The Income Tax Really Is Evil

Reprinted with Permission Mises Institute J. Bracken Lee

This was, to be sure, "the home of the free and the land of the brave." Americans were free simply because the government was too weak to intervene in the private affairs of the people—it did not have the money to do so—and they were brave because a free people is always venturesome. The obligation of freedom is a willingness to stand on your own feet.

The early American wanted it that way. He was wary of government, especially one that was out of his reach. He had just rid himself of a faraway and self-sufficient political establishment and he was not going to tolerate anything like it in his newly founded country. He recognized the need of some sort of government, to keep order, to protect him in the exercise of his rights, and to look after his interests in foreign lands. But he wanted it understood that the powers of that government would be clearly defined and be limited; it could not go beyond specified limits. It was in recognition of this fear of centralized power that the Founding Fathers put into the Constitution—it never would have been ratified without them—very specific restraints on the federal government.

In other matters, the early American was willing to put his faith in home government, in a government of neighbors, in a government that one could keep one's eyes on and, if necessary, lay one's hands on. For that reason, the United States was founded as a Union of separate and autonomous commonwealths. The states could go in for any political experiments the folks might want to try out—even socialism, for that matter—but the federal government had no such leeway. After all, there were other states nearby, and if a citizen did not like the way one state government was managing its affairs, he could move across the border; that threat of competition would keep each state from going too far in making changes or in intervening in the lives of the citizens.

The Constitution, then, kept the federal government off balance and weak. And a weak government is the corollary of a strong people.

The Sixteenth Amendment changed all that. In the first place, by enabling the federal government to put its hands into the pockets and pay envelopes of the people, it drew their allegiance away from their local governments. It made them citizens of the United States rather than of their respective states. Theft loyalty followed theft money, which was now taken from them not by their local representatives, over whom they had some control, but by the representatives of the other forty-seven states. They became subject to the will of the central government, and their state of subjection was emphasized by every increase in the income tax levies.

The state governments likewise lost more and more of their autonomy. Not only was their source of revenue being dried up by federal preemption, so that they had less and less for the social services a government should provide, but they were compelled in their extremity to apply to the central authorities for help. In so doing they necessarily gave up some of their independence. They found it difficult to stand up to the institution from which they had to beg grants-in-aid. Furthermore, the federal government was in position to demand subservience from the state governments as a condition for subventions. It has now become politically wise for governors, legislators, and congressmen to "play ball" with the central government; they have been reduced to being procurement officers for the citizens who elect them. The economic power which the federal government secured by the Sixteenth Amendment enabled it to bribe the state governments, as well as the citizens, into submission to its will.

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In that way, the whole spirit of the Union and of its Constitution has been liquidated. Income taxation has made of the United States as completely centralized a nation as any that went before it; the very kind of establishment the Founding Fathers abhorred was set up by this simple change in the tax laws. This is no longer the "home of the free," and what bravery remains is traceable to a tradition that is fast losing ground.

For those of us who still believe that freedom is best, the way is clear: we must concentrate on the correction of the mistake of 1913. The Sixteenth Amendment must be repealed. Nothing less will do. For it is only because it has this enormous revenue that the federal government is able to institute procedures that violate the individual's right to himself and his property; enforcement agencies must be paid. With the repeal of the amendment, the socialistic measures visited upon us these past thirty years will vanish.

The purchase of elections with federal money will no longer be possible. And the power and dignity of the home governments will be restored.

This measure should be supported by the governors and legislators of all the states. Every state in the Union now contributes in income taxes to the federal government more than it gets back in grants-in-aid; this is inevitable, because the cost of maintaining the huge federal machinery must come out of the taxes before the citizen can get anything. With the abolition of income taxation the states will be better able to serve its citizens, and because the state governments are closer and more responsive to the will of the people, there is greater chance that the citizens will get their full dollar's worth in services.

However, the principal argument for the repeal of the Sixteenth Amendment is that only in that way can freedom from an interventionist government be restored to the American people.

Published as the foreword to Frank Chodorov's The Income Tax: Root of all Evil (1954).

Bracken Lee (1899–1996) was governor of Utah (1949–1957) and a leading opponent of the income tax. Murray Rothbard praised him in The Betrayal of the American Right, calling him "the closest thing to a libertarian in political life."

Exponential Growth Or State-Powered Stagnation: What Will Be Our Future?

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Reprinted with permission Mises Institute George Ford Smith

Futurist and inventor Ray Kurzweil wrote an essay in 2001, "The Law of Accelerating Returns," that describes an exponential path to what for many is an unimaginable future.

How certain is the exponential he describes? "We would have to repeal capitalism and every visage of economic competition to stop this progression," he says.

In today's world of collapsing currencies and anticapitalistic agendas, that repeal is well underway. Will the exponential be allowed to benefit mankind or will we regress to stagnation and slavery under globalist rule?

The Exponential Explained

According to Kurzweil:

Exponential growth is a feature of any evolutionary process, of which technology is a primary example. One can examine the data in different ways, on different time scales, and for a wide variety of technologies ranging from electronic to biological, and the acceleration of progress and growth applies. Indeed, we find not just simple exponential growth, but "double" exponential growth, meaning that the rate of exponential growth is itself growing exponentially.

Moore's law—the exponential shrinking of transistor sizes on an integrated circuit—is thought to be nearly synonymous with this observation, but in fact, it is only one example of what Kurzweil calls "a rich model of technological processes." This has been ongoing "since the advent of evolution on Earth."

His analysis shows that although "exponential trends did exist a thousand years ago, they were at that very early stage where an exponential trend is so flat that it looks like no trend at all." 

Humans live in a linear world, he reminds us, and often believe progress will continue at the present rate. This is not surprising, since any sufficiently short period on an exponential scale will be experienced as linear. "Even sophisticated commentators, when considering the future, extrapolate the current pace of change over the next 10 years or 100 years to determine their expectations."

The full impact of exponential growth can be seen in the tale of the inventor of chess and his patron, the emperor of China. 

