You’ve Been Robbed

Robbed

You work long, hard days, but you never have enough to be secure. Your husband or wife probably works too, and yet you still never get ahead. Now think about this: Your great-grandparents worked hard, and they did get ahead. You work just as hard, but you don’t make the same progress.

Was great-grandpa really that much better than you? Not likely. So, how was it that he could get ahead on one income, but you can’t?

Take a good look at this graph:

robberd art-image001

The top line shows how many years of living expenses your great-grandfather would have accumulated as a hard-working young man. The bottom line shows what you can save. 

After working for five years, great-gramps had seven years of living expenses in the bank.

Doing the same things, you’d have less than two.

You’ve probably avoided this comparison((The graph was generated as follows: $725 per year is the income in about 1903, based upon discussions with men who lived through the time. A figure of $325 per year for living expenses is taken from a New York Times article, dated September 29, 1907. Assets were presumed to appreciate at 10% per year. For 2008 {the year the graph was generated} the annual income is $45,000 and monthly expenses were $2,000. This young man pays 30% income taxes and investment return is calculated at a reduced rate of 8.5% because of taxes upon interest. {That rate of return is ridiculously high for 2017, but I’m leaving it in anyway.} The young man of 1905 is investing $400/year after living expenses of $325. His modern descendent is investing $7500/year after living expenses of $24,000.)) , because it makes you feel bad. If so, that was your big mistake, because it was never your fault.

When great-gramps worked hard, he kept the money. There was no income tax and no sales tax. (The government survived anyway.) There was no Social Security tax either, and the streets weren’t  full of starving old people. Families were able to take care of their own.

In your great-grandparents’ day, it was very common for mechanics, carpenters, and shop-owners to make private business loans. Now you shuffle into banks with piles of the most personal documents and beg for loans. (As the banks create your loan money with a keystroke.)

You’ve Not Only Been Robbed, You’ve Been Demoralized

Why did this happen? Because Americans accepted a lie: that they were bad people.

Think this through: Your money is taken from you before it can accumulate (think “payroll deductions”), leaving you with barely enough to live a reasonable life. You have nothing left to help those who suffer unjustly – not because you don’t work, but because your surplus is continuously skimmed away to Washington.

And then those same politicians have the audacity to call you a bad person for not wanting to help the poor! Not only do they make it almost impossible for you to give, but they insult you for it!

Then of course they spend the money they took from you on armies of government employees who end up delivering a fraction of your money to the poor. (The vast majority of whom are dependent , rather than unable to work.) The rest is eaten up in bureaus, frauds, wars, handouts to foreign dictators, and other forms of crony-capitalist corruption.

Your great-grandparents were proud to help their friends and neighbors. They felt good about themselves, they felt compassion for others, and they were proud to make the world a better place. Being robbed of this heritage is the worst crime of all.

So…?

This is the point where people ask, “What do we do about this?” And the answer is simple: Stop playing their game!

The system is rigged and the abusers make the rules. All the news channels are in on the game with them. Everything big is in on the game. You’ll never actually reform it, and so long as you stay inside, you’ll keep suffering and you’ll keep it going.

People have been trying to reform this for a long time, and have accomplished next to nothing.

The only rational choice is to withdraw from the game and to start building something better .

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Paul Rosenberg
www.freemansperspective.com

Money Issues in the US: Why Can’t We Party Like It’s 1905?

money issues in the USWhen writing historical things, I try to include perspective from people who actually lived through the events. And for money issues in the US, I’m able to do that back to about 1905.

So, do you think life was nasty, brutish, and short in 1905? That there were poor and starving people falling dead on every street corner?

Hardly.

The Wright brothers were flying for 30 minutes at a crack; Einstein was upgrading the laws of physics; telephones and electric lights were being installed all across America; Henry Ford was getting the final pieces in place for his moving assembly line and Model T; radio was being developed; art was flourishing; and the world was more or less at peace.

Sure, we have far more tech and better medicine now, but mostly because the people of earlier times (like the 1905 era) gifted it to us.

People in 1905 lived in heated homes, refrigerated their food, had access to professional physicians, traveled the world (mostly on trains and ships), read daily newspapers (there were many more of them in those days), watched movies, and ate just about the same foods we eat.

