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During The Best Period Of Economic Growth In U.S. History There Was No Income Tax And No Federal Reserve

The American Free Market System At WorkHow would America ever survive without the central planners in the Obama administration and at the Federal Reserve?  What in the world would we do if there was no income tax and no IRS?  Could the U.S. economy possibly keep from collapsing under such circumstances?  The mainstream media would have us believe that unless we have someone “to pull the levers” our economy would descend into utter chaos, but the truth is that the best period of economic growth in U.S. history occurred during a time when there was no income tax and no Federal Reserve.  Between the Civil War and 1913, the U.S. economy experienced absolutely explosive growth.  The free market system thrived and the rest of the world looked at us with envy.  The federal government was very limited in size, there was no income tax for most of that time and there was no central bank.  To many Americans, it would be absolutely unthinkable to have such a society today, but it actually worked very, very well.  Without the inventions and innovations that came out of that period, the world would be a far different place today.

It is amazing what can happen when the government just gets out of the way.  Check out all of the wonderful things that Wikipedia says happened for the U.S. economy during those years…

The rapid economic development following the Civil War laid the groundwork for the modern U.S. industrial economy. By 1890, the USA leaped ahead of Britain for first place in manufacturing output.

An explosion of new discoveries and inventions took place, a process called the “Second Industrial Revolution.” Railroads greatly expanded the mileage and built stronger tracks and bridges that handled heavier cars and locomotives, carrying far more goods and people at lower rates. Refrigeration railroad cars came into use. The telephone, phonograph, typewriter and electric light were invented. By the dawn of the 20th century, cars had begun to replace horse-drawn carriages.

Parallel to these achievements was the development of the nation’s industrial infrastructure. Coal was found in abundance in the Appalachian Mountains from Pennsylvania south to Kentucky. Oil was discovered in western Pennsylvania; it was mainly used for lubricants and for kerosene for lamps. Large iron ore mines opened in the Lake Superior region of the upper Midwest. Steel mills thrived in places where these coal and iron ore could be brought together to produce steel. Large copper and silver mines opened, followed by lead mines and cement factories.

In 1913 Henry Ford introduced the assembly line, a step in the process that became known as mass-production.

When hard working, industrious people are given freedom to pursue their dreams, great things tend to happen.  The truth is that we were all designed to create, to invent, to build, and to trade with one another.  We all have something that we can contribute to society, and when families are strong and the invisible hand of the free market is allowed to work, societies tend to prosper.

It is not a coincidence that the greatest period of economic growth in U.S. history was between the Civil War and 1913.  The following information comes from Wikipedia

The Gilded Age saw the greatest period of economic growth in American history. After the short-lived panic of 1873, the economy recovered with the advent of hard money policies and industrialization. From 1869 to 1879, the US economy grew at a rate of 6.8% for real GDP and 4.5% for real GDP per capita, despite the panic of 1873.  The economy repeated this period of growth in the 1880s, in which the wealth of the nation grew at an annual rate of 3.8%, while the GDP was also doubled.

Wouldn’t you like U.S. GDP to double over the course of a decade now?

So why don’t we go back to a system like that?

In 1913, the Federal Reserve and a permanent national income tax were introduced.  Today, the unelected central planners at the Federal Reserve totally run our financial system and the U.S. tax code is about 13 miles long.  The value of our currency has declined by more than 96 percent since 1913, and the size of our national debt has gotten more than 5000 times larger.

Meanwhile, control freak bureaucrats seemingly run everything.  Almost every business decision is heavily influenced either by taxes or by the millions of laws, rules and regulations that are sucking the life out of our economic system.

My favorite example of how suffocating red tape in America has become is the magician out in Missouri that was forced by the Obama administration to submit a 32 page “disaster plan” for the rabbit that he uses during his magic shows for kids.

It is no wonder why we don’t have any economic growth.  The central planners in the federal government are killing our economy.

And the central planners over at the Federal Reserve are killing our financial system.  In school we are taught that the Fed was created to bring stability to our financial system, but the truth is that they have been responsible for financial bubble after financial bubble, and now Federal Reserve Chairman Ben Bernanke has created the largest bond bubble in the history of the world.  When that thing bursts, and it will, we are going to see financial carnage on an unprecedented scale.

Unfortunately, the truth is that the Federal Reserve never has been looking out for the interests of the American people.  It was created by the big banks and it has always worked very hard to benefit the big banks.  During the Fed era, the big banks have become the most powerful economic entities on the entire planet.  Our entire economy is now based on debt, and the big banks are at the very center of this debt spiral.  The following is an excerpt from a recent article by Paul B. Farrell

Today’s world includes four Wall Street banks each with assets over $1 trillion, each more than Goldman. Plus eight other big global banks each have over $2 trillion total assets, including, among the 100 largest, Barclays, HSBC, Deutsche, ICB-China and Japan’s Mitsubishi.

