Skip to content

Debt is Destroying Everything.

Spread the love

1 ae banner2Copyright Martin Armstrong All Rights Reserved August 19th, 2012

Debt is Destroying Everything.

Where is Common Sense When We Need it the Most?


By Martin Armstrong

1 banner free

corp treas

obama nero
 This whole Sovereign Debt Crisis is starting to look like Nero playing the fiddle as Rome burns. We have to realize that Western society is at the breaking point where Democracy fails for the majority has discovered they can simply vote themselves the assets of the minority. A Russian client writes just as Putin merely changes the title of his job to keep power: “democracy and equal rights are fairytales for boys and girls never the real world.” Obama talks about “trickle down” and speaks nothing but Marxist Class Warfare. He demonizes the mere possession of wealth as if this is the reason government is faltering and instills hatred against the “rich” while courting Goldman Sachs as his biggest contributor. He blames the rich for somehow causing the collapse of government ignoring the fact that it has been the irresponsible policies of politicians that have brought us to the brink of extinction. This is just not going to end well. Attacking the rich will cause the VELOCITY of money to decline and with it; government will be unable to sell its bonds. The bankers will demand higher taxes and already are adopting the same anti-American policies. HSBC now refuses to accept accounts from Americans in Asia. The witch hunt for wealth is spreading globally and the banks are leading the charge.



One of the greatest confusing aspects to many is the lack of understanding that this is a global economy. This confusion has led many to constantly propose ideas that are contrary to the way the economy functions. There is the “anti-globalization movement” which is critical of the globalization of corporate capitalism asserting it stands for an economic global justice movement that is against neoliberal globalization. Members criticize several related ideas that generally oppose large, multi-national corporations having unregulated political power, exercised through trade agreements and deregulated financial markets. They accuse corporations of seeking to maximize profit at the expense of worker safety, labor hiring and compensation standards that force workers to compete globally, environmental conservation principles, and the integrity of national legislative authority and sovereignty. Many anti-globalization activists call for reforms of global integration that secure democratic representation, advancement of human rights, fair trade.

The anti-globalization movement” is seriously misguided for they do not distinguish between banking and corporations involved in other areas, ignore the fact that politicians are career people not true representatives of the people, and that it has been far too often the overregulation that sends jobs overseas. By constantly raising taxes on the average wage earner, government actually increases the cost of labor to any employer. They also ignore David Ricardo’s Comparative Advantage that by protecting jobs at over-paid positions, increases the cost to the consumer who has the power to vote with his money. Instead of people continuing the improvement of their skills to shift to new fields and adapt to new technology, they seek unions to sterilize economic advancement and freeze everything in place unwilling to accept that the consumer will decide, never politicians.


This movement is no different than trying to outlaw premarital sex. International trade and deficits have been taking place from ancient times. The Silk Road connecting East and West goes back before recorded history. Cicero stood before the Roman Senate and warned that unless foreign imports were curtailed, Rome would go bankrupt. You cannot outlaw international trade any more than you can ignore international capital flows. To do so, is to court doom. You can outlaw prostitution. That will not prevent the practice. Human nature cannot be changed. Here is a Roman prostitute token from the age of Augustus (27BC-14AD) who passed all sorts of moral family laws even forbidding men to remain as bachelors. You could not pay a prostitute with a coin that had the image of the emperor, which of course all did. So they created tokens with sexual acts. You purchased the token and paid the woman with that avoiding the law. That is human nature. Machiavelli argued that history repeats because the passions of man never change. So very true!