So, was it really that bad a time?

No, it wasn’t. In fact, it was better in important ways.

Money Issues in the US: The Facts Don’t Lie

Consider this:

The working person of 1905 kept his or her money. They ended up saving somewhere between a quarter and a half of everything they made – after living expenses.

It’s hard to be completely precise when reconstructing the budgets of average people in 1905 (records are hard to find), but we do have enough for a good, close guess.

Here’s how finance worked for a working family man of 1905:

Annual income:           $700.00
Annual expenses:      ($350.00)
Annual savings:           $350.00

If you’re thinking that I’m taking liberties with these numbers, let me assure you that I’m not – I’m being conservative. For example:

  • The income figure should probably be higher. I’ve found figures of well over $800 for construction workers.
  • As for expenses, I rounded up from a New York Times article, dated 29 September, 1907. It specified $325 per year.
  • Added to that is the fact that many people grew their own food during that time, which would skew the figures further.
  • As noted initially, I compared these numbers with stories I heard from relatives who lived through the time. My uncle Dave, for example, used to tell me how he got a job paying $390 per year sweeping floors as an unskilled immigrant (who spoke almost no English) in 1903.

The next time you drive through an old part of town and see the grand old houses, remember that people were able to build and buy them because their paychecks weren’t stripped bare. There were no income taxes in 1905, no sales taxes, no state taxes, and not much in the way of property taxes.

There was also no such thing as a military-industrial complex in those days, and – miracle of miracles – the rest of the world survived!

And Now…

Today, the situation is much, much different. The average working family pays about half their income in combined taxes: income taxes (to the state and the Feds), payroll taxes, property taxes, gas taxes, utility bill taxes, sales tax, local taxes, and on and on.

So, figuring an average income of just over $50,000 (the 2011 figure). And combined taxes of about $25,000, the average American family is left to pay bills like these:

Mortgage                     11,000
Car payments              6,000
Gas, repairs, etc.         2,500
Property taxes             2,500
Food                              3,000
Total                          $25,000

That leaves people zeroed-out. And again, I’m being conservative, and I haven’t included a number of smaller expenses.

And if you think I’m going overboard, look at this graph of the savings rate from between 1947 (as far back as I could find) and 2009. This graph covers more than families, but it paints a clear enough picture:

money issues in the US

Great Grandpa Did It, So Why Not Us?

Your great grandfathers faced very few of the taxes that we face. (The government survived on tariffs.) There was no social security either, and – believe it or not – the streets were never full of starving old people. Families were able to take care of their own – it’s not that hard when you’re saving half of your income!

We have forgotten that it was once possible for an average person to accumulate money. The truth is that productive people should be comfortable. Well-off, as they used to say.

So, why can’t we party like it’s 1905?

You might want to think about that question. Here’s a thought that may be useful:

You can complain about abusers all you like, but the people who obey the abusers are also to blame.

Paul Rosenberg
“Money Issues in the US: Why Can’t We Party Like It’s 1905?”
FreemansPerspective.com

Top 5 Reasons I Stopped Caring About Politics

stop caring about politicsWhen I was young, I felt a need to understand politics, and I spent time studying. But as time progressed, I received diminishing returns on that investment. And in the past few years, I have given it up altogether.

These days, my concern with politics is limited to things like these:

  • Who is making war, and where?
  • Where is the crime occurring in my area?
  • Are there laws that will force me to move my businesses offshore?

Beyond that, I’m really not interested. I see the headlines, but I seldom read the stories. And I’m very happy saying, “I haven’t looked into it,” when people ask my opinion on the day’s ‘news.’

Here’s why:

#5: It eats up a horrifying amount of time and energy

Seriously, start counting the number of hours you spend on this stuff. How many hours listening to political radio, watching political TV, and reading political newspapers?

Then start thinking about the intense energy you spend on it. We all have limited reserves of energy; do you really believe that politics is the highest and best use for yours? What about using your energy to build your business? Or to nurture your children? Or to help a neighbor? There must be a dozen things that are more important than obsessing over the votes of congressmen or Supreme Court judges.

#4: It’s an addiction

If imagining yourself dumping politics makes you feel bad, you probably should dump it.

Try it: Imagine your life, devoid of all politics. How does it make you feel? Empty? Forsaken?

