Editor’s Note:
Anyone who has ever taken Economics 101 knows that the free market is more efficient than top down governmental planning at efficiently distributing goods and services at the lowest possible price. But often governmental bureaucrats have their own agenda that doesn’t include efficiency (or low price) as a priority. How would you feel if some government bureaucrat decided that for the “good” of neighboring countries you were going to have to destroy your means of providing for your family? That is exactly how crazy the EU has gotten. Yes the EU says that Portugal’s fishing fleet is TOO Efficient so they need to be given a handicap so other EU countries can compete… Say What? What about a tax the will destroy France’s football (Soccer) Team? See this article by David Galland. Tim McMahon~editor
There really is a limit to how long people will put up with being denied access to their fundamental rights of life, liberty, and the pursuit of happiness.
Bypassing Government Roadblocks to Your Personal Prosperity
By David Galland, Casey Research
Recently I helped out with some delivery chores. As I drove about, I discovered that one of the roads I would normally use was closed by roadblocks. It was, I imagine, due to road repair work. I had to reverse course and take a substantial detour.
I wondered why the road crew hadn’t put up a sign indicating the road was closed back at the main intersection, but I shrugged and muttered something like “Typical government operation.”
Driving back home, this idea of roadblocks took root in my mind. The thing is, only governmental entities can set up roadblocks – at least, legally.
Obviously, there are times when such roadblocks are entirely appropriate… for example, when a bridge is found to be dangerous.
In that case, putting up a roadblock to let drivers know that the road is a no-go makes perfect sense.
For example, a temporary warning sign to let people know that there is a road crew fixing potholes ahead makes sense and that sort of thing.
Otherwise, unless a road is damaged to the point where driving is either impossible or ill advised, there should be no roadblocks set up. Makes sense, right?
The decision to set up a roadblock should be taken only by people who are close to the problem, who understand the issues, and can deal with the problem on the road, fix it, and open it up again as quickly as possible.
Imagine then a world where government officials, as often as not operating hundreds or even thousands of miles away, are in control of the roadblock rules.
Despite having no real knowledge of the problem at a local level, they dictate that those roadblocks be set up and made permanent based not upon the specific condition that a road is out, but rather based on political expediency, cronyism, imaginary threats, and donations by influential lobbyists.
In a world like that, where roadblocks are set up all over the place and without any real thought to the consequences to road users, imagine how difficult it could be to get from Point A to Point B.
In fact, it would not be out of the question that the single road leading to your house could be blocked, leaving you no way out.
While that seems rather extreme, I would contend that it is a valid metaphor for the world we now live in.
To make the point, a couple of weeks ago, I discussed my recent travels to Ireland and Portugal and the devastating consequences the actions of the European central planners have had on those economies.
Before the European Commission bulldozed their way of life, the Portuguese fishermen made a nice living. They made money and supported their families the same way they had for generations. Life was good.
But not long after Portugal’s admission into the Eurozone, however, they woke up one morning to discover their own regulatory roadblock.
It was cooked up by bureaucrats thousands of miles away who have no idea of the local challenges or hazards it would bring to the local economy and the families that rely on it.
This roadblock required them under law to destroy their fishing boats, thereby preventing them from earning their livelihoods.
Another example of roadblock insanity can be seen in energy policy here in the US.
Hollow Sound Bytes and Pointless Platitudes
Politicians bray about the need for energy independence.
Behind the scenes, however, they kowtow to the environoids and special interests by littering the landscape with roadblocks that prevent energy companies from achieving and innovating our way to exactly the independence they tell us we must have at all costs!
Here’s where it affects you:
Government has set up another sizable roadblock. This time it is in the path of savers.
By meddling in the market in order to allow the debt-bloated government to continue its out-of-control spending, the Fed has suppressed interest rates to the lowest levels in US history.
Almost overnight, retirees and others who counted on the yields earned on savings to cover living costs have come to a dead stop in front of a roadblock placed in the way of their most pressing needs.
Their finances now in tatters, even people in their 70s who have worked hard and saved all their lives are being reduced to serving up French fries at fast-food joints.
For another roadblock, look no further than Obamacare.
In a recent Reason magazine article, it also expressed the same sort of convoluted logic that has gone into creating a series of related roadblocks. As one wit put it:
“If you think health care is expensive today, wait until it’s free.”
One of those roadblocks has to do with the considerably higher taxes tucked away in reams of unreadable legalese that will shift yet more funding from the private sector to the public. Here’s the text from an email sent to Doug Casey by a financial professional friend of his this week:
You may have had only a casual interest in the debate over the Obama Health Care bill, and even if you followed it closely, the headline discussion seemed to be more on the inclusion of millions of uninsured citizens, the penalties for not being insured, etc., vs. the fact that this is a noticeable income tax increase on investment income.
For those who have an adjusted gross income of $200k ($250k for joint returns) or more, the number on the bottom of the first page of your 1040, which comes before itemized deductions, charitable gifts, or personal exemptions, there is a +3.8% uncapped tax applied on all investment income (capital gains, interest, dividends, etc.), plus an obscure provision of the code known as the Pease, which reduces the value of itemized deductions, adding another +1.2% to the tax rate.
Be aware that if the current “Bush tax cuts” are not extended, the current long-term capital gains tax rate of 15% will go up by two-thirds to 25% beginning 1/1/2013. The top rate on dividends will nearly triple from 15% to 44.6%!! Ouch.
