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« The 30th Anniversary of Silver Thursday | Main | Silver Wheaton Corporation Call Options Update 18 March 2010 »

In the Shadow of the Castle

A Castle

By David Galland, Managing Director, Casey Research

These days it takes very little to set me off on yet another rant against the American political class – a proxy for governments the world over.

On occasion, I’m tempted to apologize for these rants. Not so much for the message, but for the frequency.

Unfortunately, when surveying the landscape on which our hovels rest, the king’s castle looms large in the foreground.

I am not an envious person by nature and so wouldn’t begrudge the king his fine trappings, provided they were honestly earned.

But therein lies Ye Olde Rub.

Ever more frequently these days, the drawbridge comes down and a troop of the king’s finest sallies forth to extort from me more than half of my crops, and to read new royal proclamations whose net result is to add to the daily burden of trying to provide sustenance for family and jobs for workers.

Should I protest, say, by grabbing a pitchfork and telling the soldiers to clear off my land, or refuse to fill their wagons with the best of my crops – each leaf of which represents time and investment on my part – they would grab me by the shoulders, drag me to the king’s dungeon, and confiscate my property.

In fact, all that has changed since the days of yore is that the king’s knights tend to no longer rape, as well as pillage.

To be fair, the annals of history contain rare instances of kind and intelligent monarchs, the sort who understand that overburdening the peasants ultimately reduces crop production, leading to unnecessary and unproductive hardship and, in time, even revolt. Though, by temperament, I resist authority of any description, I suppose I could live comfortably under the rule of a fair and benign monarch.

The problem with that notion, of course, is that the corruptive nature of power leads to the near certainty that Baldash the Not So Bad will be followed by Norbit the Nasty.

And all of a sudden, instead of politely requesting I kick in some reasonable percentage of my crops to help maintain a constabulary, courts, and maybe the highways, Norbit’s men are kicking in my doors and we’re back to ox carts full of my produce being confiscated to provide a new set of gold plates and to pay the cost of invading neighboring lands.

While some among you will protest, there is, I would contend, little difference between a degraded monarch and a degraded democracy. In the monarchy, a single leader directs his minions in their ruinous acts; in a democracy, the directions come from professional politicians, as well versed in gaining and keeping power as any royalty of a bygone era. (Sir Robert Byrd held high office in this nation for 57 years.)

Far from being benign, the nation’s leadership, masters at appealing to the self-interest of an unprincipled voter class, have led us to a perilous situation where the fields are being left unplanted.

And an increasing percentage of the citizenry is now muttering angry curses as the king’s men ride by in their shiny black limo-horses.

For a clear understanding of just how poorly ruled this country has been, look no further than the latest budget projections. In his recent article, “America’s Impending Master Class Dictatorship,” Stewart Dougherty does just that, analyzing the government’s wanton spending and penning some notable, and quotable, words on the topic.

One stark and sobering way to frame the crisis is this: if the United States government were to nationalize (in other words, steal) every penny of private wealth accumulated by America’s citizens since the nation’s founding 235 years ago, the government would remain totally bankrupt.

Recently our stalwart CEO Olivier Garret sent over an insider doc from the Republicans’ Study Committee that provides talking points for candidates to use in the unending struggle for control of the castle. While I think the color of flag flapping over the battlements is at this point almost irrelevant, the document contains some interesting data points.
For instance…

$13.5 Trillion of New Debt: The president’s budget proposes to increase the national debt from today’s level of $12.3 trillion to $25.8 trillion in FY 2020 – an increase of $13.5 trillion or 109.8%.  The amount of new debt proposed by this budget is larger than the total amount of debt accumulated by the federal government from 1789 to today (even including the $3.6 trillion of new debt over the last three years).

$2.8 Trillion Tax Increase: The president’s budget submission increases taxes by $2.8 trillion over ten years. This includes allowing many of the 2001 and 2003 tax cuts to expire at the end of this year, such as allowing the top rate (which is often paid by small businesses) to increase from 35% to 39.6%, and allowing the top capital gains tax rate to return to 20%. These tax increases would take effect in an economy that, according to many economists, will still have an unemployment rate around 10%.

