Real Estate Insider: Two Detroit developments secure state financing; construction costs balloon. Kirk Pinho. Real estate.
Following a military coup in the United States, what would happen to the US and the rest of the world?
A military coup d’état is unlikely. But more likely than you think.
Over the last 60 years, there have been 459 coup attempts around the world. About 50% have been successful.
Storm clouds are gathering for the United States…
The U.S. political system is slowly spinning down. This started with the New Deal, and accelerated rapidly during the 1960s. Meanwhile, global capitalism is speeding up.
These tectonic forces will inevitably collide.
U.S. government finances deteriorate each year. This is occurring at the Federal, State, and Local levels. On the other hand, capitalists continue to grow stronger each year.
The biggest clash in the U.S. is not between Left and Right. The biggest battles are between the Capitalist Class and the Political Class.
Trump supporters on the Far Right have much in common with anti-globalists on the Far Left. Both camps are:
Both Far Left and Far Right groups:
- Rail against free trade.
- Seek political solutions to economic problems.
- Contain true believers.
- Want government to “fix” things.
On the other hand, the typical owner of a McDonald’s, UPS Store, or 7–11 is a capitalist. So are many stock and real estate investors. They are not populists.
Capitalists are not true believers. They wish politicians would pursue lengthy vacations or cryogenic stasis. The longer, the better.
They don’t want the government to fix anything. Capitalists want the government to leave them alone.
Tens of millions of U.S. citizens have no investments. 15% have a negative net worth with their liabilities exceeding their assets. For the bottom 30% of the population, net worth ranges from negative to +$8,000.
Each day in America: 11,000 babies are born and 7,000 people die.
1,600 of these 7,000 die in debt. After 80 years, they leave this world with a lower net worth than they had at birth.
Each day, 10,000 new people retire at age 65 with full government benefits. That will occur 365 days each year. Forever. A tsunami of additional debt is coming our way.
This is our current situation.
If government debt is assigned to citizens pro rata, the majority of Americans are in debt.
Total debt per American family is $793,000. If unfunded commitments are totaled, the U.S. owes more money than all the other 195 nations combined.
We are in debt up to our eyeballs.
If you believe Donald or Hillary will change the course of events, then you haven’t been paying attention. There are far bigger historical forces at work.
This is a Battle Royale. A grudge match. This is one of the few things Karl Marx got right. His magnum opus was Das Kapital. Not Das Politik.
Consider these anecdotes:
- George Bush and Bill Clinton were political arch-enemies. Now they are great friends.
- A Republican now campaigns against free trade, while a Democrat gives $300,000 speeches to Goldman Sachs.
- President Obama (unaware his microphone is hot) calmly mentions to Mr. Putin: Announcements now would cause problems. After the election, I can be more open.
- President Bush’s cabinet members and press secretary observed discussions for the Iraq War before 9–11 terrorists were identified.
- In the Wikileaks e-mails of Hillary, she makes it clear her real position on Wall Street is the obverse of her public position.
Retail politics is not what it appears to be.
The third rail of American politics is redistribution from the Top 30% to the Bottom 30%. That third rail is deadly. It is more complicated than taking from the rich and giving to the poor. It is also taking from the Capitalist Class and giving to the Political Class.
Politicians lie daily. Relentlessly. They need Capitalists to fund their campaigns, and they need Populists to garner votes. To retain power, politicians have no choice but to lie. Any politician who tells the truth will be zapped—either by Capitalist donors or Political voters.
Side Note: Studies have found politicians and used car dealers live longer than the average American. Experimenters wrote: These subjects are less stressed by moral ambiguity.
Despite all the campaign speeches, debates, and lies, politics spins in tiny circles. That’s why Capital supersedes Politics in the long run. Over time…
Money always wins.
When the British Empire went broke, Winston Churchill could not save it. When the French Empire was bankrupt, Napoleon could not bring it back to life.
Spanish Hapsburgs extracted silver from the New World. They hit the Mega Trillion Lottery. But they spent the windfall like drunk sailors on shore leave—which they were.
By 1570, poor people in Spain were rich thanks to government entitlements. But today, poor people in Spain are poor.