Yes, this new world is changing fast. Back in 2008 the world’s financial banks were in ruins. Wall Street sunk into virtually bankruptcy. Goldman and its Wall Street too-big-to-fail co-conspirators had trashed the global economy, triggered a virtual depression, and Wall Street’s casinos lost over $10 trillion of Main Street retirement funds.

And as we saw back in 2008, the Federal Reserve is going to do whatever is necessary to prop up Wall Street.  Most Americans never even heard about this, but during the last financial crisis the Fed secretly loaned 16 trillion dollars to the big banks.  Those loans were nearly interest-free and those banks knew that they could get basically as much nearly interest-free money as they wanted from the Fed.

So how much nearly interest-free money did the Fed loan to normal Americans?

Not a single penny.

That would be bad enough, but it is also important to remember that since 2008 the Fed has actually been paying banks NOT to lend money to the rest of us.

What is it going to take for the American people to start demanding that the Fed be abolished?  They are absolutely destroying our financial system.

Meanwhile, the central planners in the Obama administration have been doing their part as well.  During the second quarter of this year, the number of Americans working between 30 and 34 hours per week fell by 146,500.  During that same time period, the number of Americans working between 25 and 29 hours rose by 119,000.

Why is this happening?

Well, the Obamacare employer mandate will apply to workers that work at least 30 hours each week, so employers are starting to cut back on the hours their employees are getting in order to comply with the law.

But this is just one example out of thousands, and most Americans already know that the U.S. economy has been crumbling for many years.

In fact, things have gotten so bad that even 53 percent of all Democrats believe that the American Dream is dead even though Barack Obama is residing in the White House.

But this is just the beginning.  Things are going to get much, much worse.  We are going down the same path that Greece has gone, and the unemployment rate in Greece has just hit a new all-time record high of 27.6 percent.

That is where the U.S. is headed eventually.  Decades of very foolish decisions are catching up with us.

The primary reason why all of this is happening is debt.  As a society, we simply have way, way, way too much debt.

The biggest offender, of course, is the federal government.  Since 1970, federal spending has grown nearly 12 times as rapidly as median household income has, and since the year 2000 the size of the U.S. national debt has grown by more than 11 trillion dollars.

When government debt gets too large, it has a profoundly negative effect on an economy.  The following is an excerpt from an outstanding article by Lacy H. Hunt, a Ph.D. economist

*****

Here are the studies, starting with the one with the broadest implications:

  1. “Government Size and Growth: A Survey and Interpretation of the Evidence,” from Journal of Economic Surveys. Published in April 2011, Swedish economists Andreas Bergh and Magnus Henrekson (both of the Research Institute of Industrial Economics at Lund University) found a “significant negative correlation” between size of government and economic growth. Specifically, “an increase in government size by 10 percentage points is associated with a 0.5% to 1% lower annual growth rate.”
  2. “The Impact of High and Growing Government Debt on Economic Growth: An Empirical Investigation for the Euro Area,” in European Central Bank working paper, Number 1237, August 2010. Cristina Checherita and Philipp Rother found that a government-debt-to-GDP ratio above the threshold of 90-100% has a “deleterious” impact on long-term growth. Additionally, the impact of debt on growth is nonlinear – as the government debt rises to higher and higher levels, the adverse growth consequences accelerate.
  3. The Real Effects of Debt, published by the Bank for International Settlements (BIS) in Basel, Switzerland in August 2011. Stephen G. Cecchetti, M. S.Mohanty, and Fabrizio Zampolli determined that “beyond a certain level, debt is bad for growth. For government debt, the number is about 85% of GDP.”
  4. “Public Debt Overhangs: Advanced-Economy Episodes Since 1800,”by Carmen M. Reinhart, Vincent R. Reinhart, Kenneth S. Rogoff, Journal of Economic Perspectives, Volume 26, Number 3, Summer 2012, pages 69-86. The authors identified 26 cases of “debt overhangs,” which they define as public-debt-to-GDP levels exceeding 90% for at least five years. In spite of the many idiosyncratic differences in these situations, economic growth fell in all but three of the 26 cases. All of the instances, which lasted an average of 23 years, are included in the paper. They found that average annual growth is 1.2% lower for countries with a debt overhang than for countries without. The long duration of such episodes means that cumulative shortfall from the debt excess—i.e., several years in a row of subpar economic growth—is potentially massive.

