American Consequences - December 2017

America’s Most Heroic Debtor

The Death of Shopping

Toys: To Infinity and Beyond

I D E A S T H A T M A T T E R E D I T E D B Y P . J . O ’ R O U R K E AMERICAN CONSEQUENCES

WHO DIES WITH THE MOST TOYS WINS

DECEMBER 2 0 1 7

CONTENTS

DECEMBER 2017 : ISSUE 6

LOST? CLICK HERE

91

26

58

62 46

86

4 Inside This Issue

52 The Explosion of Stuff BY CHRISTINE ROSEN 58 American Consumer Trends BY P.J. O’ROURKE 62 Will You Die in Winter? BY DR. DAVID EIFRIG 66 The Weird and Secretive World of Christmas Tree Salesmen BY PATRICKWENSINK 72 The War In Christmas BY MATT LABASH 78 All the Money in the World BY P.J. O’ROURKE 84 Read This 86 A Conversation With... JASON DELGADO 91 The Final Word BY BUCK SEXTON 94 Featured Contributors

AMERICAN CONSEQUENCES

BY STEVEN LONGENECKER

6 Letter From the Editor BY P.J. O’ROURKE 12 What Moved the Market 14 What Could Possibly Go Wrong? 16 From Our Inbox 20 America’s Most Heroic Debtor BY PORTER STANSBERRY 26 The Tipping Point BY TURNEY DUFF 32 The Ghost of Retirement Future BY BRIAN COURTNEY 36 This Year’s Holiday Gift Ideas FROM P. J. O’ROURKE AND HENRY SMITH 38 The Death of Shopping BY ALICE LLOYD 44 Death of Malls? BY AMERICAN CONSEQUENCES 48 Toys: To Infinity and Beyond BY ANDY FERGUSON

Editor in Chief: P.J. O’Rourke Editorial Director: Carli Flippen Managing Editor: Steven Longenecker Contributing Editors: Brian Courtney, Turney Duff, Dr. David Eifrig, Andy Ferguson, Matt Labash, Alice Lloyd, Christine Rosen, Porter Stansberry, Patrick Wensink Newswire Editors: Scott Garliss, John Gillin, Greg Diamond Assistant Editor: Chris Gaarde Creative Director: Erica Wood Cartoon Director: Frank Stansberry Contributing Cartoonists: Hank Blaustein General Manager: Jamison Miller Advertising: Sam DeCroes, Jared Kelly, Jill Peterson Editorial feedback: feedback@ americanconsequences.com

American Consequences | 3

INSIDE THIS ISSUE

T his month, we’re talking “consumption.” (The compulsion, not the disease.) The Internet seems to be sucking the fun out of holiday shopping... and leaving behind a bunch of credit-card bills. Editor in Chief P.J. O’Rourke gets us started with why it seems like you need to be rich today to live the ordinary middle-class lifestyle of 65 years ago. Feature contributor Porter Stansberry continues our talk of debt from last month with a look at America’s most heroic debtor... and the dangerous “solution” that governments around the world would rather put in place. Bestselling author Turney Duff talks tipping... from $5 for a better parking space to “pay to play” corporate feudalism. And Brian Courtney interviews five folks out holiday shopping – and compares what they’re buying to how much they’ve saved for retirement. (We tell how they could better prepare.) Alice Lloyd writes about the “Death of Shopping”... and we wonder whether you profited from the “ Death of Malls .” (You could have, if you’d been reading this team of analysts.) P.J. and design director Erica Wood worked with illustrator Henry Smith to create a list of fantastic (very bad) holiday gift ideas, like a special hand-crafted duplex pet pillow that allows your cat to sleep comfortably on your face... Veteran journalist and former presidential speechwriter Andrew Ferguson writes about the reasons behind the “Toy Big Bang”...

while Christine Rosen talks the “Explosion of Stuff” and who’s cashing in on it. P.J. tosses statistics in the wastebasket to talk about consumer trends: what today’s decibel levels, anxiety, traffic jams, and body mass index say about America.

Lavish experiences can be more widely and effectively flaunted via social media than beautiful items, of course, which are best coveted by a discrete audience of first-hand witnesses. Christine Rosen

Dr. David Eifrig warns about your health in winter. Author Patrick Wensink explores the secretive world of Christmas tree salesmen. And Matt Labash shares the War In Christmas... and why he’s still at heart a sentimentalist. Plus, don’t miss P.J. admit what he’d do if he had $100 billion this holiday season. Finally, we share a conversation with Jason Delgado – sniper, warrior, author, and teacher – while radio host and former CIA analyst Buck Sexton finishes out our issue with a look at what to expect from the Middle East in 2018. Enjoy the issue. And tell us what you think at feedback@americanconsequences.com . Regards, Steven Longenecker Managing Editor, American Consequences

4 | December 2017

ONEBLADESHAVE .COM/ STANSBERRY

CLICK HERE TO READ THEWEB VERSION

From Editor in Chief P.J. O’Rourke

I GREW UP LIVING AN ORDINARY MIDDLE-CLASS LIFE.

6 | December 2017

LETTER FROM THE EDITOR

THE PRICE OF BEING MIDDLE CLASS

The point of consumption is pleasure. Not an instant hot mess of pleasure... Well, sometimes... But what’s much more important is the kind of pleasure that’s so comfortable, homey, and wholesome that we don’t think of ourselves as “consumers” while we’re consuming it.