Debt killed the Spanish Empire. Over time, they spent the original trillions…and then they kept spending. Their Empire began spinning down long before the Battle of Trafalgar.
Most people believe Empires exist due to Noble Ideals, Constitutions, Politics, Laws, Geography, Resources, or Military Power. Karl Marx knew better.
Empires run on cash.
Money = Power
Super Money = Superpower
It also works in reverse. Debt killed the Roman Empire, Islamic Empire, Portuguese Empire, French Empire, Ottoman Empire, British Empire, et al.
This is not new. Cash is King predates the Babylonians, Egyptians, and Assyrians. Historically speaking, Cash is King predates both cash and kings.
Consider the Soviet Empire. The USSR never lost a world war. Their Navy was never sunk. Their vast natural resources were not squandered. The KGB never liquidated the Politburo.
The Soviet collapse was more pedestrian. They went broke.
By the 1980s, expenditures exceeded receipts. Debt skyrocketed. Internal conflicts flared. Dasvidaniya, Comrade.
Someday, debt will kill the U.S. Empire.
If our military takes a more pronounced role, it will not occur because hothead generals seize power. It will occur because Americans lose faith in “democracy” and demand the military restore order.
2,300 years ago, Plato wrote: All democracies end in tyranny.
Plato believed democracies decline when citizens vote themselves benefits and loot the public treasury. Two millennia of history have proven Plato prescient.
200 years after Plato, Gaius Gracchus in Rome began Annona bread subsidies. Citizens were thankful for the freebie in 123 B.C. But within two years, farmer revolts in Sicily led to skyrocketing grain prices. Romans said: The government must pay all costs. Not us.
So much for gratitude.
Soon, Roman politicians competed for power by promising ever-greater handouts to the masses. Emperors expanded the dole to include bread and circuses. Roman leaders eventually wised up, but it was too late. Julius Caesar and Augustus Caesar both worried that freebies could not be stopped without sparking street riots.
Side Note: In the Spanish Empire, the term bread and circuses was replaced by bread and bulls. But the concept of unearned handouts is the same, Empire to Empire.
Roman plebeians demanded government gifts decade after decade. Angry protests were routine. Citizens wanted continual increases in State benefits. Sound familiar?
Each Empire has a slightly different tipping point — a point of cascading failure. The danger is most acute when there are more citizens taking than working.
This character flaw is not unique to Romans, Spaniards, and Americans. All Empires suffer these internal battles over resources. Why? Because human nature never changes.
Government handouts end badly. The problem is not politics, but mathematics. Populists want more. Always more. But there is never enough money. There never can be enough money.
At the peak of the Roman Empire, Rome had a population of 1 million people. By the time the Empire fell, the population of Rome had decreased 95% to 50,000.
Where Emperors once paraded with a huge entourage and Praetorian Guard, wild goats now munched on overgrown weeds. There were few humans to bother them. By 1870, the population had slowly grown to 200,000 — still 80% below the peak.
In the long run: Money always wins.
Is that outcome good or evil? Personal opinions are highly correlated with personal assets. But no personal opinion can alter historical facts: Debt is a killer.
Karl Marx got it right.
For 4,000 years, the progression of empires has followed the same path.
First, the treasury is emptied. Then, taxes are raised. Then, money is borrowed from citizens. Then, from bankers. Then, from foreigners.
Next, government debases the currency.
The Romans clipped coins. We Americans print money. Same thing.
More money is borrowed, and often dispensed within days. It is usually targeted to politically important groups.
Almost nothing is spent on long-term investment. Most of the borrowed money fuels short-term consumption by the masses. After awhile, huge sums must be borrowed just to pay compound interest.
A vicious debt cycle has been set in motion. Those who receive government benefits — whether in Rome, Spain, America, or somewhere else — simply do not care.
They worry about Grandma’s Medicare. Not their country’s future. In the next phase, politicians plot to confiscate private assets. They devise a clever name like …
Save the Dolphins Asset Redeployment Act
The Capitalists are not fooled. Rich people are not stupid. The wealthy start plotting themselves, usually in secret. Some plot to flee with their capital, others plot a revolt.
