“In the same way, those who possess wealth and power in poor nations must accept their own responsibilities. They must lead the fight for those basic reforms which alone can preserve the fabric of their societies. Those who make peaceful revolution impossible will make violent revolution inevitable.” – John F. Kennedy, First Anniversary of the Alliance For Progress

If one analyzes the current civil unrest that’s occurring all over the world, then the rippling economic collapse that’s headed our way is more obvious than the propaganda that spews from the mainstream media on a daily basis. Because the US media intentionally fails to report or misleads the public on the reasons behind the violent civil unrest that is occurring in places like Thailand, Ukraine, Turkey, Spain, Greece, Italy, Argentina, etc., most view the “incidents” as isolated and unrelated.

The common truths behind all the unrest abroad are the same problems plaguing the US economy – fraud, corruption, and debt. Each consequence of excessive govt translates into a loss of confidence and an economic death spiral caused by govt needing to confiscate ever greater sums of money from citizens to keep their own boat afloat. For example, Argentina just implemented a 50% tax on all internet purchases. Capital, like rats fleeing a sinking ship, finds safer places to hide (i.e. mattress, fine art, diamonds, real estate, precious metals, etc).  The increased cost of govt that is occurring all over the world is leaving hundreds of millions without jobs and the vice of stagflation tightening.  The citizens of the world are reaching their limits, and as Gerald Celente says, “when the people have nothing left to lose, they lose it”.

To illustrate the point, the UN’s International Labour Organization (ILO) published their Global Employment Trends Report for 2014, which says there are now 206 million people unemployed, with over half being under 25 years old. Their linear projections indicate that by 2018 there will be 215 million youth unemployed. Of course, these type of trends are never linear. Instead, the unemployment problem will more than likely grow exponentially once the sovereign debt contagion starts rippling across the globe.

In the US, where 70% of our GDP comes from consumer spending, the retail layoffs continue to mount, as incomes shrink and credit deleverages.  The firings are not only in retail, as Intel and Bombardier also just issued pink slips. How can all these layoff be happening five years after the subprime collapse, when the Feds have stuffed trillions of dollars into the holes of the dyke of debt? The people are learning that the inmates are in charge, armed only with theories and no practical experience, except how to save their own skin. Politicians being more concerned about themselves is nothing new. In fact, as detailed in a very interesting piece from Martin Armstrong, politicians have become very efficient at increasing their own pay, especially during recessions, as they need to offset the declines in their economically sensitive investments.

As the Ivory Tower, self-interested Central Bankers continue to depress capital formation by artificially suppressing interest rates, govt’s pile up evermore debt and unemployment worsens. What are govt’s doing to address the corruption and distrust of govt?  Outlawing protest, of course!?!  The police, which are threatened with losing their pensions, are being force to turn against the protesters in violent encounters. Unless proactive measures are taken soon, the Draconian responses will intensify as govt digs in their heels to save their own jobs, perks and power. There are practical/sustainable solutions, but only after the morally ambivalent politicians are removed from power.

“Freedom is never voluntarily given by the oppressor; it must be demanded by the oppressed.” – Martin Luther King Jr.

In the previous post it was highlighted that there is very little practical difference between a govt conspiracy, unfettered capitalism, and Corporatism when one measures the negative impact on society. A conspiracy to grow govt reduces rights, privacy, and growth/prosperity. Failed attempts at Communism and Socialism in modern history make this point abundantly clear.

Unfettered capitalism, despite the teachings of Friedman, turns everything (including people) into a commodity that can be exploited for the sake of profit. This mutated form of capitalism is also unsustainable, because it can purchase exemptions from the rule of law, anti-competitive policies, and exploitative labor conditions. It also creates and nurtures sociopaths that feel no responsibility for the environment and society. Uninformed capitalists, like Kevin O’Leary (Shark Tank), believe the current path is sustainable, and think all the unemployed and poor need is a little more misery to provide the proper incentive. Mr. O’Leary is right about one thing, the people do get motivated to act when the “Misery Index” peaks out, but not in the way he thinks.

Due to the continuous need to exploit raw materials and labor to improve profitability, excluding the social impact from the bottom line eventually leads to civil unrest, which also scares away the necessary capital for growth. Said a different way, income inequality is a constraint on economic growth that eventually harms everyone. As many reports have stated, including the one above from the UN, income disparity has reached unprecedented levels all over the world, especially in the US.  As Nigel Farage accurately states, “we are being run by big banks, big business, and big govt”, and they like the advantage they have and have no intention of giving it up.

