Considering and Reconsidering Fiscal Policy

People might not care about politics, but politics cares about people; and it’s particularly clear in fiscal policies made by central bankers.

M​arch 6, 2023

B​y: Bobby Casey, Managing Director GWP

fiscal policy T​here’s an interesting trend on social media that presents really stupid advice cloaked as healthy psychology. It’s strange because one side will say, “Get out of that toxic relationship and don’t apologize for defending your peace!” then another will say, “Stop telling people they need to love themselves before expecting others to love them.”

W​ell which one is it? Do you want me to get away from toxic people or be an emotional half-way house for the self-loathing? It can’t be both.

T​his is the same thing the government pulls on its people. Politicians love to point out all the flaws with other countries: their corruption, their failure on human rights, their tyranny. But if you dare to throw it back on that politician, they call you ungrateful, unpatriotic, disloyal.

Which one is it? Do I try to get away from tyranny? Or do I suck it up to appear more tolerant and patriotic? It can’t be both.

T​he US is one of the more notorious for touting its “Freedom” while trouncing actual freedom. US Freedom is a lot like The Science over the past three years, it should have a trademark symbol after it to signify that it’s a brand, not an actual thing.

While the US today leaves much to be desired, the US as a concept is awesome. I​’ve traced and retraced the tracks on the virtues of decentralization over centralization of anything. The US had it right the first time: keep the states separate and join the federation for a limited amount of things like national defense.

Same is true for currency, banking, and data storage. I’m not that old, but I still remember being told not to put all my eggs in one basket. I don’t think there is a single financial or investment adviser that would tell you to put all your money into one stock. Yet, here these elitists are, recommending that we put everything under one universal umbrella.

T​hey want Central Bank Digital Currency. They want a universal corporate income tax. They want universal tax reporting (FATCA). They want universal environmental standards.

N​one of that bodes well for the average person.

I​f everyone was given an itemization of where their money went, and for what purpose legislators took out lines of credit in their constituents’ names, you’d have a mass riot and I doubt anyone would go home.

I​f you’ve ever seen those before and after make-up videos where someone looks like they just came out from living under a bridge to looking like a Kardashian, that’s what government is good at. It’s really good at disguising its ugliness.

T​he reality is, taxes are servicing a debt comprised of everything from undeclared wars, foreign aid, cronyism, an expanded police and welfare state, surveillance, and a bloated bureaucracy. All that unaccountable squandering results in reduced competition, higher cost of living, higher barriers to entry, debt slavery, suffocating regulations, insufferable taxes, and civil liberties going from codified to tenuous at best.

Look at the debts accrued in the name of “safety” after 9/11. Then in the name of saving the economy after the financial crisis in 2008. And then again during the recent pandemic. Not only is the US dollar the national currency for the United States, it is the world’s largest reserve currency. So goes the US dollar, so goes every bond holder of the US dollar.

Centralization is great when everyone is winning. It’s convenient. It’s profitable. But it can be an equally mass disaster when things aren’t going well. It becomes unavoidable and turbulent. Everyone loses:

…[F]oreigners to the US hold some $12 trillion of portfolio investments in addition to $6.4 trillion Treasury bonds, $1.3 trillion Agency bonds, $4 trillion in corporate bonds, in all $23.6 trillion, to which must be added bank deposits, commercial and Treasury bills totaling a further $7.1 trillion.

“Over $30 trillion is not a trivial amount for foreigners facing rising dollar interest rates. Not only are they not obtaining satisfactory interest compensation on their dollars, but so long as they retain them, they will find that they are increasingly enmeshed in the dollar’s problems.”

W​hen you’re the largest reserve currency in the world, but it is precariously dependent o Saudi Arabia playing nice, you have even bigger issues. Saudi Arabia, Iraq, the UAE, and Russia are all looking to deviate away from the US dollar toward China’s renminbi.

T​he choices aren’t good versus awesome. It’s bad versus bad. The US will slap a sanction on anything that dares to do anything other than tow the American line. China has a rigid controls over its currency. The choice between the US dollar and the Chinese renminbi is like the choice between Republican and Democrat. They both suck, and you find yourself voting AGAIST one more than FOR the other.

Decentralization is what will depoliticize fiscal policy. Blockchain technology has provided a path forward that both preserves privacy and removes the inflationary power from these power hungry elites. Two things the governments around the world cannot abide by.

Moreover, diversification away from fiat currencies offers an off ramp from the politicization of fiscal policy. To some degree you expect central banks to follow the political tides, but it’s become so divided that CBDC could very well be weaponized against dissenters. If Canada could do what it did to the truckers, then there are some tactics on the table we cannot afford to ignore.

Even if you didn’t get into cryptocurrency, and shifted toward precious metals or other assets that hold intrinsic value, you’d be safeguarded.

And even if you diversified between currencies, it would still be better than putting all your chips on red.

Regardless what path you choose, it’s important to consider how fiscal policy can affect you, what forces are at play, and how best to dodge the blow back from these untenable decisions. A market correction is coming.

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