Politicians announce even higher taxes and capital controls. But the Capitalists are wily. Using lawyers, technology, and suitcases, capital leaks out to more friendly jurisdictions.
As capital leaves, economic activity decreases. Some workers lose their jobs and become welfare recipients. Deficit spending increases. Finally, desperate politicians are forced to reduce benefits and freebies for the masses. That’s when the shit hits the fan.
The military observes this Battle Royale from the sidelines, silently contemptuous of both lying politicians and crooked capitalists. For those who have dedicated their lives to Duty, Honor, Country, it’s like watching a poisonous snake battle a rabid mongoose.
When hungry people break into your home or rob your store, lofty political ideals are no longer your top concern. Hobbes argued: Safety and stability are the highest priorities of the State.
If we ever get to the point of a military coup d’etat, most Americans will be relieved. Pentagon specialists have already written Ops Plans for most contingencies.
It is not because they are planning a takeover. They are not. It is because they plan for every possibility.
If Canada invades Mexico, there’s a dusty Ops Plan somewhere in the Pentagon basement.
In 1974, General Alexander Haig sent a FLASH message to top military commanders. It instructed them to disregard any orders from President Nixon to:
- Mobilize military forces to take control of Congress
- Attack the USSR or any other foreign power
Generals and Admirals dedicate their entire lives to defending America. They will prevent any politician — even a President — from destroying our country.
Most citizens have never interacted with a Flag Officer. The public is unfamiliar with the military’s jaded view of politicians and bureaucrats. This is probably for the best.
Ben Stein is an economist and movie star. While teaching Economics at the University of Chicago, his father established Stein’s Law: If something cannot go on forever, it won’t.
Our Generals and Admirals know we will reach a crisis point. It is now inevitable. Average Americans are too emotional to see the truth. For 25 years, global futurists and scenario planners at the 3-letter agencies in Washington have analyzed these dangers.
Back in 1940, actuaries knew FDR’s programs were creating a demographic time bomb. But politicians pay no attention to the actual numbers. Why would they pay attention?
Asking a politician to stop spending … is like asking a shark to stop swimming.
Admiral Mike Mullen, General James Mattis, and others have made blunt comments regarding our financial spiral. Our out-of-control debt is now a national security issue.
[Update: Admiral Mullen retired as Chairman of the Joint Chiefs of Staff. General Mattis retired as Secretary of Defense.]
Almost all Flag Officers hold a Masters or PhD.
Admiral Mullen graduated from Harvard. The current Chairman of the Joint Chiefs, General Dunford, holds advanced degrees from both Georgetown and Tufts. General Seng received her Masters from MIT and PhD from Stanford.
Senior officers are better educated than the politicians who issue their orders.
Military leaders have a deep understanding of political economy and history. They know any nation with deteriorating finances is vulnerable. As debt increases, so does risk. Threats multiply quickly on the back side of the curve.
The U.S. has detailed procedures for Continuity of Government. The most sensitive COG annexes require a Top Secret (SCI) clearance. Use your imagination.
Since 1789, every service member has taken this oath: I do solemnly swear… to protect against all enemies, foreign and domestic. So help me God.
Over the last 80 years, the U.S. has developed a redistribution ethos — a culture of gimme. In 1935, receiving unearned money from the government was considered shameful.
Back then, government payments were indicative of personal failure.
But today, tens of millions boldly seek bigger monthly payments.
I demand my rights!
Mass culture has changed individual thinking — in Rome, Spain, and America. If a future government violates the gimme expectations of Americans, many will become angry. Angry people are dangerous. Mobs of angry people are very dangerous.
The Posse Comitatus Act of 1878 forbids the use of the military against civilians inside the United States. But there are many loopholes. This Act will be bypassed if there is widespread civil unrest.
Los Angeles 1992
54 people were killed during riots after the Rodney King verdict. Property damage was $775 million. The Posse Comitatus Act and Insurrection Act of 1807 were quietly ignored. The California National Guard, Army Rangers, and Marines restored order.