*****

But it isn’t just federal government debt that is the problem.  The rest of us have way too much debt as well.

If you can believe it, the ratio of private debt to GDP was 273.3% for the twelve months ending in the first quarter of 2013.

That is an astounding figure.

And as Hunt explained, having too much private debt is also very bad for an economy…

In Too Much Finance, published by the United Nations Conference on Trade and Development (UNCTAD) in March 2011, Jean Louis Arcand, Enrico Berkes, and Ugo Panizza found a negative effect on output growth when credit to the private sector reaches 104-110% of GDP. The strongest adverse effects are for credit over 160% of GDP.

The second is the 2011 BIS study authored by Cecchetti, Mohanty, and Zampolli. They found that private debt levels become “cancerous” (in BIS economic advisor Cecchetti’s own words) at 175% (90% for corporations and 85% for households)—just slightly more than the UNCTAD study.

When you add our private debt to GDP ratio of 273 percent to our federal debt to GDP ratio of 101 percent, you get a grand total of 384 percent.

This is how we have funded the false prosperity of the past couple of decades.  Essentially, we have been putting our good times on a credit card.

And as anyone that has ever tried to live on credit knows, the good times eventually run out.

But this is what the Federal Reserve was designed to do.  It was designed to get the U.S. government trapped in a debt spiral from which there would never be any escape.

It is not an accident that our national debt has gotten more than 5000 times larger than it was when the Fed was originally created.  This is what the bankers wanted the system to do.

They wanted a system that would extract wealth from all of us through taxes, transfer it to the government, and then transfer it to them through interest payments.

We never needed a central bank, we never needed the IRS and we never needed an income tax.  America would be doing just fine without any of them.

But instead, America chose to go down the path of collectivization and central planning, and now we are heading toward the biggest economic disaster in the history of mankind.

Does Barack Obama Expect The Upcoming Election To Spark Rampant Civil Unrest?

What is Barack Obama preparing for?  What does Barack Obama actually expect to happen in November?  Does he believe that the upcoming election could actually spark rampant civil unrest inside the United States?  The conditions are certainly ripe for civil unrest in this country.  A multitude of recent polls and surveys have shown that Americans are angrier and more frustrated than ever.  Sadly, we are taking a lot of that anger and frustration out on each other.  America is more divided today than at any other time since the Civil War era.  The left absolutely hates Mitt Romney the Republicans, and the right absolutely hates Barack Obama and the Democrats.  If you doubt this, just surf political blogs for a few hours and read the comments that people leave.  This country is a boiling cauldron of hatred and anger and all it is going to take is just the right “spark” to cause all of this hatred and anger to absolutely explode.  This upcoming election season is likely to be one of the most heated and divisive election seasons in U.S. history, and if there is not a clear winner on election night there is the potential that chaos could be unleashed that would be far, far worse than anything we saw during the Bush/Gore debacle of 2000.

Right now, the polls tell us that this is likely to be a very, very tight election.  If you doubt this, just check out the daily Gallup tracking poll.

As I write this, Obama and Romney are tied at 46 percent.

In 2008, a wave of positive emotion helped Obama secure a solid victory on election night where there was no doubt about the outcome.

But this time there is not going to be the same wave of positive emotion behind Obama, and that means that the election is likely to be much, much closer.

One thing that set off alarm bells for me is when various news stories starting discussing the “legion of lawyers” that Barack Obama was recruiting for this election.  The following is from a recent article in the Huffington Post….

President Barack Obama’s campaign has recruited a legion of lawyers to be on standby for this year’s election as legal disputes surrounding the voting process escalate. Thousands of attorneys and support staffers have agreed to aid in the effort, providing a mass of legal support that appears to be unrivaled by Republicans or precedent.

Did you catch that?

Obama’s “unprecedented” legion of lawyers is definitely getting prepared for something.

In a tightly contested race, would Obama use every legal angle that he possibly could to take the election away from Mitt Romney?

Would Mitt Romney potentially do the same to Obama?

How would the rest of America respond to another huge legal struggle over the presidency?

Let us hope that we never find out the answers to any of those questions.

But fighting in court is not the only avenue that Barack Obama could potentially use to keep his spot in the White House.

There is also the possibility that Barack Obama could use his executive powers to influence the outcome of the election.

This year, Obama has issued a whole series of very strange executive orders.

Many have been wondering what the true purpose of these executive orders really is.

For example, EO 13603 enables Barack Obama to take total control over all food, all energy, all health resources and all transportation resources with the stroke of a pen.

The following is from an article about this executive order by Jim Garrison in the Huffington Post….

