Sovereign Man

It’s no secret that the conventional model of success no longer works. Go to school, get good grades, get a good job, work your way up the ladder, and then enjoy life when you retire. This idea has been drummed into our heads since we were young, but today it’s totally defunct. Following that path means you’re likely to end up with a mountain of student debt and an incredibly expensive piece of paper that guarantees neither job security nor even a real education. In my mind, the best model for education and success is the oldest one: mentorship. It’s the best way to learn real skills-- studying directly under someone who has mastered the skills that you hope to develop. It’s the way the world worked for thousands of years, and it’s the way that still makes the most sense today. For seven years in a row we’ve built our annual Liberty and Entrepreneurship camps around this concept of mentorship. And in today’s podcast, I make a departure from our normal topics and discuss business mentorship with two of the instructors from this summer’s upcoming camp. If you’re an energetic, talented young person, you won’t want to miss this podcast… or this year’s Liberty and Entrepreneurship camp. The camp is an incredible opportunity to learn and be mentored by incredibly successful, knowledgeable entrepreneurs, as well as network with other like-minded, talented young people. As a reminder, there is no charge to attend the camp; our foundation pays for the entire event. But don’t think of this as some kind of charity. For us, this an investment… an investment in relationships with the next generation of bright, talented people. I can hardly think of a better use for paper currency. Listen in here to the podcast as we discuss specifically what young people will get out of this year’s camp. And, once you listen to the Podcast, head over to SovereignAcademy.org to apply for this year’s camp. The application deadline is only days away.

I remember several years ago in the Land of the Free when the big wave in the banking industry was to offer “free checking”. There used to be a time (that a lot of people probably don’t remember) when banks charged monthly or annual fees to maintain your bank account. This changed several years ago. Banks even started running commercials encouraging customers to open their “free checking” accounts right away. Of course this is total nonsense. Banks aren’t exactly charitable organizations, and they have an uninterrupted track record of screwing their customers to make money. In this case, “free checking” is just a ruse to get you to open an account so that they can make stupid investments with your money. Banks in Europe, for example, are taking your money and buying government bonds that have negative yields and are hence guaranteed to lose money. That’s what they’re doing with your savings. It’s insane. In the Land of the Free, banks are once again stocking up on mortgage-backed securities as the most popular investment fad today, as if they have no memory of the 2008 financial crisis. There’s even one bank in San Francisco that’s offering $2 million loans with no money down, and no private mortgage insurance, to buy real estate in one of the most overpriced areas of the country. This isn’t “free checking”. It’d be more appropriate if they called it “high-risk checking”. And the trend shows that it’s getting worse. On top of everything else now, slowing economy growth almost assures that negative interest rates will be the norm across the entire developed world. They already have negative interest rates in Europe and Japan. And as Fed Chair Janet Yellen indicated recently, this is an option that’s on the table even in the United States. This kind of insanity has serious consequences to the entire financial system, putting your money at even greater risk. You’ll never hear it from the financial elite. Your banker is never going to say, “open a high-risk checking account today!” But by holding your money in such a precarious system, that is precisely what you are doing. This is our topic for today’s podcast: the trend towards “high-risk checking”, and why negative interest rates and capital controls are an almost forgone conclusion. You can listen in here.