Some believe the Mayor incited the violence with his populist comments on the verdict. While the military patrolled with loaded weapons, His Honor the Mayor continued making populist statements. After all, the rioters were his longtime political supporters. Not U.S. Marines.
That’s not Political Class. That’s Political Low Class.
Similarly, the Capitalists whose stores were looted and burned were not a political priority. When wealthy Korean, Indian, and Chinese shopkeepers lost their life savings, angry looters did not care. Neither did populist politicians.
Yet the movie stars in Beverly Hills were never in danger. Neither were the Capitalists in Bellaire.
L.A.P.D. moved its officers from poor areas to wealthy areas. Marx would say: Of course.
At first, rioters assumed the Rules of Engagement for civilian police and military police were identical. That was a terminal error for some criminals. If you attack Marines or MPs, you will not be going to jail.
The events in L.A. were racial. But Marx and Hegel believed the most fundamental battles are economic — not racial, not ethnic, not religious.
The anger of black thugs in L.A. mimics the anger of white rednecks in the Deep South. And the anger of Appalachian poor mimics that of sophisticates in Seattle and New York.
It’s not about race, ethnicity, religion, social class, or politics. It’s all about the Benjamins. Empires crack due to internal competition for resources. Debt exacerbates the fractures.
Some economic transitions are orderly, some are ugly.
American “preppers” have survival manuals, automatic weapons, electric generators, years of food, and large stacks of silver and gold.
To us, they seem crazy. They may not seem crazy in the future.
Sir John Glubb believed empires (democratic/republican/representative) become unstable beyond 250 years. Here are his stages of Empire.
- The Age of Pioneers
- The Age of Conquest
- The Age of Commerce
- The Age of Affluence
- The Age of Intellectualism
- The Age of Decadence
In my opinion, we will enter stage 6 within 50 years. Some believe we are already there.
China and India are still in stage 2 or stage 3.
Sir John calculated these lifespans in his books.
231 years Greek Empire
207 years Roman Republic
250 years Ottoman Empire
234 years Romanov Russian Empire
250 years British Empire
265 years United States
There are many common themes among these societies. Debt and devaluation of the currency are the most obvious. Most Empires disintegrate from within.
From 1880–1900, London newspapers were filled with stories about whether the British Empire might someday end. Most Englishmen said: Impossible!
Today those same stories appear in U.S. newspapers.
Empire disintegration does not mean the society ceases to exist. The Spanish, French, and British settled into gracious “retirement” after ruling the world. They still exert enormous influence beyond their borders.
On the other hand, the Russians have been uncomfortable with their new role in the world. This intensified following bankruptcies in 1991 and 1998. Russians are trying to find their niche. Many there are still conflicted about the breakup of the U.S.S.R.
Russians are proud, but enigmatic. They recently sent their only carrier (Admiral Kuznetzov) into British waters and down the English Channel.
Navy corvettes from Norway, Spain, and Great Britain shadowed the Russian flagship.
Sonar was not required. Kuznetzov belches smoke like a 1972 Ford Pinto.
Mr. Putin is a KGB-trained genius. He and his spooks once devised a secret plan to crash the U.S. dollar in conjunction with the Chinese. The Chinese replied not yet.
Mr. Putin understands the subtleties of global capitalism. The debt of Russia is de minimis compared to that of the United States.
All U.S. rivals analyze the finances of our government and corporations. They are searching for vulnerabilities to exploit.
65% of officers for the Russian SVR and Chinese MSS engage in economic analysis or espionage.
These Chinese Army officers were indicted for economic espionage.
This Chinese spy ring below (Wang Lei, Wang Hongwei, Ye Jian, Lin Yong, Shaoming Li) engaged in economic spying and theft.
Two were busted on their return flight to Beijing. FBI agents boarded the plane just prior to takeoff and arrested them.
[C’mon, fellas. Where is your creativity? James Bond would never steal secrets using Orville Redenbacher Microwave Popcorn.]
Other convicted spies include: Larry Wu-Tai Chin, Katrina Leung, Peter Lee, Chi Mak, Moo Ko-Suen, Fei Ye, Ming Zhong, and Hua Jun Zhao.
Some Chinese and Russian spies have been jailed, some deported, and some “turned” by our counterintelligence people.
