The Big Squeeze

The Big Squeeze

 

 

Chin up patriots, that most heinous annual civic duty is upon us! This solemn April 15th Tax Day, chronologically the year 2024, sure feels financially and socially like Orwell's 1984.

Multiple wars being financed by the United States, zero sovereign border security save that offered by the cartels, and a Congress which is really, really good at its primary function...spending money...has resulted in economic calamity.

The result? Crippling inflation is at 40-year highs resulting in the US Dollar having lost some 50% (you read that correctly) of its purchasing power since Joe Biden took the Oath of Office on that chilly morning in January 2021 watched by thousands through Concertina wire in our Nation’s Capital.

American citizen taxpayers are being squeezed out of their own country; consider, every 100 days now another $1,000,000,000,000 is being added to the National Debt!

Without significant increases in productivity, the US Dollar will careen towards zero value; put another way, when everything is free, nothing has value. The REAL “Green New Deal” is the collapse of the US Dollar because baby, this “green” has no value.

Socially, if ever there was a group of unrepresented, unspoken for, downtrodden, ridiculed, huddling masses it is surely composed of US taxpayers. April 15th should be a National No Tax Day; the effects would be immediate and staggering.

A Tax Holiday would result in annual productivity spikes which would defy comprehension and immediately trigger a Nobel nomination in economics. Imagine a world where citizens didn’t have to pay their own government to launder money!

The one upside to paying “your fair share,” is that at least we can still pay in U.S. Dollars, instead of something of real value like say gold, bitcoin, or real estate. Thankfully the words “This note is legal tender for all debts, private and public.” is still WRITTEN on U.S. currency. Be VERY concerned when the US Government no longer accepts US Dollars.

Checkmate Socialism

Checkmate Socialism

 

 

With the following phrase from the Federal Reserve that "All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer," the United States officially became Socialist. The death knell you hear ringing in the distance is from Capitialism. ~250 years of "the American Experience" has effectively been destroyed tonight. Checkmate Socialism.

Consider, the Federal Reserve, an unelected agency, has unilaterally made the decision to eliminate ALL depositor risk from the banking system. Bluntly, they changed the rules of the game for an institution that was politically connected at the highest levels.

 

Previously, poor leadership and bad banking decisions had dire consequences. Accepting billions in deposits, buying longer-term bonds for higher yields while keeping insufficient funds available to meet the liquidity of on-demand withdrawals would result in bank failure. FDIC insurance historically covered only up to $250K per account, per depositor, per institution. There was a reason for this termed "moral hazard." Now the taxpayer is on the hook for limitless losses. How did this happen?

When the tide went out this time though, lots and lots of startups (3,500+) with far in excess of $250K were left naked. And afraid. Even after knowing for months that the on-demand cash reserves, burn rate, and long-term loss risk were all significant factors, the FDIC did nothing until the moment of receivership.

The normal course of events in a situation like this would have been for the bank to enter receivership, the FDIC pay the limits of insurance, and then either a liquidation or sale of the remaining bank assets to make depositors partially whole. Not this time. These were very special depositors; the Federal Reserve "broke bad" to save a litany of politically aligned startups with billions in deposits unlikely ever to be recovered save by the largess of the Federal Reserve. 

 

Almost universally, the client profile of the depositors at Silicon Valley Bank that taxpayers just bailed out were wealthy investors and startups with an average balance of $4,000,000. Silicon Valley Bank would NOT qualify as the typical "community bank" almost anywhere else in the country. These startups were the darlings of Silicon Valley.

 

Banking relationships at SVB were by invitation only, and this "members-only" bank just stuck the average working class taxpayer with billions in losses and triggered a global bank run. The Federal Reserve was only too happy to spent billions in taxpayer money to shoring up the finances of thousands of millionaires and many billionaires at Silicon Valley Bank. As Jackie Chiles would say: "Outrageous, Egregious, Preposterous!"

 

Sadly this is not an isolated incident, almost every bank in America, to some degree, was/is in a similar situation to Silicon Valley Bank. SVB bought long-dated bonds with incoming despositor cash and held those bonds at increasing losses as interest rates rose. With the Federal Reserve hellbent on raising rates and the bank apparently caught on its heels, they were trapped. The "surviving" banks, however, have one major difference: their deposit bases are largely focused on retail investors who do not have the ability (or wherewithal) to coordinate an almost simultaneous run on the bank.