ub 1798 2011

Globalization is nothing new. It has been going on before recorded history. Rome claimed to rule the world (orbis terrarum) but it stood at the opposite end from the strikingly similar Han Dynasty (206BC-220AD) in China, which also claimed to have ruled the world (tianxia). There is a contemporary History Book for Tang-Dynasty in China covering the period 618-907AD. The text mentions 17 times what appears to be the Roman Empire . It also describes an envoy that was sent by the Roman Emperor to China. The Roman Emperor was recorded to have been “Anton” . The account of such an envoy who visited the older Han Dynasty predates the Venetian traveler Marco Polo (1254-1325) by more than 1,000 years. This envoy has been attributed to 166AD during the reign of Marcus Aurelius Antoninus (121-180AD). It is the death of Marcus Aurelius that has marked the peak and the turning point that begins the Decline and fall of the Roman Empire where its monetary system collapses just 72 years thereafter. This envoy establishing diplomatic contact at the peak in the Roman Empire from which a disastrous decline begins in China. Rome imported silk and spices and had a huge trade deficit with China indirectly through merchants on the Silk Road.

Today, the global economy functions no differently than it did thousands of years ago. Pictured here is our US Bond Index with theoretical constant 8% yield. This allows us to see what government bonds have done since 1798. The rally in the bonds of recent vintage is because capital rushes around the globe and must park somewhere. Where an individual can buy gold and put it in his sock drawer, big capital has no such luxury. Capital has been fleeing Europe and parking in US government debt. This chart illustrates we are not in a sustainable long-term bull market, but merely a reaction rally within a broader based economic decline.

This is the Sovereign Debt Crisis. This is how ALL empires, nations, and city states have died – always by their own hand. Unfortunately, this is our fate. It is what the NY bankers do their best to try to prevent people from reading what I write because they live in fear of the truth that what will happen once capital wakes up and sells bonds? The bankers will run to government with their hand out again threatening the collapse of government unless they are bailed out one more time for who would sell their bonds? It is the bankers who are paying people to espouse the gold standard without debt reform so they can cash in their debt and walk away. It is not the issue of what is money – it’s the debt and the bankers argue for higher taxes to keep their interest income flowing until they can redeem the bonds and walk away with gold.

public debt

Obama is preaching the destruction of the middle class small business owner in order to pay that pound of flesh now demanded by the bankers. He ignores the fact that almost 70% of the entire accumulated national debt went to interest payments to the bondholders – not to improve the lives of people. This idea of socialism has in itself been a lie. For you see, the numbers do not lie. The bulk of the national debt has been interest payments not to help anyone but the moneylenders. He preaches “socialism” while practicing the hypocrisy of lining the pockets of the New York bankers. MF Global will not be prosecuted. Why? Corzine is his buddy?

crisis democracy

We are witnessing the destruction of Western Civilization before our very eyes and there nothing we can do to stop it. The Republicans are no better. This is politics as usual. We need a complete break with this system and politicians MUST be prevented from serving more than one brief term to prevent them from becoming the political establishment. There will be no representative form of government as long as there are career politicians who only represent special interests to maintain power. If politicians are allowed to become a professional career class, they cease to represent the people and become the established government.

franklin 4

I find it terribly ironic that when speaking with Russians who fled their home country to seek freedom in America, they notice that America is becoming the very thing that they fled. Indeed, the government knows who I am for the purposes of taxes. Yet I cannot get on a train, boat, or plane without proving who I am. We have forgotten our history and the wisdom that made America great. Benjamin Franklin (1706-1790) said: “Those who would give up essential liberty to purchase a little temporary safety deserve neither liberty nor safety.” (Historical Review of Pennsylvania, 1759). This is precisely what has been done to our liberty. Government has used 911 to strip us of everything. Ben Laden won. He did what no one else could do – destroy the American Constitution and the Liberty it once stood for. James Madison warned us: “If tyranny and oppression come to this land it will be in the guise of fighting a foreign enemy.”