Mo Hailong was just sentenced to U.S. Federal prison. FBI agents caught Mo and his stooges Red–handed.
[That was gratuitous. I hate myself right now.]
Of all the Chinese spies, Shaoming Li took the best photograph.
Perhaps he attended the Hilton School of Espionage.
The Russians have more spies in the U.S. today than during the Cold War. Their primary taskings are industrial spying and theft of commercial secrets. Most famous is Анна Васильевна Кущенко (Anna Vasilyevna Kushchenko).
To her neighbors, she was known as Anna Chapman — an apparently shy young woman. At gatherings, she would discuss her love of cooking.
Ms. Chapman had plenty of cash and lots of free time. She spent hours shopping and attending parties. She dined with two billionaires, multiple millionaires, and one cryptologic linguist.
She quickly initiated a relationship with the latter. He thought: Wow! I am a lucky guy. It’s difficult to find a nice girl with wholesome values.
Cryptologists don’t get out much.
Anna even started a small business, and it boomed. Former Communists make the best Capitalists.
As it turned out, Ms. Kushchenko was neither shy nor a good cook. But she was very proficient at pulse transmissions from inside Starbucks. An unmarked vehicle on the street would collect the data, and drive on.
Apparently, not all Russian diplomats at the U.N. are actually diplomats. Who knew?
When instructed to buy a “burner” cell phone, Ms. Kushchenko did so promptly. In her haste, she discarded the receipt into a trash can in front of the Verizon store.
U.S. counterintelligence agents quickly retrieved the receipt, listened to her calls, and busted the entire spy network. Ten Russian “sleeper agents” were arrested.
Mr. Putin gave her a bear hug back in Moscow. Lyudmila Putin skipped the homecoming.
Jerry Chun Shing Lee is a naturalized U.S. citizen and former CIA officer. He sold valuable U.S. secrets to the Chinese. The Chinese, in turn, forwarded some of those secrets to the Russians.
Twelve U.S. agents in both China and Russia were interrogated and executed. One was dragged out of his cubicle and shot as co-workers watched. No trial required.
Lee also had a side gig. He would tip off the Chinese and North Koreans about private detectives investigating smuggling. These detectives were either arrested or disappeared.
Some believe Lee should be shot as a traitor. But I have a better recommendation. Let’s shoot the dumbass at CIA who recruited him.
Corporations embrace the farce of political correctness. But military and intelligence agencies operate in the real world. Life and death. They cannot allow political correctness to impede their mission.
China and Russia are playing for keeps. With the zeal of reformed smokers, former Reds now spend their time hustling Green.
The United States is more threatened by financial competitors than ICBMs. People who focus on Politics — those depending upon Hillary or Donald — are amateurs.
Politicians come and go. Presidents and Prime Ministers are here today, gone tomorrow. But Capital compounds. So does debt. Year after year, decade after decade.
Money always wins.
Is there a way to fix our country? Yes! We must stop borrowing money we can never repay. Every Empire has the same long-term solution:
We must live within our means.
Will the Political Class agree we must live within our means and follow a budget? Not a chance. Will the Capitalists agree to ever-increasing benefits for the Political Class? Not a chance.
That angry standoff forces America into ever-deepening debt. The Ship of State slowly sinks into the mud — just like so many great Empires before us.
Imagine a brutally honest or religiously devout candidate for President:
“We Americans cannot consume more than we produce. We must pay our monthly bills. We cannot charge trillions more on the national Visa and MasterCard.
We must control government spending, even if this hurts welfare recipients and retirees. We are honorable people. We must live within our means, just like everyone else.”
Eight years ago, President Obama promised to cut our annual deficit in half. In actuality, the national debt soared $8 trillion. Mr. Obama racked up more debt in a single year than the U.S. accumulated in our first 200 years combined. Whoops.
But it gets worse. The current candidates are not even pretending to reduce the national debt. At least Mr. Obama said pleasant things. Give the President credit for lying well.
Mr. Trump’s announced plans will lead to $3.6 trillion in additional debt. Ms. Clinton’s plans will lead to $3.5 trillion. The actual numbers will obviously be much higher. This election forces us to choose between the Titanic and the Lusitania.