 

When rumors on the "bro network" that Silicon Valley Bank had taken significant losses on its bond portfolio, failed to raise capital, and CEO Greg Becker uttered the fateful words "keep calm," VCs jumped on their smartphone apps while riding the Sun Valley ski lift and moved $40B+ with a swipe of their middle fingers. Silicon Valley Bank was the first "victim" of a fintech-enabled bank run.

What does this "full backstop" by the Federal Reserve mean for FDIC insurance and the banking industry in general? What's good for the goose is good for the gander, and if startup companies with hundreds of millions of UNINSURED deposits are going to be made whole, well then EVERY SINGLE AMERICAN now also has "full backstop."

 

Think of the potential here. Your banker makes a bad decision? No problem. Bank goes under for risky loans? No problem. Bank invests in longer dated bonds, bond value drops 15-20%, and bank becomes insolvent? NO PROBLEM!

There do seem to be a couple caveats, however, to the "proportionality of risk;" it is unlikely a community bank with retail deposits say in Detroit, would have been saved. Silicon Valley Bank was the poster child of progressive liberalism applied to banking, yet they did not practice what they preached. Their client base and leadership were almost exclusively of mind and race alike. They are politically connected at the highest levels. Taxpayers should be drooling for a list of "public servants" who had accounts at Silicon Valley Bank in excess of $250,000.

As the fallout from Silicon Valley Bank radiates over the country in the coming days, weeks, and months (years?) it has become obvious that the Federal Reserve is far, far too powerful. The Federal Reserve Act needs to be amended at the least, and perhaps revoked. Centralized authority for the global economy is not working (well, at least not for the vast majority of people.) For the uber-elite it works quite well.

 

The glaring problem is that too many powerful people are juiced in to the existing structure, and time and again bear no consequences for failure. A bank run can be a healthy event in that bad decisions are held accountable by customers literally voting with their feet. It is a shameless debacle that taxpayers feet are now held to the fire to pay the inequities of failed regulatory bodies, executive malfeasance, and corrupt politicians. The failure of SVB has left many Americans wondering if we just saw the end of capitalism.

 

Ode to the Taxpayer

Ode to the Taxpayer

Taxpayer burdens increases by the day, yet their representation crumbles with the dilution of citizenship. How long can the Republic last?

Inflation, corruption, and dilution are all intricately linked. As financial farmers poor economic and monetary policy steals your seed capital, and ultimately your harvest as inflation swindles us all. The cost to plant is higher. The cost of the land is higher. Fertilizer is higher. Labor is higher. Even God's water is higher. All of this is a result of too many dollars chasing too few goods.

Obviously there is a problem(s). The current economic cycle *should* be firing on all cylinders as we are well out of the pandemic. But as any farmer knows, it is tough to make progress with the plow stuck. And that is where we are right now. Inflation has ripped the heart out of the American growth miracle and left us hobbled, bleeding out in a fallow field.

Until the ravages of inflation are dealt with we are in a precarious position. And the lonesome taxpayer will be called upon, yet again, to bail out a government increasingly bought and paid for by foreign interests (read China.)

But even this would be surmountable if the value of citizenship wasn't being diluted by the hour. That is the crux of the problem dear readers. A society's riches can only support a finite number of people well. Historically, those people have been citizens with the legal right to accept the largess of their own labors. 

The value of citizenship was similar to farming; the land from which you toiled yielded crops for your benefit as you tended the land, harvested the crops, and received benefits in return for your labor, intelligence, and sacrifice. Abundance came with increased work, yield from the fields, and protection from droughts, plagues, and marauders all capable of stealing your harvest.

We now have too few in the Middle Class, typically the 85% of the population working in small, family-owned businesses that built America, bearing too much of the yoke. Representatives are no longer representing their constituents. The Federal Government is no longer enforcing laws in violation of their respective oaths of office. What we're seeing is the collapse of a country. Next on the ballot? "Non-citizen voting rights."