The truth is that millions of us are addicted to politics. People can’t pull themselves away from it – it’s the script that runs in the back of their minds 24/7.

The political addiction is so bad that even strongly religious people spend more time on politics than they do on God. Politics is the obsession of the age.

#3: It doesn’t change anything

There was a popular bumper sticker in the 60s that read: If voting changed anything, they’d make it illegal.

Let’s be honest and admit that the bumper sticker was true. Even the best examples – such as Reagan on the right or Obama on the left – have failed to change much. Government is bigger than ever, the US government is involved in more wars than ever, and the Constitution is being trashed in more ways than ever before. This is progress?

And what of the vaunted elections that they always promote? Personally, I think Alvin Toffler was right when he called them “reassurance rituals.” But, that aside, it is certain that elections are tightly controlled. In the US, two parties firmly control who gets on a ballot and who doesn’t. Everything is scripted; everything requires approval of the party. (The situation is slightly less bad in Europe.)

And please understand that ‘the government’ is far more than 600 faces in DC – it is millions of people in thousands of offices, all pulling together to get more of your money and to spend it upon themselves and their departments.

But even while politics doesn’t actually change much, it does keep everyone locked inside the system and servicing it. To illustrate, here’s a quote I never could forget, and that I hope you’ll never forget either:

Let them march all they want, so long as they continue to pay their taxes.

– Alexander Haig, 1982

So long as everyone obeys the government, why should it care about their complaints? Americans are nearly 100% obedient, so why should the government bother changing anything at all? There is no need.

Politics doesn’t change anything, because its actual goal is to keep the populace reassured and compliant. And in this it has succeeded brilliantly.

#2: In the end, it’s about violence

Here’s a passage from my novel, A Lodging of Wayfaring Men, that expressed this idea:

Coercion is the sine qua non of politics; the thing, without which, politics would not be politics. Indeed, if you remove coercion, politics becomes something else – economics.

Politics cannot exist without force. In the end, it rests on violence. No matter how much they color everything red, white, and blue, violence or the threat of violence underpins it all. As Jim Rogers once wrote, “Somewhere in every process of taxation, a pistol is involved.

Politics – government – is based upon a single transaction: Taking money from people against their will. Everything else they do falls apart without that.

You may think me rude for pointing this out, or you may come up with justifications for it, but the statement stands: Governments take money that they didn’t earn, by one type of coercion or another. If not, taxation would be voluntary and government would be just another business.

I don’t like dealing with violent enterprises.

#1: Politics is a relic of a barbaric past

Being that I study the ancient past, I can trace men ruling over men back to about 6400 BC. I can trace a government that resembles ours back to about 5000 BC.

So, what else from two thousand years before the Pyramids still rules the lives of men?

If there is any example on Earth of humans failing to evolve, this has to be it.

Men no longer pull plows. They no longer start fires with flint. Nor do they pull sleds or wooden-wheeled carts or rely upon animals for power. We have learned to write, to invent, to navigate, to cover immense distances, to drive, to fly, to reach into the heavens…

And yet this one relic of a primitive past remains. And please don’t tell me that it remains because it is good – people complain about government more than they complain about cancer.

To illustrate government’s barbaric nature, consider this: Thousands of people like me would like to experiment with different ways of living, but we are forbidden. No one is permitted to leave the game. If you try, large armed men will assault you and lock you in a cage, or perhaps they will merely steal your money from the bank you entrusted it to. But in either case, government sycophants will solemnly inform the world that you are an evil-doer.

No exit is permitted and all escape attempts are met with violence. How is this not primitive barbarity?

IT’S YOUR CHOICE.

So, there you have it. You’re big boys and girls and you can make your own decisions, but I have to tell you: I am ever so happy with mine. I am less stressed, more productive, and a clearer thinker.

Every so often, a friend asks me to examine a political issue. And, nearly always, I politely decline; it makes me feel the same as when my mother wanted me to eat liver.

Paul Rosenberg
FreemansPerspective.com

The Era of Fiat Currency Capitalism

fiat currencyI have worked long and hard to gather a broad perspective on history. I don’t doubt that there is value in specialization. In fact, I would have great difficulty doing what I do without good specialists.