rand ayn

This Crisis in Democracy is what Ayn Rand (1905–1982) wrote about in her 1957 novel Atlas Shrugged. The book explores what would happen if many of society’s most productive citizens refuse to be exploited by increasing taxation and government regulations by going on strike. The refusal evokes the imagery of what would happen if the mythological Atlas refused to continue to hold up the world. They are led by John Galt who many have compared me to. Galt describes the strike as “stopping the motor of the world” by withdrawing the minds that drive society’s growth and productivity. In their efforts, these people “of the mind” hope to demonstrate that a world in which the individual is not free to create is doomed, that civilization cannot exist where every person is a slave to society and government, and that the destruction of the profit motive leads to the collapse of society. The protagonist, Dagny Taggart, sees society collapse around her as the government increasingly asserts control over all industry. This is precisely what Obama is preaching.

invisiblehand danielle

Indeed, the key to how everything works is Adam Smith’s Invisible Hand. By each person pursuing their own self-interest, we create a functioning collective society. Where Democracy fails, is when the majority realize they can oppress the minority by legal persecution. Smith’s Invisible Hand today is being manipulated and pulled in every direction for the sole benefit of government and special interest as the bankers.

justice fat

Our legal system has collapsed entirely. The sculpture of Jens Galchiot in Denmark of Fat Justice on the shoulders of a starving African man is truly the state of affairs for all of us. There is no rule of law to protect us anymore. Government has stacked the courts with former prosecutors who rule in favor of government making the conviction rate in the USA now approaching 99%. Worse still, government can do as it likes and it is your obligation to go to court to say – hey! I have constitutional rights! In other words, like Obama’s Health Care, he passes a 3.8% tax, says it is not a tax, the Supreme Court rules it is ok because it is a tax, and all this takes place showing government acts first and then it is your responsibility to defend. In a real FREE AMERICA, the Constitution should RESTRAIN government PRIOR to acting. Unfortunately, they get to act as they please and you must say no, you have a right. This means unless you have the money to hire lawyers, you have no rights because they get to act FIRST and the burden to prove there are any restrains falls upon you. Under this structure, the Constitution has no force whatsoever but for the RICH who can afford a lawyer.

Political wisdom over the centuries was purchased with the blood and bitter experience of generations upon generations. Even in China, the minister Chao Cuo (? – 154BC) under the previous emperor Ching-ti (Liu Ch’i)(157-141BC), earned the hatred of other ministers after he introduced 30 new laws. The outrage was so intense; he was dragged out and executed in his judicial robes in the town marketplace. The abuse of the rule of law knows no bounds. When Edward I (1272-1307) returned to England in 1289, he was confronted by corrupt judges who had been bribed by special interests and dismissed them summarily. Then in 1290, Edward I seized all the property of the Jews and expelled them from England.  Kings, dictators, and professional political classes, have always exploited the rule of law for their personal gain.

Joseph Schumpeter recognized nearly a century ago: “The spirit of a people, its cultural level, its social structure, the deeds its policy may prepare — all this and more is written in its fiscal history. … The public finances are one of the best starting points for an investigation of society”.[1] How a society manages its fiscal affairs dictates the fate of the nation and the rights of its people. Sam Adams said in 1775: “No people will tamely surrender their Liberties, nor can any be easily subdued, when Knowledge is diffused and Virtue preserved.”   This is why they control the press to suppress knowledge. Then, with the passage of time, we often lose through the gradual change in the meaning of the words the spirit of liberty. The legal maxims that people have sacrificed their lives for over the centuries wither and die. Though the phrases themselves may continue to receive lip service, they are slowly stripped of their original significance until they are dropped as empty and commonplace. This is when what was intended to be a government ruled by law degenerates into a government rule by biased and bribed men. This is why NY will not prosecute its own – i.e. M.F. Global.