We don’t regard loving families, happy children, full stomachs, clad bodies, and shelter from the elements in clean, safe, verdant places

Let me go back 65 years to the ordinary middle-class life I lived as a child in Toledo, Ohio, in 1952. To calculate what 1952 incomes and prices amount to in modern dollars I’ll use the U.S. Bureau of Labor Statistics’ basic Consumer Price Index (CPI). The CPI tells me I should multiply a 1952 dollar by 9.3 to get a 2017 dollar. If the Tooth Fairy left a dime under your pillow in 1952, you don’t even have a penny now.

as a “product” to be “consumed.” We regard these things as natural and expected parts of ordinary middle-class life. But what do they really cost nowadays?

WHAT DOES IT COST TO LIVE THAT LIFE TODAY?

American Consequences | 7

LETTER FROM THE EDITOR

(Let us pause for a moment to contemplate the chilling fact that the U.S. dollar has lost 93% of its value in one lifetime. And pause also to wonder what other things, fundamental to an ordinary middle-class life, have lost 93% of their value. Trust in our political institutions? Patriotism? Modesty? Virtue? Faith? Hope? Charity?) Anyway, Dad made about $10,000 a year. That’s $93,000 these days. We were pretty well-off by most standards. (The median U.S. household income in 2017 is $59,039.) And we were quite well-off by the standards of the day. (The median U.S. household income in 1952 was $3,900.) We had a new house with four bedrooms and a two-car garage with two cars to put into it. The house cost $21,000, which is to say $195,300. It was in a city-suburban neighborhood, in the kind of so-called “close- in” suburbs that are currently getting the heck gentrified out of them now that the 1960s-1990s crime binge has abated. Our neighborhood was so safe that we didn’t know where our door keys were – in the kitchen junk drawer, maybe. We had three kids, a dog, and a stay-at- home mom. Stay-at-home moms were the norm. Then they became a male-chauvinist oppression of women’s rights. And now, I understand, they’re back but are considered a lifestyle luxury. The public schools were excellent. The grade school was a block away. Everybody walked. Nobody was dropped off by a nanny. We

If the Tooth Fairy left a dime under your pillow in 1952, you don’t even have a penny now.

no refunds!

didn’t know what a nanny was. Maybe a nanny was Billy Goat Gruff’s little sister? In first grade, Miss Westfall had us reciting the alphabet forward and backward. In fourth grade Miss Sonnenberg made us memorize the multiplication tables through 13 times 13. Miss Geiger, the principal, told us, “All I require is that when I say ‘jump’ you ask ‘how high?’ on the way up.” The high school was three blocks away. It taught Calculus but also Home Economics, Latin, and Shop. It had a state championship football team. The high school sent its share of students to places like the University of Michigan, and every year a few went to the Ivy League. Although, if you told your neighbors in Toledo, “My son is going to Princeton,” they would say, “Why? It’s so far from home.” Toledo was in the “Rust Belt.” But in those days, the Rust Belt was more like the “Cummerbund of Steel” – the center of American industrial production. Toledo was the corporate headquarters for Willys-Overland Motors (Jeep, today),

8 | December 2017

Champion Spark Plug, Autolite Batteries, DeVilbiss Paint Spray Guns, and Toledo Scale. It was the largest soft coal port in the nation. It was called “The Glass Capital of America” because the Libbey-Owens-Ford, Owens-Illinois, and Owens Corning glass companies were all based there. Business and employment opportunities abounded. Now let me try to figure out how and where an ordinary 1952 middle class Toledo, Ohio, life could be lived in 2017. It has to be in a place that’s hip and has a strong economy. Toledo was never hip. But in 1952 it was hip to be square. And Toledo was very square. So the modern equivalent would have to be someplace like Portland, Oregon. Portland’s median household income is above average. Its unemployment rate is below average. Portland is, as Toledo was, on the cutting edge of what’s contemporary in technology. Portland is sometimes called “Silicon Forest” for its abundance of tech firms. (And for all the nearby trees that hipsters love, like the squares of yore loved

wide open spaces – which Toledo had in plenty with corn fields growing right up to the city limits.) Portland is twice as populous as Toledo was in 1952, but the whole U.S. is twice as populous now. And, in the “Things We Don’t Talk About Department,” Portland is very white (72%), about as much so as Toledo was in my boyhood – if you count the Irish as white. I searched the Internet real-estate listings for a home in a Portland city-suburban neighborhood. Healy Heights seems to have the lowest crime rate and the best public schools. Other people have noticed this, too... Only six houses were for sale. The best deal I could find for a 4-bedroom with a 2-car garage was $650,000. It’s a little more posh than the house I grew up in but, having been built in the 1970s Left-Coast Modern style... Throw away the level and plumb-bob! Put the windows anywhere! Let a crazy person draw the roofline! Slap up the wood siding every-which-way! ...it is a lot more ugly. Mortgage rates were close to the same in 1952 as they are now. Dad’s monthly mortgage payment was probably about $100 ($930 in chained dollars). The Healy Heights mortgage payment is estimated at $2,536. Now to shop for two cars. Dad’s 1952 Buick Super Riviera sedan cost $2,563. ($23,836) Mom’s ‘52 Chevy station wagon cost $2,297. ($21,362) But you can’t fit three kids and the giant backpacks all kids carry everywhere these days into a modern sedan, especially

Public schools are full of bullies. Public schools

Snowflake!

don’t teach Mandarin.

