogers Blog 2013-04-10 06:53:00 (silveristhenew.com)