Hi, this next video has some of the most insane and informative charts that you've ever seen, so stick around.
Hello, and welcome to the Gold Silver Show with Mike and Alan.
So Alan Hibbard, how are you doing?
I'm great, Mike. Thank you. How are you?
Really good. And you've got another continuation on one of the previous videos that you did that was a very enlightening video.
So take us through this continuation.
Yes, thank you. Well, previously we explored the effect of the monetary system on individual prosperity,
and what we talked about in the previous video was gross federal debt and the CPI,
and today I want to talk about two other things that we didn't get a chance to talk about.
So first, let me start with the mission statement of Gold Silver, particularly the media team,
to enlighten the world that maximum prosperity can only be achieved through individual freedom, free markets, and sound money.
I absolutely love this. And of course, we and many other people talk about individual freedoms and free markets all the time.
This is discussed quite widely, and when politicians propose different legislation, that's usually what they're talking about,
either expanding or contracting individual freedoms or the markets and what's allowed to happen.
But very rarely do we talk about the monetary system itself.
And so I'm hoping that I can elevate in the mind of the viewer the importance of the monetary system on our day-to-day prosperity
when we zoom out and look at a 200 or 250-year period, I think it becomes plain as day.
So our agenda from last time, we talked about the gross federal debt and the CPI,
and so we've checked those off our list and we can link to that video in the description for anyone who missed that one.
Yeah, I like your analysis here. Future taxes and the cost to be alive.
Yes, gross federal debt. Those are future taxes and the CPI is the cost to be alive.
And today I want to talk about the trade deficit, which I'm calling like the national resume,
which is a very funny characterization. It doesn't quite match up.
But what I mean by that, so with the balance of trade being a national resume,
it's sort of like what is the skill set of our country on a global basis?
Do other countries want the things that we produce or not so much?
So it's not exactly like a resume and of course that's even a resume is outdated,
but that's just how I think about the trade deficit.
And then I want to talk about income tax rates.
And I think most of us would agree that that's just theft.
Maybe some taxes are inevitable, of course.
I'm not saying there should be zero taxes of any kind,
but we should certainly keep that to a minimum.
So any thoughts on these characterizations, Mike, before I move on?
Well, the national resume, that's a good one.
Our biggest skill is to create currency and there does seem to be a demand for dollars around the rest of the world.
So regarding government theft, that's the reason that I'm in Puerto Rico,
is if you create jobs and you create prosperity, you get punished.
They punish you if you do good.
And so what the government seems to encourage is for people to be failures,
for them to live in government housing projects and be on the SNAP program using food stamps
and any other assistance that the government can provide.
And they take that from anybody that produces.
And so to me it's just absolutely upside down.
So anyway, go ahead.
I like your explanations of what these things really are.
Thank you, thank you.
All right, well, let's start with the trade deficit here.
So first of all, I have the US trade balance in goods, so not services.
It's hard to find reliable data on services going back to the year 1800.
So this is just goods.
And I've also colored it for Republicans and Democrats in red and blue.
And it goes back to your 1800 and you can see that it hovered right around zero.
I mean, this is less than less than one billion dollars above or below zero.
I think it's even less than a quarter of a billion dollars above and below zero
pretty much for 100 years.
And it's not until the creation of the Federal Reserve, this white dot here,
that it changes significantly.
So in this case, it went up around World War One when we started,
you know, shipping things to the rest of the world.
And it came back down and it went up for World War Two.
And then it started to get volatile.
And this graph only goes to 1970.
I think it was in my first book.
The US gold stock went up, I believe 47%, something like that,
during World War One because of all of our exports and because of this positive trade
where we're creating goods and sending them to the rest of the world.
The rest of the world was paying us in gold.
And then another 117% during World War Two.
And so this matches up with the gold inflows that we had.
And by the end of World War Two, the world monetary system was no longer going to function
simply because the US owned two thirds of all the world's monetary gold
and literally half of all the gold ever mined that was still above ground.
And so this was these wars and the shift in these trade balances.
This is what made the US the top dog for, you know, close to a century or around a century.
So, okay, go on.
I just had to interject that somewhere that this trade balance matches up with the stuff that I wrote in my book about World War One.
It's my first book, yeah.
Yeah, I love it.
Feel free to interject anytime.
Yeah, so this goes to 1970 and I just want to add 10 years on to the end of this.
Just 10 years, that's it.
And keep in mind for folks watching at home that the peak here is $10 billion.
We're at positive $10 billion.
So when we add 10 years, we go to 1980, you could see we drop off below negative $10 billion.
So in just a few years, you know, we dropped off below the highest point that we ever were in the positive direction.
And it's obviously extremely volatile here and we all know what happened in 1971.