Pop quiz: What was the top grossing movie in the world the last time the US tax code was overhauled? The answer is Top Gun. And the year was 1986. (Other major hits that year include Karate Kid II, Crocodile Dundee, and Ferris Bueller’s Day Off) Think about it-- this a tax code that was created for a highly industrialized economy. And that might have made sense thirty years ago. But in the decades since, everything has changed. The world is flat. Globalized. And completely digital. An antiquated tax code based on geography and industrial manufacturing simply doesn’t make any sense today. Our banking system is in a similar position. Banks today continue to insert themselves in the middle of every financial transaction imaginable, just as they did centuries ago. Savings, lending, transfers, payments, foreign exchange—all of these transactions are highly centralized (and manipulated) by a private cartel that has no business existing in our modern world. Today there are so many platforms available where we can send and receive peer-to-peer payments on our mobile phones. We can hold deposits in the Blockchain. We can raise capital to start a new business on any number of crowdfunding platforms. Banks are no longer necessary for any financial transaction. And yet they still bully their way into dominating the financial system. This banking system might have been appropriate centuries ago when Medieval merchants needed a centralized way to extend credit. But it just doesn't make sense today. Similarly, global trade continues to be underpinned by a reserve currency issued by the greatest debtor that has ever existed in the history of the world. This might have been appropriate in 1944 when they created a dollar-based financial system after World War II. But it no longer makes any sense today. Banking, trade, and even our systems of government and the way we organize ourselves as a society, are all based on anachronistic traditions that don't belong in the 21st century. These systems are changing. And it's already happening. All the alternatives and resources already exist. This happens from time to time in human history. Kingdoms and Empires gave rise to the feudal system. And the feudal system was ultimately displaced by the nation state. This time is not different, and it’s foolish to think the nation state will last forever. Dominant reserve currencies have changed over time, from the Byzantine gold solidus, to the Venetian ducat, all the way to the US dollar today. We cannot expect the dollar to maintain its position forever. We can see these changes happening already. Wealth and power are shifting. Central bankers are running out of ammunition. Almost every major western government and central bank is on the brink of insolvency if not already bankrupt. Developing nations are already creating their own alternatives to the US-dominated financial system. Modern technology is turning the commercial banking system into an endangered species. And people are finally starting to get sick and tired of their system of government, advocating for the most extreme outsiders they can find. Isaac Newton told us that an object in motion tends to stay in motion. And these changes are very much in motion. 40 centuries of human history demonstrate that political and banking elite will not simply roll over for financial system 2.0 to take over. They will not go gentle into that good night. And that’s why these great changes bring both great risk, as well as great reward. Or more appropriately, the potential for both great loss and great opportunity.

This week I’ve been down in Southern Chile with the Board of Directors of our agricultural company. It’s summertime right now, and the weather is absolutely gorgeous. Last night, after a long day visiting one of the farms I had a chance to sit down with Tim Price to share a bottle of our very own Sovereign Valley wine and record a podcast. It’s been about two months now since the last episode, so I invite you to listen to our comeback with the Podcast Awakens. Over the course of a few glasses we dive into discussion about oil prices, financial markets, and an entire investment class that most people haven’t even heard of. One that’s likely to do VERY well this year. We invite you to clink glasses with us and listen in as we share the best kept secret in finance.

It started in 1921. World War I was over. The Treaty of Versailles had been signed two years before. And Germany, the biggest loser from the war, had been stuck with both the blame and the bill. Germany’s war debt-- which it owed not only for its own war-related expenses, but also for reparations to the victors-- was devastating. They didn’t have the money, so they started printing it. Not surprisingly, the German mark began to sink. It started slowly at first, but by 1921 hyperinflation had taken hold until prices soared by thousands of percent. One of my favorite stories from this period, was of the elderly man who went to the police to report a robbery. Thieves had stolen a wheelbarrow of money. It was common at the time to use wheelbarrows to transport the huge sums of cash that were required to buy even the most simple things like bread and milk. When the police asked him how much was in the wheelbarrow, the man corrected them saying that the thieves had only stolen the wheelbarrow, and had left the cash behind. Undoubtedly the entire society was upturned by this hyperinflation. But as history shows, in any situation, there are always winners and losers. Pensioners and people who responsibly saved their money were wiped out; whereas people who had borrowed to invest in real assets did extremely well. Owners of residential real estate suffered under government imposed rent controls, whereas owners of farmland thrived. For people who saw the decline of the mark coming and bet against it, generational fortunes were made in a matter of years. In the case of Germany in the 1920s, few people probably expected that hyperinflation would ensue. Even the president of their central bank, Dr. Rudolf Havenstein, firmly believed that there was zero connection between price levels and the amount of money he printed. Yet it happened, and those who saw the warning signs and took steps to reduce their risk did very well. Today there is no shortage of risk in the financial system either. Negative interest rates are becoming more and more common in developed nations and they’re on their way to America as well. Every time there’s a recession, the government cuts interest rates by easily half a percent to a percent. So with interest rates already at zero, when the next recession comes (and it absolutely will), you can expect interest rates to go negative. Meanwhile, Western banking systems are highly illiquid, meaning that they have very low cash equivalents as a percentage of customer deposits. This isn’t some wild conspiracy theory. You can see it for yourself in the financial statements banks publish every quarter. Solvency in many Western banking systems is also highly questionable, with many loaded up on the debts of their bankrupt governments. Banks also play clever accounting games to hide the true nature of their capital inadequacy. We live in a world where questionably solvent, highly illiquid banks are backed by under capitalized insurance funds like the FDIC, which in turn are backed by insolvent governments and borderline insolvent central banks. This is hardly a risk-free proposition. Yet your reward for taking the risk of holding your money in a precarious banking system is a rate of return that is substantially lower than the official rate of inflation. And in many cases, it’s even negative. Rates are already negative in Europe, and again, it’s coming to the US. Either way, you’re guaranteed to lose money. Risk is a funny thing. The reason why it’s so frequently misdiagnosed is because there’s often a huge discrep...