In response to the emperor's offer of a reward for his new beloved game, the inventor asked for a single grain of rice on the first square, two on the second square, four on the third, and so on. The Emperor quickly granted this seemingly benign and humble request.

One version of the story has the emperor going bankrupt as the 63 doublings ultimately totaled 18 million trillion grains of rice. At ten grains of rice per square inch, this requires rice fields covering twice the surface area of the Earth, oceans included. Another version of the story has the inventor losing his head.

Where does exponential growth take us?

It will appear to explode into infinity, at least from the limited and linear perspective of contemporary humans. The progress will ultimately become so fast that it will rupture our ability to follow it. It will literally get out of our control. The illusion that we have our hand "on the plug," will be dispelled. (my emphasis)

He calls the point of explosion the Singularity:

It represents the nearly vertical phase of exponential growth where the rate of growth is so extreme that technology appears to be growing at infinite speed. Of course, from a mathematical perspective, there is no discontinuity, no rupture, and the growth rates remain finite, albeit extraordinarily large. But from our currently limited perspective, this imminent event appears to be an acute and abrupt break in the continuity of progress. 

However, I emphasize the word "currently," because one of the salient implications of the Singularity will be a change in the nature of our ability to understand. In other words, we will become vastly smarter as we merge with our technology. (my emphasis)

How imminent is the Singularity? In his magnum opus The Singularity Is Near Kurzweil sets the year 2045 for its arrival. "The nonbiological intelligence created in that year will be one billion times more powerful than all human intelligence today…. Despite the clear predominance of nonbiological intelligence by the mid-2040s, ours will still be a human civilization. We will transcend biology, but not our humanity."

Advancements in nanotechnology will bring tools to "rebuild the physical world—our bodies and brains included—molecular fragment by molecular fragment, potentially atom by atom."

By creating universal abundance, nanotech will diminish the reasons for "breaking the peace."

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Kurzweil's Batting Average

For those wishing to assign Kurzweil the status of crackpot, check out his "How My Predictions Are Faring," which he published in 2010.

Of the 147 predictions, Kurzweil claimed that 115 were "entirely correct," 12 were "essentially correct," 17 were "partially correct", and only 3 were "wrong." Combining the "entirely" and "essentially" correct, Kurzweil's claimed accuracy rate comes to 86 percent. (Wikipedia).

Read it and judge for yourself. There are good reasons why he's received twenty honorary doctorates. He became a successful entrepreneur by applying his knowledge of exponential trends.

The Implosion of the Current World Order

Students of revisionist history and free-market economics understand what's at stake in today's world. The actions of governments in accordance with Event 201, which inflicted a globally totalitarian response to a virus; the stated aims of the World Economic Forum, in which by 2030 what's left of humanity will become happy slaves of an elite; the extinction of fiat monetary systems brought to ruin by central bank counterfeiting; governments defaulting on their debt and unable to pay their employees—all of this and more will create a world of opportunity perhaps never before seen. 

Freedom and free markets will emerge by default if not by intention.

Market-chosen money (or monies) will help rescue the world economy.

With the need for defense of private property, the market will provide solutions in accordance with treatises such as Hans-Hermann Hoppe's The Private Production of Defense and others.

I need to mention that these are my views, not Ray Kurzweil's.


The future will not be man versus government terminators, but rather technologically enhanced humans prospering together.

The state, which will still exist only if we fail ourselves, will be relegated to the dark chambers of history.

George Ford Smith is a former mainframe and PC programmer and technology instructor, the author of eight books including a novel about a renegade Fed chairman (Flight of the Barbarous Relic), a filmmaker (Do Not Consent), and an advocate of stateless market government.  He welcomes speaking engagements and can be reached at [email protected]

Democrat Reconciliation Bill Relies on Extra Taxes, IRS Enforcement to Spend over $400B on Obamacare, ‘Climate Change’

Before Obama Moved Too Slow, This Time He Moved Too Fast

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A reconciliation bill pushed by Senate Democrats aims to reduce the deficit by $300 billion by increasing taxes and IRS enforcement while spending $433 billion on “climate change” and Obamacare.

Senate Majority Leader Chuck Schumer (D-NY) and Sen. Joe Manchin (D-WV) on Wednesday unveiled the Inflation Reduction Act of 2022, which would attempt to “address record inflation by paying down our national debt, lowering energy costs and lowering healthcare costs.”

Manchin and Schumer struck the deal to advance the Democrat agenda and lower the deficit at a time when Americans continue to reel from record-high inflation...

To read more visit Breitbart.

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Rising Interest Rates May Blow Up the Federal Budget

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Reprinted with permission Mises Institute Jeff Deist

In fiscal year 2020, at the height of covid stimulus mania, Congress managed to spend nearly twice what the federal government raised in taxes.

Yet in 2021, with Treasury debt piled sky high and spilling over $30 trillion, Congress was able to service this gargantuan obligation with interest payments of less than $400 billion. The total interest expense of $392 billion for the year represented only about 6 percent of the roughly $6.8 trillion in federal outlays.

How is this possible? In short: very low interest rates. In fact, the average weighted rate across all outstanding Treasury debt in 2021 was well below 2 percent. As the chart below shows, even dramatically rising federal debt in recent years did not much hike Congress's debt service burden.

interest expense chart

This is an exceedingly happy arrangement for Congress. Debt is always more popular than taxes for the same reason starting a diet tomorrow is more popular than starting today. Austerity does not sell when it comes to retail politics; spending trillions today while merely adding to what seems like a nebulous, faraway debt definitely does. And American lawmakers are uniquely fortunate in this regard. As French finance minister Valéry Giscard d’Estaing infamously announced in the 1960s, the Bretton Woods monetary system created "America's exorbitant privilege." He understood how the US dollar's status as the world's reserve currency would allow America to effectively export inflation to its hapless trading partners while maintaining cheap imports at home. But he may not have fully grasped the political privilege which would accrue to Congress.