American Consequences | 9

LETTER FROM THE EDITOR

“ gluten free!

impossible is getting moderns to stay out of trendy restaurants. Nonetheless, food has gotten relatively cheaper. According to the Bureau of Labor Statistics, in the 1950s an average household spent twice as much of its budget on food as it does now (32% versus 15%). Food, however, is about the only thing that’s gotten cheaper in ordinary middle-class life. Partly, this is because we expect more from that life. We expect vacations. An all-inclusive trip to Beaches Ocho Rios Resort in Jamaica for a family of five plus airfare from Portland to Kingston and a generous tip to the cabana boy because of what the kids did in the pool is $9,581.75. Not that we didn’t take vacations in 1952. We went to my uncle’s cottage on the lake. That cost (steaks + case of beer + fill up car + carton of nightcrawlers for bait) $23.25. Then there is the true killer of the middle class – being schooled to death. As I mentioned, Portland’s Healy Heights neighborhood has the best public schools in the city. Of course it does. We wouldn’t move our families into anyplace that didn’t have the best public schools. But it’s not as if we’re actually going to send our children there . Heaven forbid! Public schools are full of bullies. Public schools don’t teach Mandarin.

Equally impossible is getting moderns to stay out of trendy restaurants.

not if you’re taking them on the requisite snowboarding trip to Mt. Hood. (The 1952 Toledo equivalent: ice fishing for carp on Lake Erie.) The sedan will have to be an SUV. I guess the BMW is the Buick of today. An X5 goes for $56,600. And it’s Portland so Mom gets a Prius, $23,475. (Note that that’s what it used to cost to buy a Buick – a big, swoop- fendered, port-holed, chrome-bedazzled, beautiful Buick. And now you get... a Prius.) It’s fairly easy to calculate the cost of comparable housing and transportation. Comparing the cost of food and clothing is more difficult, so I’ve left them out. Styles shift. Men’s suits cost about the same, adjusted for inflation. But who wears a suit anymore? And I Googled “men’s luxury t-shirts” and found a Salvatore Ferragamo crewneck selling for $220 at Saks Fifth Ave. Adjust for inflation all you want, but nobody in 1952 was going to pay like that for underwear. Tastes in food have changed as well, and getting over-scheduled moderns to all sit down at the same time for a home-cooked dinner is almost impossible. Equally

10 | December 2017

1952

2017

Annual Expenses, IN 2017 DOLLARS , for a Family of Five Leading an Ordinary Middle-Class Life in 1952

Annual Expenses for a Family of Five Leading an Ordinary Middle-Class Life in 2017

Mortgage Payments

$11,160.00

New Car Purchases

$9,039.60

Mortgage Payments

$30,432.00

(amortized over five years)

New Car Purchases

$16,015.00

Family Vacation

$216.23

(amortized over five years)

Education

0.00

$20,415.83

Family Vacation

$9,581.75

TOTAL

Education

$88,920.00 $144,948.75

TOTAL

Classrooms are crowded. The other children get head lice. The gym doesn’t have squash courts. PE does not include sailing instruction. The best public schools are there just in case . Just in case little Liam or little Ava have “issues” and are required to leave the best private school. The best private school in Portland is the Catlin Gabel School. K-12 tuition is $29,640 per child. Now let’s do the math (see above charts). And one last thing... Because the divorce rate has doubled since 1952, there is a very good chance that an ordinary middle-class life will include a divorce. Get divorced, start a new family, and the cost of being middle class is multiplied by two: $289,897.50 So what the math tells us is... In order to live an ordinary middle-class life you have to be rich.

Get divorced, start a new family, and the cost of being middle class is multiplied by two.

Two for the price of two!

American Consequences | 11

WHAT MOVED THE MARKET THE BIGGEST STORIES THAT MATTERED FOR THE MARKET LAST MONTH...

The S&P 500 Index led all developed markets with a 3.1% return for the month. The markets rotated from growth to value. It was a great month for financials, industrials, and consumer discretionary. The bull market is now the second-longest in modern history. We have gone 104 months without a 20% correction. Personal consumption expenditures have also moved higher for 32 consecutive months. Average hourly wages increased and median household incomes are the highest on record ($60,000). The 10-year U.S. Treasury bond yield rallied to 2.42%. Gold was flat and commodities overall sold off 0.50%. Oil prices rallied to $58. There were large weekly inventory draws and the OPEC production cuts have held. A reduction in global tensions has producers cooperating and acting rationally. Global growth ruled the market moves over the last month. The tax reform debate in the U.S. was the single biggest driver. A preliminary bill was approved in both the House and Senate, and the GOP is hoping to have a final bill for President Donald Trump to sign before Congress goes home for the Christmas break. Markets in the U.S. responded by setting new all-time highs. In summary...

BITCOIN SOARED ON NEWS that the Chicago Board Options Exchange (CBOE) would start trading futures contracts. The cryptocurrency rallied more than 120% in anticipation of the inflow of institutional dollars. A solid macroeconomic backdrop kept equity buyers engaged. Global Purchasing Managers’ Indexes (PMIs) were robust and the revisions for third-quarter GDP growth were bumped up for Europe and the U.S. In Europe, political uncertainty in Germany, Italy, and Spain pressured markets. And there is a lot of skepticism as to whether Brexit will ever be enacted. The MSCI Europe ex-U.K. Index was off 1.7% and the U.K. market was down 1.9% for the month. The Bank of England raised interest rates for the first time in 10 years. In Asia, there was scant news. The Japanese market gained 1.5% on a strong PMI and consumer sentiment numbers. China’s economic data kept pace with forecasts. The central government did employ new credit- tightening regulations, resulting in markets that were off 0.2% for November. In the U.S., the hope for tax reform took center stage. The jobs picture remains robust with the unemployment rate at 4.1%. Jerome Powell was nominated as the new Fed chief and investors have voted with their dollars that he will continue on the same path blazed by Mr. Bernanke and Ms. Yellen. The Fed also raised interest rates another quarter of a point, its fifth increase in two years.