There are two Americas.
Group 1 of 2: The Capitalist Class
This first group is comprised of gold collar workers, white collar workers, investors, lifetime savers, and blue collar workers who own their own business.
These people work long hours, 6 days a week. Compared to most of the 7.1 billion people on Earth, they make enormous amounts of money. These people avoid taking vacations and are often stressed out. But they have money in the bank. Some have billions in the bank.
They own real estate and other investments. Their children grow up with every possible advantage. Their lifestyle is luxurious compared to most.
Whatever happens over the next 50 years, these people will be fine. They know how to compete and win anywhere in the world. Despite the stress and lack of sleep, these people are happy.
American movies and television focus on the luxurious lifestyle of Group 1. Our popular culture is a primary export to other nations.
People around the world exert enormous effort to become U.S. citizens. America is often their first and only choice for new citizenship.
But we Americans should temper our delusions of grandeur. Newcomers to the U.S. aspire to Group 1 wealth. Not America.
No one travels thousands of miles to experience U.S. democracy. Foreigners do not gaze in awe at our well-dressed and slightly-crooked politicians.
Immigrants move to the U.S. for opportunity. Not politics. They move here to become Capitalists.
They move here to become filthy rich.
It’s been that way for 250 years.
Group 2 of 2: The Political Class
This second group contains true believers in the political system. This group is mainly comprised of Populists. These people work less and make less. They often live paycheck to paycheck. Some are highly educated, some poorly educated.
Some Populists have been discriminated against, some have health problems, some want “balanced” lives, and some are just plain lazy. Some suffer from bad luck. More suffer from bad choices.
This group wants the U.S. government to make things “fair.” They see Politics as a way to bring equality and justice into American society. From a philosophical point of view, this group has many strong arguments. They are often idealists, and they are usually right.
But from a practical point of view, this group is in big trouble. They are fighting both history and destiny. These people will not be fine over the next 50 years. They can barely compete now, even with all the built-in advantages of the American system.
As future globalization forces them to compete with Indians, Chinese, Russians, etc., many of these Americans will sink. As Marx predicted, capitalism is becoming hyper-capitalism.
Harvard University conducted a poll in April 2016. 51% of millennials aged 18–29 agreed with this statement: I do not support capitalism.
This is an astounding result for a country built upon capitalism. On the other hand, a change in values is common in late-stage Empires.
Populists dislike global competition, international trade, and hyper-capitalism. They do not want to study hard for 4–8 additional years. They do not want to work long hours under great stress. They do not want to take laptops and paperwork with them on vacation.
“If government must tax Capitalists 73% or enact disastrous trade barriers, so be it.
If exploding government debt results in more money for my family, then let’s borrow all we can. When something bad happens in the future, we can stop borrowing then. I want a balanced and happy lifestyle now. Someone owes me that.
The government is my ticket to the Good Life. I fervently believe in Politics and Equality. Not global competition.
Additional education? Long work hours? Acute stress?
That’s for other people. Not me!”
Who would possibly object to people over profit?
Plato would object. So would Aristotle. Both believed democracy was parekbaino (deviant and perverse) because it leads to bankruptcy of the State.
2,300 years of historical data support their view. Democracies go bankrupt when too much is confiscated from workers and given to takers.
People Over Profit = Expropriation and Redistribution
Of course, there are many different ways to bankrupt an Empire. Possible paths include:
- military defeats
- diplomatic errors
- civil wars
- ecological problems
- ethnic uprisings
- class divisions
- natural catastrophes
- imperial overstretch
But citizens cannot know ex ante if these problems are temporary or fatal. There are too many variables to predict the trajectory of an Empire — with one notable exception.
There is one guaranteed path to disaster:
Emptying the public treasury followed by exploding debt.
True to form, today’s populists (on both the Left and Right) want happy and balanced lives…and they want the US government to help pay for it. That really means they want their fellow citizens to help pay for it. Just as Plato and Aristotle predicted.
When the expectations of populists are disappointed, they get angry and take to the streets.
