FREE: JOIN 100,000+ READERS   

≡ Menu
SOVEREIGN MAN

Scam complete: the US government takes a page from Diocletian’s book…

diocletian_wikipedia

January 25, 2013
Guayaquil, Ecuador

Early in the 4th century, Emperor Diocletian issued an infamous decree to control spiraling wages and prices in the rapidly deteriorating Roman Empire.

As part of his edict, Diocletian commanded that any merchant or customer caught violating the new price structures would be put to death.

This is an important lesson from history, and a trend that has been repeated numerous times. When nations are in terminal economic decline, governments will stop at nothing to keep the party going just a little bit longer.

I thought of Diocletian’s desperation a few days ago when I read about the recent sanctions imposed on US rating agency Egan-Jones. It’s a similar story–

For years, major rating agencies (S&P, Moody’s, and Fitch) have championed the outright fraud of our financial system by pinning pristine credit ratings on insolvent governments and their heavily inflated currencies.

In doing so, the rating agencies are effectively claiming that the greatest debtor that has ever existed in the history of the world is nearly ‘risk-free’.

Clearly this is a ridiculous assertion. With a debt level over 100% of GDP, the US is so broke that the government must borrow money just to pay interest on the money it’s already borrowed. They’ve lost over a trillion dollars a year since 2008, yet they still spend money on things like drones and body scanners. It’s crazy.

As with any good scam, the government must maintain public confidence.  The moment someone says ‘the Emperor has no clothes,’ that shallow, fragile confidence will come crashing down and expose the scam. Dissent must be vigorously and swiftly pursued.

So when S&P finally downgraded the US one notch in August 2011, the SEC and Justice Department announced that S&P was under investigation, just two weeks later.

Egan-Jones, a smaller rating agency, has been even more aggressive, downgrading the US credit rating three times in 18 months. And while the federal government may not have imposed Diocletian’s death penalty, they are just as willing to squash dissent.

In a country that churns out thousands of pages of new regulations each week, it’s easy to find a reason to go after someone. As you read this letter, in fact, you are probably in violation of at least a dozen regulatory offenses.

In the case of Egan-Jones, the SEC brought administrative action against the agency within two weeks of their second downgrade. And a few days ago, the case was settled.

I’m sure you have already guessed the ending: Egan-Jones is banned from for the next 18 months from rating US government debt. They’ve effectively been silenced from telling the truth.

The lesson here is obvious. Just as in Roman times, bankrupt nations today will stop at nothing to keep up the scam just a little bit longer.

Given that all this is happening at a time when Congress is voting to suspend the debt ceiling entirely, these actions are the clearest sign yet of just how desperate the government has become.

Could the warning signs be any more obvious?

About the author: Simon Black is an international investor, entrepreneur, permanent traveler, free man, and founder of Sovereign Man. His free daily e-letter and crash course is about using the experiences from his life and travels to help you achieve more freedom.

Want more stuff like this?

Our goal is simple: To help you achieve personal liberty and financial prosperity no matter what happens. Click below to join our community of 100,000+ sovereign individuals.

Click here to receive our free intelligence

Comments on this entry are closed.

  • Pacioli

    “They’ve lost over a trillion dollars a year since 2008, yet they still spend money on things like drones and body scanners. It’s crazy.”

    Actually, what’s crazy is pretending that the finances of a sovereign currency issuer are in any way comparable to those of a private household or company.

    • Ben

      Well actually, it is just like a private company in the long run. In the short run they have more tools and options at their disposal to manipulate cashflows, but at the end of the day, money is still fundamentally just a representation of real tangible value, so any increase in the supply of money to the government to pay debts etc, will only debase their currency’s value (effectively this is like a tax on everyone else who holds the same currency). Now, it is true that large amounts of US dollars are held by international organizations, and that printing money will effectively ‘steal back value’ from these holders by debasing their value- for example say there was 50 trillion USD dollars total in the world, and a sum of that was owned by internationals- the government could produce 50 trillion new dollars and claw back half the ‘total value’ of the money by possessing 50% of it, but this only works to a certain point, before the excessive inflation makes the value inefficient for international transactions. This would then cause the USD’s comparative value to plummet, decreasing the amount of overseas ‘spending power’ the dollar has. Eventually, America becomes the new China, as labour-intensive work demand in America increases due to the new availability of cheap labour for other countries due to the weak USD. Realistically, the high-education rate /quality will typically mean that the labour includes a large bulk of ‘professional’ jobs such as graphic design, coders etc- but they are still ‘working for’ the rest of the world.

      • Pacioli

        @ Ben –

        Absolutely wrong.

        You have no understanding of (or are actively lying about) the mechanical realities of the US monetary system’s construct.

        There is no other possible explanation for how one could arrive at the disastrously mistaken conclusions that you have put forth.

      • Ben

        Ok, Would you like to explain how and where what i said was wrong, with quotes? I have a degree in this, what’s your qualification?

      • $12257016

        Criminology is my guess. Drop your pants!

      • College professor

        dp

      • Ben

        I know its probably an emotional issue for someone like you pacioli, but try to imagine it as basic supply and demand; ‘actual value’ and ‘demand’ are synonymous.

        e.g if you were starving to death, there was no food anywhere around that you could get to except for 1 man with a bananna, and all you had was a rolex, would you trade the rolex for a banana? hell yes, because the actual value of 1 bananna to you is massive as you have a low supply of food and the elasticity of supply/demand in that economy is high. If there was many rolex watches everywhere that are easily obtainable, and not much food, then nobody would trade their food for a rolex watch. Scarcity and actual value go hand in hand.