The principles that once inspired a people to rise up against oppression for which they had passionately fought in the past sadly fall to the ground crumbling into dust. Such noble principles vanish into oblivion because they give way slowly to the same corrupt tendencies of those who for some strange reason desire power over others. The image of a free constitution was once preserved with decent reverence, but quickly gives way to the desire of power over others. The history of our political concepts is in general of interest only to the specialist. They are not explained or instilled into the youth and in such situations there is often no other way of discovering what is happening in our time than to go back to the source in order to recover the original meaning of the debased principles. There is nothing that forms a more certain truth than the collapse of the Rule of Law which once stood for the Englishman’s ideal of liberty, acquired only at the price of so much blood over the course of nearly 400 years. Yet today, the Rule of Law is not even understood as a bulwark of liberty. It is surrendered ever so easily for the pretense of security. However, one cannot preserve liberty at the expense of surrendering personal rights in the nation of security.

It is always debt that destroys empires, nations, and city states. Thomas Jefferson said:

 “I sincerely believe that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.” 

Indeed, it is the debt that is now destroying all liberty. There will not be HYPERINFLATION for the bankers are in full control of Congress and the Fed. They are forcing austerity and higher taxes. The excuse is put forth that government will collapse if they cannot pay their debts. The fact that nearly 70% of the total national debt is past interest payments, we are in the last throes of this very dangerous debt implosion. The problem we face, it is EVERY country in Europe including Germany and across the globe to Japan. This is simply the way things are. The bankers are advising against HYPERINFLATION because they do not want funny money. So we have to be concerned about STAGFLATION, rising costs with collapsing economic growth. We are living so far beyond our income that we are living completely unconnected to any productive capacity. The debt can no longer be paid off. It is beyond several generations. Charles Dickens wrote in Little Dorrit that “[Credit is a system whereby] a person who can’t pay, gets another person who can’t pay, to guarantee that he can pay.” Back in the good old days when the national debt was just $1 trillion instead of $15, President Ronald Reagan made it clear:

 “We don’t have a trillion-dollar debt because we haven’t taxed enough; we have a trillion-dollar debt because we spend too much.” 

History has proven he was right!

You no doubt have heard of the No Taxation without Representation slogan from the American Revolution. What most people do not realize is taxation was sneaky and diverse at that time. The original property tax in colonial times was a “general property” tax, reaching all types of property – land, buildings, farm implements, household effects, and livestock. Jens Jensen, in his Property Taxation in the United States (1931 Chicago University Press), explained that at the time tangible property was an index of ability to pay. It was regarded as an appropriate base for a “faculty” tax imposed “upon every man according to his estate, and with consideration to all his other abilities whatsoever” (quoting the 1634 Massachusetts property tax statute). Taxation has been a profound driving force in how society developed. Why did row houses emerge in many cities? Was it to save land costs or taxation?

The shift from an agrarian to an industrialized economy changed the relative importance of land and buildings as an index of wealth. The general property tax fell heavily on farmers whose land and equipment was readily identifiable, and lightly on those whose assets took the form of intangibles such as stocks, bonds and bank accounts. Replacing the general property tax with a tax on land and buildings was an important goal as the industrial revolution reshaped society. To the surprise of many, there were window taxes. Glass windows were a sign of wealth. Developing row housing eliminated windows on two sides. The phase “stepping up in society” also referred to taxes. One was taxed according to the number of steps one had to enter the house. The more steps, the wealthier one was, and then the higher tax he paid. Taxes were also imposed on the size of the door knob you had. With the rise of Marxism during the nineteenth century, tax reform targeted the rich new-comers from this rising non-agrarian sector. Income tax became a goal to achieve by the rising bureaucratic form of government in their quest to extract greater proportions of revenue from this class of fortunate people.

There actually was a tax on windows! Toward the end of the Revolutionary War, Virginia passed an emergency tax on homeowners based on the number of windows in their houses. (Hening’s Statutes, vol. 10, p. 280.) It was to last three years and it only counted windows with glass, which eliminated the lowest economic cohort that would likely have had only shutters because they couldn’t afford glass. However, this was a war measure, not a regular tax, so most historians discount it, insisting that there were no taxes on windows. I was unable to discover whether this war-time tax was ever collected, since the war ended shortly thereafter and it was, presumably, no longer needed. Also, this law pertained only to Virginia. Here’s the law:

“A tax or rate of one shilling for every glass window shall be paid by the proprietor of each inhabited house within the commonwealth in the month of September 1781, and so on in each of the three next succeeding years.”