Unlike Social Security taxes, which are capped, the Health Care tax is uncapped. The mouthy Warren Buffett is finally getting his wish – paying more than a 15% tax rate. Instead of just writing a check for more, which he is certainly welcome to do, as an advisor to the administration, he probably had some influence on getting it applied to all higher-income Americans.
As you know, I am not a tax attorney nor an accountant, so am sending this as a heads-up, and if it is relevant to you, you should confirm the details with your tax advisors.
On the topic of throwing up more tax roadblocks, here’s one from overseas… sent along in an email from our own Vedran Vuk. In Vedran’s own words…
“”Most of the time when we think about raising taxes, it’s the threat of millionaires leaving. We don’t usually think about them not coming to a country. Here’s an interesting case of Zlatan Ibrahimovic signing a soccer contract for 14 million euros per year. If the new tax goes through in France, he will be taxed for 75% over the first million euros. If the tax does go through, good luck attracting multimillion-earning players to France. A lot of people in the 99% will be pretty unhappy when all of their sports teams become horrible as a result of the tax.”
My favorite quote from the article is:
“Ibrahimovic will earn 14 million euros annually, sports daily L’Equipe reported. Sports Minister Valerie Fourneyron said that indicates that European football needs more regulation.”
Yes, just what the world needs – more roadblocks.
Of course, this time it’s to block decisions that the football team’s management believes it needs to make in order to win (and therefore attract fans, sell tickets, and raise rates to sponsors).
Insane.
I recently ran into a public-high-school English teacher and asked how the education business was going.
His response was, “Do you have four days for me to tell you all that’s wrong?”
“It seems like every month some team or another shows up from the government in order to introduce a new teaching program. And the really frustrating thing, is that none of these people has ever taught school.”
He went on to say that it becomes clear very quickly that they have no idea what they’re talking about and that each new protocol was conceived by some bureaucrat with no teaching experience either.
It was eye-opening to hear such emotive language from a public-high-school teacher – in my experience, most of the people who choose that profession are largely on board with the whole big-government thing.
Yet, it seems that more and more people are beginning to catch on to the idea that central planning is not such a great idea.
It’s how you end up with roadblocks where roadblocks don’t belong.
It’s how you end up on a road you never intended to travel along, forced there by roadblocks that don’t make sense and clearly don’t help.
Ultimately you risk getting hopelessly lost, or you turn around go back the way you came and start again.
So yet another school program gets introduced, another law, another rule. And it all starts again.
Happily, it is almost a certainty that, in time, the bureaucrats and their many roadblocks will be shoved aside.
I say that because there really is a limit to how long people will put up with being denied access to their fundamental rights of life, liberty, and the pursuit of happiness.
There is only so long that entrepreneurs will put up with having to navigate around more and more roadblocks in order to provide a product or service to consumers, when such roadblocks serve absolutely no useful purpose.
Unfortunately, while there are a number of things you can do to get started and plenty of sound advice along the way, it will take time.
That’s because there is still a considerable swath of the voting public who actually buys into the idea that government is a force for good and that without it, equality and justice would go by the wayside.
And so it is that the US and virtually all of the large economies around the world are still firmly in the grip of the notion that central planning is the only way to get to the green pastures that surely must be just over the next hill.
Or, more specifically, the next round of legislation and policy machinations (read “roadblocks”).
There has never been a starker example of the mindset of the current administration and its many followers than a comment made by President Obama this week. Here it is:
“If you’ve got a business, you didn’t build that. Somebody else made that happen.”
His point is that essentially, all human progress is due to the good work of governments.
- That without governments, there would be no roads to set up roadblocks on.
- There would be no Internet.
- There would be no body of case law nor a judicial system to enforce that law.
- There would be no telephones.
I disagree, and so do many others – including many from past governments who see the direction Washington, DC is taking and don’t like it.
I contend that this view of the world is essentially the opposite of the tenets of the capitalist/free-market model.
In the view of Mr. Obama and his ilk, We the Sheeple are all but helpless without the government to lead us forward.
That the US government’s activities as a share of GDP have gone from well under 10% at the beginning of the last century to over 40% today – and will go over 50% by the time Obamacare is fully implemented – makes it clear that this country is now operating on principles that run completely contrary to those that promote success and economic well-being.
The consequence of continuing to operate on this model will be a steady decline in the quality of life for most Americans, while favoring a ruling elite that produces nothing… except more roadblocks.
Ayn Rand will someday be celebrated as a futurist.
But how does one fight back? Grab a gun? Don’t even think about it: the Second Amendment may have been intended to protect against a tyrannical government, but the actual truth is that the weaponry of the US government is so incredibly advanced at this point that even the most well-armed militia wouldn’t last a minute.
No, the best way to “fight back” is to get wise to the whole thing.
Understanding what’s happening and knowing where the roadblocks are likely to be just makes sense.
And having clearly set out strategies that both sidestep the roadblocks and preserve your wealth is not just a good idea – it’s critical.
The upcoming Casey Research conference, Navigating the Politicized Economy, will give its attendees a real sense of both knowledge and preparation.
The speaker lineup is a “who’s who” of investment success, and each brings a world of experience to the event.
Among the confirmed faculty are former US Comptroller General David Walker; The Creature from Jekyll Island author G. Edward Griffin; Karl Denninger, author of The Market Ticker; and Mauldin Economics Chairman John Mauldin. The early-bird registration discount ends on July 31, so grab your seat now.