Nonetheless, my particular set of abilities suits me to play specialist for short, intense periods, and then to integrate my gleanings into a larger whole.

One of my general conclusions has been that if we were to give a name to the last 40 years of Western history, we’d have to call it the era of fiat currency capitalism. There is a contradiction built into this term, of course, since fiat currencies and capitalism are oppositional, but such an inherent contradiction is also highly representative of this period.

Having been inside of this contradiction most or all of our lives, it can seem almost permanent and inevitable to us. Nonetheless, it will end, and probably before terribly long. As Robert Louis Stevenson once wrote:

Sooner or later, everyone sits down to a banquet of consequences.

For the last 40 years, things that should have crashed and burned have not crashed and burned, and it was fiat currency that permitted the consequences to be scorned. Western culture and millions of minds have been bent in the process.

Fiat versus Reality

Fiat currency is money based upon nothing at all. The Monopoly money shown above has the same actual value as the Dollars, Euros or Pounds in your pocket. For the moment, the paper in your pocket will buy you food and furniture, but not because it has any real value.

Our daily money is created by politically-favored groups who have been granted monopolies on the creation of currency. (They are referred to in polite company as central bankers.) They create our money, from nothing, and all others are forbidden from doing so. If that sounds crazy, it’s because it is.

The only people with any authority over these currency monopolists are politicians, and that isn’t terribly strong. (In the case of Great Britain, the monarch has some control as well.)

I won’t bother trying to list the ways this astonishing privilege could be abused. Feel free to play with the possibilities on your own. And do remember that more or less every dirty trick that people could get away with, they have eventually used… and bankers have never been exceptions.

This new era began in 1971, when the previous international monetary arrangements, the Bretton Woods system, fell apart. On May 5th 1971, US dollars flooded the European currency markets and threatened the Deutsche Mark. The central banks of Austria, Belgium, Netherlands and Switzerland stopped all dollar trades. Who was behind this flood of trades is unknown to me but it was apparently someone with inside knowledge. At about the same time, the French were, via complex arrangements, redeeming their dollars for gold from the US Treasury, as Bretton Woods allowed. (It was gold that kept the system honest. If you thought games were being played, you could turn in your paper for actual gold.)

If the US had allowed redemptions to continue, they would have lost all their gold reserves. So, on August 15th 1971, the US pulled out of their monetary agreements and refused to redeem any more dollars for gold. (This was called closing the gold window.) Bretton Woods fell apart and, very shortly, no major currencies were redeemable; everything became fiat currency, based on government edicts alone.

This change from redeemable money to fiat currency has affected Western life immensely. For more than 40 years, life in the West has been based on money with no value, which has spawned a lot of other things that have no value.

Quigley’s Chart

The chart below is my modernization of a chart used by Carroll Quigley, one of the best generalist historians of the 20th Century. The chart displays his seven primary factors of Western Civilization, and how they have varied over the last thousand years or so. You’ll notice that I’ve circled our era in red and called attention to the form of economic organization with blue.

fiat currency

As I’ll illustrate below, fiat currency has had significant influence, not only within the ‘Economic Organization’ category I have highlighted, but also over ‘Political’, ‘Economic Control’, ‘Dominant Group’, and even ‘Intellectual’. It has more or less defined our era. So, if I am correct that the reign of fiat currencies is ready to end… big, big changes lie in our future.

Horrific Debt

Fiat currencies allowed politicians to spend money without raising taxes. They did this by creating debt. I won’t spend time on the complex process involved, but every new Dollar, Pound or Euro that is created also creates more than its own value in debt. The currency is spent immediately but the associated debt can be pushed back indefinitely.

Faced with this situation, politicians asked their central bankers to create more and more money, which they quickly spent. Whether on social programs or wars, sensible or not, politicians spent money like there were no consequences attached.

But by spending in this way, the politicians also spent the tax receipts of future generations. Every new dollar requires the central bankers to sell more than a dollar’s worth of bonds, which are debt. This debt has been pushed endlessly toward the future… to the point where American children are now born $70,000 in debt, with five times that much promised.

All bonds are claims against future earnings. The children of the West have had decades of taxes pledged to bondholders they will never know, for money that was spent years before they were born. And, yes, it really is that bad.

