Wednesday, December 29, 2010

Let's Face It, Americans Aren't Too Smart...


One of the hardest things to do as a grown, “educated” adult is to learn from others. The inability to learn from others is what guarantees you will have a very childish perspective of the world. If the only books you’ve read were forced on you by the public education system, then your perspective is skewed. It was only when I expanded my realm of knowledge that I saw the world in a whole new way. I realized that there are recurring themes in history that humans consistently ignore because fundamentally, human nature never changes. No matter how much you warn people about the disaster that’s coming, they won’t listen. Call it what you may- naivete, ignorance, or outright arrogance- but this is just my experience. By definition you must be humble to learn.
There is a psychological phenomenon that explains the human tendency towards disbelief and inaction: the normalcy bias. If people haven’t directly experienced an extreme event before, they are prone to believe that it can’t happen. The normalcy bias explains why people refused to evacuate their homes when Katrina was clearly going to leave a swath of destruction. The normalcy bias explains why most people get destroyed by hyperinflationary events. And the normalcy bias explains why people refuse to get out of their dollars and buy gold. Most people alive never experienced a gold standard or a bond default; hence most people will be caught totally off-guard by the events of the future. However, people really shouldn’t be caught off-guard because governments historically never pay off their debts! They always default in some form.
Americans just can’t think from a global perspective. Sure the Bush tax cuts were extended, but corporate tax rates are still amongst the highest in the world. Do you wonder why industry is moving offshore? In addition, American income is taxed globally, no matter where income is earned. This mode of taxation is not the norm in history; in fact it shows our system badly needs restructuring. By any objective historical standard, current tax rates are “oppressive.”
Some people will argue that we are enjoying a rising standard of living. Ok, then why do both adults in the average household need to work now when only one person had to work before? A lot of our problems have been papered over. When the private sector couldn’t create jobs, the government stepped in as “the employer of last resort.” This is why you’ve seen a concurrent rise in the public sector and the national debt. This shell game can go on for quite some time, especially when demographic trends are on your side. But when demographic trends reverse and the debts are still lingering on your balance sheet, watch out: it is time to pay the piper.
Until events start unfolding more or less as I expect, most people will peruse this blog and think I am extreme. That’s fine, since our profits have been extreme as well. I know what my natural irrational human tendencies are, and I try my best to keep them at bay. The facts are always going to jump out at you if you allow them to. There will be even more political upheaval and social unrest moving forward. Times are changing, but historically, good things come out of times of change. We must go through our birth pains. Until then, you know what to do: buy gold, buy silver, and stay away from anything government.

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