I want to tell you about a time when I was really scared. Terrified. It was back in 2003, right as George W. Bush made his final decision to send the 'coalition of the willing' north into Iraq. Saddam Hussein knew he was finished. And, in a fit of desperation, he started launching loads of Scud tactical ballistic missiles towards the invading forces. Missile attacks are pretty scary. You can't hide behind a rock and duck the blast. And, at least as an individual, you can't shoot back. I distinctly remember being outside as the missile alarms were going off, looking up into the sky, and thinking, "Well I hope I don't die." I'm not going to tell any tough guy stories-- I was afraid. And given that there was nothing I could do, I felt totally helpless. It's that feeling of helplessness that is the closest thing I can tap into in my own experience for the horror and tragedy of a terror attack. And I know my own experiences don't begin to compare-- we were in a warzone and knew the risks. With a terror attack, one minute you're enjoying dinner, the next minute it's blood and death and chaos. It's levels beyond anything I'd ever experienced. And in a situation like that, the desire for revenge is understandable. Emotion is palatable. People want action. They want their governments to DO SOMETHING. And sure, it's very comforting to think that we could just send the military over to kick everyone's ass and bomb the terrorists back into the Stone Age. But I hope we can agree that most decisions that we make when we're emotional don't tend to work out very well. Emotional decisions are usually bad decisions. They make us feel better, but they seldom deliver positive long-term outcomes. Right now everyone wants to feel better. The world is on war footing, and few people want to think rationally. This is understandable. But when people's lives and livelihoods are on the line, the situation absolutely demands clear, level-headed thinking. After all, actions have consequences. And it's imperative to make important decisions in full light of the consequences. I discuss these consequences in today's podcast, along with some astonishing facts and history that you have probably never heard before. Given how uncomfortable and emotional the topic, this might have been the most difficult one that I've ever had to record. Take a listen here.

This morning at 7:30am, I was the first one to arrive at our new office. As I unlocked the door and let myself in, the sun was just inching it’s way up over the Andes. It was beautiful, one of those moments where I had to stop and reflect on the long path in life that ended up with me standing on the 41st floor in South America overlooking the city. Life is absolutely about the choice; we either define our realities by the choices we make, or our realities become defined by the choices that we don’t make-- choices that others make for us. That’s fundamentally what freedom is all about. Being free is a choice... one that’s backed up by small actions. Think of it like losing weight or getting fit. It starts with a choice. Sure, there are lots of reasons to get out of shape. Life gets in the way. Commitments. Family. Etc. But never forget that being healthy is natural. We’re supposed to be healthy, just like we’re supposed to be free. We’re all born free. We have to LEARN how to be unfree through a lifelong diet of propaganda that teaches us to subordinate ourselves and be afraid of men in caves. You become more fit and healthy by making a choice-- choosing a healthier lifestyle, and backing it up with small, steady action. Similarly, you can become more free by making a conscious decision to adjust your thinking, that having a government tell you everything from what you can/cannot put in your own body, to how you can educate your own child, is NOT the way it’s supposed to be. And then back that decision up with small, steady action. Today I invite you to listen in to today’s podcast as we discuss the ways in which you can choose to be free, how to back it up with real action, and what it really means to be a Sovereign Man. (Or Sovereign Woman!)

