The American Democrats and Canadian Liberals are both on a path to unsustainable debt, and age old problem that has plagued many governments that rely on deficit financing to buy votes to retain power without regard to the inevitable inflation that results. In fact, so-called progressives embrace inflation since they realize that without inflation they can never repay the debt since the sovereign books can only be balanced if the value of money is depreciated to where the national debt drops in real terms despite its rise in nominal terms and reaches a level where it can be serviced without compromising the social programs leftist governments have made society dependent upon.
Ask yourself why governments actually target a level of inflation while claiming to want price stability? Even a two percent rate of inflation causes a 50% decline in the purchasing power of money every thirty six years (1.02^36=2.04) and the leftist governments of United States and Canada are still struggling to bring inflation down to the 2% range, or so they claim, when the actual rate of inflation is more in the 3% to 5% range and the reliance on central banks to curb inflation with interest rate rises is muted by the lack of coherent fiscal policies, these initiatives clearly at cross-purposes. Inflation is an intentional tax on the poorest in society and facilitates transfers of wealth from the masses to the elites who provide the donations the Democrats and Liberals need to pay for their election campaigns, and allow the socialists to say their policies are to “tax the rich” as they enact policies that transfer more wealth to the rich, giggling at how easy it is to fool the public. Harry Truman is famous for saying “show me a rich politican and I will show you a crook”.
Clinton, Biden, Pelosi, and many members of the Democratic Party in Congress are rich but weren’t rich when elected and Justin Trudeau’s wealth has ballooned from a paltry $1.2 million inherited from his father to an estimated $97 million since 2015. Give that some thought.
Corporate taxes are another leftist favorite for campaign rhetoric for the same reason, since corporations don’t pay taxes, they collect them in price from their customers and like inflation comprise a tax on the poorest in society for the benefit of their elite donors and themselves. The annual gathering in Davos of the World Economic Forum (WEF) makes no bones about the desire for a “great reset” towards a global socialist government, an ambition that will make the corporate elites akin to royalty in the monarchies of yesteryear.
Most people have never heard of Hugo Stinnes, the German who became that country’s richest man during the hyperinflationary period of the Weimar Republic. Alert to the risks of hyperinflation, Stinnes simply borrowed as much money as anyone would lend him and bought hard assets expanding his family’s coal business into steel and shipping with borrowed money he wagered could easily be repaid with deflated currency as inflation raged.
Today, with a government debt of some US$34 trillion and a planned fiscal deficit of US$7 trillion, the United States is on a path where interest costs will exceed defense and social security and no amount of taxation will balance the books. Joe Biden is stupid but not likely stupid enough to believe this won’t cause problems and you can reasonably infer the Democrat policies intentionally damage the economy to make the electorate more dependent on government, a tried and true playbook to drive a successful capitalist free market country towards socialism or outright communism. It only took one generation to destroy Venezuela, a country blessed with the world’s largest oil & gas resources and a constitutional democracy only 30 years ago but today a Communist run basket case with widespread poverty and social unrest.
Justin Trudeau is as socialist in his ideology as Biden, if not worse, and pretends CO2 causes climate change to attack the energy industry which has been the backbone of Canada’s econony since oil was discovered at Leduc, Alberta in February 1947 contributing royalties and taxes greater than the national debt at the time Trudeau was elected in 2015 in the previous 50 years alone and without which Canada would already be a third world economy.
To profit from the toxic policies of American Democrats and Canadian Liberals, investors need to buy hard assets but unlike Stinnes, avoid excess debt since the hyperinflaton of the Weimar Republic is unlikely any time soon and the more likely outcome is a shift in leadership in Washington and Ottawa with Biden and Trudeau voted into their proper role as a sad footnote in history and a sensible government under Trump in America and Poilievre in Canada working to right the ship. Since the debt already plagues both countries, righting the ship will take time and inflation will persist so hard assets will benefit in relative value and while the real cost of debt will fall owing to inflation, the risk of insolvency points to a more cautious approach than Stinnes employed during post WWI Germany.
Investments in resource companies with extensive reserves and little debt, in real estate with long-dated lower rate financing or no debt at all, and in gold and silver should produce reasonable returns, but avoid the Ponzi scheme of Bitcoin and its ilk, a plethora of worthless tokens driven by FOMO and fad which will eventually collapse leaving many in tears. Energy is so vital to the world economy and so out-of-favor in stock markets that holdings in oil & gas shares of companies with long reserve lives, little debt and low costs (Peyto, Birchcliff, Canadian Natural Resources, Spartan Delta, Saturn Oil & Gas, Bonterra Energy, Strathcona, and many others) should see the value of those reserves keep growing, particularly as the world wakes up the reality that CO2 is immaterial to climate. The leftist charade and alarmist rhetoric will ultimately subside in the face of the laws of physics which lay waste to the man-made climate alarm leftist adminstrations have relied on for decades to rally support for socialism, free market capitalism will return to Western democracies, and energy investors will be among the financial winners in the real “transition” from AGW nonsense to common sense.
Excellent article!
What I don't understand is why these billionaires buy into this ? They have profited from free markets, free speech and probably built their businesses on the cheap and reliable energy provided by fossil fuels, yet seem very keen to deal in climate alarmism.