June 6, 2016

By: Bobby Casey, Managing Director GWP

fiscal cliffThere’s a reason why I’ve opted out of US politics. It’s entirely predicated on scapegoating. Blame the democrats, blame the republicans, blame racism, blame sexism, blame the previous administration, blame the rich, or blame the immigrants. Always finger-pointing, but never solving anything.

The reality is, the market has no bias or prejudice. Much like nature itself, you will either survive or you won’t… and it cares not which of the two you are. Ultimately, though, nature and the market, when allowed to do so, balance things out. They are self-correcting. If you look at the cycles the Earth has been through, or the patterns in science, and you see balance. In economies, you see boom and bust cycles and supply meeting with demand. When we tamper with these systems, we get disasters.

The government which was supposed to keep those systems already in place regular, instead decided to regulate those systems. So now, value is distorted. Demands aren’t met with supply. And you have a very agitated and frustrated society… rather than a peaceful and orderly one. Peace and order are replaced with compliance and control.

In the past several years, on-demand services have really surged. Video-On-Demand came about in the early 2000’s. People started getting to watch their favorite shows on their own time rather than viewership by appointment. On demand online goods and services emerged around the same time. Fast-forward a few years, you have rides on demand, which turned the taxiing services on its ear. Air BNB has redefined hotel and hospitality. Private individuals are joining in on big business opportunities!

And regulators are none too pleased. They are fighting a huge battle. Online vendors are getting persecuted for not charging state sales taxes. Ride-sharing services are getting persecuted for not being held to the same regulatory standards as taxi services. It got shot down in Austin very recently. Air BNB got into a nasty fight with the city of San Francisco because the city wanted to impose a limit on how many days a person could rent out their home and then institute horrible punitive measures against those who violated the limit.

Go Share as well as a simple Google search for “Uber for Moving” connects you with countless apps with the sole purpose of getting help to move. The pricing looks reasonable, which means it’s only a matter of time before it gets the hammer dropped on it.

The market has been generally pleased with the rating programs and accountability, as well as the competitive price points; but even more importantly, someone with a car or home can make a little extra scratch on the side.

It’s no surprise, then, that the private jet owners wanted in on the action. And how exciting it would be for everyday people to fly private jets on short distance runs! Like most large ticket items, it starts off as being for the very rich: computers, cars, cell phones, even plumbing were all things that started off as expensive things only the rich could have. Now, most of America’s “poor” have all these things. (Thank you, Capitalism!)

The idea of being able to take a private jet from say Riverside, CA to Las Vegas, NV, or from Cape Cod to Concord, or from Phoenix to Flagstaff is awesome! So awesome, in fact, that the FAA shut it down almost immediately. It’s not illegal to share a flight. It’s illegal to open up the invitation to the world and potentially …. GASP… profit from it. The service is called Flytenow. I guess the commercial and charter flight industries didn’t like the idea either since they lobbied hard against it.

People, despite the state and its myriad attempts to prevent it, are still managing to carve out new and inventive ways to do business. Technology is such a dynamic field with one idea leading to others. And with technology we are brought even closer together, with the means to reach one another more efficiently. Supply is intersecting with demand at a much more effective rate and people are making money and getting what they want.

Humans want to organize, and the new society is the open-source, on-demand, person-to-person method. The US is used to dealing in large corporations that go through the expensive process of seeking out various forms of permission, following various cumbersome and cost prohibitive regulations, and basically enduring the obscene obstacle course various barriers to entry like fees and certifications to be in business. It’s not used to individual proprietors.

The US laws and system close ranks to protect its establishment and declared winners. No new competitors. No changing the landscape of the game. No change period! Just lobbying and protectionism for the stale status quo. The government gives it for a price.

The US is quickly become a very hostile environment for self-starters and entrepreneurs. Anyone with the inclination and ethic can’t take their ideas to market and see what happens. For as much as politicians love to rail against certain sectors of society while insisting it has the best interests of the proletariat at heart, nothing about their actions corroborates that.

We aren’t in recovery mode. We aren’t in a good economic place. The US only looks good when pitted up against bigger failures… but she is absolutely on the path to failure. Remember the housing crisis? Banks didn’t just lend to subprime, and otherwise underqualified, borrowers. They lent at 100% and even 105%! These borrowers had NO skin in the game and were highly unlikely to repay the loans they took out given their financial situations. But the banks lent. They lent to the point of paying people to borrow. Paying unqualified people to borrow money… who thought that would go well?

Well, now governments around the world are doing the exact same thing with negative interest rates. We’ve been warning about this for a while now, so this isn’t news. But the lets put some of this into perspective:

Negative interest loans are being offered to governments that can’t afford to repay them.

Who would be stupid enough to even suggest it much less implement such a policy? Well, if Bernie Sanders and Janet Yellen were to have a few drinks one night, you’d find the Fed bailing out Puerto Rico in a matter of months. There’s also Japan, who is spending over 40% of its federal revenue on servicing its debts, and they have been on board the NIRP train for a while now.

“It’s not much different than when banks paid subprime homeowners to borrow money ten years ago based on a misguided premise that home prices always go up.

“Now they’re just paying subprime governments to borrow based on a misguided premise that governments will ALWAYS pay.” (Source: Sovereign Man)

Perhaps in Donald Trump’s world, where the US can’t default because it can always print money, subprime lending, NIRP, and bailouts are fine. In reality, it’s devastating. The housing crisis brought the US and even much of the world economy to its knees. We’re barely being held up by economic imagination as it is. That was a $1.3 trillion bubble.

“In January 2016, the total amount of government bonds in the world with negative interest totaled $5.5 trillion. One month later in February the total had grown to $7 trillion. By May it was $9.9 trillion. And today it’s $10.4 trillion.” (Source: Sovereign Man)

What do you supposed this bubble will do? Local governments are concerned with how many days you let your home out on Air BNB. They worry that you make more than a certain amount selling your baked goods without a license. They concern themselves with the possibility of something being so profitable it would push their cronies out of the market and force them to compete for business. But at no point are they actually concerned with whether you have a job, can put food on your table, pay for your house, or retire at a reasonable age.

In fact all ranks of government have done everything in their power to keep you from self-actualizing and forming a life outside the rat maze.  The political and crony classes do NOT want you getting out of the maze.  You’re meant to mind your place and run on the wheel, eat your pellets and otherwise remain quietly in your enclosure.  House is on fire?  Too bad.  You’re left for dead while the masters of the house run out.

Blame the rich. Blame the immigrants and the developing countries to where our industry is being outsourced. Blame, blame, blame… Has blame ever fixed an economy? Cured cancer? Put a fire out? Saved a life? Blame isn’t a solution. It’s not even an honest assessment of the problem at hand.

You know what the problem is all too well.  You know why it’s that way.  And you know what you can do.  It’s time to opt out, and find a place that is friendlier to your assets and ethic. Getting any portion of yourself, your business, or your wealth out of the US… or at the very least out of your name… is still better than putting them all in one basket.

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