Citizen-taxpayer options are steadily decreasing. Most now work for the privilege and duty of paying taxes to support healthcare for all, education for all, housing for all, etc., etc. And the tax burden grows. Get ready for the 1099-Ks coming your way in 2023 for purchases/sales of $600 or more. All while the barn door is open out back letting TRILLIONS blow away.

So here's a toast to you taxpayer, on the final day of withholding in 2022: Make sure you withhold some money (preferably gold) for yourself, and if you've taken a 30% haircut this year in your income, make sure the IRS gets their haircut too. We're in this together, right?

 

Taxflation

 Taxflation

Increasing taxes and rising inflation are a deadly combination. "Taxflation" is what we find ourselves in now globally as freewheeling politicians ratchet up the pain and are beholden to nothing but their own egos. Be afraid on this solemn day dear readers of the unencumbered politicrat whose loyalty lies only with increasing power. Beware what constitutes your "fair share," as soon it will be your full share! 

Every year Americans dutifully write out a myriad of checks to local, state, and federal governments to help fund our collective defense, social programs, and politicians' salaries under the banner of "civic duty" which is enforced by the threat of imprisonment. What other "civic duty" is compelled by the potential loss of liberty? What would be the collection rate if taxes were voluntary? Imagine if freewill dictated the scope of the government we received.

While the Biden Administration is planning to increase the budget of the IRS to something akin to a nation-state, increase tax rates, and (obviously) increase spending, the barn door is wide open out back. Billions in fraud, pork, and ill-executed government spending leaves the taxpayer without a doubt as the most maligned and least-loved animals in the barn. If America was "Animal Farm" the taxpayer would be the horse. And I think I have a pretty good idea who the pig(s) are feeding at the trough.

What to do dear financial farmers? "Fight, fight, fight against that dying light" of freedom! Readers of this blog well know I support voting, and especially voting with your feet out of states entrenched in burgeoning socialism. For those with strong backbones, however, there is yet another option: Run. And by "run," I mean run for office at the most promising level where victory may be assured. Change the potential outcomes of a country increasingly on the course of taxflation. It's your money, and the politicians work for YOU...isn't it about time we see some real return on our investment? 

Taxpayer Elegy

 Taxpayer Elegy

Jesus said "Render unto Caesar the things that are Caesar's, and unto God the things that are God's." Today millions of taxpayers across the country will transfer trillions of dollars in hard-earned income and gains to local, state, and federal tax authorities.

This "civic duty" is administered and enforced via the Internal Revenue Service at the behest of elected politicians. The IRS is one of the few unelected organizations capable of revoking your passport, directly reaching into your savings account without authorization, and denying your liberty. It is the ultimate enforcement arm of the political establishment; you don't vote, nothing happens to you. You don't pay taxes you owe, you can go to jail. America wasn't always this way.

The vast majority of taxation comes via personal income tax and associated taxes such as "Social Security, Medicare, unemployment, and other retirement taxes." Prior to 1913 there was no income tax. In 1913, the States ratified the 16th Amendment. This instituted the Federal Income Tax, many states would follow with their own tax systems over the coming decades. In 1913 IRS Form 1040 was FOUR pages long, today it is over 100 pages long. Inflation isn't only a monetary problem. Regulatory creep has resulted in the average American now unable to complete all but the simplest tax return. 

Why aren't more people concerned about taxpayer rights? Politicians certainly aren't...they live and breed (that's not a typo) on the largesse provided by the taxpayer. Politicians only respect those who control the pursestrings. ILAF proposes a solution to the income tax crisis kneecapping millions of Americans AND the concern about voting rights: Implement direct representation of the taxpayer via the annual tax return. Why? The IRS is probably the most inclusive of any organization in the world. It wants payment from everyone, regardless of skin color, orientation, background, handicap, veteran status, gender, or even intelligence.

The annual IRS return would serve both civic duties; voting and taxation. Referendums could be voted on directly from a return. Representatives could also be elected via the annual tax return. Ditto for the President and Vice President every four years. April 15th becomes Super Tuesday. This plan would truly restore power to the people, and maybe, just maybe next year you will get a "Thank You" card from your congressman instead of his lobbyist.