For real- time market updates from some of Wall Street’s most plugged-in analysts, CLICK

HERE to get instant

access to NewsWire.

12 | December 2017

EDITORS

Scott Garliss

The next leg of the growth story/ reflation trade will be an infrastructure bill. Administration officials have said they would like to get started on the process as soon as they return from their holiday recess. The hope is they can complete a bill very early next year. Both sides of the aisle have said stimulus via an infrastructure bill is something they can get behind. Considering that 2018 is an election year, members of Congress would December 18 and 19 The Senate and House are expected to vote on the final version of the GOP tax reform bill. Passage here is key to getting a bill on the president’s desk. The GOP can only afford two “no” votes in the Senate. December 22 The self-imposed deadline the GOP has set for having a final tax bill on the president’s desk. December 26 – January 3 The state of Alabama has said December 26 is the earliest date it could certify the recent special Senate run-off between Doug Jones and Roy Moore. They expect it to be done by January 3 at the latest. December 30 – January 4 China government and Caixin PMI data are released. These data are an important metric in terms of global economic health. China produces a lot of the goods the rest of the world consumes, so economic expansion is indicative of increased external demand.

January 2 – January 4 Markit PMI data for the U.S. and the Eurozone. Another key global economic growth metric. January 3 The release of the Federal Open Market Committee’s meeting minutes. The market will be paying close attention to this data for clues on growth and inflation. January 5 The release of U.S. jobs and unemployment data. These figures are indicators of trends for future growth and inflation. January 11 Eurozone industrial production data. These data point to the health of the consumer as it reflects consumer demand. FCC commissioners voted to end their power to regulate broadband providers. There wasn’t an immediate reaction in stocks as a lot of this is baked in (look at the recent move in Verizon). But the setup will be long cable and short the biggest users. like nothing more than to hit the campaign trail having passed legislation that is shovel- ready and generates jobs.

John Gillin Greg Diamond

WATCH THESE DATES

TUNE IN Stansberry NewsWire , everymorning at 8:30 a.m.

American Consequences | 13

WHAT COULD POSSIBLY GO WRONG?

Financial follies and disaster in the making

great. That’s because when credit growth far exceeds savings, it allows an economy to consume far more than it’s producing. This “pulls forward” consumption, magnifies economic growth, and increases spending and usually wages, too. It’s a boom! But by 1998, so much consumption had been pulled forward that not enough global aggregate demand was left. Eventually, these problems caused the tech and telecom bubbles to burst, and the U.S. saw a severe bear market. Tech stocks fell about 80% from their peak. We’re heading full steam into the biggest credit-default cycle in our nation’s history. We’re about to see a similar burst. Since 2009, U.S. government debt has again more than doubled on a rolling 10-year basis. By the end of this year, total federal debt per person in America will reach $62,000... That’s nearly $250,000 for a family of four.

Waiting for the bubble to burst...

Many obvious signs point to a gigantic financial bubble today. The prices of cryptocurrencies are soaring... Stocks are trading at record levels... Corporate bonds are paying record-low yields... And consumer debt is at a new all-time high, less than 10 years after the biggest consumer- lending collapse in 50 years. So what’s powering this bubble? Major governments around the world have gone mad with debt. For a period of almost 20 years – between 1979 and 1998 – the 10-year average growth rate in U.S. federal debt was more than 100%. That first big “spurt” of U.S. debt growth peaked in 1991, with a 10-year debt increase of 228%. Total federal debt per person in the U.S. grew from $3,700 to $20,000 by 1998. The period between the early 1980s and the 1990s was generally fantastic for the stock market and for investors. At the beginning of a massive credit boom, everything seems

14 | December 2017

And that’s just the federal debt that we’ve created in this generation. On a per-capita basis, federal debt has more than tripled since 2000. The ongoing debt explosion is finally reaching its peak... These rising costs are going to have a profound effect on the current widespread political belief that “deficits don’t matter,” just as soaring default rates on consumer lending are going to lead to much tougher lending standards on cars, colleges, and credit cards. All of that consumption that we’ve enjoyed on credit for the last decade is going to come back to haunt us. We’re heading full steam into the biggest credit-default cycle in our nation’s history. Tax reform... or simply a bigger national debt? By the time we go to press, Republican legislators hope to wrap up a final, revised tax agreement. They’re reportedly hoping to have a bill on President Donald Trump’s desk not long after. But delays continue to hinder the process, so the final timeline isn’t clear. On the campaign trail, Trump correctly noted that Wall Street was dealing with a massive bubble that had been inflated by irresponsible monetary policy. He mocked official unemployment statistics as meaningless. He promised to “drain the swamp” if elected president. Almost a full year into office, Trump is now taking credit for the record gains in the stock market and bragging about the same low unemployment. When it comes to monetary policy, Trump

failed to make any real change when he had his first chance. Instead of shaking things up with a radical appointment, Trump chose Jerome Powell as the next Fed chairperson... Powell is a D.C. Beltway lifer who shares many of the same views as current chair, Janet Yellen. In other words, we’ll be getting more of the same from the Fed after Yellen leaves. That just shows the real power in Washington lurks behind the scenes. And it brings us back to the reality of what Americans should expect with Trump’s tax-reform plan... With the country’s total debt already at more than $20 trillion – about $62,000 per U.S. citizen – to put it simply, the only thing this tax cut will do is add to our national debt... Once again, the can will be kicked down the road. The plan will add another $1.4 trillion to our total debt over 10 years, according to Congress’ Joint Committee on Taxation. And this new tax plan won’t help the middle class. The real cuts – $1 trillion worth – will go to corporations. Another $100 billion will reduce estate taxes for the wealthy. That leaves about $300 billion for the rest of the population. Supporters of the tax-reform bill claim these cuts will lead to new jobs, wage increases, and capital investments, but don’t be fooled... Corporations are already admitting these tax cuts won’t change their strategies going forward. Which leaves us with two questions, “What the hell will change? And when will that change happen?” (Alas, we already know the answer to a third question: “Will it be a change for the better?” No.)