If you haven’t already, now’s the time to get out your party hats to celebrate the 14th anniversary of the USA PATRIOT Act. You know about the law, I’m sure; passed barely six weeks after the 9/11 attacks, the USA PATRIOT Act is one of the most sweeping, liberty-destroying pieces of legislation in American history. Remember the rule of thumb: the more high-sounding the name of a law, the more disastrous its effects. And the USA PATRIOT Act absolutely conformed. It stands for Uniting and Strengthening America by Providing Appropriate Tools Required to Interdict and Obstruct Terrorism. And this name is truly disingenuous when you think about it. Seriously, how was America to become more ‘united’ by allowing warrantless searches, vastly expanding the powers of secret courts, and completely doing away with entire sections of the Constitution?? That’s just absurd. The name itself is a cruel joke on liberty. At 132 pages, the USA PATRIOT Act was a pretty beefy piece of legislation. But what most people fail to realize is that the law is entirely incomprehensible. Instead of simply stating in black & white what the new dark powers of government would be, the USA PATRIOT Act makes obscure modifications to other laws. Here’s an example of what I’m talking about, pulled from page 20 of the text of the legislation: Section 3123(d)(2) of title 18, United States Code, is amended (A) by inserting “or other facility” after “the line”; and (B) by striking “, or who has been ordered by the court” and inserting “or applied, or who is obligated by the order” Is that supposed to mean anything to anyone? The language is completely mystifying. Well, as it turns out, this precise section is part of what authorizes the government to monitor your phone and Internet communications. This is, of course, one of the primary criticisms of the law: it was rushed through Congress before anyone had a chance to read or understand it, at a time when everyone was scared and willing to give the government any power it wanted. The end result was a de facto Police State in the Land of the Free. Faceless government agencies now spy on every form of communication, local police turned into federally funded paramilitary forces, and the Fourth Amendment became an endangered species. Earlier this year, several key provisions of the USA PATRIOT Act were set to expire. It was an opportunity to take back some of the freedom that had been lost. Yet Mr. Hope and Change himself, Barack Obama, signed multiple bills into law to extend, and even expand, the USA PATRIOT Act’s powers. It’s amazing when you think about it: a nation that was founded on the principles of personal liberty, which fought the Nazis and built the most powerful economy in the world, is so fragile and afraid of men in caves that it cannot imagine its existence without Orwellian surveillance programs. George W. Bush used to famously say that terrorists hated America for its freedoms. So he and Barack Obama conveniently solved that problem by eliminating America’s freedoms. This is life now in America 2.0; it’s not the America we once knew, and it’s time to adjust accordingly. I invite you to listen in to today’s podcast as we discuss some of the most striking differences between now and America’s golden days. You won’t believe what once used to be possible in the Land of the Free.

Just had a great weekend in Dallas, where I had the pleasure of spending some time with Dr. Ron Paul. After our event on Saturday we sat down to record a quick podcast that I’m eager to share with you. In this quick audio session we covered his views on the biggest issues surrounding the Fed right now: - Why the Fed is not going to raise interest rates - How they’ve lost the power to manipulate markets - How they rig half of every transaction you make - The crucial issue that they don’t want people talking about - And how they’ve made us poorer You’ll definitely want to hear this. Listen in with the player above.

I’ve long-stated that the government of the United States is completely insolvent. And that is 100% true statement. The government’s own numbers show that official liabilities, including debt held by the public and federal retirement benefits, total $20.7 trillion. Yet the government’s assets, including the value of the entire federal highway system, the national parks, cash balances, etc. totals just over $3 trillion. In total, their ‘net worth’ is NEGATIVE $17.7 TRILLION… a level that completely dwarfs the housing crisis. If you include the government’s own estimates of the Social Security shortfall, this number declines to NEGATIVE $60 TRILLION. And it gets worse every year. Now, is this balance sheet an accurate reflection of reality? Do we really trust the bean counters to tell us what the United States of America is really worth? Surely there must be significant intrinsic value to the United States military, for example. Or the US government’s ability to collect taxes. Or what about the value of all the natural resources underground? These must all be HUGELY positive and would swing the government’s net worth back in the right direction. Guess again. The US military is certainly one of the best-trained and most effective forces in history. But it’s difficult to place a substantial value on it when the government can no longer afford to use it. And even when they do use it, the overall cost of doing so is negative. The wars in Iraq and Afghanistan have cost the taxpayers $4 trillion. But where’s the financial benefit? Aside from a few defense contractors profiting handsomely, the Chinese got most of the oil. ISIS ended up with much of Iraq. And Iran made out like a bandit, with the US government taking out its most threatening neighbors free of charge. Mission accomplished. Bottom line, even the best asset in the world can end up being a big liability if it’s used improperly. So what about the tax authority of the US government? If Uncle Sam can collect $3 trillion in tax revenue each year, surely that must count as a huge asset. And it absolutely is. If you conduct a Present Value calculation of the future tax revenue of the US government discounted by the official 2% rate of inflation, the US government’s ability to tax its citizens is ‘worth’ $150 TRILLION. But... if you’re going to count the government’s tax authority as an asset, you have to be intellectually honest and consider the expenses as liabilities. Think about it: yes, the government brings in tax revenue every single year. But for nearly every year over the last seventy years, they’ve spent far more money to deliver on the promises they’ve made to their citizens. Those promises are liabilities. And given the government’s spending history since the end of World War II, the liabilities far exceed the tax authority asset. More importantly, though, isn’t it a little bit scary to consider that the government’s #1 asset is its ability to steal money from you? Or that the only way the government can make its liabilities go away is by defaulting on the promises it has made to its citizens? That’s their only way out: steal from you, and default on you. Join me in today’s very sobering (and inspiring) podcast as we dive deep into the government’s own numbers and discover the truth… and what you can do about it.