Mandatory Spending: Increases from last year’s level of $2.1 trillion to $3.4 trillion in 2020, an increase of $1.3 trillion or 59.4%. Within that amount: Medicare spending increases from $425 billion in 2009 to $953 billion in 2020 – an increase of $528 billion or 124.2%; Social Security spending increases from $678 billion in 2009 to $1.20 trillion in 2020 – an increase of $523 billion or 77.1%; and Medicaid spending increases from $251 billion in 2009 to $487 billion in 2020 – an increase of $236 billion or 94.0%.

Interest Payments on the Debt: Increases from $187 billion in FY 2009 to $840 billion in FY 2020 – an increase of $653 billion or 349.2%.

As mentioned yesterday, the projection on interest costs is far too conservative. While the government’s always flawed projections don’t anticipate it, both Bud Conrad and Doug Casey see strongly rising interest rates as a certainty in the foreseeable future. At that point, the debt death spiral begins in earnest, and the whole charade begins to come apart.

But it won’t take soaring interest rates to bring the economy down. That’s just going to accelerate things. And, of course, the worse things get, the worse the monarchy will act – demanding ever higher taxes and further debasing the currency, as they now certainly must.
How can you protect yourself? It really depends on where you are from. 

One obvious solution would be to move to a different kingdom, one that treats you and your money better. Or that pretty much ignores you altogether. If you are from the U.S., the king’s tax collectors will follow you wherever you go – but even so, there are modest tax advantages you can gain by expatriation. Ask your tax counsel for details.

If, on the other hand, you live in a kingdom that doesn’t tax foreign-derived income (yet), becoming a citizen of the world can offer serious advantages and is well worth considering. The situation in most of the developed kingdoms, where easy money and quick mortgages greatly exacerbated the levels of debt, is only going to get more dire as the rulers cast a wider and stronger net in the quest for more revenue.

Even if you aren’t in a position to move, however, you’ll benefit from clearly understanding one key point about the king. While he may dress well and speak in dulcet and pleasing tones, he doesn’t actually produce anything. What money he has to spend must first be taken off the productive elements of the peasantry.

But there are limits to how much he and his men can squeeze out of the citizenry. We are nearing those limits.

That means that all that is left to the monarchy is for it to issue IOUs. And given the levels of their debts and ongoing spending, lots and lots of IOUs. Those IOUs are called dollars, or pounds, or pesos, or yen, or….

While there will be no straight line up or down for any asset class in the unsettled times we will live through, using periods of weakness to build your exposure to tangible assets – most notably gold, whose primary and best use is as sound money – is the only way to protect yourself from the Great Debasement that’s coming.

If you are still in the learning stage when it comes to precious metals, seriously consider a subscription to our Casey’s Gold & Resource Report – at just $39 a year, and with our three-month risk-free trial, it’s your single best way to get up to speed on what’s going on with this important asset class. More info here.

Have a good one.

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Reader Comments (7)

You forgot to mention former King George and the money borrowed to spread Democracy around the world, or the money borrowed to fill the coffers of the knights (CEO's) of the realm, and so on.

I didn't subscribe to hear the tired old Republican talking points, I subscribed for information about silver.

Time to UNSUBSCRIBE and spend my time reading something more worthwhile.

March 19, 2010 | Unregistered CommenterBarry D'Orazio

Surprising that there are no comments yet on this synopsis by David Galland.

Ever since the present Fiefdom assumed power about one year ago, there has been nothing but chaos in the Kingdom. What, if anyting, good or positive has been accomplished by this Administration? David Galland suggests repatriation possibilities, or investing in gold, as other writers have expressed from time to time. However, there is one more potent action that all registered citizens can take and that is to boot them all out of office. Here is the message of the day for the Obamaites: what a tangled web YOU weave, when first YOU try to deceive.