American Consequences | 15

FROM OUR INBOX

Thanks for a great magazine! – Brooks Gatlin

Re: Our Newest Readers Weigh In A re you guys developing an app so it is easier to read your magazine on a phone? I rarely have access to a computer and generally do everything online with my Android. – Daniel Koerner P.J. O’Rourke comment: Daniel, you’re talking to Mr. Internet Idiot. I finally got MySpace figured out only to discover that the only person on MySpace was me. However, I’m informed by “them that know better than us” that we have all our long articles in easier phone-readable format on our website: https://americanconsequences.com/ . I wanted to address a comment byMr. O’Rourke I saw in a recent back issue : “I wonder how many people remember Will Rogers today?” The answer is, in Oklahoma, plenty. A quick search just in Tulsa, where I live, reveals: Will Rogers High School, Will Rogers Junior High, Will Rogers United Methodist Church, Will Rogers Clocks N More, Will Rogers Lofts, Will Rogers Toastmasters, Cherokee Casino Will Rogers Downs, Will Rogers Animal Hospital, Will Rogers Health Center, Will Rogers Plumbing, Will Rogers Auditorium, Will Rogers Stampede Arena, Will Rogers Blvd. and more. As well as the usual statues, a museum, and a park at his birthplace (or as near as possible – the actual birthplace is now under Oologah Lake).

P.J. O’Rourke comment: And thank you, Brooks, and all of you Sooners for keeping the Will Rogers memory alive. I hope, however, that Oklahoma doesn’t have a “Wiley Post Flight School.” (Those who are unfamiliar with the Will Rogers story will have to look that up.) Re: Our Christmas Gift Guide Are you guys on drugs!? For that kind of money, I could ‘give my whole shave to Gillette’, and shave for the rest of my life, and STILL have half that leftover! And yes, it’s $4 yards – Canadian, courtesy of the fraud known as exchange! – Vaughn McMillan P.J. O’Rourke comment: Well, Vaughn, shaving is a “gustatory” subject, a matter of personal taste and, as the ancient Romans said, “ De gustibus non est disputandum .” Meaning, roughly, “I ain’t getting into no gustibus arguments.” But you do have my sympathy about the essentially fraudulent nature of currency exchange rates. Or, part of my sympathy. Because I just spent a couple of weeks in your splendid country, bird hunting in New Brunswick – and it was cheaper than staying home ! I’ve been getting e-mails from you, and I find them very ivory tower. Families saving money on their cable bills? Excuse me, you

16 | December 2017

Send us a message, question, or criticism at feedback@americanconsequences.com

have to have Internet service to use [a Roku stick], and Internet service is cheaper if you bundle it (unless AT&T gets to merge with Spectrum/Time-Warner or whatever they’re calling themselves these days, in which case of course the price will skyrocket).

I have never understood why the public should fund these programs... When I attended Penn, I had a small scholarship but no financial support from my family. I did live with my parents but had an hour commute every day. Penn did have a “deferred

Show me a cheap way to get Internet service, and I’m open to discussion...

Make sure you subscribe by clicking here. We’ll send you valuable updates and always send an alert when the next issue is published. When you subscribe, you’ll be the first to knowwhen future issues are published. SUBSCRIBE NOW! AMERICAN CONSEQUENCES CLICK HERE

By the way, the cheapest cable is OVER THE AIR TV, which costs NOTHING and since nothing has changed since Newt Minow called televisionland a “vast wasteland” more than 50 years ago, why pay for access? I mean, you don’t get a pass on commercials on cable, do you? If you’re really desperate and don’t want to wait a week or a day to see something you’ve missed, there’s always Hulu, for less than $10/month. – Ellen Kozak P.J. O’Rourke comment: Point taken, Ellen! I’m dusting off the rabbit ears and wadding up little pieces of tinfoil to attach to the antenna tips right now! Re: A Lottery NobodyWants to Win I’m sure most folks are like me. We know [a crisis] is coming but hope it’s after we’re gone. I don’t have many suggestions but I do have one: Federal student loans are a boondoggle created by Liberals (of all Parties) because it’s difficult to oppose politically.

American Consequences | 17

FROM OUR INBOX

P.J. O’Rourke comment: Debby, they’re coming. We’re planning an American Consequences “Education” issue this spring, where we’ll have the time and the space to go into the Soaring College Tuition Crisis in detail. While I appreciate the information about ‘debt jubilee’ – (and will do my own research now) – how OBNOXIOUS (and, dare I say it, Republican?) of you to blame the poor, the middle class, and the government for our current economic condition – while looking to stoke fear into the wealthy who don’t have the same worries... – Debby Simon Porter Stansberry comment: I’m certain I didn’t blame the poor or the middle class for our current economic crisis. In fact, I think I’m one of the very few analysts who has correctly identified the key flaw in our current paper money system: that gains in productivity aren’t flowing through into higher wages. That critical link has been broken by an ever- expanding monetary system, which provides limitless debt and constant inflation. Real wages (after taxes and inflation) haven’t risen in more than 40 years, despite massive increases to productivity. That explains why the middle class is disappearing and both the middle class and the poor are drowning in debt like never before. As for blaming the government, well, correct me if I’m wrong, but wasn’t it the government that decided not to back the dollar with gold ? And wasn’t it the government that decided to guarantee student loans (leading to $1 trillion in addition debt)? And wasn’t it the