I just got back from Caracas, Venezuela, a city so dangerous that every time I left my hotel, the staff would warn me against even going outside. It’s an incredibly difficult reality to reconcile. People hate the fact that they may get robbed or killed just steps from their front door when they leave the house every morning. And nobody wants that. After all, everyone wants to be safe. Even wild animals seek out safety in nature. A few years ago, in response to national outcry, the government of Venezuela took steps to fix this problem. There was too much death, too much crime. So they imposed strict gun control laws to stop the murderers and thieves. The end result? Violent crime actually increased. And Caracas is now one of the most dangerous cities in the world. But across the Andes is another city that used to be one of the most dangerous in the world-- Bogota. Years ago, Bogota led the region in murder. And they imposed their own strict gun control laws trying to clean up the streets. It worked. Bogota became safer. There was less murder. Less crime. Less violence. But how could the same policy engineer completely different results in two cities? This disparity becomes even more vexing when we look at other countries. Honduras and Brazil both have very high homicide rates. Yet Brazil has highly restrictive gun laws, while Honduras has fairly lax gun laws. Pakistan has some of the loosest gun laws in the world. Chile’s are fairly restrictive. Yet both have low homicide rates. Bosnia has a very liberal gun laws. Belgium has very restrictive laws. Yet their homicide rates are similar. Luxembourg has few privately-owned guns per capita, yet its murder rate is much higher than Germany’s, which has over twice as many. Hawaii and Vermont have polar opposite gun laws yet nearly the same homicide rate. Maryland and Virginia have vastly different gun laws, yet almost identical rates of gun-related deaths. The numbers are all over the board. Staunch advocates for gun control tend to think that more regulations and fewer guns make us safer. Those who oppose gun control tend to think that more guns and fewer regulations make us safer. But the data doesn’t support either assertion, meaning there must be other factors at work. (By the way, the National Academy of Science and the Center for Disease Control and Prevention came up with the exact same conclusion-- the numbers don’t support either assertion.) But it’s impossible to even begin to analyze until we admit what the real concern is. After all, we’re not really talking about gun violence. Gun violence has been occurring for years, predominantly in poor neighborhoods across the country. 75% of gun-related violence takes place in just 5% of US zip codes. But no one really cares about that. As long as gun violence stays localized to black people, Mexicans, and other ethnic minorities in poor neighborhoods, it’s considered ‘crime’ and never makes the news. It’s not until some lunatic shoots up a predominantly white, middle class neighborhood that CNN covers it, and Hollywood celebrities air public service announcements telling us that ‘we’ have to do something. That response is an emotional one. Let’s get rational. These incidents are undoubtedly tragedies. But if the goal really is to save lives, and you start with a flawed premise that it is the government’s responsibility to protect people,