The law goes on to list other taxes, calling them “urgent necessities of this commonwealth” due to the war. The abuse of taxation has been pervasive. Benjamin Franklin said: “Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.”[2] Taxation has been a consistent abuse of government.

To help fund the wars against France, England made plans to impose numerous taxes on the colonies in America to raise that money. The people in the colonies were required to pay these taxes – even though they were not represented in the British Parliament. The initial tax, called “The Stamp Act” (a tax on any printed paper to be used), was levied by the British Parliament against the colonies in 1765. The Stamp Act was also followed by a tax on tea (the Tea Act of 1773) and at the end of that year there was a very famous tax revolt that became known as “The Boston Tea Party.” Of course, paying these taxes without having representation led to the infamous slogan of the Revolutionary War, “Taxation Without Representation Is Tyranny” which is still our problem today when politicians are career individuals and represent special interests rather than the people.

Leading up to the Revolutionary War, the individual colonies generated their own revenues – with their own sets of taxes, and as such, the colonial government didn’t need a lot of revenue. During the American Colonial times, there was a wide difference in what was taxed. For instance, the northern colonies achieved their revenue goals with excise taxes, taxes on real estate, and taxes based on different types of professions, while import and export taxes were the primary taxes of the southern colonies. The mid-Atlantic colonies imposed property taxes and what were called individual “head taxes” collected for all adult males – the poll tax.

Regarding taxes post-revolutionary era, because Americans were fearful of a Federal Government that could be far too strong, in 1781 the Articles of Confederation were implemented, which gave a lot of political power to the States. Nonetheless, taxes are a complicated subject–what’s new there? In early America, most of the government’s money came from import/export duties on liquor and slaves and from port charges. Colonists paid several sorts of taxes but no income tax and only occasional taxes on real estate and personal property. The usual tax assessments due from individuals were the parish tax, which paid for churches, clergy salaries, and aid to the poor; county taxes, which paid for courthouses, bridges, and ferries; colony taxes, which paid for public officials and the Capitol Building; and in some colonies, the old feudal quitrent to the king, who legally owned all the land. (Property owners were technically only renting.) These taxes didn’t necessarily occur every year and they varied over time. Most taxes were based on the number of “tithables” in the household (white males over 16 and all slaves over 16), meaning those with the most slaves and the largest families paid the most tax.

The United States had few taxes in its early history. From 1791 to 1802, the United States government was supported by internal taxes on distilled spirits, carriages, refined sugar, tobacco and snuff, property sold at auction, corporate bonds, and slaves. The staggering cost of the War of 1812 brought about the nation’s first sales taxes on gold, silverware, jewelry, and watches. In 1817, however, Congress did away with all internal taxes, relying on tariffs on imported goods to provide sufficient funds for running the government.

seligman edwin

It was Edwin Robert Anderson Seligman (1861-1939), who did more than anyone to persuade government to restrict the abuse of “property taxes” when all possessions were taxed not just your home. Seligman was an American economist who spent his entire academic career at Columbia University in New York City. Seligman is best remembered for his pioneering work involving taxation and public finance. He decried a “general” tax on all forms of property as “nothing but an incentive to perjury,” “corrupting and demoralizing.”  He quoted an 1897 New Jersey report: “[I]t is now literally true that the only ones who pay honest taxes on personal property are the estates of decedents, widows, and orphans, idiots and lunatics.”

Seligman felt that “the general property tax as actually administered is beyond all doubt one of the worst taxes known in the civilized world….its alteration or its abolition must become the battle cry of every statesman and reformer.”

