BUENOS AIRES – Today, we woke up in Buenos Aires with a disagreeable headache… and a depressing hypothesis:
First, it doesn’t matter whether Brett Kavanaugh is on the Supreme Court or not; one more Deep State toad won’t make any difference.
Second, the Supreme Court has been derelict in its duty for the last 80 years.
For years, the Court has looked the other way as the feds robbed one class of citizen (ordinary, working people) and rewarded another (the elite).
Third, as a result, the American empire faces a catastrophic money crisis… probably accompanied by internal schisms, social breakdowns, and dangerous political scuffles.
Let’s begin by looking again at the connection between time and money.
If you work by the hour, the guy with money can buy your time. That’s what it really means to say someone is “rich” – he has more time because he can control not only his own, but yours, too.
The guy who had $1,000 worth of stocks in 1971 could buy approximately 250 of the average working man’s hours. Today, that $1,000 worth of stocks is worth about $28,000… which, at today’s $26-per-hour average, will buy 1,077 hours of the typical working man’s time – four times as much as in 1971.
In other words, compared to the wage earner, the capitalist is four times as rich.
Invert it, and you see about the same thing. A working man would have had to labor for 212 hours to buy the 30 Dow stocks in 1971. Today, his time is much less valuable; he has to sweat for 1,000 hours to buy the Dow.
That’s why the liberals whine about “inequality”… and probably why Donald J. Trump was elected. Few people may have done the math, but a lot of people suspected a rat.
And they were right.
Many – including the president – pointed their fingers… but at the wrong rat!
They thought it was the foreigners who had done them dirty: the Chinese with their “unfair trade practices” and the Mexicans “pouring across the border, stealing our jobs,” was the jingo.
For their part, investors, the rich, and the cronies and insiders thought they were smart. They earned their wealth fair and square, they believed, by funding America’s enterprises… and by carefully allocating precious capital to worthy businesses run by able corporate champions.
But the fix was in.
Executive Order 6102
How exactly was the fix put in place?
In 1933, the matter first came before the Supreme Court. Franklin Roosevelt’s Executive Order 6102 made it illegal for citizens to own gold, except in the smallest of quantities.
It came to the Supremes in a series of disputes called the “gold clause” cases. “Where in the Constitution did the president get that power?” people wondered.
Back then, some investors recalled that the feds can play fast and loose with the dollar, as Lincoln had during the War Between the States.
Gold clauses in contracts protected them by insisting on gold as a means of settling up. Eliminating the gold clause meant taking away the ability to protect against inflation… and substantially altering the terms of the deal.
But the Supremes went along with it. Colleague Dan Denning tells the tale:
…First, let me quote a few brief passages from [Justice James] McReynolds’ dissent. They capture the spirit of his objection and the relationship between sound money and political liberty. McReynolds writes that:
“Just men regard repudiation and spoliation of citizens by their sovereign with abhorrence; but we are asked to affirm that the Constitution has granted power to accomplish both. No definite delegation of such power exists; and we cannot believe the farseeing framers, who labored with hope of establishing justice and securing the blessings of liberty, intended that the expected government should have authority to annihilate its own obligations and destroy the very rights which they were endeavoring to protect. Not only is there no permission for such actions; they are inhibited. And no plenitude of words can conform them to our charter.”
McReynolds went on to make the point that when you buy a bond or make a loan, “the creditor agrees to accept and the debtor undertakes to return the thing loaned or its equivalent.” Because Roosevelt’s Executive Order meant companies could be paid back in depreciated dollars instead of gold coin or gold equal to the value of the original loan, McReynolds recognized that this was a de facto default.
The gold clause guaranteeing creditors be paid back in gold or something of equal value, “prevents the borrower from availing itself of a possibility of discharge of the debt in depreciated currency.”
Congress went along with it, too. And then, still in the minority, McReynolds saw the handwriting on the wall. The feds themselves might be the main beneficiaries. Congress would be able to borrow… and then wipe out its own debt by inflation:
“We are dealing here with a debased standard, adopted with the definite purpose to destroy obligations. Such arbitrary and oppressive action is not within any congressional power heretofore recognized. The authority of Congress to create legal tender obligations in times of peace is derived from the power to borrow money; this cannot be extended to embrace the destruction of all credits. […]
For the government to say we have violated our contract, but have escaped the consequences through our own statute, would be monstrous. In matters of contractual obligation, the government cannot legislate so as to excuse itself. […]
Whatever may be the situation now confronting us, it is the outcome of attempts to destroy lawful undertakings by legislative action; and this we think the Court should disapprove of in no uncertain terms. […]
Loss of reputation for honorable dealing will bring us unending humiliation, the impending legal and moral chaos is appalling.”
With the gold clause out of the way, the coast was clear. The feds floated out one program after another, meddling in every aspect of human life.
There was now a third party in almost every transaction – the federal regulator.
By the 1950s, the fake wars had begun, too – major wars – with no declaration or funding from Congress.
By the 1960s, the Johnson team had a full-scale war in Vietnam (a country with no capacity or intention to harm the U.S.).
In addition, it launched a War on Poverty, too… intended to create a Great Society, where the lambs would lie down with the wolves and fruit would hang from every ghetto palm.
But humiliation was afoot. It was soon clear that the feds were going to run out of money.
And this time, it was the Nixon team that shirked its duty. Rather than admit that it had overspent, Nixon repudiated the last link with real money and the ability of foreign governments to exchange their dollars for gold at the promised rate.