Sovereign Valley Farm, Chile September 24, 2015 There’s not a doubt in my mind that one of the greatest scams in the world is modern banking. When you think about it, every element of the system is stacked against us. By making a deposit we are loaning our hard-earned savings to a bank, for which they pay us a whopping 0.1% interest. In some parts of the world now they even charge us interest for the privilege of loaning them our money. Banks then take our hard-earned savings and gamble it all away in the latest investment fad, no matter how stupid and destructive it might be. When they screw up, they’re deemed ‘too big to fail’, and the government steps in to indebt future generations who won’t even be born for decades in order to bail out the banks’ stupidity. Banks are also unpaid government spies and are required by law to rat us out to federal agents should they decide in their sole discretion that what we are doing with our own money is “suspicious”. Banks have no loyalty to the customer. They serve their government masters first and foremost. Should some government bureaucrat so much as make a phone call, they will freeze you out of your life’s savings in a heartbeat. And hardly a month goes by where a bank isn’t indicted on some criminal charge to defraud their customers. They’ve admitted to rigging bond markets, interest rates, foreign exchange rates, and selling their customers’ data to high-frequency traders. And for their misdeeds they get a few slaps on the wrist and a fine that fills the government’s coffers. Too big to fail, too big to jail. It would almost be funny if it weren’t so obscene. Yet despite every shred of evidence that this system is at odds with customers’ best interests, very few people ever question the sanctity of their banks’ credibility and financial condition. It’s just assumed that banks are stable, sound, and conservative. Nothing could be further from the truth. In today’s podcast I highlight an extremely clever accounting trick that banks have been using for the last few years to hide the true nature of their finances. Here’s the short version: Banks have the ability to choose how they treat their bonds for accounting purposes. If they classify their bonds as “available for sale”, or AFS, the bank is forced to disclose any losses under ‘comprehensive income’, which negatively affects their capital levels. But banks don’t want to do that. They’re gearing up to take a HUGE bath as the values of their bond portfolios collapse. And rather than show the world how pitifully capitalized they really are, banks have opted to reclassify huge sections of their bond portfolios into a different category called “hold to maturity”, or HTM. HTM assets don’t require banks to write off any losses against their capital reserves. So the banks just get to keep pretending that they’re safe. So far US banks have rotated hundreds of billions of dollars worth of bonds from AFS into HTM. And they’re just getting started. It’s an unbelievable scam. And everyone’s in on it. All the big banks. The regulators. The government. The Fed. You’ll be amazed to see the data I present in today’s podcast; one of the largest banks in the US, for example, went from having 0.0% of its assets as HTM, to having nearly 50%. Poof. And just like that, the bank’s financial condition is tip-top. I can’t stress this enough, you really need to see dangerous scam with your own eyes. Find out the truth here:

For the year 2014 my tax bill owed to the US Government was $0. A legitimate $0; nothing I did was illegal or immoral. What this really means is that in 2014 I didn't finance any wars, buy any drones, body scanners, or bombs for the US government. Instead, I decided to purchase a brand-new leg for someone who needs it. The U.S. government sent "Joe" to Afghanistan where he lost his leg. They then told Joe that they wouldn't pay for his new leg because, and I quote, "The procedure is too risky." It wasn't too risky to send Joe to the front lines of Afghanistan, but it's too risky to give him a new leg. Joe wasn't content with that answer and neither was I, so I financed Joe's treatment and a new leg so he can walk again. In today's podcast we explore what happens when you stop paying taxes and how you can start casting a vote that truly counts.