The Welfare State

The debt of the Western states was spent on something, obviously, and the most notable destinations for that money were “welfare state” programs. This worked in the favor of politicians in the old, reliable way: by promising voters free stuff. And, more importantly, fiat currency allowed them to make good on those promises without raising taxes.

The most crucial fact about debt-funded welfare, however, is that it made it seem that politics could produce magic. Government was able to give massive streams of money to groups that placed ideals above reality. “Wishing makes it so” seemed to work. This corrupted the reasoning of millions of people and punished those who did hold doggedly to reason. And, this corrupting influence has continued for a long, long time.

Wall Street Contributed to the Damage

The people who work on Wall Street, and in the other financial capitals like London, tend to be aggressive and competitive. On top of that, the big financial firms place them into highly competitive situations like “the top producer gets a double bonus.” It should then be no surprise that such people would want to get in on the central banking game, and to create their own money from scratch.

Central banking need not be the only way to create money; any trusted debt can be used. Here is what Alexander Hamilton (who created central banking in the United States) had to say about this in his Report on Public Credit in 1790:

It is a well known fact, that in countries in which the national debt is properly funded, and an object of established confidence, it answers most of the purposes of money. Transfers of stock or public debt are therefore equivalent to payments in specie. [“Specie” was silver or gold.] In other words, stock, in the principal transactions of business, passes current as specie.

Hamilton’s formulation in plain words is this: Debt can be used as money, and people will accept it as money.

So, if the clever boys of Wall Street and Fleet Street couldn’t get in on the central banking game, they could nonetheless create a new version of it, by using new types of debt as money. (Though this was probably the result of many small decisions rather than one large one.)

What most people don’t know about Alexander Hamilton is that it wasn’t only American central banking that he created; he also created Wall Street. That his securities dealer descendants pursued an alternate way to create money seems almost fitting.

Wall Street’s new debt money is called derivatives. A derivative is a contract whose value is derived from other quantities. Derivatives have existed for a long time, but in the past dozen or so years the financial centers of the world have pumped out stunning amounts of them in a wide array of new configurations. All of these derivatives have their own value. It was one particular type of these financial products that seems to have started the crash of 2008.

I am not expert enough to reach any conclusion as to what specific fallout can be expected from this but $600 trillion dollars of synthetic monetary instruments have to be significant.

Indeed, it goes far beyond just money. The era of fiat currency capitalism has changed who we are in broad and disturbing ways.

[Editor’s Note: This article is an excerpt from our flagship newsletter Freeman’s Perspective – Issue #07: The Era of Fiat Currency Capitalism. If you liked it, consider taking a risk-free test drive. Not only will you gain immediate access to the rest of the issue (which shares 5 ways in which fiat currency has changed us for the worse), but you’ll also be able to enjoy the entire archive – more than 520 pages of research on topics of importance and inspiration to those looking for freedom in an unfree world. Plus valuable bonus reports and all new issues as well. Click here to learn more.]

Paul Rosenberg
FreemansPerspective.com

Government Against the People: It Gets Worse In the Late Stages

government against the peopleAll governments – communist, capitalist, fascist, monarchy, theocracy, whatever – survive on the skim. They take money from productive people, by force or threat of force. However prettied-up or justified this fact may be, it remains the central fact of rulership.

It’s a simple but disturbing truth: A late-stage state’s modus operandi must always be “government against the people” – an MO that is inherently predatory. And it’s not because the participants are all sociopaths (though many are).

At most times, governments try very hard to skim quietly, as with payroll taxes, where the producer’s money is taken away before he or she ever holds it in their hands. That’s also why tariffs were a traditional tax – the average person never saw it, and didn’t feel violated.

But when governments are massively over-extended, they lose the luxury of the quiet skim and become more aggressive. This is simply what happens in long-established, monopolistic institutions, like governments. They spend wildly to make themselves look good, then find they need more money. Not willing to cut their spending, they have two choices:

  1. Debasement of the currency, which they always do first. But this trick never works for very long, since people do engage their minds when conducting commerce and adjust their prices to counteract the debasement.
  2. Squeeze the producers dry, any way they can.