Observers often equate populism with Leftist movements such as Occupy Wall Street. But there are also Right-leaning populists, such as AARP, trade warriors, tariff-seekers, and those who want to ban all immigration.
Populists on both the Left and Right seek government intervention to advance their interests against the Capitalists. Populists are not concerned about government debt or their country’s future — as long as their advocacy group gets what it wants. This focus on narrow self-interest is precisely what offended Plato and Aristotle.
When populist demonstrations become violent, the military intervenes.
Could the military also be used against Capitalists? Yes. But this is rare. Historically, capitalists are more likely to take their capital and flee.
Pudgy bankers have no interest in fighting Marines.
Capitalist cocktails are Stolichnaya. Not Molotov.
On both the political Left and Right, populists engage in fantasy. They mistakenly believe Capitalism can be stopped by voting. Politicians offer sweet lies, and populists gobble it up:
Vote for me. I’ll protect your job, even if you are uncompetitive. Plus, I’ll boost your pay!
It is a sham. A con job. A brazen fabrication.
Global Capitalism cannot be stopped by voters, politicians, or protesters. It would be easier to stop a tsunami with a raincoat.
When it comes to global competition, we have 5,000 years of anecdotal data and 2,000 years of quantitative data. There is no free lunch. Not here, not anywhere.
We Americans must compete.
Roman politicians and American politicians are similar. But Roman capitalists and American capitalists are different.
In Rome, capital was physical property. In America, most liquid wealth is digital and intellectual. That makes it portable. The stocks of GE, IBM, and Honeywell are worth the same in New York, Zurich, Singapore, and Hong Kong. Same thing for bonds. Portable.
At first glance, digital wealth seems like a great thing. American entrepreneurs and capitalists have created enormous value-added (and huge riches) around the world. Google, Amazon, Apple, and Facebook are just a few examples.
But look deeper. If populist revolts start in Detroit, Baltimore, or San Francisco, the government cannot dispatch its Praetorian Guard to confiscate Big Money.
Modern capital is not held in estates, vineyards, and other physical property.
If things get bad in the U.S., modern wealth (financial assets) will flee in a blinding flash of electrons. Even the military would be powerless to stop it. America needs that capital.
There is an invisible cap on tax rates today. There was no cap in ancient Rome. The emperors could confiscate everything you owned.
If tax rates are doubled tomorrow, Google multi-millionaires won’t be sticking around Silicon Valley or the USA. Gold collar workers are in demand worldwide. They will not remain in any locale which assesses 73% tax rates.
This 73% rate was suggested by Paul Krugman and Thomas Piketty. How can two wunderkind be so smart and yet so dumb?
In Great Britain in 1967, the top tax rate was 98%. 83% base rate + 15% surtax = 98%
The wealthy kept £2 out of every £100 earned. 98 of 100 pounds went to the politicians. Wealthy Brits failed to maintain a stiff upper lip. The Beatles were so irritated they stopped singing about love. Instead, they wrote a hit song about taxes. Then, they left the U.K.
We have census data from that period. Some of the smartest people in England left. Many never moved back. It was a huge Brain Drain in pursuit of “equality.”
In older Empires, the Political Class could easily threaten the Capitalist Class using the military. All governments (then and now) enforce a monopoly on taxation, imprisonment, and the use of force against individuals. But for modern empires like the U.S., it becomes more difficult to tax liquid assets with each passing year.
Inequality is a genuine problem. But many proposed solutions simply will not work. Politicians make bombastic speeches and voters applaud loudly. But that’s about it, folks.
If the U.S. tries to screw rich people, the wealthy will send their capital out of the country. Just like sending their kids to boarding school in Switzerland.
And if populists really go crazy, rich people will leave the United States. And they will take their Big Brains and their Big Assets with them.
Voters want to soak the rich. But that is easier said than done. Liquid capital can flow overseas at the touch of a button. On the other hand, taxes on real estate have not changed much since Roman times. After all, you cannot easily move a 40-room mansion overseas. Similarly, restaurants, shopping malls, grocery stores, oil wells, coal mines, dairy farms, and hydroelectric dams are not going anywhere.