Nixon took us off the gold standard completely.
So the one thing I'll say here, there's this hypothesis that, you know, Democrats are one way, Republicans are another.
And, you know, if that were the case, we would probably see the blue lines all going a certain direction and the red lines all going the other direction.
So if all the blue lines go up, all the red lines would go down.
And that's not really the case here.
You know, we see both color lines going both different directions and obviously a ton of volatility after 1971.
So not to mention all this smoothness back here that I forgot to like really emphasize is just how smooth it all was under any kind of administration.
Yeah, when we were using gold.
Exactly.
So now let me add five more years, five years to this chart.
I'm going to go to 1985 and you're going to see what happens.
Whoa.
Drops off a cliff.
And by the way, that gigantic drop we saw was super tiny.
That was, we said negative 10 billion.
That's barely here.
And now we're already past negative 100 billion.
So we've 10 axed that deficit in five years.
Right.
And now we zoom out to today.
And what we just saw there at negative 100 billion is, excuse me, dwarfed by where we are today, negative 1000 billion or negative 1 trillion.
So we're more than 100 times negative what we ever were positive.
You can barely see that we were ever positive here.
So we are, we are like you said, we are exporting inflation to the world.
We're exporting currency and bombs.
And that really seems to be the only thing we're giving the world.
Wow.
Pretty sad.
Yeah.
So we're going to have to turn this around one way or another.
I'm a big believer that, you know, the political party of the president is not such a big factor.
You can see red goes down, blue goes down, red goes down, blue, it kind of comes up a little bit.
But then for the most part, everything's down.
But if we recolor all this based on the monetary system, it's like, oh, of course, of course, that was the reason, you know, when we were on sound money, whether it was gold or silver or a combination, everything was good.
Everything was balanced between our country and other countries.
Then with the creation of the Fed, or as I like to say, the beginning of the end, things started to get volatile and we absorbed the world's gold, which you might think is a good thing, except it brought the world out of balance.
And then we had the gold exchange standard here and it was illegal for Americans to own gold.
Yeah.
I would argue, though, that the gold exchange standard goes back to the creation of the Fed.
I mean, what do you call that intra-war gold standard where the Federal Reserve was able to lie where they would put that it was fully redeemable on the Federal Reserve notes in gold, but they only had 40% of the gold.
60% was missing.
So in other words, for every $20 gold piece, this lie allowed them to put two $20 gold certificates and a $10 gold certificate in circulation.
Only one out of those three bills was actually backed by gold.
The other two were backed by nothing.
So I would say that the gold, there is a big difference of the gold standard before that going back before 19, it's November of 1914 is the date that the Federal Reserve opened their doors for business.
And so before that, it's a very different gold standard than after that.
And it's been a lie ever since that dot, except now.
I mean, the whole monetary system is just based on debt.
Yep.
Yeah, you're absolutely right.
Yeah, I wasn't quite sure what to call that, but I just wanted to keep it consistent with the other video.
So, yeah, maybe I can go back and color these with more different monetary systems.
I didn't want to have to.
No, I would just make it a dashed line all the way back to the Federal Reserve in future videos.
This one's good enough.
Yeah, yeah.
Before that, before 1914, there is no, they're not the same.
Yeah.
So, right.
So I wouldn't label them the same.
It's much more similar to that.
I just call it all a gold exchange standard from the inception of the Federal Reserve until August 15, 1971.
Yeah, that's fair.
Yeah, and certainly that would illustrate the point even better.
So, yeah, and you can see once we went off the gold standard completely, 1971, it's all downhill from there.
So, yeah, so something's got to change one way or another.
And I think getting back on a sound money standard is probably the simplest way.
Yeah.
So what's next?
Yes.
So that is the trade deficit.
Now let's turn to income tax rates, which we know is theft.
So this is one of my favorite charts I've ever made.
It's kind of funny.
It's the effective federal tax rate on a production worker going back to the year 1790 until the year 1910.
And you can see it's not only close to zero the entire time, it is literally zero every single year for 120 years.
There was zero federal income tax on a production worker.
Wow.
No matter who the president was.
Okay.
So I thought about rescaling this chart.
Do I need to go to 6%?
How much do I stretch it?
But of course the line is stuck at zero no matter what the vertical scale is.
So kind of a funny chart, but this is more than a century of zero taxes for the little guy, the normal blue collar worker.
But then it all changed.
Oh, by the way, I should point out during the Civil War there was temporarily an income tax.
However, it was only on the quote unquote rich.
So it didn't apply to a production worker.
And for anyone curious, here are the actual income brackets.
So 1862, I'll explain, and then there's 1863, 1864, and 1865.