The Problem of Legitimacy

You may wonder why the governments don’t just cut their spending. That would seem an obvious choice. But they can’t cut spending without tarnishing their image as the mighty protector and the great fount of human compassion. People pay taxes willingly because of this high and mighty image; lose the image and you lose tax compliance.

Think about it: the governments of the West portray themselves as the saviors of the weak, the healers of the sick, and the fixers of every problem. But if they stop paying off the poor, there will be riots, and the producers will get hurt. No longer being protected, they may no longer consent to having their money taken away from them day by day.

Governments function on legitimacy more than force. If they lose their legitimacy, they are done. Therefore they cannot cut spending.

The Philosophy of “Government Against the People” at Work

Our Western civilization is at a late stage, just like Rome in the 5th century, or Greece in the 3rd and 4th centuries BC, or like the Egyptians and Sumerians before them. The same basic suite of problems engulfs them all at these stages, but we will use Rome as example, since that is the closest to us in both time and temperament.

Take a look at the two graphs below.

This one shows the Roman debasement, which involved mixing cheap metals (such as lead) into their silver coins:

government against the people

Now look at this one, showing the debasement of the dollar, which involved the creation of debt-based currency:

government against the people

 These are essentially the same chart, showing the same phenomenon.

What came next for Rome was the abuse of the producers.

Rome taxed in very different ways than modern governments, so I won’t take pages to describe it all, but I will give you a few highlights:

  • The local elites who were charged with collecting taxes couldn’t keep up with Rome’s demands and started running away. Rome couldn’t find anyone willing to accept these very high positions, no matter how much prestige was attached.
  • People adapted to avoid taxes, and Rome passed new laws in response. (This helped create the serfdom of the middle ages.)
  • People ran away to the Germanic and Frankish areas that surrounded Rome. To illustrate that fact, here’s a quote from a man named Salvian the Presbyter, from about 440 AD:

Thus, far and wide, they migrate either to the Goths or to the Bagaudae, or to other barbarians everywhere in power; yet they do not repent of having migrated. They prefer to live as freemen under an outward form of captivity, than as captives under the appearance of liberty. Therefore, the name of Roman citizens, at one time not only greatly valued, but dearly bought, is now repudiated and fled from, and it is almost considered not only base, but even deserving of abhorrence.

I could go on at length, but I think you get the picture. There were taxes on income, taxes on sales, arbitrary taxes, farm taxes, plain confiscations, and so on. If you had a friend close to the emperor, you had a chance to be ignored, but if not, you were mercilessly bled dry. (And even a friend with the emperor’s ear might not help.)

Your Choices Now

I think it’s quite clear that we’re in the same civilizational stage as late Rome. What happens to us won’t be identical, but it will be similar. The one great advantage we have now is information. If we pay attention, we are able to see what is happening before it hits. We can also adapt to avoid most of the consequences. We may not like it that we have to adapt repetitively, but history doesn’t give us many options – late stage mega-institutions will behave like late-stage mega-institutions.

And in the short term, the “Government against the People” philosophy is not going to disappear. In fact, it’s likely to get much worse. Our choice is to get out of the way, or not.

Paul Rosenberg
FreemansPerspective.com

[Originally published at Nestmann.com]

Why is it So Hard To Save Money Nowadays? The Problem With Thrift

why so hard to save money

Thrift is far more important than is commonly understood, and I will be explaining why in a future dispatch, but first we need to dispel the guilt many of us feel about the topic. There is actually a very good reason why it’s so hard to save money nowadays.

I think most of my readers will recognize the feeling I’m referring to: You read great books on success, such as The Richest Man in Babylon, you understand that saving at least 10% of your paycheck is necessary for success and you go out to do it… but obstacles keep getting in your way.

And then you feel bad. You feel that you have failed. You really don’t want to think about thrift any more.

I’m here to tell you that you were far too hard on yourself. It wasn’t your fault. (Okay, if you were out knocking back brews at a bar four times every week, that was your fault, but I don’t think many readers fall into that category.)

Thrift has been systematically strangled over the past century; it is now just barely possible. You’ve been blaming yourself for the sins of others. And remember, most of those success books were written before thrift was dead.

The Simple Reason it’s so Hard to Save Money in Today’s World…

When analyzing the economics of civilizations, the big question is this: Where does the surplus go?