March 19, 2010 | Unregistered CommenterJohn Ell

When He got elected everyone should have been sayin OBUMMER
theres goes the country there goes freedom we will gently slip into the clutches of europe and the new world order without them firing one shot. all is lost as we have known it.!! we will simply blend in!!. That is the reason for Health Care Reform!!that is reason for the Patriot Act. that is the reason for Bigger Goverment in Socialist form
not a true democracy. To become like old Mother Europe.Once the batch is the same as the one it came from then the blending can begin!!
The evolution of a dying nation-a dying empire-started in October of 2008 and is being fined tuned by this President
since January of 2009.
This Financial crisis and the rampid spending is all by design not accident. A false flag that was created for the purpose of psycological propaganda. to manipulate the thinking of the masses to desire one world goverment. For you as an individual to give up your desire and the idea of nationality
think about it-- doesnt this all make sense!!!!

March 19, 2010 | Unregistered Commenterd------

First off, let's thank Wordpress@silver-prices, gold-prices, and uranium-prices, for allowing us to publish our thoughts, feelings, and beliefs about where we are going as a nation. Many are in a state of denial about the atrocities existant in our Washington politics. The Washington weasel has sold everthing in sight to get the votes for his atrocious health care. He has suckered in Bart Stubak by agreeing to the abortion situation. Wait, Bart, in three or six months Obama will reneg on the deal.
Someone should ask Obama if he would have sold his two kids to get health care passed. Who knows what a ego-maniac would do. One thing we do know, Obama has done something that all of our enemies that the US has fought throughout all the wars could not do which is to take away our freedom and liberty. I always believed that America could not be beaten by outside forces, only by treachery from withing. By violating the wishes of the majority of American Citizens, Obama has imperiled our liberty and freedom under the Constitution. If Democracy is intended to be government of, by, and for the people then any other nation considering a Democtatic form of government had better run away like from the gates of hell because we have set a very poor example. We see right before our eyes the disintegration of the Constitution. In November 2010, it is every American's duty to vote to regain both houses of Congress for Conservatives and then in 2011 to Impeach Obama. The US can't afford three more years of this guy.

March 21, 2010 | Unregistered CommenterJohn Ell

Its time to vote the Rascals out. if you have to vote for the lesser of two evils then vote for the least they are alittle morew at being old american than any Democrate.

March 21, 2010 | Unregistered Commenterd------

"If voting made any difference, they'd make it illegal." Emma Goldman

Come on guys. Electoral politics is an elaborate shell game. Nothing more. If you're counting on the likes of the Bush, McCain, Palin, etc. to save our bacon, you're gonna be sadly disappointed. How many times are you gonna let them con you?

"Meet the new boss. Same as the Old Boss."
The Who.

My prediction, which could be total nonsense, is that these sham elections won't contain the rage much longer...maybe another 2-3 election...and it'll come out sideways. But I'm sure the combine has already anticipated that and has planned their next moves on the chessboard as they guide us toward a fascist world government that makes the world safe for insider (banker/military industrial) "elite."

The new feudalism...debt already here and will simply become worse. You get to pay interest to the bankers in perpetuity, both as a consumer, if you're dumb enough to take on credit card debt, etc., and as a hapless citizen through your share of the government's indebtedness.

"You load 16 tons...what do you get? Another day older and deeper in debt..."
Tennessee Ernie Ford.

Atlas needs to start shrugging.

March 22, 2010 | Unregistered Commenterfallingman

Part of a missive from Peter Schiff this morning:

Sunday, March 21, 2010, will go down in the history books as the day democracy died in America.

Since Barack Obama took office last winter, the administration, Harry Reid and Nancy Pelosi have edged America closer to the brink of socialism with their bailouts of the banking and automobile industries, mind-blowing spending and appointment of czars to micro-manage America.

But yesterday, with the House passage of the Senate health care bill, the federal government officially crossed the line. The far left has socialized nearly one-fifth of the American economy and forced our health care under government control.

March 22, 2010 | Unregistered CommenterSilver Prices

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