So just looking at 1862, the first year that there was an income tax,
it was a 3% tax on any amount over $600.
And in case you're curious, $600 back then, what is that today?
Well, if we adjust it for the price of gold, that would be about $75,000 as an annual salary.
So the first $75,000 was not taxable, but any amount over that would have been 3% equivalent.
And then the rich, the rich rich had to pay a 5% tax on amounts over $10,000.
And by today's standard, that's one and a quarter million.
So 3% and 5%, those are much smaller percentages than we're paying today.
And that was to save the country, right?
The country was in a Civil War existential crisis.
And even those tax rates weren't as burdensome as today's.
So showing the same thing here, just going a little bit further from 1910 taking it out to 1930,
with the creation of the Fed, we finally get an income tax, and that goes up to 6%.
Then it starts coming back down.
And then we get the Great Depression, and we get World War II, and taxes go back up again.
Then taking it out even further, going to today, we see kind of an oscillation,
but hovering around 20%-ish.
And again, this is for a production worker.
So still very high taxes, and these are World War-level taxes that we still haven't gotten away from.
So yeah, so what are your thoughts here, Mike?
It's very interesting.
And again, the red and blue, it isn't necessarily that Democrats want to raise taxes.
They happen to be in office at the beginning of both of these wars.
So it really doesn't seem connected as much to the political party.
Yeah, there's only a little bit of that to your point.
But then you can see a blue line goes down pretty significantly here, and then the red line goes up.
So as Republicans raising the taxes, and then Democrats cut taxes, and then kind of a little bit of everything.
So yeah, it's not a one-way street.
It's not a perfect correlation.
So I think there's something else going on, and you know what I think?
It's the monetary system that enabled all this.
So one last thing I want to show before we recolor this chart with the gold and the green is I want to add payroll tax,
because there's social security and Medicare tax that comes out, and at first it was only 1%, 1% tax,
and then it escalated 1.5%, 2.5%, 3%, something like that.
But today it's, I think, 7.65% for the employee.
So I just wanted to add that in, and you can see, you know, this is the old line here, transparent, and the new line significantly.
Right. So basically what they've done, it's another lie basically.
It's smoke and mirrors, where when somebody files their tax return,
they're not quite as angry about the levels of taxation, but they don't realize on their tax.
The tax return isn't showing what the business paid on their behalf, and it is their income tax,
simply because if they weren't hired and the job didn't exist, the business wouldn't be paying that tax on their behalf.
And so this is the accurate way of looking at it. People should be outraged.
Yeah, and we're paying a 25% tax, regardless of the administration, right?
Red, blue, up, down, up, down, whatever, 25%, whereas for over 100 years we didn't pay any income tax.
There was no social security. There was no Medicare.
There were no government mandated Ponzi schemes to insure against whatever, being disabled or living too long.
The only reason that this doesn't go beyond 25% is the Laffer curve.
When you raise taxes too much, you slow down the economy so much that the government actually gets less revenue and not more.
This is the sweet spot where the government gets the most income, where they can squeeze the population just enough
so that the economy still does well, but they get to take most of the proceeds.
But what that doesn't do, there's another Laffer curve, a sweet spot for maximum prosperity.
And so for the economy to do best instead of the government doing best,
is probably down at around 10% or even less enough to run the legal system
and create a fair and level playing field for all businesses and individuals
instead of getting involved in every aspect of everyone's lives.
So there's two Laffer curves, one for maximizing government income
and one for maximizing our own prosperity, our own lives.
Yeah, exactly. And this just represents a huge drain on everyone's freedom.
And so let me just recolor that based on the monetary system.
And you can see that this is a much stronger predictor, much stronger correlation than who's in office.
There's also another argument for me of making that dashed line go all the way to the Federal Reserve.
It's when we came up with Mickey Mouse phony baloney gold standards instead of a real gold standard like before the Federal Reserve.
Yes, I totally agree with you. Absolutely.
So yeah, I mean, this chart speaks for itself. I don't know what to add here.
I mean, there was no tax and then you get the Federal Reserve at the beginning of the end.
And yes, we can think of this as a dotted line where it was the phony baloney gold standard.
And then there's a period of 30-something years where it's illegal for Americans to own gold.
And then we get the fiat system.
And, you know, this to me seems like a much more compelling explanation of why we're paying taxes than who sits in the White House.
I don't think the political party matters that much. I think the monetary system matters everything.
I think it's basically 100% the monetary system.
Yep.
Yeah. So, yeah, that's what I got. I want to finish where we started,
that maximum prosperity can only be achieved through individual freedom, free markets, and sound money.
We need sound money. We have to talk about this. Sound money.
Okay. I want to thank you, Alan, and thanks everybody for watching. We'll see you next time.