Prediction: over the next 50 years, expect to see taxes on U.S. real estate rise and taxes on financial assets decline. Politicians cannot tax what the County Sheriff cannot impound.
Clearly, this is not fair. But this is the real world. The global system runs on Capital Flows. Not Ethics. Not Politics. Not Equality.
So what does this have to do with the military? Just this: many Americans have a notion of “fairness” which can never be achieved except in populist daydreams.
When voters are finally told the truth — that we must encourage and reduce taxes on Capital for the long-term good of our country — Regular Joes will become very unhappy. If they are simultaneously out of work or having trouble providing for their families, that simmering anger could lead to civil disorder.
No one likes arrogant billionaires. Egomaniacs! But we need them…and their money.
The gathering storm for the U.S. is still far away — on the distant horizon. But it is coming. Government debt never goes away. It just gets bigger and bigger.
Our problem is not unique. Other Superpowers have been in this predicament before us. Unlike them, we Americans still have a chance to solve our problems.
We are rapidly running out of time. The vicious cycle of debt has already started to accelerate. $8 trillion in 8 years — that is unprecedented in all human history.
If we do not live within our means, then we will face crisis after crisis. It is inescapable. The United States is powerful. But worldwide capital flows are more powerful.
“Retirement” could be rough for us. The American national character is not suited to being a gracious loser. But we may have no choice. If we continue our out-of-control spending, we will be forced to join the Brits, French, and Spanish in the Superpower Emeritus Club.
The probabilities of a military coup d’état within the U.S. are still very small. But if economic chaos becomes acute, Americans will be grateful the military is prepared.
Das Kapital, Marx
The Republic, Plato
Why Nations Fail, Acemoglu and Robinson
Colossus: The Rise and Fall of the American Empire, Ferguson
Empire: Rise and Demise of the British Order with Lessons for Global Power, Ferguson
Civilization: The Six Killer Apps of Western Power, Ferguson
The Ascent of Money, Ferguson
From Hegel to Marx, Hook
21 Trends for the 21st Century, G. Marx
End of the Free Market: Who Wins the War Between States and Corporations, Bremmer
Capitalism and Freedom, Friedman
Sinking Nation: Unraveling the Complexities of U.S. Debt, Marshall
Suicide of a Superpower, Buchanan
Coup d’ État: A Practical Handbook, Luttwak
Debt and Disorder: International Instability and U.S. Imperial Decline, MacEwan
Global Debt Crisis: U.S. and European Federalism, Peterson and Nadler
The Rise of the West, McNeill
Debt: The First 5000 Years, Graeber
Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor, Landes
Books by Sir John Glubb
- The Fate of Empires
- The Course of Empire
- The Story of the Arab Legion
- A Soldier with the Arabs
- Britain and the Arabs: A Study of Fifty Years, 1908 to 1958
- War in the Desert: An R.A.F. Frontier Campaign
- The Great Arab Conquests
- The Empire of the Arabs
- The Yezidis, Sulubba, and Other Tribes of Iraq and Adjacent Regions
- The Lost Centuries: From the Muslim Empires to the Renaissance of Europe
- Syria, Lebanon and Jordan
- The Middle East Crisis: A Personal Interpretation
- A Short History of the Arab Peoples
- The Life and Times of Muhammad
- Peace in the Holy Land: An Historical Analysis of the Palestine Problem
- Soldiers of Fortune: The Story of the Mamlukes
- The Way of Love: Lessons from a Long Life
- Haroon Al Rasheed and the Great Abbasids
- Into Battle: A Soldier’s Diary of the Great War
- Arabian Adventures: Ten Years of Joyful Service
- The Changing Scenes of Life: An Autobiography
Bad Books – Fuzzy Opinion from Fuzzy Academics
Capital in the Twenty First Century, Piketty and Goldhammer
Peddling Prosperity, Krugman
The Limits to Growth: A Report to the Club of Rome, Meadows and Randers
The Population Bomb, Ehrlich
Guns, Germs, and Steel: The Fates of Human Societies, Diamond
The Rise and Fall of the Great Powers, Kennedy
Saving Capitalism, Reich
Political Order and Political Decay, Fukuyama