Is this privilege sustainable? That may well be the most important political question of the twenty-first century. As Nick Giambruno explains, our forty-year experiment in relentlessly lower interest rates may soon end regardless of what the Fed does. Markets and geopolitics are powerful forces. Inflation, huge projected deficits, economic sanctions on Russia, oil disruptions, and a diminished appetite around the world for propping up Uncle Sam forever all exert upward pressure on Treasury rates. The Fed proved it can and will serve as market maker and backstop for US Treasurys, with its sordid QE (quantitative easing) bond purchases after the Great Recession and its deranged response to covid. But it cannot force investors, even crony institutional investors, to buy American bond debt at rates well below inflation forever. This is not hypothetical; Giambruno notes how certain Treasury yields quietly rose five time just since the absolute lows of 2020.

If Treasury rates continue to rise, and rise precipitously, the effects on congressional budgeting will be immediate and severe. Even if we laughably assume total federal debt remains static at around $23.8 trillion (the publicly held portion of the $30 trillion), interest rates of merely 2 or 3 percent will cause interest expense to rise considerably. Average weighted rates of only 5 percent would cost taxpayers more than $1 trillion every year. Historically, average rates of 7 percent swell that number to more than $1.5 trillion. Rates of 10 percent—hardly unthinkable, given the Paul Volcker era of the late seventies and early eighties—would cause debt service to explode to over $2.3 trillion.

Interest on debt in the hands of the public at different interest rates (billions)

Total debt in the hands of the public$23,874. 2
Interest rateInterest expense

Again, even 5 percent average rates would cause debt service to become the single biggest annual expenditure for Congress—ahead of Social Security ($1.2 trillion), Medicare ($826 billion), and the Department of Defense ($704 billion). The starting point for budget makers every year would be an interest expense totaling nearly half of realistic tax revenue. And keep in mind that these figures are for the existing federal debt, exclusive of the vast future deficits that are almost dead certain to happen. Seniors like entitlements, and the percentage of Americans over sixty-five is set to double by 2050. Republicans and Democrats like war, busy as they are installing more US troops in Poland and envisioning new aircraft carriers to patrol the Mediterranean (yes) and the South China Sea. What happens when the interest-bearing debt is $40 or $50 or $60 trillion?

At some point, given the sheer and utter profligacy of Congress, will the world demand junk bond rates to loan America another dime? Everyone knows the US will never pay its debts except nominally through inflation; everyone knows off–balance sheet entitlement promises cannot be kept in any meaningful way. Spendthrifts get cut off eventually, even those with powerful militaries and hegemonic currencies. This may not happen soon, if for no other reason than that the rest of the world holds trillions of US dollars too. But if American exceptionalism goes the way of the British Empire, this will be the reason why.

During the incontinent George W. Bush administration, Dick Cheney infamously chided Treasury secretary Paul O'Neill with the assertion "Reagan proved deficits don't matter." We see the same deluded thinking today among proponents of modern monetary theory, the idea that sovereign governments can command resources at will. This mentality pervades Congress, which in turn is rewarded by voters who want wars and welfare today without thought to future generations. They choose to believe the Cheneys and the MMTers, who tell them deficits and debt are essentially costless. 

But debt and deficits do matter. We are about to find out how much they matter. The good news, and it is very good news, is that Americans soon may enjoy the benefits of compounding interest on savings (our grandparents can explain this to us). Civilization begins and ends with capital accumulation, the very thing politics and central banks attack with impunity. It is beyond time to reward savers and punish Congress.Author:

Jeff Deist is president of the Mises Institute. He previously worked as chief of staff to Congressman Ron Paul, and as an attorney for private equity clients. Contact: emailTwitter.

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In Defense Of Defaulting On The National Debt

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Reprinted with permission Mises Institute Joseph Solis-Mullen

With the acknowledged national debt now a politically and economically unpayable $30 trillion (in reality, its unfunded liabilities are far greater), Americans should start to become acclimated to the realities of the United States’ eventual, inevitable default. While it may seem unfathomable, and the results too catastrophic to imagine, in fact the likely damage to everyday Americans would be minimal in the short term and unquestionably a net plus in the long term.

This is far from surprising and not a new problem. As Carmen M. Reinhart and Kenneth S. Rogoff detail in their comprehensive review of the subject, history shows that great powers defaulting on their debts was long the rule, not the exception, and that the long-term implications of various regimes’ repudiations of their external debts in particular were minimal or a net plus, depending on the circumstances.

As a way of starting, it is helpful to contextualize the current numbers we’re talking about, because, frankly, they would have been unfathomable previously. As the old math joke “What is the difference between a million and a billion? Basically, a billion” illustrates, the orders of magnitude under discussion are scarcely comprehensible. But the reality is that trillion dollars is $999 billion plus another billion.

The present debt level has only been manageable because of the artificially low interest rates provided by successively accommodating Federal Reserve chairs dating back to Alan Greenspan. With both fiscal and monetary policy having been run heedlessly off the rails for twenty years, the reckoning of a higher interest rate environment necessarily awaits. Short of cuts in annual spending drastic enough to produce large running surpluses (not likely), default is the only sensible option toward which to encourage policy makers.

For context, consider that when Ronald Reagan and the Democrats controlling Congress started running budget deficits that hadn’t been seen since the Second World War, the national debt was running in the hundreds of billions—eventually jumping into the low single-digit trillions.

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In the 1990s, as the unipolar moment was beginning, successive administrations and Congress seemed to recognize the foolishness of their previous policies. Compelled by grassroots activism and insurgent Republican candidacies, George H.W. Bush and Bill Clinton both made deals to cut spending and raise taxes. By the time Clinton left office, the country was running a budget surplus and the national debt was projected to be paid off by the end of the decade.

Then came George W. Bush and his disastrous wars of choice. The size and scope of the government grew at the same time that historic tax cuts were enacted. The words of then vice president Dick Cheney should have spooked foreign buyers of US debt more than they did. He was of the opinion that “deficits don’t matter.”

