“When you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you — when you see corruption being rewarded and honesty becoming a self-sacrifice — you may know that your society is doomed.” — Francisco d’Aconia’s “Money Speech” from “Atlas Shrugged”
Some gold bugs are claiming that the United States is acting more and more like a banana republic.
Countries south of the border are famous for corruption, rigged elections, military dictatorships, runaway inflation, crime, an extreme inequality of wealth and debt so high that they default.
Venezuela is the most extreme case. It was once the wealthiest country in Latin America in terms of natural resources, as it has more oil reserves than Saudi Arabia. And yet the people are starving, prices are going through the roof and the economy is collapsing. Meanwhile, the corrupt government under the Marxist dictator Nicolas Maduro has survived one election after another. He is still in power.
Not all Latin countries are political and economic basket cases. Chile threw off its Marxist president Salvador Allende via a military coup in 1973, and under the direction of the Chicago boys (followers of Milton Friedman at the University of Chicago), the country gradually subdued inflation, privatized most of its industries, cut taxes and regulations and created a sound social security system (the first defined contribution plan).
As a result, the economy has had steady, above-average growth rates.
The Chile Model Versus the Venezuela Model: No Contest!
Below is an amazing graph showing the economic performance of the major Latin American countries.
Chart courtesy of José Piñera
This chart says it all about Latin America.
Let’s hope Chile continues on this path after the Dec. 19 elections.
Since this graph was made in 2018, Chile has been in political and economic turmoil. It has also witnessed a disastrous stock market. Inequality is a major issue in Chile. When the government raised subway prices, Chileans protested in the streets of Santiago.
If the pro-market candidate, José Antonio Kast, wins, Chile will hopefully continue its upward trend.
If the socialist Gabriel Boric wins, the Chilean growth model may be dead. Nobody wants Chile to go down the road of Argentina, or heaven forbid, Venezuela.
Where Is the United States Headed?
The United States is no banana republic, but we are headed in that direction. We are facing another round of crime, especially brazen shoplifting, homelessness, begging, rising inflation and product shortages amid uncontrolled wasteful deficit spending that is sending the national debt through the roof.
You can watch how the national debt keeps growing here.
It’s now over $29 trillion! It went up sharply under President Donald Trump and now President Joe Biden.
In 2021, for the first time ever, government spending at all levels (federal, state and local) in the United States hit 50% of gross domestic product (GDP). It was 35% back in 1995. You can see the shocking graph in the “You Blew it” column below.
But there is hope. A few countries, like Sweden and Canada, have faced a national crisis and changed their ways. To read more on this topic, you can go to last Thursday’s CAFÉ here.
We still have the rule of law and the “tolerable administration of justice,” as Adam Smith called it. Judge after judge has ruled that President Biden’s mandatory vaccination executive order is unconstitutional.
The United States is supposed to be a representative democracy, not a dictatorship. Americans are still optimistic that we will overcome our problems and achieve a better world. That’s why the stock market is near an all-time high, and we are 100% invested. But there are no guarantees.
Know the signs of the times.
Update on New Edition of ‘Maxims of Wall Street’
“Gorgeous. Epic. Pithy. (And a great little value).” — **** Review on Amazon
The 10th-anniversary edition of “The Maxims of Wall Street” is temporarily out of stock, although you can buy unsigned copies on Amazon at The Maxims of Wall Street: Skousen, Mark: 9781684511976: Amazon.com: Books.
Lake Book Manufacturing, our book printer in Chicago, informs me its staff expects to ship the second printing of the 10th-anniversary edition of “The Maxims of Wall Street” on Friday, Dec. 17.
When I receive them, I’ll number and autograph each one and mail them out right away, hopefully by Christmas.
A lot of my subscribers have pre-ordered copies. If you want to order “Maxims” in advance, go to www.skousenbooks.com. The price is $20 for the first copy, and all additional copies are $10 each. If you order a box of 32 copies, the price is $300. I will pay the postage if mailed inside the United States.