Because of efforts such as Seligman, land and buildings form the major part of the property tax base today, together with only selected items of personal property, such as certain equipment, inventories, and automobiles.  Locally-assessed personal property constituted only 9.8 per cent of the property tax base in 1986.  This reform recognized the impracticality of attempting to value and tax property of every kind.  However, the explicit change to a more narrow tax base, primarily land and buildings, meant that the tax made no attempt to gauge a taxpayer’s general wealth or ability to pay.

In 1862, in order to support the Civil War effort, Congress enacted the nation’s first income tax law. The Act of 1862 also established the office of Commissioner of Internal Revenue. The Commissioner was given the power to assess, levy, and collect taxes, and the right to enforce the tax laws through seizure of property and income and through prosecution. The powers and authority remain very much the same today.

This 1862 income tax was a forerunner of our modern version in that it was based on the principles of graduated, or progressive, taxation that discriminated among the people and it was particularly intrusive since like the tax system today, it does not trust the citizen and therefore withholds taxation on income at the source. It was clearly unconstitutional since it was a direct tax and thus required direct responsibility of citizens regarding their private affairs.

2 yr calculator21

During the Civil War, a person earning from $600 to $10,000 per year paid tax at the rate of 3%. Those with incomes of more than $10,000 paid taxes at a higher rate. Additional sales and excise taxes were added, and an “inheritance” tax also made its debut. In 1866, internal revenue collections reached their highest point in the nation’s 90-year history—more than $310 million, an amount that was not reached again until 1911.

In 1868, Congress again focused its taxation efforts on tobacco and distilled spirits and eliminated the income tax in 1872. It had a short-lived revival in 1894 and 1895. In the latter year, the U.S. Supreme Court decided that the income tax was unconstitutional because it was not apportioned among the states in conformity with the Constitution.

In 1913, the 16th Amendment to the Constitution made the income tax a permanent fixture in the U.S. tax system by amending the Constitution to remove the restrain upon government prohibiting direct taxation insisted upon by the Founding Fathers. The amendment gave Congress legal authority to tax income and resulted in a revenue law that taxed incomes of both individuals and corporations. In fiscal year 1918, annual internal revenue collections for the first time passed the billion-dollar mark, rising to $5.4 billion by 1920.

Of course Congress lied to the people to get the income tax in place. Like any of the bridges and tunnels, they impose a toll with the solemn promise that once the bridge is paid for the toll will be removed. Of course that day never comes and the excess money as in New York then paid for the construction of the World Trade Center. Yes – that was the NY Port Authority that built the World Trade center with your bridge tolls. Today, the toll is $12. The Income Tax was no different. They promised it would only tax the rich. Well, there just aren’t enough of those people. With the advent of World War II, employment increased, as did tax collections—to $7.3 billion. The withholding tax on wages was introduced in 1943 of course to pay for World War II. Gee, since politicians only borrow and never pay anything off, I suppose they did not lie for we are still paying interest on World War II dent as well. The income tax was instrumental in increasing the number of taxpayers to 60 million and tax collections to $43 billion by 1945. Nonetheless, it has reduced the living standard to where now it takes two incomes to support the family and the wife has lost the choice to stay home and raise the kids. Yet this is progress. They have successfully used socialism to enslave the people to pay interest to the bondholders.

Those that preach returning to a Gold Standard I am deeply skeptical about for if I were a bondholders I would be paying people to put out that bullshit so I could exchange the bonds for gold. I am also deeply skeptical about people claiming HYPERINFLATION is the risk. They fail to understand history for that exists ONLY when the government cannot sell bonds and thus must print to survive.  As long as there are bankers, they will preach austerity and raising taxes to get paid. They do not want funny money. So what is taking place is what always takes place, the economic implosion of society. This is precisely how Rome failed. Once government turns against its own citizens, the VELOCITY of money declines indicating capital is starting to withdraw from commerce, raising taxes as insane as this becomes and threatening every free enterprise, causes capital to hoard and when that happens, the end is near.

 maximinus i

The Decline and Fall of Rome was clearly underway. When an emperor tried to reduce government expenditure, the troops rioted as we see in Greece today. We see the same economic problems back then and the same pattern government always takes to try to survive. It was in 238AD when a group of landowners rebelled against the rising imperial taxation killing the tax collectors. As taxes rose and government expenditure rose with ever debasing currency, things were just nuts. Maximinus I (235-238AD) supported the government bureaucracy. He by no means sought to reduce the pay of government employees; instead, he raised taxes to pay their wages. He took three actions against the people that were very Marxist as we hear today.

