Government Mules

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by David Galland: Save
the Virgins!



Watching my
children grow older, now heading into the treacherous shoals of
the teenage years, has been a visceral reminder of how the human
mind develops. As young children, we see the world with fresh eyes
and wonderment, and then quickly begin testing the physical and
societal bounds as part of morphing into our more mature selves.

As we age into
our teens and beyond, the testing of boundaries evolves into a series
of calculations. If I do “A,” we wonder, will it lead
to “B” or maybe “Z”?

From a young
age, most of us are told to advance our education and otherwise
better ourselves so that we will be able to find a good job, or
a succession of good jobs, that will provide sustenance and security
lasting most of a lifetime before retiring to dawdle about in our
golden years.

At least that
is the modern view of life pursued by the vast majority of the citizenry
in the developed world.

But having
spent some time in rural Argentina recently – where it seems
to me that most people spend more time living and less time planning
to live – I have had some time to ponder the assumptions embedded
in this view.

What if, I
wonder, the whole modern construct of what passes for making the
right moves in an advanced society is plain wrong?

Is the goal
of working hard to get a good job and then moving up the corporate
ladder really so desirable? Is marrying and having 2.5 kids and
growing old in a glorified box in the burbs really so wonderful?

I asked someone
who knows what percentage of their income – which is to say
the income of a reasonably successful person – now goes to
taxes, and the answer was, “Over 60%.”

What if the
modern version of society is really nothing more than a sleight
of hand designed to fool the masses into becoming little more than
government mules, allowed their simple pleasures in exchange for
providing the muscle and the money needed to feed the beast?

An increasing
number of the mules seem to me to have become disheartened at the
difficulty of creating and keeping enough wealth to live the life
envisioned in youthful dreams. And correctly so: building lasting
wealth is relatively easy when you keep 90%, but nearly impossible
when you keep just 40%. And, if the trend now in motion continues
in motion, the productive elements will soon be lucky to keep 30%.

While even
I can’t foresee things getting as bad as they did in Britain
in 1974, when the top 750,000 wage earners were slapped with a tax
rate of 98%, the steady build toward more regulations, more government,
more tariffs, and more taxes in more sectors of the economy will
affect a broader swath of the public and, in so doing, weigh even
more heavily on the nation.

And it will
result in much the same thing experienced by the British at the
time – a mass expatriation by the more independent-minded and
entrepreneurial types.

(While the
audience obviously skews toward the idea of expatriation, it is
interesting that a just concluded International Living survey found
that some 96% of respondents were now actively considering expatriation.)

But I drift
like a pick-up truck going too fast around a rain-slicked corner.

The modern
version of the world, at least to my eyes, appears to be losing
credence with an increasing number of Americans. Simply, the material
well-being and little extras that we the people have previously
dreamed of are now unaffordable for most – especially now that
a willingness to take on an excess of debt is no longer being readily
confused with net worth.

For the government,
with its switch long rusted on expansion mode, the promises of a
better tomorrow must be preserved, if only as an inspirational illusion.
Yet, with the hard reality of a collapsing Camelot obvious for all
to see, the administration and Congress are now discomforted by
the loud chorus of mules braying for more and better fodder. And
increasingly by the voices of others, the workers in this economy,
who are beginning to chafe in the traces.

to maintain societal status quo, the government is pursuing fiscal
and monetary policies that are anything but status quo, including
running trillion-dollar deficits as far as the eye can see. But
maintaining the status quo is only going to get harder. Social Security,
a time bomb planted by FDR, will run a deficit this year, as opposed
to 2017 as recently believed. The deficit is no surprise to anyone,
but the accelerating pace of the nation’s fiscal ruin very
much should be.

I was in grade
school when John F. Kennedy delivered his signature line, “Ask
not what your country can do for you, but rather what you can do
for your country.”

In today’s
paradigm, millions of Americans demand that the country do more
for them than they are willing or able to do for themselves, for
many in no small part because they have already been asked to give
up so much. At the same time, the government is making increasingly
muscular demands that those still able to give, give more.

On both sides
of the equation, the government looms large – as you would
expect it to in a world where public institutions have become the
controlling force in virtually all aspects of life.

But the paradigm
is broken, in no small part because a long succession of U.S. governments
have habitually made politically easy or expedient choices –
in the process squandering the wealth of generations and setting
the stage for a serious confrontation between the government mules
that have and those that have naught.

Of course,
I hope for the best as the country goes through the paradigm shift
to whatever’s coming next. Yet, because no one can say what
the new paradigm will look like – and a lot less or a lot more
government are both equally likely – I am simultaneously planning
for the worst, including buying hard assets and diversifying internationally.

To fail to
do so would be to passively accept the life of a government mule.

As David said,
diversifying internationally is one of the most critical things
to do right now, for any savvy investor. Discover
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David Galland
is the managing editor of Casey

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