Nor did they matter to Barack Obama, his successors, or their congressional partners—to the point that the mere $30 trillion in openly acknowledged debt amounts to over $80,000 per American.

Nor did the regular trillion-dollar deficits matter to the Fed, which with its accommodating and regularly mandate-violating policies has raised the stakes of the coming financial oppression orders of magnitude higher than they would have been had interest rates been determined formulaically or purely by market forces.

The good news, at least for ordinary Americans, is that we personally just don’t hold very much of the debt. Fully two-thirds is held between the Fed, various other US government entities, and foreign governments. A US government default wouldn’t be the first time the latter have taken a haircut (Alexander Hamilton and Richard Nixon both undertook such necessary actions), and our own government has spent the money so poorly that no coherent argument can be made that justifies paying them back. They would just continue in their profligate ways. As for Wall Street, they’ve lived on corporate welfare long enough to justify their taking a one-time bath.

Apart from not paying perpetual interest on ever-increasing debt, another benefit of default, rarely mentioned but arguably one of the most important from the antiwar libertarian perspective, is that it would essentially end Washington’s ability to practice unbridled military Keynesianism. Slapping pointless wars and military buildups on the credit card has become Congress’s standard operating procedure. It is not a coincidence that our annual trillion-dollar deficits are approximately equal to the trillion dollars dumped into the the military-industrial complex black hole each year.

With foreign investors temporarily alienated, the Fed would be faced with the choice of either absorbing the entire amount of “defense” spending with its own balance sheet (thus sparking a drastic inflationary bout that would visibly discredit the unconstitutional institution) or forcing Washington to give up the myth of global military indispensability.

Either case is preferable to the current course.

It is in the interests of the American people, our children, and our grandchildren, and would arguably do more for world peace than any other realistic scenario imaginable.

So, contact your representative today and tell them you support defaulting on the debt.

A graduate of Spring Arbor University and the University of Illinois, Joseph Solis-Mullen is a political scientist and graduate student in the economics department at the University of Missouri. An independent researcher and journalist, his work can be found at the Ludwig Von Mises Institute, Eurasian Review, Libertarian Institute, Journal of the American Revolution,, and the Journal of Libertarian Studies. You can contact him through his website or find him on Twitter @solis_mullen.

Decentralization Is Inevitable

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Thank God for truth, divine law and our inherited common sense. A nation built upon lies, fraud and ulterior motives has never lasted. People who betray their sworn oaths to honestly serve their fellow man do great harm to their fellow man. And unfortunately, citizens who are innocent, naive, self-indulgent, distracted and disengaged from the process of self-governance will suffer greatly as wayward governments run by narcissistic politicians collapse under decades of compounded corruption. We become enslaved by our lack of knowledge, until such time we find the courage to escape our captors. 

The controlling minority of politicians in our United State’s are aligned with the dying, bankrupt European Union, NATO bloc war hawk nations, private Central Bankers, the United Nations and the World Economic Forum’s globalist agenda. America is financially, morally and constitutionally bankrupt. 30% of every US dollar in circulation has been produced out of thin air during the prior 30 months. Today, only 3% of all money on earth can be physically withdrawn from banks, 97% is digital. Privately owned Central Banks can continue to produce an infinite supply of new money with no voter approval or political accountability. And every new dollar they add makes every existing dollar we hold, worth less. It’s called inflation. Can you feel it?

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Globalist bankers are frantically attempting to inflate their fiat money supply to delay the pending financial system collapse. Under the cover of media “happy talk” and business “news” gaslighting choreographed to deceive the public, they are buying more time to construct their new Central Bank Digital Currency (CDBC) system of digital money, power, surveillance and control. They’re in a panicked sprint to build their new digital banking prison before their current fiat banking monopoly burns completely to the ground. Make no mistake, the only similarity between a CBDC and a true Crypto currency is that both are digital.  CBDCs are issued and centrally controlled by global bankers with unlimited power, zero transparency and no accountability to any citizen or nation. True Crypto currencies are issued with decentralized governance algorithmically programmed and assigned to the owners of each crypto currency, True crypto offers full public transparency, perfect blockchain accounting, no ability to issue infinite new supply of the crypto (inflation), and no ability for a government or non-government agency to own, control or weaponize a decentralized crypto currency for political objectives. True crypto currency is designed to prevent political perversion of money and the Ponzi scheme system built to steal and destroy the wealth of individuals. 

Common sense is all that is required to understand why Central Bankers, their financed politicians and captured regulators work so feverishly to promote CBDCs and the few crypto currency projects they own and control. Truly decentralized crypto currencies are viewed by them as counterfeit money (not “theirs”) and they represent a dangerous, existential threat to central bankers who have reigned terror over our world since the birth of the Federal Reserve in 1913. 

Consider carefully where you consume your financial, investment and political news in these days of chaos, destruction and spiritual warfare. Discernment is a blessing from God.  Truth will set us free.

Stagflation Comes From Exorbitant Money Creation And Unhampered Government Spending

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Reprinted with permission Mises Institute Antony P. Mueller

Too much government spending and loose monetary policy lead to rising prices combined with falling economic growth rates. All Keynesian roads lead to stagflation. It is the result of economic mismanagement. Again and again, the belief has been proven wrong that central bankers could guarantee the so-called price stability and that fiscal policy could prevent economic downturns. The present crisis is one more piece of evidence that interventionist monetary and fiscal policies are disruptive. Instead of a permanent boom, the result is stagflation.

Stagflation—a Keynesian Curse

“Stagflation” characterizes an economy that is plagued by inflation combined with stagnation. In this case, the conventional macroeconomic toolkit of monetary and fiscal policy is of no avail.

Rising price inflation rates and a tanking economy are the results of the policy mix of the past decades. It has become common to believe that expansive monetary and fiscal policies would not cause price inflation. As recent as 2020, the economic policy followed the false consensus that combatting the fallout from the lockdowns with additional money creation and higher government spending would lead to an economic recovery without higher price inflation. It was assumed that what worked in 2008, would also function in 2020. However, policymakers ignored the difference between the two episodes.