“Those who assert that evil means can lead to good ends are deceiving themselves.” – Martin Luther King Jr.

When one digs into facts behind our debt-based growth over the last 30-40 years, even pro-capitalist will discover that it is not simply “survival of the fittest” at play. It is unconstrained fraud and corruption, caused by the “credibility trap” that has created Too Big To Fail & Jail banks, which is sending the capital-needed-for-growth underground and to safer jurisdictions, like Singapore. The Jerry Sandusky case at Penn St., as well as the money-laundering by big banks and the Vatican, should tell everyone that the credibility trap and “control fraud“ are approaching peak destruction.

Hardcore capitalist and Libertarian’s believe in the ability of free-markets to eventually right all wrongs, and they are normally correct. It is also true that we all eventually die too. Communism eventually rights all wrongs as well, once the govt runs out of other people’s money and the people revolt. Is it necessary for citizens to endure decades of misery while systemic abuse corrects itself?  Everything has limits, including the amount of un-backed credit and debt that can be created out of thin air to fund a consumer-based economy and political promises. The uninformed, well-intentioned, know-it-all’s that confidently lecture the youth about their laziness fail to appreciate the systemic destruction of jobs and income that plagues even the unspoiled youth of the world. Why don’t these people use their communicative skills to educate, instead of promoting the status quo?

There are always two sides, and both must be understood before sustainable solutions can be achieved. For example, artificially suppressing interest rates can reduce interest payments on debt and house payments. However, it also reduces pension fund returns, the incentive to purchase govt debt, and the interest income for those living on fixed income – all of which reduces the real capital necessary for growth. This is a balance sheet problem, and when one person gains, another one losses,  which might explain why the Feds massive bond buying program (QE) is making the economy worse, not better.

The so-called capitalist that seek power and wealth at all cost, fail to comprehend the unsustainable results of their actions – maybe because their hubris prevents them from considering that, just as govt’s run out of other people’s money, private endeavors can run out of capital, qualified labor, and credit-created demand.  To minimize the painful learning curve that citizens seem destined to repeat in the age-old struggle to restrain the growth of govt, the feedback loop between the creative destruction of Capitalism and the uninspired destruction from excessive govt must be accelerated. Is it really necessary for the normal cycle extremes to pass through Socialism or Corporatism?

The poor and unemployed in countries like Ukraine, that do not have govt safety nets, achieve faster feedback loops than in the West, where citizens don’t reach their limits as long as their Food Stamp card is replenished (which the new farm bill will began to cut by $9 billion). Safety nets have decreased self-reliance, and distanced kids from their elderly parents, who are now taken care of by the govt. The protest against govt corruption in Ukraine is going into its third month and violence has escalated to the point where police have shot protesters dead. Now, instead of the police confronting protesters in the town square, which could prove to be a bit of a PR problem, they are showing up at front doors and dragging people off to jail as a means of intimidating them into not protesting.

So far, the unarmed, but self-reliant protesters are not leaving until the fraudulent govt steps down. The fraud and corruption in the West will produce a similar level of economic desperation. During the Occupy protest there were dozens of reports of people being severely roughed up and detained for long periods of time with their hands zipped tied in painful positions. With the assistance of the NSA, it will be easy to identify the doors that police may want to visit.  The question that should be asked is, how will govt-dependent citizens with no self-reliance respond and cope with an economic collapse in this country?

Instead of an individual group like the Federal Reserve holding the power to play God and try to manipulate or eliminate the Business Cycle, the people should hold the power on major issues like going to war, bailouts, and yes – Obamacare. Why would anyone want to hand over their voting rights to Representatives that can be bribed or blackmailed, as is the case today? We can map the human genome and store all the electronic data ever created on earth. I think we can figure out how to verifiably vote through referendum’s electronically.

The Current “Solutions” Have Not Worked, Because They Can’t

The proponents of Keynesian economics, conveniently forget that public servants are also human, and therefore susceptible to the same deadly sins they assign to the private sector, like greed, power, envy, etc.  What else explains the fact that so many people at the SEC, CFTC, and Justice Dept looked the other way and have not prosecuted documented frauds, like MF Global, interest rate collusion, and selling subprime mortgages as AAA? Why do so many public servants take bribes? Why do NY judges ALWAYS rule in favor of NY banks? It’s called human nature, and just like morality, it can never be legislated away, no matter how many lawyers in Congress want to believe they can play God.