payment” plan. Every semester I went to the Bursar’s office and received a LOAN to cover that semester’s tuition. The conditions were clearly spelled out. I could make a payment against the loan BUT, if the loan had not been repaid by the end of the semester, my grades would not be released, my completion of those classes would not be made official and I would not be eligible for a follow-up loan. If the loan was not prepaid for the final semester my degree would be withheld until I was current. In order to meet these requirements, I had to work to make money. The EE school had a rule that a student enrolled therein was not permitted to have a job that required more than 20 hours per week. My solution was that I usually was working concurrently at two jobs, each of which was a 20-hour week. Moreover, if I was delinquent at the end of the final semester, my Degree would be withheld. I paid like clockwork. My GPA was not stellar but I had my Degree AND no debt!!! Respectfully, G. Donald Weber, Jr. P.J. O’Rourke comment: Point taken, G. Donald! Those publicly funded loan programs are a terrible bait-and-switch. But see the letter below for the No. 1 reason that today’s students fall into the trap. We have college students who took out loans to attend grad school... because we, their parents, couldn’t afford the ENORMOUS COST... Why no discussion or charts to show just how much college tuition has soared during this same time? – Debby Simon (continued below)

18 | December 2017

government that decided to bail out the universe by adding more than $10 trillion in new government debts in just the last decade? Why shouldn’t we blame the architects of this financial insanity? Awesome magazine. OK, now my question. What’s gonna happen to folks on SSDI, SSI, SS if the big crash goes down like I’m researching? Thank You and God Bless You and America – Michael Jensen Porter Stansberry comment: That’s a great question. Our entire financial system, as it’s currently constructed, is based purely on trust. Our currency isn’t backed, directly, by anything. Instead debt, of one kind of another, makes up virtually all of the reserves of the financial system. Anything that undermines people’s belief that their money is good... and that their deposits will be returned... threatens the stability of the entire system. If there’s a sudden shock to the system – like a run on the banks sparked by the risk of a Debt Jubilee – that could cause the entire transfer payments system to collapse. But look... even without a sudden panic it’s not clear to me how the government can possibly fund the promises to provide these benefits over the next 10-15 years. Ponzi schemes never last. So there will either be a dramatic reduction in benefits (who is covered, what is paid) or else there will be a huge (and in my view completely unsustainable) increase in deficits and debts.

One thing is clear, in my view: The current system must be completely restructured. And given our current political disunity, it’s hard to imagine that will happen peacefully. I’m completely dependent on government money, military retirement, VA disability, and Social Security. How do I prepare if that money stops coming? I live within my means but barely. Any ideas or recommendation. – Tim Drye Porter Stansberry comment: You need a private source of income. What can you do for others that’s valuable? Re: The Republican Tax Plan I don’t understand a tax reduction for the wealthy in hopes that it will trickle down. Why not make it a tax deduction for new jobs created. For example, a hedge fund manager makes $3 million, at 35% that’s $350,000 in taxes owed... – Fred Driemeyer P.J. O’Rourke comment: Fred, as we “go to press,” it’s still too early in the legislative sausage-making process for us to know exactly what part of the pig went into the Tax Reform sausage grinder and what part of the pig will come out. But with all due humility as a former D student in the subject, I’d like to take issue with your math... $3 million at 35% is $1,050,000.

American Consequences | 19

AMERICA’S MOST HEROIC DEBTOR

THIS MONTH, WE RETURN TO THE IDEA OF A JUBILEE FROM ANOTHER PERSPECTIVE...

CLICK HERE TO READ THEWEB VERSION

20 | December 2017

The year was 1885, and Mr. Clemens had it all... He was 50 years old and had achieved everything he ever wanted. He was fabulously wealthy. He and his wife had inherited a fortune from her family and had three lovely daughters. Oh, and he was also the best-known author on Earth. By that time, Samuel Clemens – known to the world, of course, by his pen name Mark Twain – had already published Adventures of Huckleberry Finn , which established him as a major author, as well as the The Adventures of Tom Sawyer and The Prince and the Pauper . On top of that, Clemens’ publishing company – Charles Webster & Co. – had secured the rights to President Ulysses S. Grant’s memoirs. That went on to be the best-selling book in the history of American publishing up to that point. Figuring he’d reached the point where he could do what he wanted... and having tired of life on the lecture circuit... he retired to his palatial Connecticut mansion. As the money poured in from his publishing company and the royalties of his own books, Clemens settled into a lifestyle of lush consumerism. As filmmaker Ken Burns noted in his 2002 documentary Mark Twain ... the Clemens household was spending $30,000 a year on expenses and generously supported charities and extended family in an era where the average annual wage was less than $500.

“If there is one person who is more thoroughly and unceasingly happy than I am,” he wrote around this time, “I defy the world to produce him.” In 1889, Clemens published his fifth novel, A Connecticut Yankee in King Arthur’s Court. It was a commercial and critical flop. Claiming not to care, Clemens called the book his swan song, retired the “Mark Twain” name, and gave up writing as a commercial enterprise. He no longer needed the “Mark Twain” brand... After all, he was a proven success in the business world. Clemens went on to invest $25,000 in a steam-generator venture. He threw another $25,000 at steam pulleys, placed another $25,000 bet on a maritime telegram, and $50,000 on a new engraving venture. Meanwhile, Clemens’ publishing company signed up Civil War hero William Tecumseh Sherman, General Custer’s widow, and Pope Leo XIII in an effort to replicate the success of Grant’s memoirs. Clemens’ big bet was on the Paige Compositor, an electronic typesetter that had 18,000 moving parts and could do the job of six men. Clemens bought half the company and bragged “[This machine] can do everything a human could do, except drink, smoke, and go on strike.” Always the dreamer, Clemens filled the margins of his manuscripts with calculations of how many Paige machines they’d have to build to meet global demand.