        If, however you were in the middle of new york with ample food and a banana seller asked to trade your rolex watch for a banana, what would you say? you would tell him to fuck right off, because you have many food choices (high supply) and therefor you don’t need that bananna (low demand/actual value).

        How does this relate to the economics of a currency? Well, it simply shows that the more currency there is in total, the less actual value each individual dollar has. Actual value is what you are trading (for AND with) – you are asking for a bowl of food that took real effort to produce. Say there was a micro economy with $1000 in it. A house here only costs $50, because it is comparatively a lot of money. Then say there was an economy with $1,000,000,000,000,000 in it. Would $50 buy a house? hell no!

        Back to the current situation- if many people have money in their account, and then the government goes and prints a whole bunch of new cash, what happens to the actual value of the existing dollars? they plummet in value. The actual value has transferred from the dollars in your pocket, to the pockets of the government, without you even know.

        BUT WAIT, you say. “Wouldn’t this cause massive inflation which is noticeable? I’d have to pay more for my food!”
        Well…. not necessarily. It really depends what happens to the ‘new’ dollars. If the governement introduces them to the market, then there will be a surplus and inflation will occur- but on the otherhand, if the government uses the new money in a way that it doesn’t go in to the hands of the producers and the people on the street, e.g. simply uses them to ‘pay off foreign debt’ on paper (and then the new owners of those dollars keep them in reserve, or again pay them back to the US government), then there is no surplus in the market of dollars UNTIL they get reintroduced there. So, inflation is made possible by the creation of new dollars, but only eventuates when the money is introduced to the market.

        Will this be the end of the US as we know it? Answer: maybe, maybe not, but there will be a wealth transference. Those with value stored in cash will experience the brunt of it. Cash should only be used for transactions, NOT for storage. Gold is a good alternative, VALUABLE property (actual value, not monetary value) is another good alternative.

      • dwpittelli

        To the extent the government is using money to buy bonds from any party, said party will then have cash, whose dispersal will be inflationary. Measured CPI can be held back for a time, especially if the economy is weak, but the inflationary pressures will exert themselves eventually.

    • teapartydoc

      They are. It just takes longer because there are more creditors to run through.

    • dwpittelli

      Whether or not federal finances are comparable to those of a private entity (something not asserted in the article), how sustainable do you think trillion+ dollar deficits are? Aren’t you troubled by the fact that we can’t even get domestic or foreign investors to buy all our bonds, and have to get the Fed to create more money instead?

      • Pacioli

        @ Pit –

        The article aboslutely did assert that gov’t finances are comparable to a private entity.

        “They’ve lost over a trillion dollars a year since 2008, yet they still spend money on things like drones and body scanners.”

        It’s absurd to refer to ‘losing money’ unless you’re trying to analogize to a private entity. It’s simply erroneous.

        “Aren’t you troubled by the fact that we can’t even get domestic or foreign investors to buy all our bonds…”

        This language betrays a woeful lack of understanding of the mechanical realities and structure of our monetary system. ‘Domestic and foreign investors’ have bought all UST bonds in each and every bond auction throughout our history. That is a fact. To insinuate otherwise is erroneous.

      • dwpittelli

        Your objecting to the word “lost” is not the same thing as the user asserting that “gov’t finances are comparable to a private entity.” But to go to the wider question of whether certain deficits are sustainable, personally I think gov’t finances are more comparable to household finances. A $1 trillion deficit in a nation of about 100 million households means the problem is the same as if every household in the U.S. is spending, on average, $10,000 a year more than it earns, and going $10,000 more in debt each year, with the total debt now about $160,000 per household. While that isn’t best described as a “loss” either, that is obviously a problem, and a household that finds itself in that position must typically declare bankruptcy and/or sell a house in which it has considerable equity. The federal government has no comparably benign options. The fact that the 100 million households got together and held this debt collectively does not change this underlying reality.

      • $12257016

        The emperor has clothes because I say he does damn it! Lol

      • Kent Dorfman

        Where are YOU living Pacioli? In the U.S. fully 80% of the last 12 months’ bond auctions have been bought up by the Federal Reserve Bank a PRIVATE central bank who is, in turn printing dollars in to circulation. Now, these may by and large, be ‘virtual’ dollars, but they are in the monetary system. If this does not perfectly describe a Ponzi scheme, I defy you to come up with a more accurate definition.

  • http://www.facebook.com/tom.bolt.549 Tom Bolt

    Crooks use to be individuals, then bands now they are governmments.

  • Enderr

    The inflation is there, no one is really paying attention to it. Your paying the same price now that you did a few years ago, but the item now is smaller. Example Big Gulps have always been 44oz. Last year they made them 40oz but kept the same $0.99 price. Sugar went from 5lb to 4lb bags. People notice the price change, not the size change. Another example, in 1964 a loaf of bread was a dime. That same 1964 silver dime can still buy a loaf of bread today.

Read previous post:
ramirezandcalifornia
Here’s a great question worth asking yourself–

January 24, 2013 Santiago, Chile What would you do if you hit your breaking point... tomorrow? Where would you go?...

Close