Capitalism is more intuitive and more consistent with human nature, which makes it easier to hijack the teachings of Adam Smith and Friedrich Hayek. For example, we don’t expect everyone in a classroom to be given the class average on a test regardless of the actual score a student studied to achieve. Survival of the fittest also does not mean you poison all your competitors to eliminate the competition. Many people still believe we have a capitalist economy, when in fact it has not existed for many decades.  Free-market capitalist believe in competition, ethics, the rule of law, and risk-reward. Instead, capitalism has mutated into the exact opposite – corporations ignoring laws and ethics to eliminate the competition so they can obtain the risk-free return.

All systems of governing will have flaws that are rooted in the passions of man. The oscillation between the extremes creates the various cycles that Martin Armstrong has meticulously documented. A new, highly transparent system must be designed that minimizes the negative consequences of extreme oscillations. The challenge will be overturning all those that currently benefit from the status quo, and that includes:

– the private sector leaders that have checked their morals and ethics at the door and bought themselves political favors, manipulated and extorted people and governments around the globe, including having democratically elected leaders assassinated.

– the public servants that have accepted all of the political favors, and also checked their morals and ethics at the door.

– the NSA, which is drunk on power and wants you to believe they are doing God’s work of protecting the masses, when they are more like the old Stasi or a high-priced debt collector for a broke and scared govt. They believe the Constitution can be used for toilet paper every time they defecate on our rights. Most have no idea that all the data collection and surveillance is all about identifying enemy’s of the State and tracking down money, not stopping terrorism. How else does one explain spending $20-$57 billion and thwarting no terrorist attacks? It’s similar to claiming red-light camera’s stop accidents, when the real purpose is to collect money for govt’s. I would hate to think of all the tactics the states would dream up to transfer money from the citizens to govt, if they had the relative budget of the NSA.

Capital Hill and the mainstream media knew the NSA was “Hoovering” up data on everyone long before Snowden went public. Why do you think Snowden had to go to the Guardian instead of going to the US media? Congress could shut down the NSA anytime they want, but won’t, because the NSA holds the dope on any remotely wayward politician, and it knows the whereabouts of hidden private sector funds to help fund political promises.

Anyone that reads reports from sources outside the US-captured media knows our govt lies about virtually every foreign conflict. The most recent was the false claim that the Syrian govt was responsible for the chemical attacks that killed 1400 civilians. The early boots on the grounds reports, which we reported on back in Sept, claimed it was the rebels, funded by the US, Saudi Arabia, and Qatar to change regimes that would replace Russian gas pipelines to Europe with Saudi/Qatar-based pipelines. Independent reports now confirm that it was impossible for the rockets to have been launched from Assad controlled territory.

Broke govt’s around the world have no motivation to reduce their spending or default on their debt to reduce the interest payments and fees paid to the entities that purchase and create the debt – even though the majority of the interest payments go overseas and does not stimulate the local economy. The Fed knows that interest rates will eventually rise, causing interest expense to consume the majority of tax receipt. To pay the bills, govt can continuously raises taxes, employ bail-ins, or enlists the services of the NSA to track down money. It doesn’t matter, the consequences are the same – the economy contracts and capital seeks safer havens, which further contracts the economy and tax receipts.

This deflationary death spiral only results in govt becoming increasingly desperate to keep their power and perks, which has steadily gotten worse since the Arab Spring in 2010. Based on the armaments and ammo being procured by all levels of  government in the US, it doesn’t appear our policy makers are very confident they will be able to simply inflate the debt away. Many developed countries around the globe that are afraid of the civil unrest caused by the govt fraud and income disparity are already cracking down on protesters for having the audacity to disagree with their govt’s corrupt policies. As highlighted in the stories from the countries above, these govt’s are outlawing protest, imposing fines, threatening 15-years in prison, and restricting internet access, which as JFK stated, is making violent revolution inevitable, because govt is making peaceful revolution impossible.

The U.S. Congress has already passed HR 347, which essentially criminalizes protesting against anyone that has a Secret Service detail – and it’s up to the protesters to know who is guarded by the Secret Service and the secure zone around said person. Even if you didn’t know you entered a restricted space, too bad – you could still get 10-years in jail. By Executive Order, the President can already shut down the internet. The same outlawing of protest that we see over seas is taking place on these shores, and prior to the next financial crisis there will be aggressive tactics to outlaw and confiscate guns. It’s the only Right, granted to free people in the Constitution, that’s preventing govt from imposing their will.