In the aftermath of the financial crisis of 2008, the stimulus policies did not turn into price inflation right away because the newly created money remained largely in the financial sector and did not spill over to the real economy in a big way. At that time, the main effect of the policy of low interest rates was to support the stock market and to provide a windfall to financial investors. While Wall Street flourished, Main Street was left on the sidelines and while profits surged, wages remained stagnant.

Compared to the financial crisis of 2008, the difference is that the production side of the economy is severely damaged this time. The crisis of 2008 left the capital structure of the real economy intact. Due to the lockdowns, however, this is no longer the case. Consequently, severe interruptions of the global supply chains have happened. In such a constellation, new stimulus measures have the effect to weaken further the economy. The present situation is more like the oil price shock in 1973. At that time, too, the external shock hit an economy rampant with liquidity. Stimulating the economy by fiscal and monetary expansion produced long-lasting stagflation. Back then, along with “stagflation,” the term “slumpflation” was coined to characterize an economy that is mired in a deep slump and gets devastated by price inflation.

When stagnation and recession show up together with price inflation, the conventional macroeconomic policy becomes impotent. Applying the Keynesian recipe to an economy whose capital structure has been ravaged means inviting disaster.

Intentionally or by ignorance, policymakers neglected the long-term effects of their doing. Going this wrong way led to such aberrations that policymakers and their intellectual bodyguards even tended to believe that some truth could be found in the alchemy of the so-called modern monetary theory and market monetarism.

The consequences of these policy errors have now come to light. They are particularly grave because they were committed by all major central banks and the governments of all leading industrialized countries. They all follow the concept of “inflation targeting.” Other than timing, there has been not much difference among the policies of the major Western economies. Japan is a special case only insofar as its policymakers have applied the Keynesian recipe for over three decades by now.

Let us have a look at Japan first and then at the United States.


Japan began with the application of vulgar Keynesianism as early as in 1990. Faced with a slight downturn of the economy after the boom of the 1980s, the Japanese leadership did not want the economy to cool down but to go on with the show.

The government began to accelerate public spending and increased the fiscal stimuli the less its spending policy fabricated the expected result of an economic recovery. Even when monetary policy fully supported the government’s expansive fiscal policy, the expected recovery did not materialize.

The short run became the long run. The policy mix between fiscal and monetary policy has been going on over the past three decades. The Bank of Japan implemented a policy of extremely low interest rates and finally resorted to a policy of negative interest rates (NIRP). In the meantime, public debt as a percentage of the gross domestic product (GDP) rose to 266 percent (see figure 1).

Figure 1: Japan: Policy interest rate and public debt as a percent of GDP


Figure 1
Source: Trading Economics.

Despite the magnitude of the stimuli, this policy mix did not lift the Japanese economy out of its quagmire. In stark contrast to the Japanese boom of the 1980s, economic growth has remained anemic during the past quarter of a century (figure 2).

Figure 2: Japan: Annual economic growth rates of real GDP


Figure 2
Source: Trading Economics.

As an “early starter” in applying vulgar Keynesianism as its macroeconomic policy focus, the Japanese economy was also early to suffer from the stagnation of its productivity rates. Different from countries like the United States, France, Germany, and many other industrialized countries, which have continued with productivity gains over the past decades, Japan has moved sideways after it had begun with its extreme Keynesianism in the 1990s (figure 3).

Figure 3: Productivity per hour worked: Germany, United States, France, Japan


Figure 3
Source: Our World in Data.

It is important to note that one of the most devastating effects of the Keynesian policy mix is its effect on productivity. A country’s long-run economic growth is mostly the result of productivity gains. Labor productivity is the main determinant of wages. A slowdown of productivity precedes the economic decline. When the output per unit of input tends to fall, even lower interest rates will not stimulate business investment. When government jumps in to compensate for this “lack of aggregate demand,” things get worse because governmental enterprises are fundamentally less productive than the private sector.

The United States

Confronted with the financial crisis of 2008, the US government decided to launch a series of stimulus packages. The American central bank provided full support of this policy and began to reduce drastically its interest rate.

As a result of these policies, the ratio of public debt to the GDP rose from 62.6 percent in 2007 to over 91.2 percent in 2010, reaching 100.0 percent in 2012. The next two boosts came in the wake of the policies to counter the effects of the economic lockdowns, when the ratio of public debt to GDP rose to 128.1 percent in 2020 and to 137.2 in 2021 (see figure 4).

Figure 4: The United States: Policy interest rate and federal debt as a percentage of GDP


Figure 4
Source: Trading Economics.

In the face of the outburst of the financial market crisis in 2008, the American central bank brought down its interest rate quickly from over 5 percent in 2007 to under 1 percent in 2008. After a short-lived period when the American central bank tried to raise the interest rates, the consequent market reaction of falling prices of bonds and stocks induced the Fed to resume its policy of “quantitative easing” that combined low interest rates with the massive expansion of the monetary base. Trying to ease the economic effects of the lockdowns in early 2020, the Fed decided to go on with its expansive monetary policy. In due course, the central bank’s balance sheet rose to $7.17 trillion in June 2020 and reached $8.96 trillion in April 2022.

Figure 5: Balance sheet of the US Federal Reserve System


Figure 5
Source: Trading Economics.

As figure 4 shows, the Fed had tried to trim its balance sheet from 2015 to 2019 when it had brought down the sum of its assets to $3.8 trillion in August 2019. Yet beginning already in September 2019, many months before the lockdown was implemented, the balance sheet of the American central bank began to expand again and reached over four trillion before the additional big increase happened due to the fallout from the lockdowns.

Since the time before the financial crisis of 2008, the assets of the Federal Reserve System rose from $870 billion in August 2007 to $4.5 trillion in early 2015 and to around nine trillion US dollars in early 2022.