Now, the feds had gone Full Paper. Their money was nothing but pieces of paper backed by what was soon to be the world’s biggest debtor.
And now, there was nothing stopping them… There was nothing to stop the chaos McReynolds foresaw.
Tune in tomorrow to see where it led.
MARKET INSIGHT: RETURN OF THE TECH IPO
By Jeff Brown, Editor, Exponential Tech Investor
The number of exciting technology companies coming to market has picked up in 2018.
As I’ve explained to readers of my Exponential Tech Investor newsletter, the pace of exciting technology initial public offerings (IPOs) over the past 10 years has been underwhelming.
That’s due to a flood of venture capital (VC) and private equity funding that’s been readily available for private technology companies.
This has made it easier for companies to stay private and raise round after round of private capital rather than having IPOs.
And while this has been good news for technology executives and venture capitalists, it means that average investors have been locked out of investing in some of the most innovative companies in the world.
For example, ride-sharing company Uber was recently valued at $79 billion. At this valuation, Uber would be considered a large-cap company if it were publicly traded. But it’s not.
Uber remains a private company. And that means that average investors have never had a chance to purchase shares.
But the good news is that, after years of low IPO numbers, we’re finally seeing the pace of tech IPOs pick up.
As you can see, the valuations of tech IPOs stayed relatively low after the 2000 dot-com bubble.
This caused a bottleneck in exciting tech companies going public. But that bottleneck is breaking up.
Tech IPOs in 2018 are estimated to hit a total valuation of $9.73 billion. That’s the highest level since 2000.
I expect this trend to continue in the years ahead as the backlog of VC-backed companies finally goes public.
– Jeff Brown
P.S. With tech IPOs finally picking up, now is one of the best times in the past two decades to invest in quality, small-cap tech companies.
A once-in-a-decade event is taking place on November 14… and it’s going to send a handful of technology companies soaring.
USA Today is calling it the “next tech revolution.” And according to a report in MIT Technology Review, it’s expected to create $12.3 trillion in new wealth.
That’s why I’m holding an urgent online event tonight at 8 p.m. ET… I’ll show investors how the November 14 event could lead to the largest investment gains I’ve seen in more than a decade. Reserve your spot here.
America’s Wealthiest Riding High
As Bill showed, stock-owning Americans (typically the rich) have benefited from soaring stock prices over the last five decades. And the most recent numbers are in. In 2017, wealthy Americans scored a 15.5% return from stocks, nearly twice what they got in 2016.
This Is What Kills the iPhone
The smartphone in your pocket will soon be obsolete. In its place will be a piece of sci-fi tech that’s right off the movie screen. Jeff Brown, Bill’s top technologist, shows why the future of consumer electronics will be smartphone-free.
An Explanation for Sluggish Wage Growth?
Real wages have gone nowhere for almost 50 years, as Bill correctly noted. One possible reason? Americans aren’t getting paid more, but the benefits sure are better…
In the mailbag, dear readers consider if the Supreme Court failed Americans…
The SCOTUS really has just two decisions to make. Since all its cases come from lower appeals courts, its first decision is to consider, or not consider, taking the case. Its second decision, if it takes the case, is to either uphold or overturn the lower court’s decision. This process could be done completely fairly, with no bias or partisanship, in about five minutes with the following procedure: Put nine quarters in a cup. On live TV, ask the question, “Shall the Court consider this specific case? Heads means yes; tails means no.”
Then, have a court representative dump the quarters on a table. Count the heads and tails. If there are more heads than tails, proceed to part two. Ask the question, “Shall the Court confirm the decision of the lower court? Heads means yes; tails means no.” Dump the nine quarters again. There’s the decision, and it would be final. The justices, meanwhile, can retire with permanent paychecks at their present level.
– Carl N.
You hit the ball out of the park with your analysis of how the Supreme Court failed us, then went on to indict the other two branches of government with the pinpoint focus of a laser. Considering the discussions I’ve read of states issuing their own currencies and seceding from the Union, perhaps what America really needs is not another civil war, but a second Revolutionary War – one that will reinstate the Constitution that the modern American government flushed down the toilet long ago.
– Dale A.
Meanwhile, a Dear Reader makes a counterpoint to Bill’s use of time as our ultimate resource…
Bill, your idea of time is a very linear one, and, in my opinion, could use rethinking. The idea that time is an objective construct has been brought into question by Einstein in his theory of relativity. Time has a subjective aspect as well. For example (as Einstein said), when a man spends an hour with a beautiful woman, it can seem like a minute has passed. But if a man sits on a hot stove, a minute can seem like well over an hour.
Quantum physics has more recently proven scientifically that an observer’s subjective state of consciousness actually changes the objective reality of what is being observed – necessarily so, too – with linear time. In other words, time is pliable at the level of the very small.
Could it be that the Newtonian concept of time as linear and objective is not a fact, but a strongly held belief… like a flat Earth or Earth being the center of our solar system? And as a corollary, could it be that in the new paradigm, individual man and woman will evolve into “self- governing” systems, while the current objective realities of economics and politics will give way?
– Chuck M.
IN CASE YOU MISSED IT…
Jeff Brown is hosting an urgent tech investing webinar tonight at 8 p.m. ET.
During this free event, Jeff will show you why one piece of technology will rewrite modern society… and make smart investors a fortune.
To save your spot, and get the names of the four stocks on Jeff’s watchlist, go right here.