In ancient times, Maximinus I  declared ALL wealth now belonged to the state! Today, under Obama, the United States has outlawed any American having any account outside the country by threatening foreign entities with the confiscation of their assets if they do not report what Americans are doing overseas. Foreign banks have shut down American accounts, told them to get out even closing safe deposit boxes that have been there for decades. Most banks will no longer accept accounts from Americans. So while it would be unconstitutional to decree an American cannot have an account overseas, they instead threaten anyone who deals with an American. This is collapsing international trade like never before. It has also led to an exponential rise in surrendering American citizenships.

Maximinus was desperate for money as governments are today and those rich bastards were going to cough up everything then as is the battle-cry today!  Maximinus had doubled the soldiers’ pay, and the military needed additional funds for road-building to maintain control. Obama enacted his health-care act, you will be taxes for the next 4 years before any benefits will be paid, no new doctors are provided, but he hired 16,000 more IRS agents to harass the people to ensure all investment income is now uncovered.

Maximinus ransacked public places and temples stripping anything of value. Can you imagine the government coming into your church and taking anything of value to pay for government employee wages? This led to a great tumult resulting in many massacres in defense of religion. He used Conspiracy, a crime still used by the United States yet abandoned in Europe, Russia, and even China. Conspiracy is the law of tyrants, for it allows the conviction of someone for a crime they did not commit, nor even attempted to commit but you claim they “intended” purely as a mental state to commit in the future. Maximinus engaged in legal persecution. Thus, the criminal law became (1) committing the act, (2) attempting to commit the act, and then (3) there is Conspiracy which is claimed you have only “intended” to commit the act in your mind, which cannot be proven and typically requires extorting a confession by force. Using conspiracy, Maximinus effectively tore the Roman economy apart at its seams. He charged a noted Senator by the name of Magnus, with conspiracy against the emperor, found him guilty, executed him, and then arrested 4,000 others claiming they conspired with him to intend to depose him. He then used the criminal law to claim they committed a crime of conspiracy, and that of course justified confiscating all their property as well.

Maximinus also declared that all wealth simply belonged to the emperor in a communistic fashion. What took place, however, was the complete breakdown of society. Wealth was driven underground and money now was hoarded causing VELOCITY to collapse as cash flow in circulation vanished and hoarding prevailed. This caused the economy to implode as commerce ceased fostering an economic depression, which naturally reduced tax revenues. Maximinus did not stop with simply private wealth. He ordered the wealth of all temples to be confiscated as well. Countless died in defense of their religious beliefs. Not even the gods were respected by Maximinus and more than the current government respects the 10 Commandments – Thou shalt not covet thy neighbor’s goods. All government does is yell about the “rich” and getting them for everything they can. Of course the definition of the rich keeps falling and is now HOUSEHOLD income of $250,000 gross – not Warren Buffett. That’s every small business owner.