Components of a Sustainable Alternative to Socialism and Corporatism

If we proactively change the system, there’s a much better chance of getting something that is favorable for the masses. If we wait until the “big reset”, there’s no telling what system will prevail. Since severe hardship will exist, you can count on most people grabbing what ever political life boat they can find, no matter how totalitarian.

The idealistic solution should resemble something very close to the classical liberalism of Adam Smith and Friedrich Hayek, which advocates civil liberties with a limited government under the rule of law. A Laissez-faire economic policy, which adds social and environmental responsibility to the bottom line, would produce a more sustainable solution. God knows that Socialism and today’s predatory form of Capitalism with unequal enforcement of the rule of law is not working for the citizens of the world.

“Capitalism is the worst economic system, except for all the others”

– Winston Churchill

When one listens to the people who have actually lived and worked in third-world country’s, you hear the same message about the U.S. – we have imposed our will through military and economic force to exploit the resources of poor countries for the benefit of our corporations. What you hear from Americans that have no real experience abroad is, “the U.S. must be the best place on the planet because everyone wants to immigrate here.” What these people fail to comprehend is the U.S. plays a huge roll in making these poor countries a living hell hole, which provides the incentive to look for greener pastures. However, now that the asset stripping policies that the U.S. applied abroad have been employed at home, more people are learning through the school of hard knocks that the people running the show may not be all that ethical and moral. The reports coming out of Davos should provide ample confirmation.

In a recent speech entitled, “The False Left-Right Paradigm and the Fatal Intransigence of Oligarchies“, Chris Hedges elaborates on the words of John F. Kennedy. If govt’s continue to squash the ability to peacefully protest and debate these issues in public, then it is inevitable that the civil unrest will turn violent. Since the ability to bear arms is the only thing that will keep our govt from imposing its will, you can be certain that the ability to track, confiscate, and ban guns will be attempted with ever greater vigor.

If there are to be a proactive solutions, we have to stop government borrowing, end taxation federally, print (versus sell bonds that have an interest expense) to pay for federal government, privatize departments so people are qualified to work, install term-limit to end career politicians and the corruption it brings, and this is just for starters.

The people need to ignore the fringe false debates the govt hopes will distract, and demand through actions that politicians and corporate leaders focus on the real factors that will first and foremost put us back on sound economic footing. Some of the real issues include:

– Instate term-limits.

– Reinstating Glass-Steagall, break up the banks, eliminate proprietary trading, and regulate the banks like utilities.

– Rescind the “Citizens United” ruling that recognizes corporations as people.

– Reform political system to replace Representative voting with Democratic voting on critical issues like wars and taxes to eliminate bribes and blackmail of politicians.

– Eliminate the Federal Reserve and fractional reserve lending, and a return to sound money policies, like “One Dollar of Capital”  that will prevent the excretion of credit from nothing, which only benefits those that already own assets at the expense of those that suffer the consequence of inflated cost.

– Eliminate collective bargaining of PUBLIC unions and rescind Davis-Bacon Act, especially before any new infrastructure projects are proposed to stimulate growth. Municipalities are broke because public unions fight for policies that deliver services at the highest possible cost, when govt should strive to provide the most services at the lowest cost.

– Spending must be limited to what is ABLE to be collected in taxes. Since govt has never been able to collect more than 20% of GDP in taxes, Govt must always plan on spending no more than 18% of real GDP.

– Include the income generated by govt-owned asset in the budgets of all govt entities that produce CAFR’s (Comprehensive Annual Financial Report). Implement Tax Retirement Funds in every incorporated municipality, and use the investment assets of govt to help pay the bills.

– Halt government borrowing, and when necessary bypass the money-center banks by using printed money instead of interest-bearing debt to pay the bills.

– Replace the income tax and above-ground property tax with a consumption tax and land tax.

– As much as possible, eliminate or convert govt agencies into private enterprises.

– Prosecute all those in the healthcare industry under the Sherman Act for all of their monopolistic practices, and health care cost will be cut in half overnight.

– Reinforce whistle-blower protections that error on the side of more transparency, not less.

– Last, but certainly not least, throw the banksters and Corporate exec’s in jail that have committed fraud and corruption (along with the judges that have prevented the equal enforcement of the rule of law), which undermines the trust and confidence necessary for robust capital formation.

Free-market capitalism cannot exist without trust, confidence, and the equal enforcement of the rule of law.