Even when inflation rates began to rise towards the end of 2020, the US central bank had kept its policy of tapering small and refrained from tightening. The monetary authorities had given up on the objective to rein in the money supply. Each time they tried to tighten monetary policy, the financial markets began to tank and tended to crash. As soon as the central bank began to raise its policy rate of interest, the bond market began to tank and took the stocks down with it. In 2022, it was not different. Yet in early 2022, the policymakers could not shrink back. Different from the episodes before, the price inflation had begun to skyrocket.

In the first months of 2022, stagflation became fully visible. While price inflation rose, the rate of real economic growth began to fall. In the first quarter of 2022, the inflation rate moved up to a rate of 8.5 percent, while the real annual growth rate fell by 1.4 percent (see figure 5).

Figure 6: United States: Policy interest rate and official consumer price inflation rate


Figure 6
Source: Trading Economics.

With the global supply chains now in disarray, and national protectionism on the rise, the assistance that came from the expansion of international commerce after the crisis of 2008 is no longer with us. The lockdown of the economy has severely hurt the global system of supply chains. Now, a huge monetary overhang meets a shrinking production. The war in Ukraine, which started in February 2022, is not to blame for the distortions, albeit it will make them more severe.


The levee broke. Price inflation is on the rise. This is the result of the accumulation of liquidity that has been going over decades. There is the risk that things will get worse because the world economy has been severely wounded by the lockdown. More so than only mild stagflation, a “slumpflation” looms on the horizon as the world economy gets mired in the morass of a deep slump combined with steeply rising price inflation.Author:

Antony P. Mueller

Dr. Antony P. Mueller is a German professor of economics who currently teaches in Brazil. Write an email. See his website and blog.

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Will Inflation Turn Into Stagflation?

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Reprinted with permission Mises Institute Peter St. Onge

Will inflation turn into stagflation? With inflation hitting 40-year highs, it’s the question of the hour.

Currently, Wall Street and the Fed are saying no, forecasting a respectable 3.7% real for 2022, 2.7% for 2023, and 2.3% for 2024. These aren’t epic prints, but they’re also nowhere near recession.

Of course, that same dream team of Wall Street and Fed missed inflation to an epic degree last year: in mid-October of 2021 the Wall Street Journal’s survey of economists were predicting 5.25% inflation by December—just two months later. Actual CPI in December was an annualized 9.5%, and it was 7.1% on a year-on-year basis. That’s pretty embarrassing for a two-month prediction of a large aggregate like inflation.

Incidentally, in that same survey the median economist predicted supply chains will be cleared by June this year—just 4 months to go. So we’ll see if they’re similarly deluded or, like the prodigal monkey throwing darts, they get one right.

So are the monkeys right on growth? Or, like “transitory inflation,” will they again throw what monkeys normally throw?

Noisy Data, Noisy Policy

The problem so far is the data is so noisy from Covid disruptions: if governments impose, then remove, then reimpose measures according to the latest opinion poll, they have a lot of trouble statistically adjusting. Still, Covid disruptions are gradually getting smaller, meaning we’re starting to get a picture of what the underlying economy looks like. As Warren Buffett famously put it, “When the tide goes out, we see who’s swimming without a suit.” Covid restrictions are, increasingly, a tide going out. So now we see what’s left.

In short, it’s not pretty. The Atlanta Fed does a nearly real-time evaluation of GDP, and they’re saying it’s now at 0.7% real. That’s about US population growth, meaning the economy is, at the moment, at a standstill. Also known as stagnation.

Meanwhile, of course, inflation continues surprising on the upside—well, surprising Wall Street and the Fed, not necessarily surprising many of us—coming in last month at an annualized 8.0% for the month—a flaming 7.5% year-on-year.

Put those two together and you get stagflation—rising prices while the economy stagnates.

According to Atlanta Fed, we’re already there. So will it continue?

I’ll briefly run through what I think are the threats to growth, and what I think are the odds that we whistle past the graveyard and go back to decent growth, with or without inflation. Or, on the other hand, the bearish case where the economy crashes into a repeat of the 1970’s: soaring prices, scarce jobs, dystopian cities, and national decline.

The Bear Case

The two best ways for a government to crash an economy are regulations and taxes. Both suppress growth year-in-year-out, but to really spark a crash one or both have to get much worse, ideally all of a sudden.

At the moment, major tax hikes are off the table for the foreseeable future. This is because Biden and Congressional Dems are unpopular and have a razor-thin majority, while DC consensus is the GOP will retake Congress in 2022, putting an end to Biden’s handlers’ tax-hiking dreams.

Of course, some states are already trying to hike taxes, like California, but states can only hike so much before companies flee. Indeed, with so many upper-income workers now location-independent thanks to those same Covid lockdowns, states like California could see something new: thousands of six-figure families fleeing all the way to Arizona, Texas, or Florida.

So, given those constraints, I don’t think taxes crash us unless Americans wake up one morning and decide they quite like Joe Biden after all. I’ll let you run those odds.

What is, however, quite threatening is regulations. 1970’s-style regulation increases are, like taxes, neutered by Biden’s unpopularity and Congress’ razor-thin majority. But there is still a lot of damage that can come from Biden’s Executive Orders (EO’s). If you’re not American, or if you have a healthy disinterest in DC, in the US system EO’s are wide-ranging powers a President has to impose a variety of mandates and restrictions across the economy. Trump enthusiastically used these to minimize economic harm, and Biden’s handlers could just as enthusiastically use them to maximize economic harm.

Now, we haven’t heard much on EO’s yet, since they take time to comply with administrative rules so they stick. But there’s a whole parade of them coming down the pike. I’ve written recently on one batch attacking crypto, and others targeting financial markets could catastrophically handicap growth. All with more to come—we got Biden for another 3 years.

A Great Deal of Ruin

So, yes, there are threats. But it’s important to zoom out and remember America is not the government alone—there’s 300 million of us out there, building, creating, hustling to route around the damage of government policy.