President Obama’s National Defense Resources Preparedness Executive Order of March 16 does to the country as a whole what the 2012 National Defense Authorization Act did to the Constitution in particular — completely eviscerates any due process or judicial oversight for any action by the Government deemed in the interest of “national security.” Like the NDAA, the new Executive Order puts the government completely above the law, which, in a democracy, is never supposed to happen.

Later in that same article, he detailed some of the extraordinary powers that the executive branch would be given if Barack Obama decided that “national security” required it….

• The Secretary of Defense has power over all water resources;
• The Secretary of Commerce has power over all material services and facilities, including construction materials;
• The Secretary of Transportation has power over all forms of civilian transportation;
• The Secretary of Agriculture has power over food resources and facilities, livestock plant health resources, and the domestic distribution of farm equipment;
• The Secretary of Health and Human Services has power over all health resources;
• The Secretary of Energy has power over all forms of energy.

According to this executive order, a “national emergency” is not even required to activate these powers.  If Barack Obama decides that there is a threat to “national security” (or to his job security) he could activate these powers at any time.

Another executive order, EO 13618, would potentially give Obama power over all communication resources in the United States.

So does that mean that Obama could potentially pull the plug on the Internet during a crisis?

That is a very good question.

Overall, Obama has issued 130 executive orders during his time as president.  The amount of power that he now claims to possess is absolutely mind blowing.

So will he ever actually attempt to use the powers that he has granted himself under these executive orders?

Let’s hope not.

In addition, it appears that the Department of Homeland Security is gearing up for something.

An article posted on RT the other day entitled “DHS gears up for civil unrest prior to presidential elections” detailed some of the purchases that the Department of Homeland Security is looking to make….

The DHS submitted a rushed solicitation to the Federal Business Opportunities site on Wednesday, which is a portal for Federal government procurement requisitions over $25,000. The request gave the potential suppliers only one day to submit their proposals and a 15-day delivery requirement to Alexandria, Virginia.

As the brief explains, “the objective of this effort is to procure riot gear to prepare for the 2012 Democratic and Republican National Conventions, the 2013 Presidential Inauguration and other future similar activities.”

The total amount ordered is about 150 sets of riot helmets, thigh and groin protectors, hard-shell shin guards and other riot gear.

Specifically, DHS is looking to obtain:

– “147 riot helmets” with “adjustable tactical face shield with liquid seal”

– “147 sets of upper body and shoulder protection”

– “152 sets of thigh and groin protection”

– “147 hard-shell shin guards” with “substantial protection from flying debris, non-ballistic weapons, and blows to the leg” and “optimized protective design for severe riot control or tactical situations.”

– “156 forearm protectors”

– “147 pairs of tactical gloves”

The riot gear will be worn by Federal Protective Service agents who are tasked with protecting property, grounds and buildings owned by the federal government.

You can find the DHS solicitation right here.

Also, as I have written about previously, earlier this month FEMA posted a solicitation for a large number of pre-packaged meals.  According to the solicitation, the maximum number of meals that would be provided to FEMA under the contract would be 17.5 million meals.  The following is from the FEMA solicitation document….

As referred to in paragraph (b) of FAR Clause 52.216-22, “Indefinite Quantity” of this contract, the guaranteed contract minimum is 21,000 packaged meals to include the base and option periods.  The contract ceiling amount shall not exceed 17,500,000 packaged meals.

So do those solicitations mean anything special or are they just part of normal government operations?

That is a good question.

But what we do know is that U.S. military personnel are going to be deployed at the Democratic and Republican national conventions in support of U.S. Secret Service personnel.  The following is from a recent Stars and Stripes article….

“During the Democratic/Republican National Conventions, Department of Defense personnel will support the U.S. Secret Service,” a Northern Command spokesman said in an email.

“For operational security reasons we do not discuss the numbers of military personnel and resources that are involved,” U.S. Navy Lt. Cdr. William G. Lewis said. “Additionally, we do not share our operational plans.”

Could the same forces be deployed to quell civil unrest sparked by a controversial election result in November?

Let us hope that this upcoming election season is not as bitter and divisive as many are projecting and let us hope that there is a clear winner in November.

The conditions are definitely right for America to be absolutely torn apart if the “perfect controversy” comes rolling along.

At this moment, Americans are incredibly frustrated.  Our economy has been in the dumps for quite a few years, and now it look like another recession is starting.  The patience of the American people is running out.

Over much of the western United States things are so hot and dry right now that just a single spark is often enough to set off a forest fire that can burn for weeks.  Well, the same thing can be said for the political climate in the United States right now.

The American people are so hot and so angry that it would not take much to set off a raging political fire.

Let us hope that cooler heads prevail, because a single spark could set this country ablaze.

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