Paris, France August 18, 2015 I’m the world’s worst tourist. To give you an example, I’ve been to Paris at least 50 times yet I’ve never been to the Eiffel tower. The prospect of standing in line to look at stuff doesn’t thrill me in the slightest-- least of all when that stuff happens to be the monuments of destructive monarchs. Here in Versailles (which I’m visiting at the request of my parents) is an epically grand palace that remains one of the top tourist attractions in the world. It’s one of the finest reminders of the largesse and stupidity of empires. This colossally expensive, and self-centered palace was all for the benefit of one guy (Louis XIV) at the expense of everyone else. And it’s this kind of largesse that ultimately bankrupted France. It took time, but by the late 1700s France was completely broke and was borrowing money just to pay interest on the money they’d already borrowed. In 1789, starving French peasants famously revolted and ousted the king. But as they soon discovered, revolution didn’t make their fiscal problems go away. It doesn’t matter who’s in power. Debt will follow citizens around like a bad rash. And so, the newly empowered National Assembly came up with a bold solution. They decided to print money. The first batch was in April 1790 at 400 million units-- a sum that was considered astronomical at the time. And they promised that was all the money they would ever print. Of course, they kept printing. And printing. And printing. They printed so much that the workers running the printing press actually went on strike from being overworked. By 1795 they had printed some 35 billion units; almost a hundred times as much as they had originally promised. (That number was so large at the time that they didn’t even have a word for ‘billion’; they just called it 35 thousand million.) As you can imagine, this ultimately resulted in hyperinflation and the complete loss of confidence in the currency. One of the greatest books ever written on the topic is Andrew Dickson White’s “Fiat Money Inflation in France”, originally written in 1876. White wrote the book in hopes of convincing policy makers in the United States to avoid making the same mistakes. Needless to say, they didn’t listen. And here we are more than a century later in the midst of one of the greatest financial bubbles in history. I really recommend picking up White’s book. It’s a great read and it’s short. I’ve read it several times, from which I’ve come away with three key lessons that I’d like to explore with you today. 1) It is the people themselves who ask for the instrument of their own demise. They cheer when their policymakers conjure something from nothing and make phony promises. 2) Yet even with all the central planning in the world, and the tightest capital controls, price controls, and information controls, you still can’t prevent the collapse of an unsustainable financial system. Delay, perhaps. But never prevent. 3) Lastly, even when paper currencies are doomed to fail, they always go through periods of strength. French paper currency in the late 1700s went through periods where it actually increased in value. In 1792, for example, the currency surged 20% after the French army scored a major victory. It was exactly the sort of thing to make politicians say, “See! Paper currency is a great idea.” And yet it still failed, just as every experiment with paper currency always has. The French episode highlights each of these lessons,

August 14, 2015 Istanbul, Turkey Just a few weeks ago, US talk show host Stephen Colbert was asked if he thought that Donald Trump had a chance of becoming President of the United States. Colbert responded sincerely. “Honestly, he could. And that’s not an opinion of Trump. That’s my opinion of our nation.” He’s right. The Land of the Free may very well be ready for something completely different. And Trump certainly seems able to deliver. He is, after all, unique in his field. Donald Trump has never served in politics, and his blunt style is almost the exact opposite of every other major candidate. But there’s one thing that really sets him apart, that, in my opinion, makes him the most qualified person for the job: Donald Trump is an expert at declaring bankruptcy. When the going gets tough, Trump stiffs his creditors. He’s done it four times! Candidly, this is precisely what the Land of the Free needs right now: someone who can stop beating around the bush and just get on with it already. As history shows, a default is inevitable. The calculus is quite simple: when governments take on too much debt, they start having to divert a huge amount of their tax revenue just to pay interest. This means that, at a minimum, the government has to sacrifice many of the promises they made to their citizens. They cut other programs in order to have enough money to pay interest. But that’s not too popular. So instead they typically just borrow more money... until they’re borrowing money just to pay interest on money they’ve already borrowed. This makes the problem exponentially worse. Debt skyrockets. And soon the government is spending more on interest payments than national defense. (The US is almost at this point). Eventually a bankrupt government has no choice: either default on their bondholders, or default on the obligations they made to their citizens. Or both. This could take the form of a ‘selective default’. For example, the US government could default on the $2.4 trillion that it owes the Federal Reserve. Or the $1.2 trillion that it owes China. These are both possibilities. But the prospect of default on “risk free” US government bonds would throw the global financial system into a tailspin; not to mention it would be the final nail in the coffin for the US dollar’s dominant reserve status. Fortunately there are easier options for Uncle Sam. The biggest debts that are owed by the US government are the obligations they owe to you. Specifically, all the benefits like Social Security and Medicare they promised to American taxpayers. The US government’s own numbers estimate these obligations at nearly $42 TRILLION, completely dwarfing what they owe China, or anyone else. Then there’s the obligation they have to preserve the purchasing power of the $12 trillion held by the American people. That’s the current value of the money supply in the United States right now. History shows that debasing a nation’s currency is one of the easiest and most effective ways for bankrupt governments to plunder their citizens’ wealth, little by little over time. As I explain in today’s podcast, the hard reality that most people don’t seem to get is that the US government is bankrupt. This isn’t some wild assertion or conspiracy theory; their own financial statements show that the government’s ‘net worth’ is NEGATIVE $17.7 trillion. And yes, the US is already borrowing money just to pay interest. In fact the combined expenses of interest on the debt plus mandatory entitlements like Social Security near...