In Greece, for example, surplus was generated by the labor of slaves, and went to the citizen (property owner), who tended to be a very good judge of where and how to use it best. In Western civilization, surplus was generally left in the hands of the person who earned it, who also tended to be a good judge of how best to use it.

Through the past hundred years of a declining Western civilization, the movement of surplus was radically transformed… it was skimmed away, in thicker and thicker layers, to growing governments in capital cities.

The result of this is the current situation: Essentially all surplus is skimmed away from the producer. This is accomplished with direct taxes, such as income taxes, as well as with the hidden tax of inflation, real estate taxes, sales taxes, and dozens of others. (On your phone bill, electric bill, gasoline, liquor, etc.)

In other words, it’s so hard to save money because the government takes so much of it away.

We are so used to this situation that we fail to remember that it was not always so. And that is why we feel guilty about not being able to save money. And we shouldn’t – a large army of state employees work every day to remove our surplus from our hands. Aside from acting especially stupidly, it really isn’t our fault.

How it was in 1890

If you’re like most of us, you had great-grandparents worked hard, saved their money, and improved their situation in life. It was normal to do so in the later 19th Century, even until the first World War. Great-grandfather got ahead; you work just as hard, but you don’t make much progress. And there is good reason for this: When Great-gramps worked hard, he kept the money.

In Grandpa’s day there was no income tax and no sales tax. (The government survived anyway.) There was no social security tax either, and – believe it or not – the streets were never full of starving old people. Families were able to take care of their own.

We have forgotten that it was once possible for an average person to accumulate money. Mechanics, carpenters, shop owners and people like them filled their bank accounts with gold and silver. It was common for people like bakers and carriage builders to make serious business loans and to retire comfortably, living off of their investments.

Making a Fortune

In those days before mass-taxation and fiat currency, young men would go out to make their fortune. (“Fortune” didn’t mean multiple-billions, it meant enough capital for the rest of your life.) Young men would go to where money was being made, work hard, cooperate with similar young men, learn everything they could from the older men, save, invest, learn how to succeed, then return home as a prosperous adult.

Not every young man went out to build a fortune, and some certainly failed, but these activities were not punished at the time – which made them much easier than they are today. Gathering a fortune was common enough that it was built into the mating strategy of the time. Many women would agree to marriage only after the young man had “made something of himself.” This mating strategy was legislated out of existence, which is too bad, because it was generally a far healthier strategy than what developed in its wake.

Here is a graph depicting the difference between you and your great-grandfather:

why so hard to save money

The top line shows how many years of living expenses your great-grandfather would have accumulated as a hard-working young man. The bottom line shows what you can save.

After working for five years, Great-gramps had seven years of living expenses in the bank. Doing the same things, you’d have less than two.

In the modern world, everyone’s fortune is taxed away as it is being formed, and what is saved is eroded by the creation of currency. Very few of us ever get beyond ‘escape velocity’ to accumulate money. In other words, we work all our lives, just to stay more or less even.
With surplus removed from individuals, all investment capital is forced through institutions. Money is not saved, it is obtained from banks. Finance has been centralized and removed from the hands of individuals.

In the 19th Century, productive people made loans; in the 20th Century, their children shuffled into banks and begged for loans.

Grandpa wasn’t really better than you.

The Worst Part

And the worst part of this was mass demoralization: People began to feel morally weak, which generally happened in the name of compassion.

Here’s how the trick worked:

  1. Your money is taken from you before it can accumulate, leaving you with barely enough to live a reasonable life.
  2. You have nothing left to help those who suffer unjustly; not because you don’t work, but because your surplus is continuously skimmed away.
  3. Politicians imply that you are a bad person for not wanting to help the poor.

Not only do the cultural elite make it almost impossible for you to give, but they insult you for it. Then, of course, they spend the money they skimmed from you on armies of government employees, who deliver a small fraction of your money to the poor.

Your great-grandparents were proud to help their friends and neighbors. They felt good about themselves, they felt compassion for others, and they were proud to make the world a better place. Being robbed of this heritage was far worse than the loss of surplus.

So, the question of why money is so hard to save has been answered. Now if only the steps from here were so simple.

Paul Rosenberg
FreemansPerspective.com

Featured image courtesy of Joyous!, wikipedia.org