Wrong Leader

This letter was written by Porter Stansberry, Financial Advisor, Editor and Publisher. He granted broad permission to distribute with its posting. I provide it here slightly modified by error corrections.

Dear Mr. President,

Welcome to the ashbin of society.

With the speech you gave last week, you have firmly and permanently put yourself in the same garbage bag as all the other communists and socialists of the 20th century.

Your speech sounded like the faint echo of a speech Lenin gave in an icy square in Moscow 100 years ago.

The promises you made, Mr. President, about the government giving people things they can’t provide for themselves – a better income, reliable health care, an advanced education, cheaper mortgages, a “shiny, happy” life – have been made time and time again… sometimes by speakers even better than you.

And they have always been lies.

While the government can demand obedience (and taxes), it can’t mandate dedication, creativity, or innovation. The fact is, the government itself is nothing more (or less) than the organized ambitions of the people.

Promising something to the people that they don’t already have is a logical absurdity. And therein lies the timeless flaw of all collectivist theory: Governments cannot deliver benefits to the people that the people cannot deliver to themselves.

To demonstrate this truth, consider this example… Governments cannot simply mandate higher tax revenue. Any substantial increase to tax rates will reduce total collections, an economic phenomenon known as the “Laffer Curve.”

This has been proven countless times in our country and many others. Any sensible person will immediately understand why. Taxes are a disincentive. The higher the marginal rate of tax, the more powerful its impact.

That’s why, over many decades (and many different tax structures), U.S. tax revenues have been remarkably stable at around 20% of GDP. That’s why, as you surely know, Mr. President, changing the tax code will not result in increased tax revenue.

Taxing only the rich simply doesn’t work. It never has. And it never will. To increase the government’s revenues, we must first increase the size of the economy. The government cannot tax what the economy doesn’t produce.

In another time, most Americans might have simply ignored your speech as the ignorant remarks of yet another handsome, Ivy League-educated, dilettante president. But at this point in our history, my bet is people are going to take you far more seriously than you expect. In fact, I think you’re going to get what you deserve – the trash heap. Why will Americans turn on you so rapidly and so completely?

Two things have changed – forever – about American politics.

The first is the media and access to critical information. It’s no longer possible for a president’s administration to control what people read, see, and think by simply managing the evening news broadcasts.

Thus, all your lies are now exposed almost instantly and broadcast to millions of people via websites and services like the Drudge Report, Twitter, and Facebook. Socialism cannot possibly survive over any long period of time in a society with a free media – because socialism is based on a lie. Facebook means the “half-life” of socialism is now weeks instead of years.

Even mainstream publications like the Wall Street Journal have called you a liar recently. They have no choice. Your lies were broadcast to the entire world long before their op-ed pieces appeared.

Your advisors told you none of these “bloggers” mattered. All you had to do was promise more benefits to more voters and then force fewer voters to pay for it all. I’m sure you did the political calculus… You believed your power to bribe and bamboozle the poor and the ignorant was stronger than the resentment you’d engender among the “rich.” And I must admit… since at least World War II, that’s been a safe bet in American politics.

But you forgot one critical factor: We simply can’t afford this nonsense anymore…

Immediately after your speech, the price of silver went from $39 to a new high above $42. Gold went up, too.

These are signs, Mr. President, that the world is losing confidence in our currency. If our foreign creditors were to call in our debts, America would suffer an economic cataclysm unlike anything we’ve ever seen in our entire history.

Americans now owe a total of $56 trillion. Without the Fed’s money-printing, it’s unlikely we could afford even the interest on these existing debts… much less the $1.5 trillion or more in debt you continue to rack up year after year by promising benefits we haven’t earned.

Sooner or later, our foreign creditors are going to decide our money-printing amounts to a default, and they will stop buying our bonds. On that day, everyone who trusts you, everyone who believes in your lies, will be wiped out.

But that won’t be as many people as you expect.

Almost every American knows in his heart what made this country great for the 200 years between 1776 and 1976. It wasn’t the lies of our presidents. It wasn’t our ability to print money and rip off our Chinese creditors. It wasn’t the modern crybaby mentality of our school system or our unions. It wasn’t the baby boomer’s dream of a 40-year retirement with free prescription drugs.

And it sure as hell wasn’t a suave, made-for-TV version of Karl Marx promising everything to everyone, but with no way to pay for it.

No. What built America was her people’s unwavering faith that they were free to enjoy the rewards of their accomplishments.

As our country tumbles into bankruptcy and crisis, the people are going to want their prosperity back, Mr. President. And deep down, they all know… even your most fervent supporters know… you don’t have the goods. You don’t have the foggiest idea of how to deliver prosperity to America because, really, you don’t understand what America is all about.

Regards,

Porter Stansberry