This is nicely captured in Adam Smith’s famous response to a colleague panicked about policy: “My boy, there is a great deal of ruin in a country.” Policies always look horrible way out at sea, but we the people usually manage to whittle them into little waves by the time they get to shore. Not every policy—the 1970’s did happen—but most of the time.

This means even a constant series of new EO’s are up against the world-moving day-in day-out hard work of those 300 million Americans the bureaucrats and politicians are trying to destroy. I recently saw a TV show where the local government closed the bridge a logger needed, and his response was to refloat a sunken barge, plug it using $10 in toilet wax, and float the logs. Multiply that by 300 million and Washington’s up against an army—many armies—when it’s trying to crash our economy.

To illustrate the power of this People’s Army, even the 1970’s—the worst policy failure in a lifetime—real GDP growth plunged, yes, but it plunged from 4.5% in the 1960’s to 3.2% in the 1970’s—a one-third drop. That one-third drop meant millions unemployed and cities collapsing, to be sure, but it also didn’t mean we were eating house cats and fortifying gas stations with heavy crossbows. They destroy, we build, and there are more of us than them.

Now, anything’s possible, and threats to the real economy could conceivably soar if Washington agrees on some sufficiently stupid scheme. But given the distinct unpopularity of both Biden and Congress, I think the standard tax-and-regulation disaster scenarios are unlikely. Instead, we continue limping along with the lousy but non-catastrophic policies we have.


Policy suggests we won’t necessarily bounce back—existing taxes, regulations, and handouts are keeping production muted, dragging out supply chain adjustments, and the idiots in Washington will likely continue both. But I don’t think the odds of a policy-induced crash are high. It’s too soon to bet on them as an investor and, anyway, your investments shouldn’t be based on economic growth—prepare for the worst, but bet on the most likely.

Final point, this all comes with a huge caveat: the Federal Reserve. The Fed’s pace of money creation since Covid has been unprecedented, while the Fed itself increasingly admits its models are blind—for which it blames Covid. Put these together and the Fed is, effectively, a car driving at night, very fast, with no headlights. That is a real threat, probably to an unprecedented degree. 

This article is excerpted from CryptoEconomy. Click here to subscribe to Peter's newsletter. Author:

Peter St. Onge

Peter St. Onge is a Mises Institute Associated Scholar and an Economic Research Fellow at the Heritage Foundation.  For more content from Dr. St. Onge, subscribe to his newsletter where he writes about Austrian economics and cryptocurrency

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Reprinted with permission Mises Institute Tho Bishop

Price inflation is the highest its been since 1982. Real wages are plummeting. Joe Biden’s approval ratings are now on par with George W. Bush’s after both the Iraq War, the financial crisis, and eight years of Jon Stewart. This is with the benefit of Kim family–level devotion from the corporate press, Big Tech, and almost every pop culture figure.

In this case, correlation is causation. Inflation has now topped covid as the greatest concern of Americans.

As history shows, this shouldn’t be surprising. While modern politicians have bought into the myth that monetary policy is something that should be left to a technocratic elite, money issues have long been a motivating issue for populist causes. There is no more “kitchen table” issue than the daily reminder that your paycheck buys less than it did last year.

The political benefactors of inflation are obvious: anyone running against Joe Biden. Twenty twenty-two will be a year where many talentless Republican political consultants will be able to ride a red wave and claim a victory they will base an entire career around. Unfortunately, the Republican Party is as culpable in America’s inflationary crisis as Joe Biden. We will see if anyone in DC catches the irony when the majority of Republican senators end up endorsing another term for Jay Powell.

This gets to the core of the problem. As we see inflation rise as America’s most pressing political issue, we have a political system completely unprepared to deal with it.

After all, few in Washington even know what the underlying cause of inflation is. It’s not port capacity, and it’s not greedy corporations. It’s not simply about progressives’ aims to price out fossil fuels or the price tag of any one specific spending bill.

No, the cause of inflation is the arrogance of modern economic PhDs. It is the consequence of rendering money into a tool of the state, a power which has been abused to plunder from the people so that politicians can spend freely. It is an era of monetary hedonism, maintained by an institution that has for over a decade now consistently failed by its own measure. The fact this system has lasted fifty years is in large part because most of the world’s central banks have engaged in similar—if not even more reckless—policies to the Fed.

Ivy League universities are just as capable of infecting the world as any Chinese laboratory.

Unfortunately, the GOP has been defined by its complete disinterest in rooting out institutional malfeasance. Abolishing a federal agency is a bumper sticker Republicans use for a campaign fundraiser, not a political goal. Any attempts to push for any meaningful reform to the Federal Reserve will be treated as a threat to the entire global financial system, and Republicans will cave—just as they voted to bail out Mexico in the ’90s, just as they voted to bail out Wall Street in ’08, just as they repeatedly cave to debt ceilings and government shutdowns.

If there is no political solution to the Fed, does it mean there are no possible remedies to help protect average Americans from the inevitable monetary crisis?

No. The answer to America’s inflation issue is to empower citizens to save in alternative currencies. Just as Republicans have found school choice easier to push than abolishing the Department of Education, monetary choice offers a policy approach that doesn’t require an all-out assault on a powerful institution with a well-paid army of propagandists.

This approach to the Fed was something promoted strongly by Ron Paul during his congressional career. The most significant component of his Free Competition in Currency Act was the elimination of taxes on gold and silver—something that could be updated to include cryptocurrency. If the only major policy wins Republicans are capable of having in DC are tax cuts, these would technically qualify.

Abolishing these taxes would eliminate one of the state’s most powerful tools for forcing the dollar on its citizens. If Americans can freely move their wealth from the control of the Fed and into nonpolitical assets, they will have real protection against the long-term consequences of inflation. Even better, this will undermine Washington’s concerted efforts to weaponize the banking system against political dissidents.

Most importantly, though, it would be a tax cut that would immediately redistribute wealth away from Wall Street and into the pockets of average Americans. As such, it is an ideal policy aim for the growing populist Right.