By Porter Stansberry

“If there is one person who is more thoroughly and unceasingly happy than I am,” he wrote around this time, “I defy the world to produce him.”

American Consequences | 21

In April 1895, Twain headed west to start his lecture tour throughout the U.S. and Canada. From there, he set off for Australia and New Zealand and four months of packed houses... Then to India for three months where he kept countless British ex-pats entertained with his wit and humor... Then for two more months of lecturing around the rapidly colonized African continent, before finally heading back to England to wrap up the first year of his debt-retirement binge. After a year of the grind, Twain lamented that his lecture tour “seems as if it has already lasted 1,000 years.” But after just one year on the road... Mark Twain had paid back $35,000 of Samuel Clemens’ debts . Twain would spend the rest of the decade in Europe publishing, lecturing, and relentlessly chipping away at his debts. By fall of 1900 – a little more than five years after hitting the road – he repaid the last of his debts. Twain returned to the U.S. a star, and the world had nothing but respect for the man who publicly endured a decade of trials to pay them. As Andrew Carnegie said, “Our friend entered the fiery furnace a man, and emerged a hero.” Thomas Edison said, “The average American loves his family. If he has any other love left over for some other person, he generally selects Mark Twain.” Sadly... Twain’s story is more than 100 years old. In the intervening century, the world’s governments have crafted a different, disgraceful model for debtors to follow... AMERICA’S MOST HEROIC DEBTOR

As you can probably guess, things turned sour. The steam investments went up in smoke. The telegram and engraving businesses also failed. None of the memoirs came close to replicating the success of Grant’s. And the Paige Compositor required monthly infusions of $3,000-$5,000 just to stay afloat. In the end, Clemens dumped $300,000 (more than $7 million today) into the Paige Compositor. By Christmas 1890, the best-known author on Earth had lost almost all of his wife’s inheritance, taken out loans against the assets of his publishing company, and could not find anyone to loan him money. By 1893, Clemens was bouncing between hotel rooms and the guest rooms of friends. Two years later, Clemens declared bankruptcy. There was no alternative. The debts had mounted to more than $200,000. But pride was also at stake here... and the family name. Clemens publicly guaranteed he would pay all of his creditors in full, even though he was not required to do so under bankruptcy law. Rather than sulking, the disgraced Samuel Clemens dusted off the Mark Twain brand and got back to work. He had failed as a businessman, but Clemens would use the two professions from which he retired – lecturing and writing – to regain his financial footing. Mark Twain was back. There was one problem... Twain hated the lecture circuit. In the days of smoky locomotives and large oceangoing steam liners, a five-continent lecture tour would be a grueling siege on the senses. It was, as Twain put it, a “heart-torturing idea.” But he did it anyway.

Twain returned to

the U.S. a star, and the world had nothing but respect for the man who publicly endured a decade of trials to pay them.

22 | December 2017

Once the French troops left, Emperor Maximilian lasted all of 11 months. By the end of 1867, he had been captured and sent to the firing squad along with his top generals. The new Mexican state – backed by the United States – repudiated the debts run up by Maximilian, the French puppet. And the creditors – the French, mostly – got nothing. Sack later argued that the reign of Maximilian was abhorrent and that the Mexican people should not be harnessed by this “odious debt.” “It is a debt of the regime, a personal debt contracted by the ruler,” Sack wrote, “and consequently it falls with the demise of the regime.” What he meant was, we won’t buy the Emperor’s New Clothes. Few people would argue that people recently freed from true oppression should have to shoulder debts incurred to guild their despot’s palace... but you shouldn’t be surprised to discover that modern governments have found it useful to scorn their own obligations. Take Ecuador... In 2008, President Rafael Correa declared the nation’s $3.9 billion in foreign-held debt “illegitimate.” He claimed the prior corrupt and despotic regimes were responsible. Exactly which despotic regimes he meant is unclear. The country has been a democracy since 1979. As the Washington Post reported at the time... Ecuador is ceasing payments not because

Walking Away From ‘Odious Debt’

He argued – back in 1927 – that some government debts were so outrageous that they could not rightly be owed by the people.

It started out as pure theater: Red silk from the orient and solid silver cuffs, studded with the Russian crown jewels. Even the walking stick was bathed in gold. Tsar Nicholas II would wear this spectacular costume to the Russian Imperial winter ball in 1903. But Alexandre Zak rejected the excesses he saw. It’s not because Zak was a communist. He was a professor of finance and law at the university in St. Petersburg during the Tsars’ regime. He fled Russia after the Leninist revolution. He landed first in Estonia, then later New York, where he advised the U.S. Justice Department during World War II. By then, Zak had Americanized his name to “Alexander Sack” and written one of the key texts in international financial law, “The Succession of Public Debts of a State.” In it, he argued – back in 1927 – that some government debts were so outrageous that they could not rightly be owed by the people . Sack based his doctrine around despotic regimes that piled up debt for self-interest as opposed to the state’s or people’s needs. His doctrine claimed this illegitimate – or “odious” – debt belonged to the regime and not the nation. So it should fall along with the regime’s demise. Sack’s examples included the reign of Austrian Prince Maximilian I, who was “emperor” of Mexico from 1863 to 1867... Maximilian was a puppet of France’s Napoleon III and was “elected” Emperor while French troops were massed in Mexico City.

the oil-rich country cannot afford to pay but because it has made a political decision not to...