The Rule of Law in Rome collapsed as it is doing right now in the USA. Historia Augusta tells us that Maximinus -“condemned all whoever came to trial” and that he “reduced the richest men to utter poverty.” The USA conviction rate today is about 99%. The courts abandoned the people as they have done so again in the protecting M.F. Global & the NY Bankers. At the time of the American Revolution, you were the property of the king. If you committed a crime in France and were English, the French king sent you to your king for punishment. Today, the slogan is to make the rich pay their “fair share” but nobody asks what that is. If you are American and live overseas enjoying no benefits, you owe taxes because you are American. There is no payment for any “fair share” it is an obligation for you are still the property of the state. You are a slave by birth if American born.

decfall silver

When the Rule of Law collapses, that is it. There was truly nothing left for contracts have no meaning. Like MF Global, people who simply had money on deposit lost and government did nothing because Corzine was part of the crowd. Nowhere could a person turn for justice in Rome as is the case in New York City. With the people under siege from their own government, they hoarded wealth to conceal it from state spies. This caused a collapse in VELOCITY of money flow as commerce foundered sending the economy into a Great Depression spiral. This was open warfare against the possession of wealth. This is precisely the same mistake governments are making today. As they hunt down the rich, they cause money to hoard and the will only reduce the VELOCITY ensuring a downward economic spiral. Now 3 year money at banks is paying just 0.5% down from 0.7%. There is no incentive to keep cash in banks or in bonds. Money will hoard as it always does in tangible assets that are movable.

Today, the government pays rewards for anyone reporting someone who has hidden cash and did not pay their taxes. Maximinius also had networks of spies, who were people eager to hunt down the rich who were paid for their services as well. This precisely caused capital to hoard and undermined the economy to such an extent, that commerce slowed as wealth was hoarded being driven underground causing the VELOCITY of money to collapse. This creates a feedback loop causing unemployment to rise sharply under such conditions.

Clearly, Maximinus had seriously disrupted the entire economy. The VELOCITY of money came to a near halt as spies were everywhere and people were afraid to show any wealth at all. This economic implosion was similar to the Communists taking Russia or China. This economic tsunami this unleashes is how empires die – always by their own hand. Once they are weak, then they are easy prey for their rivals. Mycenae conquered the Minoans after their economy collapsed thanks to the Santorini (Thera) eruption of 1642BC. Rome fell to the barbarian invasions because its economy weakened thanks to Maximinus, A rival can never conquer a state while it is strong. Let its economy decline and it is easy pickings. So will the fate of the United States.

It is simply the pattern of history. You cannot attack the productive class. This hatred of wealth is the key to the destruction of empires. It is also one of the Ten Commandments that is a profound warning against Marxism.

moses 1

Thou shalt not covet thy neighbor’s house.

It is curious that this aspect of human nature is regarded as one of the 10most important things not to do. Only when we look at history can we see the consequences of seeking to take the assets of the “rich” and how this defeats the core driving mechanism of society – Adam Smith’s invisible hand. By attaching the right as the Democrats constantly preach, they cause capital to flee and hoard. This is precisely why Roosevelt confiscated gold in 1934, to end the hoarding. It is what Grover Cleveland observed and admonished his own Democratic Party for engaging un unsound finance that led to the virtual bankruptcy of the United States in 1896. It appears we are just incapable of advancing as a human society for we seem to constantly revert to this barbaric tendency – coveting thy neighbor’s house. Cleveland stood before a special session of Congress on August 8th, 1893 during the Panic of 1893 and said:

cleveland grover

At times like the present, when the evils of unsound finance threaten us, the speculator may anticipate a harvest gathered from the misfortune of others, the capitalist may protect himself by hoarding or may even find profit in the fluctuations of values; but the wage earner – the first to be injured by a depreciated currency – is practically defenseless. He relies for work upon the ventures of confident and contented capital. This failing him, his condition is without alleviation, for he can neither prey on the misfortunes of others nor hoard his labour.”

[1] Joseph Schumpeter, “The Crisis of the Tax State” (1918), in Joseph Schumpeter, The Economics and Sociology of Capitalism (edited and introduction by R. Swedberg), Princeton: Princeton University Press, 1991, p. 101.

[2] Letter to Jean-Baptiste Leroy (13 November 1789); reported in Bartlett’s Familiar Quotations, 10th ed. (1919).

[3] Essays in Taxation 27-28 (1895; 10th ed. 1931) [citations omitted].