After all, if the goal of a political movement is to oust a powerful cabal of neoliberal globalist oligarchs, success is going to depend on achieving political victories that don’t only weaken your enemies but enrich your allies. Progressives and authoritarians are overrepresented in the halls of an increasingly woke Wall Street, while regime skeptics are overrepresented in crypto and among those who buy gold.

As in the past, there is the opportunity for the current inflation crisis to radically transform American politics. As the nation continues to lose trust in institutions, and as a new generation of populist Republicans grow their numbers in the party, there is an opportunity to deliver a major blow against the financial class that has taken over the global economy.

Is the current generation of right-wing populists prepared to listen to Ron Paul and embrace a Rothbardian Right?

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Could 2022 Bring The Collapse Of The Euro?

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Reprinted with permission Mises Institute Alasdair Macleod

Like the Fed, the ECB is resisting interest rate increases despite producer and consumer prices soaring. Consumer price inflation across the Eurozone was most recently recorded at 4.9%, making the real yield on Germany’s 5-year bond minus 5.5%. But Germany’s producer prices for October rose 19.2% compared with a year ago. There can be no doubt that producer prices have yet to feed fully into consumer prices, and that rising consumer prices have much further to go, reflecting the acceleration of the ECB’s currency debasement in recent years.1

Therefore, in real terms, not only are negative rates already increasing, but they will go even further into record negative territory due to rising producer and consumer prices. Unless it abandons the euro to its fate on the foreign exchanges altogether, the ECB will be forced to permit its deposit rate to rise from its current —0.5% to offset the euro’s depreciation. And given the sheer scale of recent monetary expansion, euro interest rates will have to rise considerably to have any stabilising effect.

The euro shares this problem with the dollar. But even if interest rates increased only into modestly positive territory, the ECB would have to quicken the pace of its monetary creation just to keep highly indebted Eurozone member governments afloat. The foreign exchanges are bound to recognize the developing situation, punishing the euro if the ECB fails to raise rates and punishing it if it does. The euro’s fall won’t be limited to exchange rates against other currencies, which to varying degrees face similar dilemmas, but it will be particularly acute measured against prices for commodities and essential products. Arguably, the euro’s derating on the foreign exchanges has already commenced.

But there is an additional factor not generally appreciated, and that is the sheer size of the euro’s repo market and the danger to it that rising interest rates presents. Demand for collateral against which to obtain liquidity has led to significant monetary expansion, with the repo market acting not as a marginal liquidity management tool as is the case in other banking systems, but as an accumulating source of credit. This is illustrated in Figure 4, which is of an ICMA survey of 58 leading institutions in the euro system.2



The total for this form of short-term financing grew to €8.31 trillion in outstanding contracts by December 2019. The collateral includes everything from government bonds and bills to pre-packaged commercial bank debt. According to the ICMA survey, double counting, whereby repos are offset by reverse repos, is minimal. This is important when one considers that a reverse repo is the other side of a repo, so that with repos being additional to the reverse repos recorded, the sum of the two is a valid measure of the size of the repo market. The value of repos transacted with central banks as part of official monetary policy operations were not included in the survey and continue to be “very substantial”. But repos with central banks in the ordinary course of financing are included.3

Today, even excluding central bank repos connected with monetary policy operations, this figure almost certainly exceeds €10 trillion by a significant margin, given the accelerated monetary expansion since the ICMA survey, and when one allows for participants beyond the 58 dealers recorded. An important element of this market is interest rates, which with the ECB’s deposit rate sitting at minus 0.5% means Eurozone cash can be freely obtained by the banks at no cost.

The zero cost of repo cash raises the question of the consequences if the ECB’s deposit rate is forced back into positive territory. The repo market will likely contract in size, which is tantamount to a decrease in outstanding bank credit. Banks would then be forced to liquidate balance sheet assets, which would drive all negative bond yields into positive territory, and higher, accelerating the contraction of bank credit even further as collateral values collapse. Moreover, the contraction of bank credit implied by the withdrawal of repo finance will almost certainly have the knock-on effect of rapidly triggering a liquidity crisis in a banking cohort with exceptionally high balance sheet gearing.

There is a further issue to consider over collateral quality. While the US Fed only accepts very high-quality securities as repo collateral, with the Eurozone’s national banks and the ECB almost anything is accepted — it had to be when Greece and the other PIGS were bailed out. And the hidden bailouts of Italian banks by bundling dodgy loans into repo collateral was the way they were removed from national bank balance sheets and hidden in the TARGET2 system

The result is that the first repos not to be renewed by commercial counterparties are those whose collateral is bad or doubtful. We have no knowledge how much is involved. But given the incentive for national regulators in the PIGS to have deemed non-performing loans to be creditworthy so that they could act as repo collateral, the amounts will be considerable. Having accepted this bad collateral, national central banks will be unable to reject them for fear of triggering a banking crisis in their own jurisdictions. Furthermore, they are likely to be forced to accept additional repo collateral if it is rejected by commercial counterparties and bank failures are to be prevented.

The numbers involved are larger than the ECB and national central banks’ combined balance sheets.

The crisis from rising interest rates in the Eurozone will be different from that facing US dollar markets. With the Eurozone’s global systemically important banks (the G-SIBs) geared up to thirty times measured by assets to balance sheet equity, rising bond yields of little more than a few per cent will likely collapse the entire euro system, spreading systemic risk to Japan, where its G-SIBs are similarly geared, the UK and Switzerland and then the US and China which have the least operationally geared banking systems.

It will require the major central banks to mount the largest banking system rescue ever seen, dwarfing the Lehman crisis. The required expansion of currency and credit by the central bank network is unimaginable and comes in addition to the massive monetary expansion of the last two years. The collapse in purchasing power of the entire fiat currency system is therefore in prospect, along with the values of everything that depends upon it. 

Excerpted from "Gold and Silver Prospects for 2022" at


Alasdair Macleod

Alasdair Macleod is the Head of Research at Goldmoney.

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