Liberty United Forum and Luncheon, Kimber Academy, Lehi, Utah, Saturday, Dec. 11, 11 a.m. -2:30 p.m.: I’ll be speaking on “Benjamin Franklin’s Warning to America.” To register, go here.
IMPORTANT: I am launching a new Cryptocurrency Portfolio, the details of which will be revealed during the most important Eagle Eye Podcast ever. I’ll join Publisher Roger Michalski at 3 p.m. (Eastern) on December 14, 2021, for this podcast. We’re calling it 2022: The Year of the Crypto, and during this brief, 30-minute session, you’ll find out my #1 Cryptocurrency Pick for 2022… The Two Safest Crypto Plays in the Market Today and my first Recommended Crypto Portfolio for 2022. Don’t miss out. Be on the outlook for our email with a link to the podcast on Dec. 14 at 3 p.m.!
Bob Dole, Senator Tax, Dies
Last week, Robert Dole, the long-time senator from Kansas and presidential candidate in 1996, passed away. He received bipartisan tributes as a wounded World War II veteran, a Senate leader who was known to work with both sides of the aisle and a man who had a sense of humor.
I met him once or twice and found him to be friendly and personable. He did a lot for the veterans of this country. On a personal level, there is much to be admired in the man.
‘Tax Collector of the Welfare State’
But Bob Dole also epitomized the never-ending growth of government in our era. Speaker of the House Newt Gingrich rightly called him “the tax collector for the welfare state.”
He was known as Senator Tax. He did support the Kemp-Roth tax cuts of 1981, but after that, it was all downhill.
He was the senator who actually wrote and pushed through the Tax Equity and Responsibility Act of 1982, known as TEFRA, which turned out to be the worst tax act in our history. President Reagan, who held his nose and signed it, should have vetoed it.
We are still suffering from TEFRA today. Hidden in the act is the requirement that retirees must withdraw and pay taxes on 5-8% of their IRA retirement funds every year. It is called the dreaded Required Minimum Distribution (RMD).
In 1983, as Senate Finance Committee chairman, Dole engineered the “rescue” of Social Security — a stiff increase in payroll taxes that set an enormous yoke on the necks of younger workers. In 1984, he voted for yet another package of tax increases. He voted for still another in 1985, 1986, 1987, 1988 and 1989.
Then, as Stephen Moore of the Heritage Foundation puts it, “came the GOP’s darkest hour, George Bush’s 1990 budget deal, with Bob Dole leading the way.” Dole not only failed to warn Bush against breaking his famous “read my lips” vow, but he also mocked Republicans as wimps who “never made a tough vote in their lives.”
Thanks in large part to Dole’s efforts, income taxes went up, gasoline taxes went up, beer and wine taxes went up, “luxury” taxes went up, airline ticket taxes went up and payroll taxes went up. With so many “revenue enhancements,” did federal deficits, at least, go down? No, they went up too. Bush’s presidency, on the other hand, plummeted, and he lost to Bill Clinton in 1992.
But Dole remained in the Senate until 1996, when he ran for president. He fought tooth and nail against Newt Gingrich’s “Contract with America.”
His legacy is best described in this chart below, which shows how government spending as a percentage of GDP has gone from 32% to 50% during his tenure as a senator and Senate Majority Leader.
The 50% G/GDP figure reminded me of Abraham Lincoln’s famous “House Divided” speech that he made before the Republican State Convention in Illinois in 1858. After declaring that “a house divided against itself cannot stand,” he declared:
“I believe this government cannot endure permanently half slave and half free.”
According to Milton Friedman, “The thing you should keep your eye on is what government spends, because that’s the true tax.”
Despite Dole’s heroism and lengthy rehabilitation to recover from his severe injuries while defending our freedom, he was part of an unfortunate trend of excessive government spending that I hope will soon end.