American Consequences | 23

World Debt, joined the Greek people by saying... “Greece must unilaterally suspend repayment of its debt.” In one interview, he questioned the legitimacy of the debt related to the Olympic Games and debt relating to Greece entering the European monetary union. Other cries of odious debt came from left- wing politicians in Germany. According to a translation from a local documentary, Sahra Wagenknecht from the German left-wing political party Die Linke, argues that part of the national debts in the European Union countries is illegitimate because they resulted from policies against the people’s interest. More recently, these cries have turned into action... Look at Croatia. In February 2015, it erased more than $20 million in debts for 60,000 people. This was money owed to banks, telecom operators, municipal authorities, and utility companies. Not a single person or investor was refunded for their losses. And it’s probably no surprise that the stock market went down significantly over the next year (see chart). AMERICA’S MOST HEROIC DEBTOR

Correa has been threatening default and demonizing foreign investors since his presidential campaign in 2006. Most recently, he has cited a presidential commission report that found evidence of criminal violations by previous governments that sold debt to pension funds, hedge funds, and other overseas investors. These problems didn’t go away under Correa’s watch, however. While he claimed to have lowered debt while he was in office, the real numbers show that he increased it... potentially to levels not allowed by the country’s constitution. And this year, the country’s new leftist president Lenin Moreno is trying to refinance “expensive” foreign debt. According to Reuters: “ Ecuador has to cough up some $6 billion for debt payments and oil-for-loans, mostly to China .” What’s next for Ecuador? Why, more debt: Moreno said he had reached out to the World Bank for potential financing that could help him fund ambitious social programs including free education, health and housing for lower-income families, and subsidies to eradicate extreme poverty. And you’re no doubt familiar with the well- documented problems in Greece... Among violent protests outside parliament, the people of Greece called for debt repudiation, claiming the debts aren’t their responsibility. Eric Toussaint, who heads up the do-gooders at the organization The Committee for the Cancellation of the Third

You shouldn’t be surprised to discover that modern governments have found it useful to scorn their own obligations.

24 | December 2017 October 2017

This of course has nothing to do with Sack’s ideas. He wanted countries and citizens to take responsibility for money borrowed willingly for public purposes. He argued that states must repay their legitimate debts for international commerce to flow. He was strictly focused on tyrants who used their office to enrich themselves. Regardless... we’ll hear more about Sack’s thesis in the years to come. Right now, the Department of Justice in Washington is already coordinating an investigation into fraudulent loan practices around the country. Many academics and economists are pushing for a Jubilee. A half- dozen laws have already been introduced in Congress. After all, the debts of Western governments are so immense, they can never be paid back . Central banks have tried to cover the interest payments with more borrowing and money printing. But we are seeing ominous signs that central banks have reached the limit of their ability to perpetuate our culture of debt. And that leaves one choice... Warnings Everywhere The bull market that began back in March 2009 in stocks, bonds, and real estate is the result of this central-bank manipulation. The major Western governments are all guilty of creating trillions of dollars out of thin air, which they then use to prop up the price of financial assets around the globe.

What happens if the world’s central banks lose control of the paper-money system? What if the world’s leading sovereign governments become so highly indebted that no one is willing to hold their obligations, not even their own citizens? What happens if the governments whose obligations form the foundation of the world’s monetary system were to be rendered not only bankrupt, but actually insolvent? We’re seeing plenty of signs of this today. A financial revolution is already underway. More and more individuals find themselves suffocating from overwhelming student-loan, auto, and credit-card debts. As is the case in any crisis, the wealthy will make a fortune... so will the prepared. For example, the incredible rally in bitcoin and other “cryptocurrencies” has been partially fueled by a growing distrust of governments and central-bank manipulation... More than ever before, people are seeking out nontraditional assets that can’t be devalued by the irresponsible actions of central banks around the world. But regardless of what happens to bitcoin and the cryptocurrency markets, the consequences will be devastating for traditional currencies. These consequences will come to a head. Eventually, they will lead to an all-out “Debt Jubilee.” What could possibly go wrong?

After all, the debts of Western governments are so immense, they can never be paid back.

American Consequences | 25

26 | December 2017

MOVING UP THE LADDER... FROM $5 TIPS TO CORPORATE FEUDALISM

In my 20s and 30s, I had a big advantage... I understood the “favor economy” of doormen. And how that same idea translated into big bonuses on Wall Street. Every December, my roommates in our Manhattan apartment would start talking about how to tip... comparing which doorman was most helpful over the previous year or howwell the concierge treated them. I’d just shake my head. They didn’t get it. Tipping doormen wasn’t about past accomplishments like signed packages, hailed cabs, and squashed noise complaints... It was about the future packages, cabs, and complaints.

By Turney Duff

American Consequences | 27

Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32 Page 33 Page 34 Page 35 Page 36 Page 37 Page 38 Page 39 Page 40 Page 41 Page 42 Page 43 Page 44 Page 45 Page 46 Page 47 Page 48 Page 49 Page 50 Page 51 Page 52 Page 53 Page 54 Page 55 Page 56 Page 57 Page 58 Page 59 Page 60 Page 61 Page 62 Page 63 Page 64 Page 65 Page 66 Page 67 Page 68 Page 69 Page 70 Page 71 Page 72 Page 73 Page 74 Page 75 Page 76 Page 77 Page 78 Page 79 Page 80 Page 81 Page 82 Page 83 Page 84 Page 85 Page 86 Page 87 Page 88 Page 89 Page 90 Page 91 Page 92 Page 93 Page 94 Page 95 Page 96

www.americanconsequences.com

Made with FlippingBook - Online catalogs